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New Suez Canal project to generate $100bn a year and 1 million jobs

Article - August 10, 2015

While the New Suez Canal will double the capacity of the 146-year-old waterway, the canal expansion is just the beginning of a much more ambitious scheme that aims to turn the environs into a world-class transport, logistics and industrial hub

When one thinks of Egypt’s greatest engineering feats, perhaps the Great Pyramids first spring to mind. However, equally impressive is the Suez Canal, a man-made waterway connecting the Mediterranean Sea and Red Sea. Opened in November 1869 after 10 years of construction, the canal revolutionized world trade – dramatically cutting transit times from Europe to Asia by eliminating the need to sail around Africa’s Cape of Good Hope.

It has served as the lifeblood of Egypt’s economy for almost 150 years, now generating billions of dollars in annual revenues, and a profound source of national pride.

Officially inaugurated on August 6, the New Suez Canal, the first major expansion of the waterway in its 146-year history, has been hailed as the “megaproject of the century” and a symbol of the new Egypt.

Construction time for this monumental project was initially estimated at three years. But last year President Abdel Fattah El-Sisi promised in a televised speech that it would be completed in just one year.

He has managed to keep this promise thanks to a hugely successful and well thought-out financing strategy, as well as the hard work and diligence of the 41,000 workers involved in its construction, who labored around the clock to move half a trillion cubic meters of earth – the equivalent to moving 200 Great Pyramids.  

“We will lift our country on our shoulders,” President El-Sisi told the nation in his televised address, promising that “Egyptians will experience a new economic era that will depend on the strength of people and the project will be owned by Egyptians.”  

The president invited the public to have a direct stake in the New Suez Canal. As a result the Egyptian people completely funded the project, investing $8.5 billion dollars in just eight days through the purchase of tax-free investment certificates offered by state banks for as little as 10 Egyptian pounds (around $1.30).

The new 45-mile lane that opens today will allow ships – including the world’s largest container ship, the colossal Maersk Triple-E Class – to travel simultaneously in both directions for the first time.

This will double the daily vessel capacity from 49 to 97 and reduce total navigation time from 22 hours to 11 hours. At the same time, six new road and rail tunnels linking the Sinai Peninsula with Ismailia and Port Said have been dug underneath the canal, which will significantly boost connectivity between both sides of the waterway. 

Mohab Mameesh, Chairman and Managing Director of the Suez Canal Authority, has said the new canal will more than double annual revenues from $5.4 billion to $13.5 billion by 2023, further strengthening its vital role as one of the country’s principal sources of foreign currency along with tourism.

But the canal expansion is just the beginning of a much more ambitious scheme. The master plan for the Suez Canal Zone (SCZone) project is a comprehensive long-term development strategy that aims to turn the waterway’s environs into a world-class transport, logistics, commercial and industrial hub – providing strategic access to a market of 1.8 billion consumers, including Egypt’s large and growing domestic market of around 90 million people enjoying rising standards of living and purchasing power.

“The Zone should create an industrial awakening. In different locations, we have a total area of 460 square kilometers that we’re developing” 

Yehia ZAKI, 
Director of Operations, Dar Al Handasah

 

The government believes that over the next fifteen years, the SCZone will have the potential to create one million jobs and generate $100 billion in annual revenue.

“This project will represent 30-35% of Egypt’s new economy,” says Minister of Investment Ashraf Salman, who is confident that it will attract $220 billion in investments over the same time period. 

“The Zone should create an industrial awakening. In different locations, we have a total area of 460 square kilometers that we’re developing,” says Yehia Zaki, Director of Operations at Dar Al Handasah, the Lebanese-based engineering and consulting firm that developed the master plan, which was presented to investors and dignitaries from around the world at the Egyptian Economic Development Conference in March.  

“There are certain areas of committed projects and developments. Part of our strategy is to honor whatever is already operating and integrate it into the master plan. We have very strong reasons to believe that industry can act as a hub in the area.”

In order to turn the area along the Suez Canal into a logistics and industrial hub, the master plan focuses on three main development sites: Port Said at the northern mouth of the canal opening onto the Mediterranean; the city of Ismailia and its surroundings, which will be the administrative center for the SCZone; and Ain Sokhna, situated on the southern end of the canal along the Gulf of Suez.

“The master plan covers the areas around the new canal, including six ports and Ismailia’s ‘Technology Valley’, and the integration of the ports’ operations and infrastructure so all the services function in a complementary and fully integrated manner,” adds Mr. Zaki.

According to the General Authority of SCZone, East Port Said will be transformed into a major transshipment hub and a thriving gateway port with a dedicated multi-modal logistics facility generating over 105,000 jobs.

Already one of the world’s busiest ports, development of 2,600 hectares for storage and logistics services will further increase its international standing.

This development will include: fully integrated container terminals which will increase container capacity by 20 million TEUs (standard 20-foot container) by 2050; a large-scale multipurpose general and dry bulk terminal; a dedicated area for automotive products; and a liquid bulks terminal, which will accommodate five megatons of different liquid bulk commodities, such as liquefied natural gas (LNG). 

Close to 4,000 hectares around Port Said have been earmarked for light and medium manufacturing activities, including: agribusiness and food processing; automobile parts assembly; construction and building materials; pharmaceuticals; electronics; and textiles.

Space will also be allocated for business, commercial, and R&D activities. Authorities say this will create more than 80,000 jobs.

Residential areas will be developed to host the influx of new workers around Port Said, as well as supporting social and community infrastructure.

Already known as “The City of Beauty and Enchantment”, Ismailia will also become “Egypt’s Silicon Valley”, where the focus will be on hi-tech activities such as R&D, ICT and renewable energy development.

