Egypt's Suez Canal faces alternative spots on trade map

There are fears in Egypt that new regional maritime projects will decrease Suez Canal's geostrategic relevance

Nesma Moharam

Egypt's Suez Canal faces alternative spots on trade map

last update on 18 Nov 2023

There is little enthusiasm in Egypt for the India-Middle East-Europe Economic Corridor (IMEC) which was unveiled during the latest G20 summit in New Delhi, India.

The project, which will create a trade route parallel to the Suez Canal, bringing Europe and India together via Arab Gulf states, such as Saudi Arabia and the United Arab Emirates, is raising fears in Egypt about the prospects of the Suez Canal, the shortest cut between the Red Sea and the Mediterranean.

Egyptians, including people on the streets, worry that the IMEC will reduce interest in the 193-kilometre Egyptian canal, especially in the presence of apparent consensus in Western capitals over the need for lessening dependence on China and as Cold War winds blow powerfully in these capitals.

The new potential corridor will increase the geostrategic relevance of Gulf nations, bringing them to the centre of international trade, and force major powers to take their interests into consideration in a world that is becoming more multipolar as major power rivalry gets more intense day after day.

The fear here, however, is that the new corridor will decrease Egypt's geostrategic relevance, at a time the populous Arab country depends on the Suez Canal more intensely for income and future economic planning.

The canal is a pillar of this country's strategic and political weight, encapsulating the gifts of geography to it in a passageway Egyptians paid dearly to dig, protect, and upgrade over the decades.

Getty Images — The canal is a main contributor to Egypt's national income, bringing in $9.4 billion in the fiscal year 2022/2023

Soft-pedalling

Several Egyptian officials rushed to downplay the importance of the IMEC, with some of them appearing sceptic about the viability of implementing the corridor.

Chairman of the Suez Canal Authority, which operates the Suez Canal, Osama Rabie, said the proposed new route would be both long and costly for shipping lines.

"Some goods might expire as they take the journey from the source to the destination on this new route," Rabie told a local television channel in a recent interview.

Three days later, Egyptian Minister of Transport, Kamel al-Wazir, said the Suez Canal would continue to be the world's most important maritime passageway.

Nevertheless, national worries about the IMEC were manifested in the number of articles, columns and analyses local newspapers ran and the time local television channels specified for the effects the potential corridor would have on Egypt and the Suez Canal.

Pillar of national economy

Deep under those worries is the paramount importance of the Suez Canal to Egypt and its economic present and future.

The canal is a main contributor to Egypt's national income, bringing in $9.4 billion in the fiscal year 2022/2023, which ended in June, from $7 billion only in the previous fiscal year.

The canal mainly contributes almost 5% of Egypt's gross national product and 10% of its gross domestic product.

Although it comes in fourth place in terms of national earnings, after the exports, remittances from Egyptians working in other countries, and tourism, the Suez Canal is central to Egypt's economic future planning.

Several Egyptian officials rushed to downplay the importance of the IMEC, with some of them appearing sceptic about the viability of implementing the corridor.

AFP — Tugboats pull the ship MV Glory in the Suez Canal between the cities of Port Said and Ismailiya, Egypt Monday, Jan. 9, 2023.

The canal, as maritime transport expert, Wael Qadoura, describes it, is the focal point of the Egyptian economy.

"It is so especially with Egyptian plans to utilize its location to turn the region around it into a major logistics hub," Qadoura, a former member of the board of the Suez Canal, told Al Majalla.

"We are talking here about the world's most important maritime corridor, one that carries almost 12% of the world's trade and around 30% of its containers," he added.

The Egyptian government invested heavily in the upgrade of the Suez Canal in the past decade so that it can stand competition with current or potential alternative routes.

In 2015, the canal allowed two-way traffic, for the first time, since its opening in 1869, after a year of hard work, during which a parallel channel was dug with over $6 billion in investments.

In the following years, different parts of the canal were deepened to allow for the navigation of vessels with great drafts.

Despite international trade fluctuations and the international economic slowdown, initially induced by Covid-19 and then by the war in Ukraine, these upgrades are paying off, contributing to increasing the daily revenues of the canal and the number of vessels navigating the passageway.

Apart from these upgrades, Egypt is also establishing a series of ports along the canal to cope with the growing diversity of international trade, including the East Port Said Port, a hub for intercontinental trade, and al-Sokhna Port at the southern entrance of the Suez Canal, which serves oil and gas fields in the area.

Egypt's plan to turn the Suez Canal region into a major logistics/industrial hub that attracts tens of billions of dollars in foreign investments and creates tens of thousands of jobs for Egyptians will qualify it to drive Egypt's aspired economic growth in the years to come.

Egypt's plan to turn the Suez Canal region into a major logistics/industrial hub that attracts tens of billions of dollars in foreign investments.

Potential alternative routes

The announcement made about the IMEC during the latest G20 summit in India might have taken the members of the public in Egypt and its media by surprise.

Nonetheless, economic and transport planners in this country might not have been caught unawares by the same announcement.

The fact is that Egypt has been trying to increase the appeal, relevance and practicality of the Suez Canal as a fast link between the Mediterranean and the Red Sea for a long time now.

This initially came against the background of the emergence of potential alternative routes to the canal, including a proposed Israeli fast freight train from Eilat on the Red Sea to Haifa or Ashkelon on the Mediterranean.

Egypt is now constructing a high-speed electric rail line to link its Red Sea and Mediterranean coasts, investing $4.45 billion in the project.

The new rail line consists of three parts, the first of which is due to be ready for operation before the end of this year.

On 20 September, the Egyptian minister of transport described this new line as a 'new Suez Canal on rails'.

The line will extend from Ain Sokhna on the Red Sea to Alexandria, Alamein and Marsa Matrouh on the Mediterranean over 660 kilometres.

Reuters — A container ship sails through the Suez Canal

The real fear in Cairo is that effects on the Suez Canal from the IMEC will come from the expected shift in trade interest in Western countries to India in the future with the construction of the new corridor, from China at present.

"This corridor is an important component of the American strategy to undermine China by sabotaging its Belt and Road Initiative," Samir Ghattas, the head of local think tank, Middle East Forum for Strategic Studies, told Al Majalla.

"The US wants to turn India into the world's factory, which will put this country at the centre of international trade, instead of China now," he added.

The Suez Canal is a main stop on China's Belt and Road Initiative which was developed by the Chinese government in 2013 and includes investments in dozens of countries.

China invests heavily in Egypt, especially in the Suez Canal region. It is by far the largest investor in the Suez Canal Corridor.

China has already established an industrial zone in the corridor that plays host to a large number of Chinese factories and companies that manufacture their products locally and ship them to the international market, using Egypt's strategic location as a link between all continents.

Apart from China, the Suez Canal Corridor also attracts billions of dollars in investments from other countries which are also establishing their own industrial zones, seeking to capitalize on the area's proximity to export ports and also Egypt's proximity to international markets.

Nevertheless, whether investors' interest in the Suez Canal as a whole will shrivel up as a new trade route appears in the horizon is yet to be seen.

This prospect, at least, causes fear in Egypt and fuels more work to keep the canal relevant to international trade.

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