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Egypt’s flourishing maritime industry

The development of Egypt’s maritime industry including its seaports and the Suez Canal will bring enormous benefits to the economy as a whole

Khalid Taimur Akram , Friday 20 Nov 2020
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Egypt’s maritime industry plays a pivotal role in the economic development of the country. Its geostrategic position is of great significance at the crossroads of three continents, Europe, Asia and Africa, connecting these by the Nile River and the Suez Canal, and this is underlined by Egypt’s 15 seaports on the Mediterranean Sea and 33 on the Red Sea.

Egypt also has 44 further ports that facilitate pivotal sectors of the economy including the fishing industry, mining, petroleum and tourism. The transportation and storage sectors contribute more than five per cent to annual GDP growth, and Egypt is modernising its maritime sector to secure higher economic revenues and investment opportunities. 

The government of Egypt has set out a long-term strategy for developing the country’s maritime industry by raising the efficiency and competitiveness of its maritime ports. The maritime sector of Egypt has also maintained its steady growth despite the global challenge of the Covid-19 pandemic.

Approximately 90 per cent of Egypt’s international trade is seaborne and relies on maritime transport services, and this significantly contributes to its economic development, with the port of Alexandria, the country’s main commercial port, handling approximately 60 per cent of foreign trade. The average number of ships and cargos passing through the Suez Canal has been relatively stable this year even at a time when the world as a whole has been suffering from restrictions linked to the Covid-19 pandemic.

The Egypt Vision 2030 sustainable development strategy envisages infrastructural development as a prerequisite to improving industrial competitiveness and creating modern and innovative industries. The development of the country’s various seaports under this vision is projected to augment the capacity of these ports from 120 million metric tons to 370 million metric tons by 2030.  

 

MARITIME LOGISTICS AND SHIPPING: To enhance its logistics services, Egypt has recently included five new tankers in its fleet of fuel-supply vessels, which will help it to emerge as a regional energy hub in the Eastern Mediterranean region. 

The new tankers have more capacity and operate at a much lesser cost. This improvement has enhanced the competitiveness of Egypt in the global supply market and has increased the demand for its logistics services. The country has also opened its economy to foreign investment in shipbuilding and vehicle manufacturing, sectors which will boost its maritime economy and enhance Egypt’s trade with the rest of the world. 

The liquefaction and processing of gas at the Edco Station on the Mediterranean coast is expected to enhance logistics investment opportunities for Cairo and increase its maritime potential by increasing ship traffic in the Mediterranean Sea. Egypt is also expecting to receive Cypriot gas by 2024, which will increase its revenue-generation opportunities many times over.  

The future progress of Egypt lies in the vital development of its maritime industry. The government of Egypt has taken many initiatives to maximise the benefits of this extremely important sector for national economic growth, such as development at all the country’s maritime ports and the provision of investment opportunities for foreign investors in major seaports including Alexandria, Damietta, East Port Said, Hurghada and Safaga.

 

DEVELOPMENT OF SEAPORTS: Egypt has more than 40 seaports, of which 15 are used for commercial purposes. 

However, challenges such as the lack of an appropriate planning and development strategy and limited geographical connectivity have resulted in the fragmentation of the Egyptian ports. The country’s maritime industry is facing an estimated infrastructural gap of $49 billion, but over the past decade the government as well as private institutions have been channelling in resources, including through the use of taxes, privatisation and attracting a significant amount of foreign direct investment to fill this multibillion-dollar infrastructure gap. 

 

SUEZ CANAL AREA DEVELOPMENT PROJECT: Egypt has launched a mega-project for the expansion of the Suez Canal and the development of the Suez Canal Economic Zone in the Suez Canal Area Development Project.

 Due to its geostrategic location, the Suez Canal has the utmost significance as a link in the global supply chain and a major shipping and trade route between the North Atlantic and the Indian Ocean via the Mediterranean and the Red Sea. The Suez Canal handles approximately 10 per cent of global seaborne trade bound to Africa, Asia and Europe, providing economic benefits to Egypt through tariffs collected from passing ships and vessels. 

According to 2019 statistics, the Suez Canal generated $5.5 billion and contributed approximately two per cent of Egypt’s GDP during the fiscal year 2018-2019. The Suez Canal is the fastest shipping route for cargoes bound to Europe and Asia. Currently, around 13 per cent of ships and 20 per cent of containers pass through the Canal Zone.  

To achieve further economic growth by the development of the maritime sector and facilitate cross-border transportation and trade, the Egyptian government introduced the Suez Canal Area Development Project in 2014. Under this project, a new parallel channel was constructed along part of the Suez Canal, increasing its capacity and the number of shipments crossing the canal. This is expected to increase from 49 to 97 ships per day by 2023, and the project will also reduce the transit time of passing ships. 

According to statistics for the 2018-2019 fiscal year, the revenue generated by the Suez Canal has reached approximately $5.73 billion. It is estimated that by 2023, the revenue generated by the canal will increase by up to $13.5 billion, or approximately 259 per cent of the existing revenue, thus making the Suez Canal Zone one of the major sources of foreign exchange in Egypt with more foreign currency pouring into the state treasury. 

The Canal Project will also enhance employment opportunities for local people and will have positive ramifications for the overall economic development of the country. The development under this project has reinforced the position of the Suez Canal as a global maritime trade route and a shipping lane for which the world has no alternative. 

By enlarging the transit capacity and increasing industrial activities in the Zone, it is expected that Egypt will become an international logistics and industrial hub in the near future, providing a plethora of opportunities to increase economic investment in Egypt. The Egyptian government has also planned to develop this important link in the global supply chain further during fiscal year 2020-2021.  

 

THE SUEZ CANAL ECONOMIC ZONE: The development of the Suez Canal Economic Zone is a major part of this project, and, established on an area of 461 km2, it provides ample opportunities for industrial, commercial and residential developments. 

The reforms introduced by the Egyptian government will attract foreign investment to establish export-oriented industries to the Zone, which will also boost indigenous industrial production and assist Egypt in increasing its exports and strengthening its position as a logistics hub in regional and global value chains.

Moreover, the construction and development of East Port Said has not only expanded the industrial zone and the logistics centre attached to it, but has also established cross-Canal connectivity and links between mainland Egypt and the Sinai Peninsula. The latter has great tourism potential due to attractions like coral reefs and religious structures, and these can help to boost Egypt’s tourism industry.

Egypt’s maritime industry has huge significance for the overall economic development of the country. The Egyptian government has taken various initiatives and brought about various reforms in its strategy and policy-making in this area, and these have had a positive impact on the development of this key sector. 

What is needed now is for the country to maintain a balance between economic costs and benefits and to make further efforts to bring in foreign investment. 


The writer is executive director of the Centre for Global & Strategic Studies in Islamabad.

 

 

*A version of this article appears in print in the 19 November, 2020 edition of Al-Ahram Weekly

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