The Unique Opportunity for Egypt’s Future

The Unique Opportunity for Egypt’s Future

By Dr. Hossam Badrawi 2011

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It was the afternoon of Tuesday the 7th of July 2009, when I completed a letter directed to the president of Egypt about Egypt’s competitiveness as it came out in the sixth report of the Egyptian National Competitive Council ENCC. The report entitled, “Beyond the financial crisis: Competitiveness & Sustainable Development. The report discussed Egypt’s competitiveness indicators, and the performance of the country in 12 pillars, namely: institutions, infrastructure, macroeconomic stability, health and primary education, higher education and training, goods market efficiency, labor market efficiency, financial market sophistication,, technological readiness ,market size, business environment and innovation. The report also discussed the Egyptian economy in the face of the global financial turbulence at the time. It advocated for a clear vision for increasing Egypt’s competitiveness at the individual, corporate and national levels
As the founder of the Council, and honorary chairman I was asked by the board to communicate with the president and try to get his support to convince the government to produce a national competitiveness strategy and integrate this strategy in every sector of the society.
Few days after, I received a call from Ambassador Soliman Awad, the office director of the president , a good friend of mine since his post in Brussels, telling me that the president would like to meet with me and members of the board of ENCC to discuss our proposal next week .
However, few days later, I received again another call from Ambassador Awad apologizing, as the meeting will not take place . Instead the president has asked the prime minister to meet us
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and gave him instructions to explore ENCC suggestion to develop a competitiveness strategy for the country.
This did not come as a surprise to me as I knew that some of the close advisors of the president did not like me to come close to him or have direct communications without them being around. This was actually part of the wall built around President Mubarak, and the fight that existed within NDP, the ruling party. Several years before, in 2004 I wrote a report to the president about the necessity to come out politically and lead a campaign to recognize corruption and create a national inspiration towards transparency. I was part of creating the Arab Parliamentarians against corruption and lead a national NGO to advocate for that. The president was excited about the proposal as i was informed by his Secretary and asked to meet with me , but again the meeting was cancelled after his advisors worked out a possible negative outcome towards the anti corruption move , as it may , in their perspective ,implicate a criticism to his rule. The meeting with the PM, was finally realized on the Monday the 12th of October 2009 attended by Minister Mahmoud Mohi El Din, Minister of Investment, and Minister Rashid M. Rashid minster of Trade and Industry. Both ministers were great supporters of the ENCC, and had the capacity and the vision to understand the value of competitiveness. In that meeting the ENCC was assigned officially by the government to develop the National Competitiveness Strategy of Egypt within 12 months. This comprised interaction with all stakeholders including government agencies and privet sector. Minister of Investment was assigned to be the liaison of the government with the council.
To us, this was a great sign; the government is ready to work hand in hand with the civil society and privet sector, as partners. A proactive move towards more integration.
ENCC contracted with number of international experts in competitiveness, and created a committee chaired by myself and
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directed by the council active, professional,Dr Mona El Baradi. In the path of creating the strategy, one of the projects that came to picture was the Suez Canal Corridor .However this chapter of the book is not about the whole strategy of Egypt for competitiveness, but about this extraordinary mega project that captured our imagination.
Mr. Alf Monghan, one of the expert within the group, came to my office , with two of his colleagues, after the preliminary meeting that discussed the competitiveness strategy of number of other countries , like Brazil, India, Ireland, Korea ,Mexico and others. Dr Badrawi, he said, you asked us as experts to work with you to develop Egyptian competitiveness strategy, and not to use other countries’ strategies as is. You said, Alf, continued, that this strategy should depend upon an Egyptian vision, resources using existing and potential elements, so as for the strategy to be implementable.
The committee, created for the same purpose , in Ireland , almost 15 years ago, studied all other countries competitive advantages around the world, and found out that only one country has something no other country has. That country is Egypt. It is not its historical heritage, not the beautiful touristic seashores, but the unique presence of Suez Canal. This 170 kilometer connecting the Mediterranean with the Red sea, north with south, west with east, and allowing the whole world to pass through Egypt carrying raw materials and goods, this Canal allows a large percentage of the world trade to pass through Egypt and the country is satisfied by the passing fees and happy with the 4 Billion Dollars revenue without interacting with this huge opportunity.
