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How Egypt lost the Suez Canal

When built, the Suez Canal contributed to transforming desert into an economic hub. But capitalist-imperialist schemes prevented Egypt from benefiting from the infrastructure it created

Wael Gamal , Sunday 19 May 2013
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1.

“The journey seeks to dig a canal in a desert covering thousands of miles to connect the Red Sea with the Mediterranean Sea, which would make Europe the neighbour of India and shortens the distance to it. This is the task Father Prosper Enfantin wants to accomplish with men of great destiny even though they are short on financial resources.”

The French newspaper L'Echo de la Fabrique which is closely associated with Saint-Simonians*, 15 September 1833 (from Fawwaz Tarablousi’s book Steel and Silk: From Mount Lebanon to the Suez Canal.

2.

“Since the beginning, Mohamed Ali objected to the Canal project and did not want it because of what he anticipated as serious repercussions. He was not responsive to European engineers and financiers who sugar coated the project, deflecting them off gently with wisdom, promising and giving them hope. But he continued to hold off on the project until the end of his reign.”

Abdel-Rahman Al-Raf’ie, Egypt Endeavours in Modern History: From the Reign of Mohamed Ali until Saeed.

3.

In 1846, a meeting took place at the home of Enfantin on Rue de Triomphe in the Ninth District, Paris attended by Arles-d’Ivoire and businessmen from Germany and Britain. It concluded by creating the “Suez Canal Studies Company” with a capital of 150,000 French francs. Its headquarters would be at the home of Enfantin who began the meeting with a long speech about the sacrifices his group has made since 1833 for the canal. He concluded with a statement that clearly demonstrates the incredible transformation in the vision of the project’s mastermind: “Gentlemen, the Suez Canal is no longer a mere philosophical theory or a political matter. It is a trade transaction.”

Fawwaz Tarablousi’s book Steel and Silk: From Mount Lebanon to the Suez Canal.

4.

“Ferdinand de Lesseps wrote to his friend and disciple, who loved to eat macaroni (Mohamed Saeed, who became the ruler of Egypt), and the Khedive invited him to visit Egypt where he was warmly welcomed. The 'chief engineer' convinced the Khedive that the canal would boost Egypt’s independence and immunity from the Ottomans. No single European power would be allowed to control the project, and it would be under the patronage of European countries combined. He also highlighted the personal glory Saeed would receive for building the Suez Canal. De Lesseps said the Canal would make Egypt a world trade hub between East and West, and would generate revenue and wealth many fold more than crops, including cotton.

“Thus, de Lesseps won sole concession to dig the Canal and established the Universal Company of the Suez Maritime Canal for this purpose, with a 10-year franchise that begins when the Canal is completed. All costs of constructing the Canal would be footed by the company, and then the Egyptian government would pocket 15 percent of the company’s annual profits, 10 percent would go to the founders, and the remaining 75 percent divided among shareholders.”

Fawwaz Tarablousi’s book Steel and Silk: From Mount Lebanon to the Suez Canal.

5.

“When the company finished its studies, de Lesseps presented the study to Saeed Pacha and he signed the second concession contract dated 5 January 1856, ratifying the previous franchise to de Lesseps, including concessions to the company that were so flagrant no rational government seeking to protect the interests of the country would accept.”

These conditions included a waiver on the price of the land and buildings needed to build the seawater canal, freshwater canal, two branches for irrigation and drinking, and two kilometres on either bank of the canal. These were all tax exempted and the company had the right to annex land from individuals as necessary for construction, it also had mining rights at government mines and quarries for all construction and maintenance needs for free.

It also obligated land owners to receive a license from the company to irrigate their land in return for a fee. The concession was for 99 years and so digging of the Canal began on 25 April 1859.

Abdel-Rahman Al-Raf’ie, Egypt Endeavours in Modern History: From the reign of Mohamed Ali until Saeed

6.

“When Saeed died in 1863, Egypt had a debt of nearly eight million pounds sterling to be paid over 30 years, and another one million to be paid over three years, along with several short-term debts worth about nine million pounds sterling. The total sum of Egypt’s debt floating and fixed (ie short and long term) amounted to nearly 19 million pounds sterling when Saeed died, or nearly five times the revenue of the Egyptian government in the year prior to his death.”

Galal Amin, The Story of Egypt’s Economy from Mohamed Ali until Mubarak.

7.

