OBG talks to Ahmed Ali Fadel, Former Chairman, Suez Canal Authority (SCA)

Interview: Ahmed Ali Fadel

How concerned are you about the impact that increased toll charges are having on the competitiveness of Egypt’s waterways?

AHMED ALI FADEL: We always do what we can so as not to lose a single client or a single tonne of cargo. Therefore, the Suez Canal tolls are subjected to thorough studies on a year-round basis. Many factors are considered whenever we make a decision on a toll increase. One has to keep an eye on economic, political and broader global changes, while also carefully considering the profitability of a transiting vessel and the non-discriminatory policies that the SCA must abide by. The tolls have to be calculated according to vessel type, size and the kind of cargo involved.

In 2012 the SCA’s tolls have been increased by only 3% and in line with rates of inflation and international growth. The increase, therefore, does not have any negative impact on how competitive the Suez Canal is when compared with other alternative routes, especially in light of the fact that the SCA has not imposed any increases since 2009 because of the global economic crisis. Moreover, the latest toll increase was justified for a variety of reasons. For one, the fee helps pay for new development projects, such as the dredging in 2010 that now enable bigger ships to pass through the canal, increasing the permissible draft from 18.9 metres to 20 metres. The SCA was also able to purchase a number of modern tugboats to service transiting vessels with funds from the rise. Furthermore, political changes in Egypt also led to increased labour costs, and when coupled with the depreciation of the local currency and higher inflation rates, it became increasingly difficult and expensive to import the machinery necessary for our operations.

What impact has the threat of piracy had on ships travelling through the Suez Canal?

FADEL: Piracy at sea is very old, as we all know, having evolved from the armed burglary of ships to kidnapping and keeping vessels or hostages to exchange for ransom. Approximately 20,000 ships cross the Gulf of Aden or pass by the Somali coast every year. This region accommodates all the trade traffic between Asia, the Persian Gulf, Europe and the east coast of the US, and in spite of the sporadic piracy, traffic through the Suez Canal has been growing. The number of ships that were kidnapped off the Somali coast and Gulf of Aden fell from 49 ships in 2010 to 27 ships in 2011; the latter represents only 0.2% of the 17,799 ships in transit around the region in 2011.

Egypt is playing an important political role in the compromise between the conflicting forces in Somalia in an effort to reduce the impact of piracy. The SCA, alongside the Ministry of Foreign Affairs, monitors acts of piracy and an action group within the SCA collects information in real time on acts of piracy, so that appropriate measures can be taken.

However, this has its costs. Premium charges have been raised on ships that pass through the region and the fees involved in hiring security forces to protect ships in this area have increased as well.

What do you feel are the greatest challenges facing the competitiveness of the canal in comparison with other global transit corridors?

FADEL: In January 2010 a project for deepening the draft of the navigational canal to 20 metres was completed, and the canal is now able to accommodate vessels of up to 240,000 deadweight tonnes. As a result, the canal is just as competitive with other major transit corridors. Some 62.6% of the global shipping fleet is tankers, 96.8% of which are of bulk carriers. Virtually all other types of vessels, including container ships, can use the canal, so it remains competitive. Work on stepping up the draft of the western bypasses from 14.6 metres to 15.8 metres is under way. Studies are being conducted on digging more bypasses to lengthen the doubled parts of the canal, while the waiting areas at the lakes, moorings and berths for big ships at the western bypasses are also being improved.