Egypt: On the move

Already a key conduit for both European and Asian trans-shipment activity, Egypt is working to gain a greater slice of lucrative regional trade as more land-based freighters look to the country as an alternative entry point to Gulf and African markets.

In late December, the minister of transport, Galal Al Saeed, announced that the Japan International Cooperation Agency had been assigned the task of developing a new master plan to meet the transport needs of the country. Central to this plan will be a proposal to link the Red Sea port of Sokhna by highway and rail to the port of El Dekheila, just to the west of Alexandria on Egypt’s Mediterranean coast.

Such a development, the minister said, would enable Egypt to become a leading transit hub for goods passing between the east and the west. In order to achieve this, however, logistical centres would have to be established at October City outside of Cairo or in areas close to the ports.

In addition, existing port facilities would have to be upgraded and extended to service larger vessels, while the latest technology, data systems and communications networks would have to be adopted, Al Saeed said.

The idea of strengthening Egypt’s transport infrastructure, particularly the artery that runs from the Red Sea to the Mediterranean, is by no means new, having been introduced a number of times over the past 20 years. However, the commissioning of a study on the exact needs of the sector is a significant step towards developing a plan for the future.

There is already growing international demand for Egypt to boost its transport links between the Mediterranean and the Red Sea. On December 27 Al Saeed told local business representatives that Turkey had decided to use Egypt as its new gateway to the Middle East and North Africa, after its route through strife-torn Syria was all but barred.

Approximately 46,000 Turkish trucks transited Syria in 2010, the last year of uninterrupted trade. However, with the breakdown in relations between Damascus and Ankara – which saw Turkey impose sanctions on its neighbour in an effort to press Syria into implementing democratic reforms, followed by the Al Assad government suspending a bilateral free trade agreement and imposing a 30% tariff on all Turkish imports and prohibitive duties on fuel and freight – Egypt is now placed to host much of this traffic.

According to the minister, ships would carry Turkish long-haul trucks from the port of Mersin on Turkey’s Mediterranean coast down to Alexandria, Port Said or Damietta, from where they would take overland routes to the Gulf or Africa. The shift of Turkish trade could bring in revenue of more than $165m a year.

Promoting trade movement through Egyptian ports and land-based centres will be good for the economy, Al Saeed said, and the government will do all that is necessary to facilitate the transport of Turkish goods. This would help Egypt develop into a global logistics area, especially for the movement of goods between Europe and Africa, he said.

Turkey is one of the largest road haulage operators in the region, and the one most likely to be affected by a long-term severing of land routes through Syria, but other countries also make extensive use of trucks to move freight, and they too may soon be coming to Egypt in search of new links to established destinations.

Egypt is already a major player in the international transport sector, controlling one of the most important maritime arteries in the world – the Suez Canal. Annually, some 18,000 vessels pass through the man-made waterway, carrying a total volume of around 850m tonnes. The canal is also one of Egypt’s main foreign revenue earners, bringing in well over $400m a month in fees, a figure little affected by the political unrest of 2011.

Though it was immune to the domestic problems that afflicted the economy in 2011, the canal could see a drop off in traffic this year. On December 22, Moody’s Investors Service downgraded its assessment of Egyptian government bonds, lowering the country’s rating from B1 to B2, while also saying they were under review for a further possible downgrade.

Although the republic’s uncertain political environment bore most of the responsibility for the downgrade, an additional concern cited by Moody’s was the fact that Europe’s faltering economy could result in a slowing of traffic through the Suez Canal as demand for imports waned.

It remains to be seen to what extent Europe’s woes will drain off traffic from the Suez Canal, and whether road haulage fees will offset any decline. However, if the new master plan is fully implemented, Egypt will be ideally placed to expand its role as a trans-shipment destination and a base for regional overland trade.