Suez Canal 2.0: Egyptians pour savings into president's ambitious project
Selling a vision of greatness restored, cash-strapped Egypt has raised $8.4 billion from the sale of investment certificates to its citizens. But experts caution that the retooling of the Suez Canal may not pay off so quickly.
President Abdel Fattah al-Sisi’s promise of a second Suez Canal has lit the touchpaper of Egyptian nationalism. Across the country, citizens jostle for position in public banks, waiting their turn to invest in the $8.4 billion project they hope will restore Egypt to greatness.
In just eight days, citizens across the cash-strapped nation have coughed up the full sum, trading their savings for investment certificates.
President Sisi’s plan involves widening and deepening the original channel, itself a modern symbol of national pride; adding a 45-mile long additional lane to accommodate two-way traffic; and building tunnels underneath to speed travel to the Sinai peninsula.
Such an expensive project at a time when Egyptians are experiencing rising poverty and rolling power blackouts may seem strange. But the former head of the armed forces has his reasons.
In 1956, then-President Gamal Abdel Nasser cemented his status as a national hero by snatching the canal from British hands and placing it under Egyptian state ownership. Built with French and Egyptian capital, the canal opened in 1869, connecting the Mediterranean Sea to the Red Sea. Now Sisi, who was elected in June on promises to extinguish the Islamist Muslim Brotherhood and return Egypt to its former status as a regional leader, is looking for a Nasserist moment of his own.
But away from the nationalistic fanfare, the dream has a darker side: Lives and livelihoods are quite literally being ripped up to achieve it, and analysts are expressing concerns over the project’s timetable, expected profitability, and overall transparency.
Slumped under a mango tree near the village of Atbal, a few hundred yards east of the original canal, Haj Sami Tawfik, a farmer, is one of around 2,000 villagers displaced since the start of the project. “I can’t describe how it feels to see my trees ripped out of the ground,” he says. “Where are we supposed to go?”
The area’s now-homeless residents say they received only a day’s warning before hundreds of khaki-clad soldiers arrived. “They had come to demolish everything,” says Mr. Tawfik. “Some people managed to grab their belongings, but many couldn’t.”
“I don't know anything else but farming,” his brother, Rabie adds later. “I came here as a young farmer – that’s all I can be.” The 58-year old is staying temporarily in the city of Suez, along with the families of a dozen laborers.
A lawyer for the displaced families, Shereen al-Haddad, believes military contractors in charge of the project were not warned that the construction zone was an inhabited area. She says 10 other villages – apparently home to 50,000 people – are also under threat.
In bank queues across Egypt, ordinary investors know little of these goings-on. “I didn't hear about any displacements. Even if this is true, I’m sure the army has something in mind that hasn’t been revealed yet,” says Moataz al-Ashmawy, a masters student at Mansoura University, some 90 miles north of Cairo.
Trust and tax-free returns
Public trust in Egypt's army rose after it ousted Mohamed Morsi, an unpopular Islamist president, last year. That the institution is overseeing the Suez Canal project underscores the military's growing role in Egypt's economy since Mr. Morsi's ouster, as well as the waterway’s perceived importance to national security
“I’m getting married, and I believe this is a very good investment for the future of my family,” says Mr. Ashmany, who is spending 2,000 Egyptian pounds ($280), most of his monthly salary, on investment certificates.
Like many others, he sees investment as a national duty. He's also attracted by the bond's 12 percent tax-free return that matures in five years and is guaranteed by the government. The governor of Egypt’s Central Bank and other finance officials have talked up the project's importance, boosting public confidence.
Economists and maritime analysts say it makes sense to widen the original channel so that Egypt can keep pace with other trade hubs, especially the Panama Canal. But some caution that the long-term financial benefits aren't a given.
If all goes to plan, Egypt would reap the benefits of the canal’s expansion within the decade as more ships pass through. But according to Omar El-Shenety, managing director of the Dubai-based Multiples Investment Group, there is growing skepticism over whether a second channel can boost revenue in the way Egypt's authorities have predicted.
"Demand is based mainly on global trade growth, not only on the type of canal you have,” he says. He also points out that the decision to build six additional tunnels – there is currently only one – could be unnecessarily time consuming for construction companies that have been told to finish the project within a year.
The lack of transparency surrounding the project is also a concern. “With a mega-project like this, one would expect a detailed level of information to be made public, but that hasn’t happened, which hints to the insufficiency of solid and comprehensive studies for the project,” says Mr. Shenety.
Worryingly, irrigation experts say the second channel is being built too close to the original canal, and the new building site has begun to fill with groundwater. However, many economists say the government's guarantees minimize the risk to investors, with a worst-case scenario of an extended repayment period.
On the banks of the canal, displaced residents are quick to stress that they do not oppose the construction project itself, possibly mindful that insulting Egypt's popular army could bring repercussions.
“I've always been a patriot and I'd like to stay this way,” says Rabie Tawfik, who served in the Egyptian army during the 1970s. “We aren't against the project, we just want justice.”
And back in the living rooms of Egypt’s citizen investors, positivity is the only message in town. “History has witnessed the Egyptian’s ability to create miracles,” proclaims one advert over an inspirational theme tune. “The Suez Canal is one of those miracles … a contribution to human life.”
Additional reporting contributed by Mohamed Ezz.