Khedive Ismail (who succeeded Saeed) was shocked by the brazen concessions to the company, and began negotiations to ease them, most notably “reducing the number of labour the government must provide to the company to 6,000 because the current number (at 20,000) harms the country and agriculture. Also, increasing their wages to two francs a day per worker,” and cancelling the company’s land concession. The company objected and sought arbitration in France which ruled against Egypt and fined it 3.36 million pounds, or almost half the capital of the company. “Thus, all the phases of the project since the beginning until after its completion were disastrous for the country.”

Abdel-Rahman Al-Raf’ie, Egypt Endeavours in Modern History: From the reign of Mohamed Ali until Saeed.

8.

The goal of 19th Century expos was, similar to modern-day Davos, to bring industrial and trade leaders closer together “to transform the world into modern capitalist production and exchange. Michel Chevalier, chief editor of the Saint-Simonian Globe newspaper, defended the expos for the same reason he defended constructing canals in Panama and Suez: to open up the world to the free trade of goods.”

“After the success of the Paris Exposition in 1855, an international expo was held in Istanbul itself to promote capitalist production and marketing. Egypt followed one decade later after the Paris Expo of 1867. The Egypt Expo was timed with the inauguration of the Suez Canal that was built under the supervision of Saint-Simonian engineer de Lesseps, which confirmed the importance of Egypt to global trade. The expo took the shape of a new city modeled on European style where the roads were built hastily next to Cairo districts, and sometimes traversing them.”

Timothy Mitchell, Colonising Egypt.

9.

“Thirteen years after Ismail’s reign, in 1876 the year when Egypt lost control of its financial administration which came under the control of foreign financial monitors, Egypt’s foreign debt reached 91 million pounds.”

Galal Amin, The Story of Egypt’s Economy from Mohamed Ali until Mubarak.

10.

“In 1875, European bankers declared Egypt bankrupt. Ismail sold Egypt’s shares in the Suez Canal to pay back debts, which were mostly bought by British Prime Minister Disraeli with a loan from the Rothschild family. Thus, Britain became the largest shareholder of the Canal, owning 44 per cent of shares. Disraeli told Queen Victoria the news: ‘The Canal is now yours, majesty. Egypt’s share is no more than 15 per cent of profits which generates no more than one million francs annually.’ Soon France bought this right from his successor Khedive Tawfiq, and so Egypt lost its entire share in the Canal.” In 1881 “the British defeated Orabi’s troops at Tal Al-Kabir battle and Britain occupied the Suez Canal region and declared Egypt a protectorate.”

Fawwaz Tarablousi’s book Steel and Silk: From Mount Lebanon to the Suez Canal.

11.

“The impact of the Suez Canal cannot be denied in transforming the desert into an economic hub, accompanied by cities, ports and workforce, and the region was connected to the rest of the country via a network of roads. Nonetheless, concessions prevented the country from benefiting from the infrastructure it created. The Canal served the financial and strategic interests of the company, not the domestic economy, and therefore the Suez Canal is a model of all the discrepancies of the franchise system. It gives the country modern infrastructure but at the same time prevents the development of the local economy.”

Caroline Piquet, The Suez Canal Company’s Concession 1854-1956: Creating modern infrastructure, destroying the potential of the local economy.

12.

On 1 April 1882, the first recorded labour strike in modern Egypt began by miners from Upper Egypt at the new docks in Port Said, demanding higher wages. Miners were part of a formidable political movement in Cairo because of the Orabi revolution, and after months of negotiations and strike, they defeated foreign business owners by their cohesion and solidarity, before their movement was crushed with the defeat of the revolution in the face of British invaders. On 9 February 2011, two days before Mubarak stepped down, nearly 6,000 workers at the Suez Canal went on strike in Ismailiya, Suez and Port Said demanding higher pay and the abdication of the dictator during a revolution demanding freedom, social justice, development and national dignity.

13.

“There are 30 articles in the law that exempts this region of all regulations in force around Egypt. Its rules and regulations barely offer any alternative to regulate activity in this region. It is almost as if it were an invitation to the world, saying this region in Egypt that the law refers to is beyond the jurisdiction of Egyptian law and institutional agencies. And thus, anyone who wants to set up shop there is welcome to do as he pleases.”

Tarek Al-Bishri, "What does the Suez Canal Region Project mean?" published in Al-Shurouq newspaper 10 May 2013.

 

* Disciples of Saint-Simon, the French philosopher and economist (1760-1825), who advocated handing power to industrialists not scholars, since the former are the true leaders of the people and lead them in their daily activities. The nation, in Saint-Simon's worldview, is a large industrial workshop where difference of birth and descent evaporate and all that remains are differences in capabilities and knowledge.

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