The investment in the Canal has been done, the Brand has been created, yet the potential of the project has not been achieved. This revenue of 4 Billion dollars could have been maximized more than ten folds, if Egypt creates a different vision for the
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Canal, and allowing the multinational companies and the rest of the world to invest in what can reduce their costs and improve their competitiveness with what Egypt can gain out of that.
The whole project with its global vision captured our imagination and we decided in the board of ENCC to interact with society and test how all the stakeholders perceive that vision.
I worked in 2 directions, one via the experts and professionals to prepare presentations about the project and start preliminary working documents and the other via meeting many of the stakeholders. I organized at the end of 2009 early 2010 ,seven meetings; each meeting had around 25 invitees, from different backgrounds, business, military, diplomat, reporters, engineers and others. Some of the meetings were also with business associations, and chambers of commences. The objective was to realize if this project can capture their imaginations and stimulate them similar to what has happened with me and my colleagues or not. We also wanted to collect all stakeholders’ responses so as to be ready to answer all possible questions that could be created or cross the mind of the society. As much as we wanted the investors to be excited about the project, it was important to work on marketing the project at a national level and test the citizen’s ability to have a national pride of such a mega project that can improve the economy and create employment.
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The Geographic line of the Suez Canal is the least congested population in Egypt. It scores the heights level of human development within the governorates of Egypt. As this area was under the control of military for decades, it has the least problems in ownership of lands and obstacles to develop them. This mega project can be the door for Sinai development which has been hindered for years.
I also came out in 3 popular TV interviews to speak about the project and I received tens of documents about the Canal, and copies of studies done by local and international organizations for it’s development. Many individuals of great knowledge about the Canal and with passion to the project came across and gave me their insights, time and contribution. It was clear to me that innovation does not only mean new idea, but having a new vision of an existing project can be as creative and innovative too. In modern history nothing has worked more to confirm Egypt’s position as a crossroads between the three continents of Europe, Africa, and Asia as the Suez Canal. This artificial seallevel waterway connecting the Mediterranean Sea to the Red Sea, and in so doing connecting Europe to Africa and Asia, is a project with origins way back to the time of the pharaohs, 4000 years ago. The French engineer Ferdinand de Lesseps was struck with the project and persuaded all stakeholders to resurrect the golden idea into a modern construction that would forever connect the world of the West to that of the East. The project was finally realized in its contemporary state in 30 November 1869, where it was open to international water- after ten years of construction work.
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The capital of the Project in the beginning was 200 million francs which has been difficultly collected from shareholders. The Compagnie Universelle du Canal Maritime de Suez almost went bankrupt twice in 1864 and 1872 trying to sustain the project. Despite the difficulties faced the project in its infancy, Suez Canal became the most important and richest global marine company in the world at that time. A bridge between European and Asian markets since the 19th century, the Suez Canal replaced the then common route from Europe to Asia (of central importance for the Indian silk trade) via the Cape of Good hope. So doing, the Suez Canal was offering a much more economically and pragmatically sound solution to the long navigation around the African continent. The Suez Canal was a real adventure project, geopolitically strategic, as well as highly lucrative .It created beyond expectations a regional as well as international trade dynamics, which in turn came to play a fundamental influence on the political front. One of the most significant events in the contemporary history of Egypt as well as the region was the 1956 middle east war that brought Nasser and Egypt face to face with Israel and the western allies . The suez canal undoubtedly became one of the most important features of the Egyptian landscape as it continued to play a pivotal role in Egyptian affairs – both domestic as well as international. Egypt today more than ever has to modernize itself and create more dynamic, efficient, and competitive economy. Having ownership of such important route and collecting tolls is not enough to secure and enhance the future of the canal or the country .Egypt must grab a larger share of international trade and transport-related business, through establishing a value to be added to the world’s main trade highway “the Suez Canal”.
