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Al-Sissi seeks to boost economy and his image through Suez project

The economy may be in dire straits, but Egypt is proudly proclaiming its “Gift to the World” in the shape of a major expansion to the Suez Canal. Whether the project will recoup its huge costs remains to be seen. Cairo (dpa) – Egyptians are being inundated with images of ships passing each other in opposite directions. Hoardings and television spots show two-way traffic of tankers and freighters on the “New Suez Canal” instead of just one as has been the case until recently.

The enlarged canal – one of the world’s most important waterways – is being officially opened on Thursday, and the state public relations machine has swung into action to herald the project as a panacea for the country’s overwhelming economic problems. “Egypt’s Gift to World,” the official website proclaims. The plan is for this “gift” to recoup the massive investment of more than 8 billion dollars rapidly from the fees paid by the ships.

The government is confidently predicting that income from the canal – the shortest shipping route between Asia and Europe – will more than double to a little over 13 billion dollars annually, although independent economists are sceptical. The fact that the first in a string of major projects under President Abdel-Fattah al-Sissi has been completed within a year is certainly impressive.

So is the fact that it has been done with the money of the ordinary Egyptians who bought shares in the company as an “act of patriotism.” The high returns promised may well have contributed to the willingness to invest. The economy is becalmed, with growth low and youth unemployment reaching an estimated 40 per cent. The national debt is high, and a quarter of the population of almost 90 million lives on less than 50 dollars a month.

Al-Sissi is using mega projects to counter the dire economic situation. Apart from the expansion of the Suez Canal, the former general is planning a new capital that will be built from scratch to the east of Cairo. There are plans for the first 200-metre skyscraper and the country’s first nuclear power station. “This is mainly for propaganda, and to what extent there is an economic concept behind it remains unclear,” in the view of Stephan Roll, an expert on the Egyptian economy at the German Institute for International and Security Affairs (SWP) in Berlin.

He points to the expanded Suez Canal as an example. Expanding it is one thing, but whether this will automatically lead to a rise in the number of ships passing through it is quite another. In June, fewer freighters used the canal. The construction work generated a large number of jobs, but these were temporary. SWP’s Roll fails to discern a sustainable aspect. “This is the military way of running an economy – from the drawing board.”

Another serious problem is the inability to attract foreign investment. Bureaucracy, corruption, lack of transparency and the tense security situation have made Western companies and Arab businessmen from the Gulf alike wary of becoming involved. Repeated attacks have scared off the holidaymakers on whom millions of Egyptians depend for their livelihood. The British government’s travel advice on Egypt says there is a “high threat from terrorism” and warns that attacks on foreigners and the possibility of kidnapping cannot be ruled out. While Roll has doubts about the trickle-down effects of the major projects, Sherif El Diwany, director of the Egyptian Centre for Economic Studies, takes a more positive view.

“Mega investments are a sustainable mechanism for giving a boost to an economy in trouble,” he says, pointing to the situation in the country since the toppling of Islamist president Mohammed Morsi in 2013. El Diwany sees the opening of the expanded Suez Canal as a reason to celebrate, embodying as it does the hopes of broad sections of Egyptian society for a better future. But for the moment, the big event is working in the favour primarily of al-Sissi and his government, which is considering declaring Thursday a national holiday. Ahead of the big day, posters were on sale in the Egyptian capital showing the ex-general’s face against the background of a huge ship.

Benno Schwinghammer, "Al-Sissi seeks to boost economy and his image through Suez project," Business recorder. 2015-08-05.
Keywords: Economics , Economic issues , Economic problems , Official website , Massive investment , Nuclear projects , Nuclear power , Economic studies , Economy-Egypt , Security issues , Muhammad Morsi , Egypt , Cairo , SWP