The UAE's Ambition: Why Did the Establishment of the Suez Canal Holding Co. Raise Concerns among Egyptians?

Amidst the severe economic crisis in the Egyptian economy, the regime of Abdel Fattah el-Sisi is seeking to privatize government-owned companies. This alarming plan includes some sensitive sectors and areas, notably the strategic axis of the Suez Canal.

On June 7, 2023, the Egyptian Cabinet, led by Mostafa Madbouly, approved several detailed decisions, including the establishment of the Suez Canal Holding Company for Industries and Naval Services and Investments, with headquarters in Ismailia.

 

Controversial Decision

The government transferred the ownership of Canal Mooring & Lights and Port Said Engineering Works and Marine Construction from the Suez Canal Authority (SCA) to the newly established holding company as its subsidiaries.

What is noteworthy is that these two companies were transformed into business sector companies.

Since the main responsibility of the parent company (Suez Canal Holding Company for Industries and Naval Services and Investments) is managing the investments and assets of its subsidiaries, they can be put up for sale.

But this doesn’t stop there. According to a decision by the Prime Minister’s Office, the new company will have the right to merge and establish other companies.

The decision will be under the authority of the head of the Suez Canal Authority, Admiral Osama Rabie, one of the senior generals close to Sisi.

According to observers, the primary objective of this company is to attract foreign investment, particularly from the Gulf countries, especially since the United Arab Emirates has long-standing aspirations in the strategic Suez Canal area.

Egypt’s total commitments for the fiscal year 2022–2023, which started in July 2022, amount to a substantial $20.2 billion.

Of this considerable sum, an impressive $8.7 billion was slated for payment during the first half of the fiscal year, which concluded in December 2022, while the remaining balance is expected to be fulfilled in the first half of 2023.

These financial obligations underscore Egypt’s commitment to its economic and developmental endeavors, indicating its determination to meet its fiscal responsibilities within the specified time frame.

However, until June 2023, the Egyptian government has only managed to raise about $153 million, apart from traditional borrowing methods.

This was achieved through the selling of a 9.5 percent stake in state-controlled Telecom Egypt for 3.75 billion Egyptian pounds ($122.4m) in a move aimed at pushing forward the government’s privatization program. However, the government failed to sell most of the companies it listed on the stock exchange (32 companies) at the beginning of 2023.

 

Canal Authority Law

The general concern about tampering with the security of the Suez Canal and its ownership is not a result of the current situation but dates back to October 6, 2022.

It was when the House of Representatives approved the articles of a draft law presented by the government regarding the amendment of provisions of Law No. 30 of 1975, which regulates the Suez Canal Authority.

The draft law included provisions that faced objections from politicians and human rights activists, especially regarding the establishment of a fund owned by the Suez Canal Authority, under the pretext of developing the canal’s resources through the exploitation and maximization of funds to be placed in it.

Additionally, there was a second part concerning enabling the new fund to buy, sell, lease, rent, and utilize fixed and movable assets.

The final vote on the law was postponed indefinitely due to the widespread popular rejection of its provisions, which aimed to retain the majority of the resources of the Suez Canal Authority outside the general state budget and direct them toward what is known as “presidential development plans.”

The project proposed “establishing a fund for the Suez Canal Authority to contribute alone or with others in establishing companies or increasing their capital, as well as investing in securities, purchasing, selling, leasing, renting, and utilizing its fixed and movable assets.”

This sparked a storm of objections from various parties, including inside the Parliament itself, where several members objected to the new amendments, seeing their main objective as “selling assets owned by the Suez Canal Authority.”

For example, MP Atef Maghawry made televised statements in which he stated that “the resources of the Suez Canal are a major source for the Egyptian treasury, and they should not be deducted.”

Then, on November 7, 2022, the House of Representatives backtracked and postponed the final vote indefinitely due to the widespread popular rejection of the law.

As for el-Sisi, he addressed the Egyptian people directly in a speech on December 26, 2022, denying any intention to sell the canal.