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Egypt’s new globally integrated transportation, logistics, transformation & services Corridor can ‘raise the bar’ for competitors, lessening ‘bypass’ potential and loss of revenue.
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It is my conviction that The national objectives of Suez Corridor should be to strengthen the bonds of industrial and commercial relations of the Canal Zone and Sinai with neighboring countries in Arab Region, Middle East and Mediterranean Basin. In addition, Local objectives should aim to establish a large number of industrial and free zones equipped with services and facilities not only along the canal but also in other geographically connected such free zones in Rafah, AlArish and North Sinai. Actually, Egypt can change its potential, stimulate its national purpose and pride as an economic powerhouse to drive regional development via this new vision of the old project. To achieve this, the first goal should be to act positively in the geopolitical dynamics of the region in addition to being an example for regional development along with a security dividend in terms of
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immediate presence interest of the international community. The second goal is to impact positively the efficiency of global trade and boost Egypt’s global influence and goodwill. The third goal is to focus on labor-intensive projects that have the potential for growth to strengthen the region’s capacity to increase employment. The fourth is to depend on the number of sites as centers of industrial growth led by the city of Port Said, Ismailia, Suez, and possibly creating two more new cities. The fifth goal for such a project would be to boost industrial activities with comparative advantages such as industries and services based on the exploitation of natural gas and mineral wealth. The sixth goal would be creating new touristic destinations along one of the most beautiful scenery along the 170 kilometers of the canal with its amazing lakes and all year excellent weather. The Suez Economic Corridor Project as I see it, is an exciting and realistic concept that can lead to creating a fully integrated system of trade, industry, transport, logistics, and technology within a special and dynamic region made up of ports, railways, airports , and manufacturing clusters. Using a global brand, the Suez Brand, the Corridor can and should be able to attract public and private investment into a highly competitive and trade-focused region and establish Egypt as a world-class destination for investment and a logistic hub to service the European, Asian and African market space.
The Corridor would be comprised of several key “pillars” that would support the various trade and technology clusters. These would include, primarily, setting up suggested industries as a corner stone to establish the project renaissance as a medium term strategy, during which the project achieves objectives of operational priorities in response to evolving conditions. These industries should comprise The Shipping Industry which comes first in mind, including many fornications like maintenance, dry dock, repair, refitting, crew, cruise ships, shipping support, catering, etc. The Logistics industry to be created in this project includes intermodal and electronic data interchange (EDI), container terminals and train service, Roll-On, Roll Off containers and
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rail links for Egypt, ports, and the region, improved transit and facilitation, including customs services for the MENA Region, the Landlocked African countries, and the facilitation of the Asian-Europe Trade.
Sinai, is still a virgin natural resource area, where related industry would be a value added particularly for mining. Development of the project can stimulate natural resource investments in Africa and the Sahel which Support to develop and incubate Green Energy investments with Egyptian and foreign partners in the solar, biofuel, and renewable energy investment and research industries I can see technology parks and manufacturing business rather than be stifled by logistic challenges in Cairo, the Suez Corridor would attract businesses and employees that want to be close to the action, working in the dynamic Canal Zone area, within hours of major markets and cities.
As Egypt is in the middle of the world, and has a leadership role in the Middle East and Africa the global supply chain industry would be a flourishing one . The Suez Corridor can and would demonstrate its commitment to be the “economic leader” of the MENA region, based on a modern vision for the future- one that is outwardly focused and embraces the assets and advantages that make Egypt unique. On the other hand the long-term strategy should identify the metrics that enable the Suez Corridor to be effective and sustainable in confirming the completion of the project’s success. This would happen through the integrated concept of developing the infrastructure of the major cities along the canal, airports, multiple ports along the 170 kilometer of pass way, railways, world class roads and places of interest . Major cities are the cornerstone to guarantee housing near employment places and this leads to create a demographic extension
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around the 3 major cities of the Canal. Establishing Airports to accommodate the expected trade would be a necessity. Other supporting ports should be built using the latest technology, up to par with other international ports in order to adapt to international working standards, which will facilitate regional and international cooperation. Railroad Lines which should have an enormous capacity to transport goods at low cost between the Corridor and other governorates, as well as other countries together with the establishment of a world-class road network to link the components of the project, are imperative to complete the interconnected network.
