• 18:52
  • Thursday ,25 September 2014

Suez project a good step, but Egypt needs to industrialise

By-Taha Abdel Alim



Thursday ,25 September 2014

Suez project a good step, but Egypt needs to industrialise

Egypt has begun the construction of a national project aimed to exploit its strategic location by widening and deepening the Suez Canal, the most important maritime corridor connecting world markets.

Construction of the project is underway through Egyptian companies and efforts and an eye on the needs of national security and domestic funding to protect the sovereignty of Egypt over its canal.
The feasibility study of the canal project is impressive: doubling Egypt’s revenues from transit fees through the canal and increasing its share of profits from services for global maritime trade. However, we still need to understand that Egyptian industry is the best way to benefit from this project – developing both flanks of the canal, comprehensive economic progress and shedding poverty and destitution.
The Suez Canal can receive all giant vessels as long as they are empty or partially loaded – the size of their keels when fully loaded is deeper than the canal itself. Without deepening the canal and its branches, 65 percent of crude oil tankers, 94 percent of dry bulk carriers and 100 percent of container carriers cannot pass through when loaded at full capacity.
At the same time, the current course of the channel only allows vessels to pass in one direction in the single lane zone. Widening 75 percent of the canal will reduce the waiting and transit time for vessels and improve the economics of operating ships, thereby attracting global maritime lines that do not use the Suez Canal and doubling revenues and rates of transit.
The project also includes digging six new tunnels for cars and trains to connect the two banks of the canal, which bolsters national security by developing the Sinai Peninsula and ending its isolation. The cost of the canal project can be recovered even before all components are complete.
Despite the unique location of the port in Port Said at the mouth of the Suez Canal and Egypt's significant share of global maritime trade, the country only ranks 37th out of the 50 most important container ports in the world. The port of Suez and others in Egypt are not even included on this list.
Meanwhile, revenues from maritime corridors and ports in other countries that do not enjoy a similar location as the Suez Canal and its ports are much higher than Egypt.
This project aims to convert the ports, course and surroundings of the canal into a world industrial and trade centre by developing the ports of Port Said and Suez to become centres for various types of global and regional transit trade – including maritime, land and air. It houses logistics facilities, such as cold storage units, terminals for loading containers, storage warehouses, as well as fuelling services, supplies and vessel maintenance and repair basins.
The project also aims to attract Egyptian, Arab and foreign investors to finance industrial and export services northwest of the Gulf of Suez and east of Port Said.
President Abdel-Fattah El-Sisi should fulfill the promises he made in his inaugural address – bolstering industry as the central nerve of Egypt's economy and a means of creating jobs and employing youths. Also, laws should be revised to give incentives to industry and make it easier for investors to acquire land and licenses to establish projects.
Construction of the Dabaa nuclear power plant needs to move forward, along with improving the country's reliance on solar energy for electricity generation, because without constructing the necessary power base there will be no industry. Small and medium size enterprises (SMEs) should also be developed to provide intermediary components in production, which saves foreign currency and raises standards in deprived and poorer areas.
The state must today – and not tomorrow – decide on and implement an ambitious strategy to bolster Egypt's potential as an advanced industrial state. Without this, Egypt's economy will not shed its chronic flaws – structural, trade, financial, monetary – and the country will never witness comprehensive and sustainable development. Most of all, Egyptians will not have a dignified life through high income and productive jobs and the nation will never enjoy national and human economic security.
Unfortunately, industry remains absent on the agenda of the Egyptian nation and its political leaders, even though there is no alternative to industry in order to achieve equality in wealth distribution in an advanced country, instead of equality in the distribution of poverty in a backward nation.
A final argument in favour of industrialisation comes from recognising the limitations of water and land for lateral agricultural development – it's impossible to raise Egypt’s agricultural yield without the input of advanced industrial technology. We must also realise the limitations and dangers of relying on revenue from fluctuating income such as oil exports, Suez Canal revenues, tourism or expat remittances.
Doubling the added-value of tourism, for example, depends on local production of this sector's needs of manufactured components. The elements of success are the same – whether for industry or any other aspect of economic development.
The role of the state is paramount in industry. As the United Nations Industrial Development Organisation (UNIDO) asserts, obstacles should be removed, production hastened and market flaws corrected. The state should be a regulator, protector, incentive giver and an allocator of public funds. It should also have critical influence on the credit market, be an investor through state-owned firms as well as a consumer that guarantees an industrial market through public purchases.