charged with investigating the feasibility of constructing a canal to link the Mediterranean and Red seas. This canal, to be called the Suez Canal, was to be the world’s
first great international enterprise of the nineteenth century. It was to be financed by
European capital with Egyptian financial support, and a concession to design,
construct, and operate this revenue producing facility was expected from the Egyptian ruler at that time, Pasha Muhammad Ali.
Ferdinand de Lesseps was given the responsibility for forming the company to
build and operate the canal, and on November 30, 1854, his Compagnie Universelle
du Canal Maritime de Suez obtained the concession from the Egyptian government,
with the following conditions:
• The concessionary period was for 99 years.
• The Egyptian government donated the land and relaxed many of the taxes
generally levied on imported materials and equipment.
• The Compagnie Universelle du Canal Maritime de Suez was to pay all costs for
design and construction.
• The company would set the schedule of tolls for the canal after consultation with
the Viceroy Muhammad Ali. There was to be no preferential rate treatment - all
nations would be required to pay the same schedule of rates.
• The profits was to be divided as follows:
• The government of Egypt 15%.
• the initial stockholders 10%,
• accrual to the company 75%.
• Also, in what might have been the first affirmative action plan, the concession
agreement was modified in January 1856 to include, among other provisions, a
requirement that at least 80 percent of all workers employed on the project must
be Egyptian.
Construction began in 1859 and was scheduled for completion in 1864 at a total
cost of £8 million, a sum that grossly underestimated the real cost of the project. In
1863 British engineer Sir John Hawkshaw projected the eventual total cost would be
£10 million when the project was to be completed in 1868 – 4 years later than
originally anticipated. The substantial cost overruns would eventually result in the
title to the project being transferred from French to British hands.
The Viceroy of Egypt accumulated so much debt in the course of financing a
substantial portion of the canal that by 1875 the interest on the debt alone exceeded
the gross income of his entire country - and he went looking for a buyer. The Dervieu
Brothers of Paris and Alexandria, and a group associated with French concern Crédit
Foncier sought assistance from the French government to purchase the canal. The
French government, showing some lack of foresight, saw no need to assist the
Dervieu Brothers in their quest to purchase the canal. The British used the canal
considerably more than the French, so English interest in ownership was high; the
British government stepped in and bought the Egyptian Viceroy’s shares. Shortly
thereafter, the British purchased the remaining shares from Ferdinand de Lesseps’
company.
502
18 Infrastructure Markets and the Private Sector
first great international enterprise of the nineteenth century. It was to be financed by
European capital with Egyptian financial support, and a concession to design,
construct, and operate this revenue producing facility was expected from the Egyptian ruler at that time, Pasha Muhammad Ali.
Ferdinand de Lesseps was given the responsibility for forming the company to
build and operate the canal, and on November 30, 1854, his Compagnie Universelle
du Canal Maritime de Suez obtained the concession from the Egyptian government,
with the following conditions:
• The concessionary period was for 99 years.
• The Egyptian government donated the land and relaxed many of the taxes
generally levied on imported materials and equipment.
• The Compagnie Universelle du Canal Maritime de Suez was to pay all costs for
design and construction.
• The company would set the schedule of tolls for the canal after consultation with
the Viceroy Muhammad Ali. There was to be no preferential rate treatment - all
nations would be required to pay the same schedule of rates.
• The profits was to be divided as follows:
• The government of Egypt 15%.
• the initial stockholders 10%,
• accrual to the company 75%.
• Also, in what might have been the first affirmative action plan, the concession
agreement was modified in January 1856 to include, among other provisions, a
requirement that at least 80 percent of all workers employed on the project must
be Egyptian.
Construction began in 1859 and was scheduled for completion in 1864 at a total
cost of £8 million, a sum that grossly underestimated the real cost of the project. In
1863 British engineer Sir John Hawkshaw projected the eventual total cost would be
£10 million when the project was to be completed in 1868 – 4 years later than
originally anticipated. The substantial cost overruns would eventually result in the
title to the project being transferred from French to British hands.
The Viceroy of Egypt accumulated so much debt in the course of financing a
substantial portion of the canal that by 1875 the interest on the debt alone exceeded
the gross income of his entire country - and he went looking for a buyer. The Dervieu
Brothers of Paris and Alexandria, and a group associated with French concern Crédit
Foncier sought assistance from the French government to purchase the canal. The
French government, showing some lack of foresight, saw no need to assist the
Dervieu Brothers in their quest to purchase the canal. The British used the canal
considerably more than the French, so English interest in ownership was high; the
British government stepped in and bought the Egyptian Viceroy’s shares. Shortly
thereafter, the British purchased the remaining shares from Ferdinand de Lesseps’
company.
502
18 Infrastructure Markets and the Private Sector