Go global or get lost. This is not just a slogan: it's a way of life in the age of globalisation. National economic borders have fallen and national protectionist policies are things related to the past. It doesn't matter whether a country is big or small, developed or underdeveloped, industrial or agricultural, new or old; in all cases a country can join the ranks of the fast-growing globalised world economy on its own merits. The only things a country needs to have are determination, knowledge, productivity and the ability to compete successfully with others. Whether communist China or Vietnam, capitalist Japan or the USA, big Brazil or small Israel, a country is able to climb the ladder and join others through what is known as global value chains of production. A country is not seen as successful because it produces a product from A to Z, but its success is measured by the added value of its components and its participation in the global value chain as many countries contribute to the process of production. For Egypt, the New Suez Canal brings with it a huge chance and golden opportunity to access the global economy and to acquire an advanced and progressive position in the global value chain. The New Suez Canal brings the opportunity for Egypt to become a world transportation hub and the commercial gateway to Africa and the Middle East and Africa's most active player in the areas of renewable energy, communications and advanced industry. For almost one-and-a-half centuries, the Suez Canal was seen by different Egyptian administrations as a mere shipping route, just a waterway to help ships carrying trade from the East to the West and vice versa. This is about to change. The New Suez Canal will transform the whole region around this shipping route. The route itself has been developed in depth and width, providing ships passing north and south with savings of up to 10 hours sailing through the canal itself. In addition, the canal provides savings of 30 to 50 per cent of the sailing distances between ports in the East and West of the world. Thus, the New Suez Canal will become more attractive, more comfortable, and less costly for shipping than ever before. Moreover, it will allow larger and deeper vessels to pass through, bringing the world's seaborne trade closer to all interested parties, sellers, buyers and shipping companies. Developing the New Suez Canal has just begun. It will create a new life for all Egyptians, especially for those who live around the canal region or close to it. New roads, flyovers, bridges, tunnels, ports, railways and airports will emerge one after the other to create new life in the region. Six governorates will directly benefit from the New Suez Canal development plan. The governorates of North Sinai, South Sinai, the Red Sea, Suez, Ismailia and Port Said will witness huge changes in development patterns compared to what they have seen before. The New Suez Canal can be described as the “spearhead” for a new economic future for all Egyptians. One million new direct jobs will be on offer, in addition to at least three million indirect ones in all economic sectors. Young graduates will have the chance to get serious training and skilling programmes to prepare them for employment in new and advanced industries and services such as information technology, solar and wind energy, port management, ship repair and maintenance, and international communication systems. The completion of the New Suez Canal on schedule is a huge challenge that is being met successfully. When President Abdel-Fattah Al-Sisi requested that a parallel waterway 72 km long should be completed in 12 months, many experts and business organisations raised doubts. Difficulties during the digging added to these doubts, with fears that the cost of the project might exceed estimates. But day after day the Suez Canal Authority was on top of the job to make sure it would be done on time. Now, with the opening of the New Suez Canal, Egyptians are proud to have been able to meet the challenge and are preparing for a historic opening to celebrate the event. They have proven to the whole world that they are able to create such projects with their own money – $8.5 billion – and their determination. As we are approaching the opening date, we should be ready to face more challenges ahead and to move forward from expanding our strategic international waterway to establishing an international key investment zone able to attract investors from everywhere in the world. THE PROJECT: The idea behind the New Suez Canal is not just to develop the waterway linking the Mediterranean and the Red Sea in order for the canal to be able to receive ships of all sizes, but also to start an ambitious plan to develop the whole region around the waterway including North and South Sinai, Suez, Ismailia, Port Said and the Red Sea governorates. Developing the waterway itself is expected to increase Suez Canal revenues from about $5.5 billion annually in 2014 to $13.5 billion in 2023. Moreover, the project will also benefit the whole country. According to estimates prepared by the Ministry of Planning, planned investment in the Suez Canal region will provide about one million direct work opportunities and create an international maritime hub in the region that includes sea ports, maritime logistics and shipping facilities in Port Said, Ismailia, Qantara East, Suez and Ain Sokhna. The project includes three main development areas, three main implementation phases, and plenty of economic activities. The three development areas are the East Port Said new port and logistics facilities. On 7 August, the day after the opening of the New Suez Canal, work will start digging the 9.5 km new canal linking the existing shipping route north of Ismailia with the projected East Port Said new port. Shipbuilders and shipping companies consider this area to be one of the best spots suitable for a new international port. When completed, the East Port Said new port is expected to become one of the busiest ports in the Mediterranean, hosting many other shipping and maritime facilities. Many international shipping companies and