The Union of Arab Banks (UAB) predicts that the New Suez Canal will have a major impact on the Egyptian and the global economy, according to a study issued by the UAB’s Research Department.
The UAB explained that the Suez Canal is the most important international waterway, and that digging this canal aims to attract hard currency, and provide additional income from transiting fees. It also aims for the establishment of mega-projects on both sides of the canal, and to provide job opportunities for young people.
The union predicted the Suez Canal Axis Development Project will create nearly 1.5m jobs. The preliminary required investment estimates for this project is $100bn.
It added that the canal digging cost $4bn. As for the establishment of six tunnels (three in Port Said, and three at Ismailia) to link the west of the canal to its east – as part of the axis project – is estimated to cost $8.2bn, and will take two to three years to complete.
According to the UAB’s Research Department, the Suez Canal is the fastest maritime waterway between Europe and Asia, and its revenues constitute a major source of foreign currency for Egypt.
It explained that the canal recorded its highest revenues during fiscal year (FY) 2013/2014 since its opening in 1869. During that year, the total revenues amounted to EGP 37bn ($5.3bn). Compared to the previous FY, this represented an increase of 5.5%.
The study added that method of collecting fees from vessels transiting at the canal depends on the principle of the currency basket (SDR). This includes four main currencies that are weighted differently, in order to minimise the risk of currency fluctuations: the US dollar at 44%, the euro at 34%, the Japanese yen at 11%, and the sterling pound at 11%.
The aim of the development of the Suez Canal, according to the UAB study, is to expand international maritime transport, intensify it, and increase its economic revenues. The expansion project aims to develop the canal as a waterway and increase its capacity to 97 vessels per day by 2023, compared to the current average, which stands at 49 vessels per day.
The UAB study further highlighted that the Egyptian government’s expansion project is expected to increase its revenues from $5.3bn to $13bn by the year 2023.
It added that the Suez Canal Axis Development is based on three phases, and aims to transform the axis into an international manufacturing and logistics hub, as 10% of the world’s goods and 20% of its containers go through the canal.
It explained that the first phase of the project includes the development of the ports of Port Said and Suez. This phase ends in 2017, and aims at establishing a transhipment hub, to make the canal’s ports a trade repository for the world. Two international storage areas will be established. The first of them is in east Port Said to serve giant ships and reduce their cargo between Asia, Europe and North America. The second will be in Ain Sokhna, to serve ships between Asia, Africa and Latin America.
The union added that the second phase of the Suez Canal Development Axis aims to establish a free industrial zone, as well as a logistics storage area. This phase ends in 2022, and is expected to achieve revenues of $100bn.
The third phase, according to the union, targets the establishment of a global facilities centre to take advantage of the time difference between the East and the West. Ismailia was selected to host this phase due to its location between the ports of East Port Said and Ain Sokhna. A major city will be built in Ismailia and will include a variety of residential areas, hotels, and an airport, as well as huge conference and exhibitions rooms to promote conference tourism. This phase is expected to be completed in 2030, and should double revenue to about $200bn.