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The global meltdown (and a few pirates) squeeze an Egyptian cash cow.
CAIRO — The Suez Canal has always meant more to Egyptians than the revenue it generates. Whether it was the construction of the canal in the mid-19th century, its nationalization in 1956 or the fact that it served as a battle site in the 1973 war against Israel, the canal, to many Egyptians, represents an important chapter in their land’s storied history.
Since then-Egyptian President Gamal Abdel Nasser announced Egypt would nationalize the canal and strip the British of their dominion over it, the Suez has provided a steadily increasing stream of revenue for the Egyptian government.
In 2004, President Hosni Mubarak installed a new economically minded government that has found ways to send canal revenue soaring, and has made the canal a more integral part of the economy here.
Rising oil prices also contributed to the increase in revenue. “As oil prices went up, the canal was able to raise its fees without adding that much to the total cost,” said Omar Radwan, executive director for asset management at Egyptian investment bank HC Brokerage.
But a decline in global trade and the recent boom in high seas piracy have sent income from the canal plummeting and generated worry among economists and government officials alike. (Read about world leaders discussing taking the pirate fight to land, about how to stop the Somali pirates, and about how Somali piracy emerged.)
After tourism and remittances from abroad, the Suez Canal represents the third-largest source of revenue for the Egyptian government. But the government recently announced that the canal's March revenue was 21 percent off March 2008 levels. The government reported $327.9 million in revenue last month, with 1,439 ships passing through the nearly 120-mile long waterway. The government collects revenue based on the tonnage of each ship passing through.
And this is just a continuation of a longer trend. Revenue reached its peak in October of last year and has trailed off sharply since, with February numbers producing the lowest monthly revenue figure in years.
Though both the economic recession and piracy off the coast of Somalia are to blame for the decrease in canal traffic, most experts agree that weak international trade is primarily responsible.
“With this piracy, you will have some cargoes avoiding the Suez. You’ll find some ships going around the Cape of Good Hope,” said Magdy Sobhy, an economist for Egyptian think tank the Ahram Center. “But mostly, the slowing has come from the recession.”