The canal with the created water lakes carries huge potential for developing Places of Interest for tourism and recreation, which can contribute to attract new investments.
The preliminary “revenue model” for such a project is based on a combination of tangible and intangible economic scenarios. Over time, the project would generate billions of dollars of direct and indirect capital flows through the increased generation of user fees, corporate taxes, property taxes, and associated revenues. However, the benefits to private investors would be even more substantial. Local and international investors, including many leading global brands, would create new value, as well as create millions of jobs, by successfully building, growing, and managing a successful economic corridor and trade hub project. The Prerequisites Strategy to develop the project as a whole will depend upon the availability of ground space without obstacles or complications, and with a communication and unifying vision between institutions and various government agencies. These conditions will increase the production capacity, education, training and innovation through the development of human resources, the integration of infrastructure elements that have been previously displayed at all levels of services, depending on the factors that explain the added value, in
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addition to boost the competitiveness to create a quantum leap and increase the liberalization the Egyptian trade and industry to enable real competition. The Egyptian National Competitive Council has proposed an approach of implementation to this mega project, phasing a framework to reach for medium and long term strategy to be one of the most important world’s waterways:
• Phase 1: Exploratory and scoping the opportunity • Phase 2: Governance and stakeholders • Phase 3: Marketing as concept of targets • Phase 4: Implementation phase
In phase one, exploration and scoping the opportunity depends on pre-feasibility studies including diligence reports that facilitate potential entrepreneurs in project identification for investment. This should provide comprehensive information for investment opportunity in a business, specific information regarding different business areas like marketing, technical, industrial information etc. These factors will facilitate existing entrepreneurs in improving their exiting setup and project investment information and financial projections to support viability of the business. The ENCC has put guidelines as the basis for pre-feasibility. It was our vision and is still, that a project with this magnitude should be handled away from government bureaucracy, and with freedom of implementation outside the side fights that arises between government agencies and ministries authorities . All stakeholders should be invited and hence the presence of a clear vision and commitment should be clear nationally and internationally. Assigning resources and an accurate timeframe for project prefeasibility with determination of market demand and needs should be available .Expectations of current and potential users together with defining their and stakeholders benefits & potential ROI are essential.
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This is a project with risks and expected bottlenecks in implementation that has to defined with imagination and studying similar situations with creation of solutions. The vision , should paint the pre-feasibility with proper establishment of future availability of land, workforce and infrastructure, estimation of needed investment and resources necessary to realize full potential ,funding options with emphasis on private or privet public partnership.
Obtaining needed information about the logistic infrastructure on the site and getting all needed information packaged in a usable document that can provide any investment group with a preliminary project proposal, concerning profit and loss will help inviting serious investment to the project.
It is understood that possible schedules and levels and total project concept would be available . Gaining insights on needed government officials who will be concerned with the project is something that needs to be not only clarified but also managed by a higher authority so as not to let those government agencies to offer obstacles to the implementation.
Finally the ENCC advised creating a unified responsible agency that would prepare a usable working document for use in planning and funding requirements for the project and the possible return on investment.
In phase two, the Corridor will provide a quantum leap in competitiveness by helping speed up the pace of internationalization undergone by the Egyptian industry (exports), presenting opportunities for rearward linkages to existing Egyptian industry – feeder industries and sub-suppliers and facilitating the reorganization of Industry – along cluster, ethical employment and alternative, ‘clean’ energy lines. The previous vision of strategy needs Leadership that can endorse the image of the ‘National Champion’ and the Governance that can ‘Buy-in’ key stakeholders; establish Steering Group / Commission
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Regulatory Regime with Declaration of Unified Regulatory Regime for transparent and balanced integrated, effective guidelines. In phase three the target marketing in Suez Corridor project must go toward the promotion and distribution of its products and services easier and more cost-effective. So, before launching a marketing campaign, Egypt needs to focus on all related marketing concepts. Phase four would focus on the implementation of the planning, analysis, design, development, and evaluation process of the project. It should involve making sure that all functioning systems are in place to support and maintain the instruction. Implementing and maintaining a fully operational instructionally requires functional support from a variety of areas. Personnel and processes are needed to manage, administer, support, and deliver. The Operational Stage requires continuous support and maintenance to ensure that it operates effectively and cost-efficiently, producing learners who meet the necessary employment performance requirements.
