Project Management Institute

Egypt, renewed

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“The country has been going through continuous turmoil, facing one of the greatest social crises. The Suez Canal has a very strong symbolic value for many Egyptians.”

—Amr Adly, PhD, Carnegie Middle East Center, Cairo, Egypt

From the great pyramids to the Suez Canal, Egypt has a long history of planning grand projects—and pulling them off. However, ambitious new plans by Egyptian President Abdel-Fattah el-Sissi to lift Egypt out of its post-revolution slump are meeting skepticism.

That’s because Egypt also has a historic track record of bureaucratic delays, corruption and project mismanagement, all of which have been exacerbated by the country’s recent political turbulence. Former President Hosni Mubarak worked 14 years on an unfinished desert reclamation project whose name, Toshka, has become synonymous with grandiose government-led megaprojects.

“There’s an air of unreality to the grand project idea, and it’s remarkably consistent going back to the early 1950s in how the military has thought about the economy,” Robert Springborg, who studies the Egyptian military, told Bloomberg Businessweek.

Aiming to buck this trend, President Sissi has proposed investing US$140 billion in projects ranging from new tourist destinations and airports to development of desert land. It’s an ambitious figure for a country whose gross national income just two years ago was US$259 billion.

Digging the Way Out

The cornerstone of President Sissi’s plan is a major expansion of the Suez Canal, a powerful economic engine for Egypt.

The president wants to build a second lane for the canal, which serves as the shortest path for Asia-bound vessels leaving Europe, to allow for two-way traffic. That would dramatically expand the canal’s capacity, more than doubling its annual revenue from US$5.3 billion to over US$13 billion. The project would also bring an estimated 1 million jobs to a country plagued with rampant unemployment since the 2011 revolution.

“The country has been going through continuous turmoil, facing one of the greatest social crises. The Suez Canal has a very strong symbolic value for many Egyptians,” says Amr Adly, PhD, a political economist and scholar at the Carnegie Middle East Center who’s based in Cairo, Egypt.

Fifty companies led by army engineers began work on the project in August. The initial plan called for completion in three years at a cost of US$4 billion to US$8 billion, but President Sissi has since asked project leaders to finish it in just one year.

A pilot boat leads a tanker carrying liquefied natural gas through the Suez Canal

A pilot boat leads a tanker carrying liquefied natural gas through the Suez Canal.

1 million

Jobs estimated to be created by adding a second lane to the Suez Canal

US$1 billion

Egypt’s planned investment in large solar energy projects

US$40 billion

Cost of a program to build 1 million homes in Egypt

President Sissi has proposed investing US$140 billion in projects ranging from new tourist destinations and airports to development of desert land.

 

Solar panels in Egypt

Solar panels in Egypt

How such a quick timeline will be met is just one of the questions looming over the project. Another is financing. President Sissi is gaining populist buy-in for the project by issuing certificates backed by the finance ministry that allow individual Egyptians and expatriates to invest in the initiative. He has said the canal-expansion project will be funded solely by Egyptians.

“The banks could easily finance this through loans. The Sissi government wants to mobilize popular support and middle-class savings,” Dr. Adly notes.

Still, it’s unclear whether the government, which has been enacting austerity measures, will be able to supplement the money raised by citizens, Dr. Adly says. Equally uncertain is how the timeline for raising funds will affect the project’s completion.

“Though daily hardships are as they are, the government is trying to give the people a sense of purpose.”

—Amr Adly

Past national megaprojects have failed largely because the government did not do its due diligence, Dr. Adly says, warning that President Sissi risks the same outcome if this project isn’t properly managed. “The way decisions are made and the way plans are set, the state is too insulated from the reality on the ground,” he says.

An analysis of the project published by the Middle East Institute cautions that project managers must anticipate problems. Each implementation phase will introduce new challenges, requiring flexible management by project leaders, the study notes.

Foreign investors in a dozen nations have shown interest in investing in projects related to the canal expansion. In addition to the 72 kilometers (45 miles) of waterway being added to the canal, plans are underway to build an industrial zone alongside the canal for companies and tourists.

A Sense of Purpose

President Sissi’s planned projects extend well beyond the canal. The president is also reviving a plan to build a technology valley in nearby Ismailia, which would serve as an industry hub.

While Egypt has benefited from technology outsourcing in the past, that business greatly eroded when companies pulled out amid the recession. Yet President Sissi and private investors are banking on its return. In August, Egypt signed an agreement with the International Data Corporation to help Egyptian companies find opportunities in other African markets.

President Sissi’s plans also include green projects. In 2014, the government announced it would invest US$1 billion in the development of large-scale solar energy projects. They’re part of an effort to overcome the country’s energy crisis and spur job growth by increasing the use of renewable energy from 1 percent currently to 20 percent by 2020. Wind projects are slated to account for 12 percent of Egypt’s planned energy portfolio.

Private investors, too, largely from Gulf states, are helping rebuild Egypt’s economy. Arabtech, based in Dubai, United Arab Emirates, has launched a US$40 billion program to build 1 million homes across the nation.

“Though daily hardships are as they are,” Dr. Adly says of the post-conflict nation, “the government is trying to give the people a sense of purpose.”
—Ambreen Ali

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

PM NETWORK FEBRUARY 2015 WWW.PMI.ORG
FEBRUARY 2015 PM NETWORK

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