Agri-processing, logistics centers, a dry port and other light manufacturing facilities will also be developed just north of Ismailia in Qantara, while construction of urban areas in Qantara and New Ismailia City will have the capacity to host over 350,000 residents. 

The third development node, Ain Sokhna Port, will become home to one of the largest industrial and port complexes globally and a strategically located gateway to some of the fastest growing regions in the world: East Africa, the Gulf and Asia. 

Like Port Said, 4,000 hectares will be available for light and medium manufacturing activities such as automobile parts assembly, construction and building materials, electronics, food processing and textiles. 

A further 2,260 hectares will be allotted for heavy industries including oil refining, petrochemicals and energy component manufacturing. The highlight development in this industrial zone will be local company Carbon Holding’s $7bn petrochemical complex, which is expected to create approximately 100,000 direct and indirect jobs and generate annual revenue of $6bn.

“We have a number of projects that are surrounding the new Suez Canal expansion project.  We expect the impact of the project to be very large for both the country and our company” 

Magdi Moheb Kassabgui, 
Chairman of the Board, Reliance Investments

Around Ain Sokhna Port’s environs, a central business district for commercial and retail activities will be developed, as well as a business and R&D park.“By moving into the industrial zone south of the Suez Canal, you are looking at many logistics operations being based there. The fact that there is logistics means there will be warehousing – meaning that eventually, there will be manufacturing. For a company like ours that produces a variety of petrochemical products, these manufacturers are going to require the products that we produce,” says Carbon Holdings Chairman and CEO Basil El-Baz, who believes that the SCZone “is not just a very good project, but a necessary project in this specific time in Egypt’s history”.

Mixed-use residential developments will occupy more than 1,500 hectares, while around 110 hectares have been earmarked for social and community facilities, such as schools and health centers.

Indeed achieving the vision for this landmark project will require significant investments in infrastructure that will connect each development node to the wider region.

Mr. Zaki says that $15 billion will be invested through 2030 in power, water, desalination, and sewage to meet rising demand. For power production, emphasis will be given to the harnessing of clean and renewable resources such as wind, solar and biofuels. 

The master plan also contains proposals for a road and rail express ways linking East Port Said to Ismailia and onto a new inland dry port situated at 10th Ramadan City.

The transport arteries running through the development nodes of the SCZone will also connect to Cairo and the New Capital City, with international air links provided by Cairo airport and potentially by Port Said Airport.

There is no doubt that the SCZone project is Egypt’s most ambitious development project to date – a project that is going to require substantial investment from the private sector.

But with so many free trade zones, shipping hubs and special economic zones in the region and around the world available to investors, what makes the Suez Canal Expansion Project and Suez Canal Zone stand out amongst the competition? 

“Firstly, among our studies that examined other areas around the world with similar projects, a certain study in particular gives assurance about the viability and attractiveness of the Suez Canal Expansion and Zone Project.” replies Mr. Zaki. “

Secondly, investors have been knocking on our doors and asking about it from an early onset. Everyone is quite interested and eager. There are a number of industrial developers that are holding their decision to build a new factory as they are waiting for the Zone to be integrated. Interested parties have done their homework, which makes us feel more confident.”

Local firms set to cement the SCZone’s success

Perfectly positioned to prosper from the billions of dollars being pumped into the construction of the SCZone and its related infrastructure work is Suez Cement, the country’s leading cement manufacturer.  

With an industrial network of five production facilities in Suez, Kattameya, Tourah, Helwan and El Minya, the company produces approximately 12 million metric tons of clinker, or lump cement, per year. 

“Cement is the backbone of any production and for a country like Egypt that is on the verge of taking off, you will find that the construction business is the first that shows a result,” says Suez Cement Chairman Omar Mohanna.

“We took advantage of the dormant period in activity here in Egypt to equip ourselves for better days. Those days are coming” 

Omar mohanna, 
Chairman of Suez Cement

“We took advantage of the dormant period in activity here in Egypt to equip ourselves for better days. Those days are coming and our responsibility is to meet the market demands and expand.” 

Among the steps taken were upgrading manufacturing processes to meet international environmental standards and expanding the company’s production of the right kind of cement required for the more modern building techniques expected for the Suez Canal projects.

As the SCZone becomes one of the world’s premier transport and logistics hubs, local companies offering freight services also stand to benefit greatly from the project’s development.

One such company is Reliance Logistics – a subsidiary of Reliance Investments – which will be in a prime position to offer logistics, maritime freight and trucking services to the influx of potential new clients operating along the Suez Canal corridor. 

“Logistics is an important sector that needs to be developed in Egypt and as a group we have a mission to try and develop new concepts of logistics in a number of sectors and industries,” explains Magdi Moheb Kassabgui, Chairman of the Board of Reliance Investments.

“As far as the Suez Canal is concerned, we believe that we need to look at it with a different concept. Warehousing is going to be extremely important there. We need to create a logistics hub in the Suez Canal region where we can serve several industries.

“We have a number of projects that are surrounding the new Suez Canal expansion project.  We expect the impact of the project to be very large for both the country and our company.”

Like Suez Cement, Reliance Investments is also set to take advantage of the demand for locally produced cement as construction of the SCZone project goes into full swing – through its subsidiaries Reliance Ready Mix and Reliance Cement Trading. 

“There is optimism and appetite to focus on the opportunities in Egypt,” adds Mr. Kassabgui, “whether they are related to infrastructure, logistics, or the Suez Canal. The latter is opening doors for many projects.”

 

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