The key development activities of this project, in our opinion, are the holistic vision and comprehensive master plan, Master Resource mobilization, Institution building and coordination, together with developing the unified regulatory regime, Properly build Physical infrastructure, with concentration upon Human Capital, and Ongoing Product Development. Finally, the main benefits of the Suez Corridor would surpass the economic values . Egypt is in need to be unified behind a mega project, and in spite of the fact that I was not a believer that nations can be inspired by a mega investment as there are no such project anymore, I was not only inspired but captured with the size and value of what can happen around the Suez Canal. The Canal has this effect upon Egyptians and can be a pear head of national pride and success.
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Practically, it would transform Egypt to an important transport and logistics center of The World – developing transit, logistics, assembly and distribution potential – between the producing nations of the East and the consuming nations of the West – based on current market trends such as the ‘neighborhood effect’, multi-modal transportation, industry clustering, value/supply chain integration, JIT delivery and the once-off, ‘time-out’ opportunity of the Panama Canal Putting factories closer to component suppliers and markets can create Neighborhood effect. Global supply chains are shrinking and more goods are starting to be produced closer to home. This is driven primarily by the need to reduce transportation costs, because the environmental costs of far-flung supply chains and because nearer ‘neighbors’ can better facilitate JIT delivery than companies thousands of miles away could. The strategic purpose of the new Corridor is to turn the comparative advantage of the Suez Canal into a competitive advantage for industries and businesses surrounding it. It is an opportunity to develop competitive industry clusters around the comparative advantage of Suez, using a globally recognized brand to communicate and build credibility for the new approach. Thereby, realizing the full national wealth creation potential of Suez – for Egypt. The Corridor will provide a significant leap in competitiveness with its joined-up approach bringing the prospect of exponential benefits and growth. ‘Clean sheet’ potential for development – away from the congestion of the Nile valley, Linkage potential to existing industry, no ‘baggage’ from the past, Industry clustering potential, easy port access for business. Seamless infrastructure and multimodal connectivity will ensure the area can operate as smoothly as a Swiss watch. The Suez brand in our opinion can provide a platform for credible and effective promotion of Egyptian business through easier communication and greater national credibility – making it easier to ‘sell’ other products such as foreign direct investment ( FDI) in Egypt.
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It creates the ultimate proposition for investing in Egypt, replacing previous incentives and cheap labor. If presented and communicated effectively, the Corridor will trigger major participation by the private sector. Egypt can move ahead of the curve in the competition for FDI by leveraging the concept to move up the investment and employment value chain. The concept and its associated global brand will be a mega-attractor, giving Egypt the ‘edge’ in international investor competition. It will facilitate efforts to move from low wage and environmentally injurious industries, toward better quality jobs and ‘cleaner’ businesses, assisting the country’s Investment Promotion program to move from ‘taker of events to maker of events’ and from ‘gravitation to attraction’, in terms of new FDI . Again ,creation of a ‘Big Tent’ for all stakeholders to participate in and facilitate the concept. This is ‘cause and effect’ in terms of opportunity and challenge. The challenge is to achieve a consensual approach to development, the opportunity is once the ‘Big Tent’ has been created, it can double as a mechanism (re-usable vehicle) for other ongoing major economic reforms in Egypt. The concept is ‘Big’ enough to be the forcing mechanism for sustained and accelerated national reform. This is an Economic Powerhouse ,an industrial growth pole. Growth potential of additional 15 to 20 % of GDP to the country in the long term.. It will boost Egypt as a center of power and influence in the region and ensure Suez realizes its full national prosperity creation potential not only for Egypt but for the region and the whole world. The inspiring project would Maximize use of Egypt’s International Trade Agreements. Egypt’s array of international trade agreements can be applied and utilized in a more effective way which focuses on a competitive advantage of service and manufacturing goods. Suez Canal can provide an economic development frame and vision for the next 20 years of national economic development in Egypt and this itself represents a hope for future generations.