port-management authorities have shown interest in taking over the development of the East Port Said new port. The second main development area is the “Technology Valley” east of Ismailia. There are hopes that this area will be able to house electronic and scientific industries, including electronic chips, software development and hardware computer equipment, information technology, and wind and solar energy equipment. The area allocated for the Technology Valley has been available since 1999, but it has not been able to host a breakthrough until now. There are hopes that developing the entire region of the Suez Canal will give the Technology Valley a good chance to make the desired leap forward. The third main development area is the Gulf of Suez, which now hosts many industries and power stations, including the wind power station in Zaafaranah. This area enjoys many geographical, commercial and natural advantages. Its proximity to the port of Ain Sokhna and the rail network makes it ideal for building industrial zones and setting up new industries including cement, petrochemicals, iron and steel. The beauty of this area resides in the fact that it enjoys high potential for growth, having many existing minerals, natural resources, power stations, commercial routes and developed port facilities. China, India, Russia, Germany and the UAE have all already expressed a strong desire to invest in this area. According to the New Suez Canal master plan, the project will be implemented in three main phases. Phase one is the digging of the parallel shipping route from Ismailia to Port Said. The second phase will concentrate on developing the infrastructure serving the whole project, including roads, bridges, tunnels, railways and ports linked to the project from Safaga on the Red Sea to Al-Arish and East Port Said on the Mediterranean. Phase three will include energy, water and industrial projects. These three phases are interconnected and offer in their totality the new hope that all Egyptians are eager to see in the near future. In order to link the three areas together and develop the required infrastructure, this year's budget includes projects to develop and build new highways, flyovers, bridges, tunnels, power stations, water facilities and land reclammation all linked to the Suez Canal development. The Ministry of Planning estimates that the Suez Canal region development plan will require an additional 6 GW of electricity and 1.5 cm of fresh water daily. New projects will be funded through public-private partnerships (PPP) in addition to funds that are already available from the sale of the investment certificates issued for the Suez Canal Authority last year and bringing in LE61 billion. The initial cost of the New Suez Canal shipping routes was estimated at LE30 billion, which means that the Central Bank of Egypt is now holding LE31 billion for the Suez Canal Authority to carry out projects included in the development plan. Phase two may need funds exceeding the LE30 billion initially allocated for infrastructure projects. Arab and foreign investors are expected to provide enough funds through wholly owned and public-private partnership projects. In other words, the administration will have to prove efficient enough to attract Arab and foreign investors to inject adequate funds to a project thirsty for money. The third phase will be mostly the responsibility of the local and foreign private sector, but it will need a lot of modernisation of the government administration and other organisations connected to the proposed projects. Bureaucracy, corruption and conflicts of interest between different ministries and governmental agencies could prove fatal for the future of the New Suez Canal. Straightforward investment and implementation laws should replace existing ones that are full of loopholes resulting from loose phrasing, exemptions and discrepancies. THE CHALLENGES: As a major project, developing the Suez Canal region is not expected to succeed without facing various challenges. Thus far, Egypt has been able to clear the hurdles of funding the digging of the parallel shipping routes and some of the infrastructure projects such as roads and tunnels. However, this is just the beginning. The next few years will show how Egypt will be able to attract foreign investment, continue developing infrastructure, training the required skilled manpower and transforming the Suez Canal region into a genuine international maritime hub and a key international investment zone. In order to do this successfully, the project has to pass four serious tests: viability, security, sustainability and competitiveness. The viability test does not doubt that the New Suez Canal project is a viable one, but its viability rests on its totality and integrity. In other words, as the project includes the development of the shipping route and the three principal areas stretching around the route or connected to it, it is necessary that the projects within it should be carried out in their totality through three implementation phases. It is not necessary that projects in phase two or three should wait until the end of the previous phase. Some projects need to be revitalised or re-examined. The East Ismailia Technology Valley and the industrial zones northwest of Suez are clear examples. The area around the Suez Canal shipping route is rich in resources that should become targets for early investment and exploitation. Any delay in employing all the relevant assets that can help make the New Suez Canal a successful project should be employed to achieve the required success. Looking back to some earlier projects, such as the Toshka Development, seen as a new food basket for Egypt, or Sadat City as a new capital of Egypt, means that we should always be wary of the impacts of changes of heart or circumstances. The viability test does not only rest on the total implementation of the project, but also on developing the Suez Canal region in relation to the whole of the Egyptian economy. If some policy-makers or government leaders look at the New Suez Canal as a “centre of excellence” disconnected or isolated from the