AS A feat of brawn it is impressive. In just one year, a third of the time engineers wanted, Egypt has shifted enough sand to allow more and bigger ships to pass more swiftly through a crucial artery of global trade. As a political stunt it is big, too. Since coming to power in July 2013 President Abdel-Fattah al-Sisi has offered an unspoken bargain: in exchange for shrinking political freedoms he would bring stability and progress. Small wonder his government declared a holiday for the lavish opening on August 6th of the New Suez Canal, as it dubs its project; to bolster pride in the achievement, its religious-affairs ministry instructed mosque sermons to cite the Prophet Muhammad's digging of a trench to defend Medina from attackers. In economic terms, however, the expansion of the Suez Canal is a questionable endeavour at a time when the government is struggling to provide adequate services to its citizens. True, the channel is a significant source of revenue. Last year it pumped $5.5 billion into an economy weakened by years of turmoil. But both this sum and the number of ships transiting the canal have been flat since 2008. Egyptian officials claim that the $8.2 billion project, which expands capacity to 97 ships per day, will more than double annual revenues to some $13.5 billion by 2023. That, however, would require yearly growth of some 10%, a rosy projection given that in the entire period from 2000 to 2013 world seaborne shipping grew by just 37%, according to UNCTAD. A recent forecast from the IMF suggests that in the decade up to 2016 the annual rate of growth for global merchandise trade will have averaged 3.4%. Before its expansion the Suez Canal was operating below its capacity of 78 vessels a day. It could already handle all ships except the very biggest oil tankers. By the estimate of one Egyptian economist, the maximum growth of revenue that the new dredging now allows from the passage of slightly bigger oil tankers amounts to just $200m a year. Boosters say more ships will flock to the canal because new bypasses permit faster two-way traffic. Economists counter that for ships that already save as much as ten days at sea by using Suez instead of sailing around Africa, a few hours less transit time through the canal will make little difference. One clear plus for the debt-strapped Egyptian government is that the project is domestically financed: thousands of Egyptians last year snapped up nearly $9 billion in special investment certificates paying 12% interest. The downside for punters is that they are in local currency, in a country where inflation is currently running at over 10%. But there may be another long-term plus. Egypt's government plans to turn the whole canal zone into a giant logistical, ship-servicing and manufacturing hub. If that ambition comes true, mosque-goers will truly take heart from the government's scripted sermon which divines "useful lessons from the Prophet's example of innovative leadership, among them the unity and continuity of command, mutual love between the commander and his soldiers, and wariness of naysayers." Source: The Economist