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Our message to the new government of Egypt is that the Suez Canal strategy must focus on Comprehensiveness & Integration, which aim to develop the potential programs in a manner that best serves the commercial, industrial as well as construction benchmarks of the project , Flexibility & Adaptability, which aim to develop appropriate adjustments adapted to the requirements of the market and technological changes, Self Independency, which aims to achieve maximum self-reliance for existing projects in service elements and indoor facilities to ensure the efficiency and operational continuity. Finally, profitability & Productivity, which aim to increase financial returns and that is in the form of land and set of items available for sale and lease, without prejudice to the environment.
It would not be fair to conclude this chapter of the book without mentioning three important names, who opened my eyes to different perspectives of the project. Engineer Mamdoh Hamza, Navy General Sherin Hassan and Ambassador Raouf Saad . They delivered documentations about a mega Port Saied Harbour Project that was presented and adopted by the Government of Egypt in the ninetieth of the last century however was dwarfed and minimized and not implemented due to lack of proper planning and absence of global vision. Eng. Mamdoh Hamza, a genius architect consultant has presented to me and the society years ago a complete presentation and documentations about how the canal project originally engineered and executed. He showed the brilliance of planning and the commitments of Egypt to building the Canal . He collected actual photos and original engineering drawings of the whole project.,a wealth of information that was put available to the people and experts. These data would raise the pride of every Egyptian of a national mega project that can inspire them while innovating the vision of of developing the Suez Canal almost hundred and fifty years later. Navy General Sherin Hassan , is a story by himself with the documentations and vision of the genius of the geographic position of
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Egypt and the Canal within Egypt. The Importance of the Location can not be explained and felt with passion like when this great man speaks about it. Finally Ambassador Raouf Saad , a well known , fine diplomate with immense experience and knowledge ,and a former deputy of the minister of foreign affairs. Ambassador Saad was a witness of many talks and initiatives about the Suez Canal mega project twenty years ago. His patriotism, professional attitude , competency and humbleness is to be recorded as the finest between diplomats and citizens.
Studies were made by many local and international agencies. ,visits were executed , explorations were made, Experts from all over were involved, however the project was buried again once in 1996 and again at 2004 then again and again 2012 when Government of the Mosslem Brotherhood took the project into a privet direction that gave one state (katar) a privilege over the project. It was always the the Lack of global patriotic vision, imagination and political will that handicapped the implementation. This is a project that could have and still can lift Egypt up with inspiration to a better future with success and benefits to all stakeholders.
I sometimes wonder , how Egypt keeps missing valuable opportunity one after the other. It is my conviction that it is the time for Egypt and the rest of the world to invest in a unique opportunity offered by the genius of the Suez Canal.
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Addition for better understanding of history of the project July 2014. After the January revolution 2011, every government came in power in Egypt for few months has taken the project title in it’s hand to get people’s support , however the project again has been tackled piece
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meal which we think would not achieve the holistic vision of it’s value. Non of these government handled the project in the appropriate approach. MB , actually was going to kill the whole idea by their approach, and concept. later on after president ElSissi was elected, he took the project into another dimension yet his government concentrated ( at least in the nations perception) upon digging a new Canal to improve efficiency and increase number of ships passing through. As i expected the project even with the perceived narrow scope hold the nation imagination and people believed in it, providing most of needed funding in few days. The project is much larger than that and i hope our studies about handling the mega project implementation is to be considered. After all , progress and development is an accumulative effort and no one should ignore positive efforts done to achieve utmost success. As this chapter was written early 2011 after the uprise in Egypt , hoping not to lose track and give lessons of political practices, i added this paragraph in 2014 to explain what has happened since the original writing.