Suez Canal Improvement Project

Suez Canal Improvement Project
Reasons for taking up this project

Egypt’s Suez Canal is a man-made canal connecting the Mediterranean Sea and Red Sea. The current canal, which was first excavated at the end of the 19th century by the former French diplomat Ferdinand de Lesseps, was later expanded in a series of improvement projects. Along with the Panama Canal, the Suez Canal is an extremely important waterway for global shipping. Approximately 10% of the world’s ocean freight moves through it.

The Japanese government assisted in the 1975 expansion of the Suez Canal by making a 38 billion yen loan for the first expansion project. Prior to that, however, Japanese engineering and construction companies had contributed to the expansion efforts in 1961 by contracting with the Suez Canal Authority.

The Japan Society of Civil Engineers is discussing the Suez Canal development project for the following reasons.

  • 1)Overseas development by Japanese companies is currently being promoted by both the public and private sectors, but Japanese companies earned a good reputation by winning major projects in Egypt soon after Japan started making yen loans in 1958.
  • 2)Moreover, in the wake of the oil crisis in Japan, these successes led to the yen loan-funded Suez Canal construction project (starting in 1975) and became early prototypes for Japanese official development assistance (ODA).
  • 3)Given the Suez Canal’s critical role in Japanese and global shipping, the accomplishments of ODA and Japanese firms have been remarkable, and we can see an extraordinarily broad spectrum of accomplishment on a regional level as well.
  • 4)Furthermore, in addition to the expansion projects made possible through yen-based loans to the Suez Canal Authority, there are many good examples of ongoing economic and technological collaboration, including development studies by the Japan International Cooperation Agency (JICA) and the transfer of unique Japanese technologies through the dispatch of experts.

1Project Background

Formation Stage
1869 The Suez Canal was opened to vessels of all nations.
1958 A Japanese ODA survey team was sent to ascertain the state of the canal.

After its excavation by de Lesseps, the Suez Canal was operated as a corporation. In 1875, however, Egypt handed over the operating company to Britain to satisfy its foreign debt obligations. Later, Egypt’s President Nasser nationalized the Suez Canal in 1956, which touched off the second Middle East War, sometimes called the Suez crisis.

Between the time it opened in 1869 and when the expansion projects began in the early 1960s, the Suez Canal was deepened from 10 meters to 15.5 meters; the maximum ship size it could accommodate went from 5,000 DWT to 80,000 DWT; and space for multiple lanes was added.

The Egyptian government came up with the “Nasser Plan” to develop the canal starting in 1960. This would turn the canal into a multi-lane waterway approximately 160 km in length.

A Japanese ODA survey team was sent to Egypt in 1958 to ascertain the state of the canal. This was the first action taken in the direction of Suez economic cooperation, and technology exchanges between Japan and the Suez Canal Authority progressed as Japan sent experts to Egypt and Egypt sent trainees to Japan from 1960 on.

Location of The Suez Canal
Figure 1: Location of The Suez Canal

2Project Chronology

Execution Phase
1961-1967 A project financed with Suez Canal Authority funds was undertaken.
1967 The third Middle East War broke out and the canal had to be closed after some large warships sank.
1975 The Japanese government assisted expansion of the Suez Canal by making a 38 billion yen loan for the first expansion project.
1977 Expansion of the Suez Canal continued under the aegis of economic cooperation, with an additional yen loan.
1975- Japanese government extended a significant amount of technological cooperation along with the economic cooperation. Cooperation, including a canal expansion plan, a safety navigation plan, Regional development plan, Tunnel and Bridge construction plan and so on.

2.1Development by the Suez Canal Authority in the 1960s

A project financed with Suez Canal Authority funds (hereinafter, the “SCA project”) was undertaken between 1961 and 1967. Japanese engineering and construction firms, which had no major overseas project experience at the time, won contracts for and delivered projects that involved major technological challenges, such as excavating bedrock that was much harder than originally anticipated. The projects progressed with difficulty, as the dredging ships that had been built for the project required many modifications. This became the basis for Japan’s dredging technology, which has since become highly regarded around the world. In addition, many engineers and workers, along with their families, were sent to the Suez, and the work was unprecedented from a logistics perspective as well.

The Japanese competed with many overseas firms for the first phase of the SCA project. But in the second and third phases, the Japanese firms won negotiated contracts, which was unheard of at the time. The first phase began in 1961, and the project was completed in 1967, after the second and third phases.

A fourth phase of the SCA project was planned. Yet, the third Middle East War broke out just when the contract was being awarded, and the Suez Canal had to be closed after several large warships sank in it, which brought construction to a halt and caused the construction firms to leave.

2.2Restarting the Project with Yen Loans

While the canal was closed, global ocean freight was forced to take alternative routes, and crude oil shipment, in particular, were impacted in many ways, and becoming one factor in the skyrocketing price of crude oil. Also during that time, ships became larger, and for Japan, an oil importer, the re-opening of the Suez Canal held great significance and became an urgent issue. The Japanese government (via the Overseas Economic Cooperation Fund (OECF)) provided a loan of 38 billion yen in 1975, which restarted the operation as phase one of the Suez Canal expansion project. This project involved several Japanese firms because of tied procurement terms. Previous minesweeping operations had been inadequate, so many mines and unexploded bombs from the Middle East wars had to be disposed of first. The scale was without precedent even among domestic Japanese construction projects, and a great deal of labor was expended before it was completed.