rest of the Egyptian economy, they will be committing a huge mistake. It is true that it is a leading project, but it is equally true that the New Suez Canal's success depends upon its connectivity and integration with the rest of the economy. Government policies and implementation programmes should reflect the fact that the viability of the project rests on its total implementation and on its integration with the rest of the economy. Nothing can be judged to be complete until it is complete. The area south of Ismailia up to the Gulf of Suez will also need to be developed in order to add a parallel shipping route matching the one in the northern section. In this case, the Ahmed Hamdi Tunnel will become obsolete, and it will need to be replaced by another one at a new depth equal to the north section. This project will help commercial vessels to pass through in two separate convoys at all times, one going north from the Gulf of Suez to Port Said, and the other going south from the Mediterranean to the Red Sea. The security test recognises that security is a decisive factor for investment and growth. Unfortunately, the New Suez Canal project rests on a knife-edge. The North Sinai governorate is the most vulnerable area in Egypt and is exposed to terrorism, extremism and violence on a daily basis. Part of the city of Rafah has been demolished, however, in order to deny extremists the ability to use tunnels stretching from Gaza to Sinai or to access the weapons, explosives and fighters moving through these tunnels. Plans to develop the port of Al-Arish or to build highways running through Sinai will depend on the degree of security in these areas. Foreign companies eager to invest in Sinai's minerals, land, water, oil or petrochemicals will only come forward once they feel confident that the area is secure for people, equipment, transportation and economic activities. Although the Egyptian army and security forces are making progress in the war against terrorism, Sinai is not yet secure enough to become an investment destination. The security test is perhaps the most serious one facing the New Suez Canal in the short and medium terms. The sustainability test says that inclusive and sustainable development projects are seen as the most successful ones. Threats to sustainability include political instability, a lack of trust and a shortage of funds. The new political system in Egypt that emerged following the 30 June Revolution has not yet taken its final shape. There is as yet no parliament, little political accountability, and with the exception of the elected President Abdel-Fattah Al-Sisi, the whole country is run by unelected authorities. Presidential decrees regulating key economic areas such as investment, industrial relations and taxation are expected to come under the inspection of the next parliament, of whose political map and balance of power no one can be certain. Trust among the people, strongly let down by governments following the country's two revolutions, is currently not always high, meaning that very strong hopes are being pinned on the New Suez Canal project. If people are let down again, they may express their disappointment in many ways, including by protest voting. Arab and foreign investors may also feel a lack of trust. They may feel let down by an ageing, inefficient and corrupt Egyptian bureaucracy. The country's political leaders should be aware that they need to work hard in order to enhance trust and increase support for the administration. Egypt's public finances are currently in tatters, and the government's need for local and foreign currencies is proving to be endless. The treasury borrows more than LE1 billion every day from the local banking system. Its foreign debt is expected to increase in the short and medium terms. Some projects, including infrastructure, need long periods in order to recover their costs. All these factors will increase the burden of funding, both local and foreign. In order to ensure the sustainability of the New Suez Canal project in its totality, the political leadership of the country should realise the importance of political stability, trust and the regular flow of funds to help yield success. The competitiveness test says that the most sophisticated test that will determine the success of the New Suez Canal is its ability to compete. On the whole, the Egyptian economy is performing poorly on the Global Competitiveness Index, with Egypt sitting in the Index's bottom fifth. This is not an honourable place to be, and corruption, inefficient government, and badly framed laws and regulation are the main sources of our poor economic performance. Low productivity of labour and capital is the result of poor education, little training, the ignorance of new technologies and a lack of adequate investment in R&D. Moreover, the New Suez Canal will have a serious competitor in the Chinese project to re-establish the old Silk Road across Asia. Although the Chinese project has many strategic and comparative disadvantages, China has already committed tens of billions of dollars to bringing the old Silk Road back to life. Other competitors to the New Suez Canal project include the Panama Canal and the projected Nicaraguan Canal linking the West and East of the US. Although the New Suez Canal project has the advantage of time-saving, which should generate up to 50 per cent of operating costs, the Suez Canal Authority will need to improve its performance in order to become more efficient and offer new bundles of diversified services and products to ships passing through the waterway. The New Suez Canal will be very hard to crack if it is part of an efficient and highly productive economy. Egypt will have to break with the history of the Suez Canal as just a waterway for international shipping. The world has changed, and Egypt must change too by stopping living in the past. Egypt must work hard to make a future to be proud of. The New Suez Canal could become Egypt's access to such a bright future, with the globalisation of the Egyptian economy starting from there. The writer is former senior political affairs officer at the UNDPA.
