Thursday, August 06, 2015

Egypt's New Suez Canal

I have never actually thought the Suez Canal project, in its own right, was a priority for Egypt and highly doubt the economic viability for it, I don't think the project will generate the payback that has been promised by its champions. For one, the drop in oil prices is not good for the Suez Canal and will probably trigger a fall in the revenues of the Canal. I doubt that in the next five years the project will prove winner on standalone basis.

What is undeniable however, is the economic recovery that Egypt has witnessed since the very dark days of last winter of 2013/4. By the time the curfew that lasted many months was lifted in November of 2013, the economy was in tatters with virtually zero new investment, unemployment at sky high levels and the Egyptian consumer culture was badly shaken, confidence was at an all time low.

The Egyptian opposition has a great deal of legitimate criticism towards the Sisi regime in the areas of human rights and in the lack of transparency in the so called Egypt's War on Terror. The Sisi regime has created a totalitarian feel in the county with a 1950's flavor. There is no shortage of areas to criticize Sisi on, but where the Egyptian opposition, Muslim Brotherhood and the cadre of orientalist and novice reporters lose credibility is on the economic front.

There is little doubt that the management of the economy since these horrible days in the winter of 2014 has been excellent. What the Suez Canal  project did was truly amazing, it acted as stimulus for the economy and a confidence booster for the nation. the economic turnaround has, by any measure, been impressive. From total stagnation, Egypt saw GDP growth topping 4%. 

I have been critical of some aspects of financing the Suez Canal project through fixed interest bonds, that made it politically impossible for the Central Bank to raise interest rates to support the Egyptian Pound instead of opting for the economy choking currency controls. That aside, the proof is in pudding, the economic benefit is clear for all those who want to see.

Yes, a military guy with clear authoritarian tendencies, cavalier attitude towards human rights,  horrible ad hoc public speech giving skills, and who has worrying populist tendencies can actually lead and deliver an economic recovery! Criticise what should be criticized and praise what should be praised or at the very least remember that: silence can be golden if you can't accept the truth.

Ayman S. Ashour