Expansion of the Suez Canal continued under the aegis of economic cooperation, with an additional yen loan from the Japanese government in 1977 and JICA-sponsored development plans (Suez Canal Phase 2 Expansion Plan Survey, 1980; Suez Canal Navigational Safety Plan Survey, 1986).

2.3Continual Technological Support in Conjunction with Economic Cooperation

Japanese government extended a significant amount of technological cooperation along with the economic cooperation it gave to the Suez Canal. Many cooperative projects were done in parallel with canal development and met with great success, including various kinds of technological cooperation to improve the management capabilities of the Suez Canal Authority, the sending of hydraulics experts to resolve the problems of sand drifts at the canal’s Mediterranean end, the construction of the Ahmed Hamdi Tunnel connecting the Sinai Peninsula with the Egyptian mainland and the Suez Canal Bridge, and a proposal to develop the Gulf of Suez region.

3Project Characteristics

3.1Long-time Partnership with the Suez Canal Authority and its link with Economic Effectiveness and Technological Cooperation

Development financed by yen loans and the concomitant technological cooperation of various types and over many years yielded results with respect to both the infrastructure and the operation of the Suez Canal. In addition, this process spurred technology transfer, so it is a prime example of the self-reliance that is characteristic of Japanese-style aid.

3.2Promotion of Japanese Companies’ Overseas Business

Construction projects by Japanese engineering and construction firms in the 1960s, along with the later expansion of Japanese ODA, became good case studies for overseas success by Japanese engineering and construction firms. Thanks to the yen loan-financed Suez Canal project and its tied terms, other Japanese engineering and construction firms, trading companies, and other businesses set up operations in Egypt. Although yen loans later became untied, then were subsequently tied again (through STEP, etc.) with changes in the international cycle, the Suez Canal project, which occurred at the beginning of ODA, was a strong impetus for many Japanese firms to venture overseas.

4Lessons Learned

4.1Appreciation of Japanese Cooperation

Behind the Egyptian government’s acceptance of Japanese ODA projects were the political relationships between Egypt and other countries during the conflicts in the Middle East. The existence of a relationship of trust between Egypt and Japan from these projects and the technological cooperation focused on technology transfers from Japan that aimed to support self-sufficiency were major factors as well.

4.2Advances in Maritime Civil Engineering Technology

The issues experienced in the process of widening and deepening the Suez Canal that required crisis management, such as removing mines and other hazardous materials, contributed greatly to the development of dredging and construction technologies at Japanese firms from the 1960s onward.

Reference
  • 1) The Overseas Coastal Area Development Institute of Japan (OCDI) 30-year history and related JICA surveys (Suez Canal Expansion Plan Survey, 1975; Suez Canal Expansion Plan Survey, 1980; Suez Canal Navigational Safety Planning Survey, 1985; Gulf of Suez Coastal Development Plan Survey, 1986; etc.)
  • 2) Penta-Ocean Construction Co., Ltd. website

Roundtable discussion was conducted on December, 2016, with five engineers who had worked for Suez Canal Improvement Project.

The discussion was facilitated by Masaru Suzuki, a member of the Infrastructure International and Cooperation Contribution Archives Working Group

Biography

Yasuji Kakimoto

Born in 1950. Joined Penta-Ocean Construction Co., Ltd. in 1974. Engaged in renovation of Suez Canal since 1975. Worked in Singapore and Hong Kong since 1986. Became the Director of the International Business Division in 2004 and Executive of the International Business Unit in 2013. Retired in 2016.

Takanobu Enoki

Born in 1939. Joined the Mizuno Gumi Co., Ltd. since 1957 and in Penta-Ocean Construction Co., Ltd. in 1967. Engaged in renovation of Suez Canal in 1961 and 1975, and continued in other overseas construction mainly in Iraq, Diego Garcia and Indonesia. Moved to Yoshin Construction Co., Ltd. in 1986. Retired in 1998.

Takuzo Miyahara

Born in 1940. Joined Penta-Ocean Construction Co., Ltd. in 1958. Engaged in renovation of Suez Canal since 1965 and 1977. Moved to Penta-Ocean Dredging Co., Ltd. in 1989. Became Vice President and Representative Director in 1997. Retired in 2007.

Yoshifumi Ariuke

Born in 1948. Joined Penta-Ocean Construction Co., Ltd. in 1972. Engaged in many constructions in addition to the renovation of Suez Canal in Egypt since 1971. Held a major position at the domestic branch office in 1997. Retired in 2011.

Takaaki Yamamoto (formerly of Penta-Ocean Construction Co., Ltd.)

Born in 1951. Joined Penta-Ocean Construction Co., Ltd. in 1973. Engaged in renovation of Suez Canal since 1978. Held a major position at the domestic branch office since 1993. Moved to Penta-Ocean Dredging Co., Ltd. in 2007. Became President and Representative Director in 2010. Retired in 2017.

This article is collated and presented by the Japan Society of Civil Engineers’ Infrastructure International Cooperation and Contribution Archives Working Group (chaired by Professor Atsushi Fukuda, Nihon University).

Note that this article was produced with assistance from grant funds for port research from the Ports & Harbors Association of Japan, awarded in the 2015 round for “Research related to Archive Improvement for Overseas Harbor ODA Projects.”