On August 5th, Egypt announced the commencement of a project to dig a new canal lane running parallel to the existing Suez Canal in an effort to expand trade and speed up traffic transiting through the existing waterway. The project is also expected to increase the number of ships that use the waterway each day, and generate income to boost the struggling Egyptian economy. Revenues from the Suez Canal, which total about $5 billion every year, are a crucial source of foreign currency for the Egyptian economy, which has seen a sharp decline in tourism over the past few years since the 2011 uprising. The project, which is estimated to cost $4 billion, is thought by officials to be capable of creating up to 1 million jobs in Egypt, and will coincide with a related project to develop the surrounding port and storage facilities in the Suez Canal area. Both projects have been planned for years to develop the area around the Canal and generate more income.
Currently, the Suez Canal, which carries about 12 percent of all international trade and allows ships to travel from Europe to Asia without sailing around southern Africa, only provides one-way traffic. However, the new 45-mile lane would allow ships to travel in both directions for just under half of the Canal’s 101-mile span. Further, the project is expected to reduce the maximum waiting hours for ships from 11 hours to three hours. Egyptian officials have set an ambitious schedule for the project, stating they would like to complete the project by mid-2015.
Egyptian President Abdel Fattah El-Sisi has stated that the project will not depend on foreign funding, and would be financed through the offer of 500 million shares to Egyptians only. However, other sources indicate that shares may be offered to non-Egyptians at a premium rate of $100 per share.
Although the project and related development of the surrounding area have been touted as a way to boost revenues and expand the capacity of the Canal, some analysts are skeptical that the expansion project will have such an effect. In particular, one analyst notes that because capacity will be expanded for only part of the length of the canal, it is not clear how much of an effect this will have on the Canal’s overall operations. Others note that the Canal will not be deepened to allow fully-laden supertankers to pass through the canal. Egyptian officials, however, are bullish on the project, estimating that the new Canal lane will increase annual revenues to $13.5 billion by 2023.