However, he emphasized that “the state intends to list Suez Canal Authority companies on the stock exchange for Egyptians to purchase their shares.”

Nevertheless, media commentator Hafez Mirazi commented on the president’s speech in a tweet, saying: “It is not enough to reassure the Egyptian people that the state will not relinquish the Suez Canal. The President of the House of Representatives should issue a statement confirming that.”

He added: “Not only because his argument that selling shares of the canal fund does not mean selling the canal is weak, but also because Chancellor Hanafy el-Gebaly himself was the head of the Constitutional Court that allowed the transfer of Egypt’s ownership of Tiran and Sanafir.”

 

UAE and Ports

The debate about the buying and selling of the canal raises the question of who would have a keen interest in that strategically important area and who would invest in it.

The focus has been directed toward the United Arab Emirates due to its close alliance with the Egyptian regime, and considering that UAE President Mohammed bin Zayed is the biggest supporter of Sisi.

All of this is part of Abu Dhabi’s most significant project, which revolves around gaining control over global ports and maritime trade routes.

It is a fundamental desire that drives them to invest in challenging regions like the Horn of Africa in order to secure its ports.

They have done so in Eritrea or by exerting direct and indirect control over the most prominent Yemeni ports, such as Aden and al-Mukalla, as part of their involvement in the war against the Houthi rebels. These ports are located on the Red Sea.

In fact, Emirati academic Abdulkhaleq Abdulla, an Associate Professor of Political Science at the United Arab Emirates University in Al Ain, close to Mohammed bin Zayed, stated in an interview with Deutsche Welle on September 6, 2017, that the UAE manages a large group of ports around the world, starting from China in the east, passing through ports in Europe and Asia, and ending with ports in the United States and Latin America, amounting to approximately 78 of the most important, largest, and best ports in the world.”

Therefore, it was obvious for the UAE to direct its investment efforts in Egypt toward the Suez Canal region. The UAE is the fiercest competitor in the race to secure the largest possible share of investment opportunities in the Egyptian Suez Canal axis and the first to establish a foothold in this area in 2018 through the investments of DP World in the Egyptian Ain Sokhna Port, according to the Egyptian website Masr 360.

Now the Emirati direction seeks to inject new investments along the banks of the canal, which handles 10% of global maritime trade, according to the same source.

 

Obstacles and Concerns

However, if the UAE is the closest ally to Sisi and has invested billions of dollars in Egypt, what prevents Sisi from granting them exclusive access to the canal region?

Why did he postpone the project to regulate the Suez Canal Authority? And why is he resisting Emirati pressures to facilitate the procedures of sale and privatization?

Here, it cannot be ignored that a significant portion of the Egyptian military’s economic empire is now at stake, especially in the canal region and other ports, which is not an easy matter.

This was affirmed by Africa Intelligence on October 19, 2022, when it revealed that Mohammed bin Zayed urged Sisi to expedite the sale of Egyptian companies to Emirati investors.

This clearly indicates the existence of hesitation and obstacles on the Egyptian side in this context.

The French website explained the situation by stating that the Sovereign Wealth Fund of Abu Dhabi entered into fierce competition with Dubai Ports World, a subsidiary of the Dubai Emirate, to establish a foothold for Abu Dhabi in Egyptian ports.

This is part of Abu Dhabi’s plan to control major ports in the region, especially in the Red Sea, Bab al-Mandab, and the Horn of Africa, with the Suez Canal being of particular importance.

The internal Emirati conflict and greed for control over this area have caused hesitation among Egyptian generals and raised concerns specifically about the Suez Canal region.

Here, the role of army brigades becomes apparent. They are not pleased with the Emirati enthusiasm in the race among Gulf states to secure investments for themselves along the banks of the Suez Canal.

Additionally, the region is considered a security dimension for Egypt in its relationship with “Israel,” and it is a testament to Egypt’s strategic strength in the Red Sea region and global trade routes. Weakening the state’s grip on this area poses risks for the future.