Two weeks ago, parliament passed a bill that gives the Suez Canal Authority (SCA) greater flexibility in managing its financial assets, enabling it to enter partnerships with the private sector.

The bill, which allows the SCA to establish a fund to optimise the use of its assets, triggered outrage among some intellectuals and politicians who interpreted it as paving the way for the sale of the canal. In a statement responding to such suspicions, Parliamentary Speaker Hanafi Gibali said that “while such concerns are legitimate… it is important to clarify the situation.”

The new legislation contains no provisions that violate Egypt’s sovereignty, ownership, and control of the canal, he said. It is a public asset that, under Article 43 of the constitution, cannot be sold or otherwise disposed of. That article “obliges the state to protect and preserve the canal as an international waterway owned by the state and develop the canal zone as an economic hub.”

SCA head Osama Rabie was also keen to allay concerns.

“The purpose of the law is to establish a fund to increase the SCA’s ability to develop, sustain itself and respond to economic shocks,” he told the press. “The SCA does not own assets. It sends all its revenues to the treasury. There was a pressing need to create a fund to allow development of the canal to be financed by its surplus revenues.” The fund, he added, will be used to finance mega projects in, for example, green energy production and shipbuilding

The fund, clarified Gibali, “will do all what investment funds do — that is selling, buying, and leasing fixed and mobile assets in order to generate more income for SCA.”

Plans to develop the Suez Canal Zone began well before the bill was drafted. In 2002 a law was issued establishing the Suez Canal Economic Zone. It was amended in 2015 to provide for the addition of four industrial zones and six ports.

Developing the Suez Canal region has been a subject of discussion since construction of the waterway began in 1859. In the proposals he submitted to khedive Ismail, Ferdinand de Lesseps included plans to install lighting along the banks of the canal to facilitate navigation and the provision of services to ships at night, making it possible for traffic to continue around the clock.

The latest plans for developing the Suez Canal Zone, posted on the website of the Organisation for Urban Planning and Development, reviewed the relative merits of agricultural versus manufacturing, commercial and service industry development. Planners generally favour the latter. The National Strategic Plan for Urban Development for 2052 includes proposed geographic boundaries for the Suez Canal Zone spanning the governorates of North and South Sinai, Suez, Ismailia, Port Said, and Sharqiya, and suggests novel administrative entities and arrangements that could facilitate development plans.

Bassem Fahmi, a former project director for UN Habitat, says developing an economic region around the Suez Canal must take into account not only the location but legislative and governance frameworks and management mechanisms.

“The Suez Canal should be treated as an economic zone, not just as a maritime corridor. We need to look at it as a comprehensive development project.”

It is important, he said, to study the area’s potential ability to compete with such projects as Neom in Saudi Arabia, Jebel Ali in Dubai, and even Panama and Singapore. Activities need to be established that attract people and offer job opportunities, and ways to provide incentives to transnational firms with direct access to world markets incentives to base themselves in the area must be explored. Incentives could take the form of usufruct arrangements for a set number of years with contractual stipulations obliging the entities to develop the area in ways that help realise development aims, create jobs and increase the area’s competitiveness.

Administrative systems need to be free of complexities and routine. “Routine is not bad, in and of itself,” says Fahmi. “Following the 25 January Revolution, it was routine that kept the government functioning. But new mechanisms are needed to serve Egypt’s development strategy. Any entity established to administer development in a particular economic region should be subordinate to a particular minister who is responsible for keeping activities in line with the overall comprehensive development plans of the state.”

Development plans for an economic sector may require legislation to be tailored to the developmental requirements of the targeted region since failure to take local conditions into account could result in legislation hampering development. The legal framework must be flexible and incorporate provisions designed to advance the implementation of Egypt’s international trade agreements.

It is important to draw on experiences elsewhere in the world which will help avert mistakes when setting up the system. This applies, in particular, to identifying the global value chains into which the economic zone is to be integrated, which in turn entails identifying sources of raw materials, primary components and potential markets.

Abbas Al-Zafrani, former dean of the Faculty of Urban Planning at Cairo University, suggests that developing the Suez Canal economic region should concentrate on the southern and northern gateways to the canal.

“These points are where ships stop to obtain logistical support. The desert hinterland around Suez and Port Said could become hubs for developing the Canal Zone in general, and the initial focus should be to generate incentives that attract logistic companies, shipbuilding, storage and packaging services, and assembly plants for electric equipment, household machinery, cars, and other industries. All these things will generate surplus value while boats and containerships transit the canal.”

Al-Zafrani advises against partnering with too many foreign entities when it comes to the provision of logistic and transport services, warning it “could lead to competitors in other shipping centres attempting to obstruct logistics projects in the zone until they secure advantages that will give them a competitive edge”.

“When we look at international trade before the Suez Canal and the discovery of the passage around the Cape of Good Hope, Mediterranean trade with the Orient was centred on Alexandria. Goods were transported from there to Suez where they would be loaded onto ships bound for the coasts of East Africa, the Indian Ocean and the South China Sea. Cairo, located between Alexandria and Suez, burgeoned economically as a midpoint in this global commercial highway.”

“Any new activity introduced into plans for the development of the Canal Zone should aim to serve international trade as well as augment Egypt’s manufacturing ability, even if it starts by assembling components made in China for products that are then shipped to European markets.”

* A version of this article appears in print in the 5 January, 2023 edition of Al-Ahram Weekly