Expo 42: Trading places

Down by the quayside in Port Said, two worlds steam past each other on the waves. One is packed tightly into a squat green ferry: chain-smoking taxi drivers, hollering fish-bait hawkers and countless chattering families. The other – a colossus – yawns silently above them: 100,000 gross tonnes of solid steel, 15,000 cargo containers, and not a person in sight. For a fleeting moment the little passenger vessel locks paths with this hulking backbone of global trade. And then it chugs on, across to the other bank where the next batch of city commuters is waiting. In the Suez Canal – the most important waterway on the planet – casual hops across the channel can be a disorientating experience.

Egypt has been engulfed by revolution this year, bringing millions on to the streets and toppling a dictator who previously appeared unassailable. As this ancient country begins its precarious path towards democracy, Egyptians are realising that bringing down the three-decade rule of Hosni Mubarak is only the beginning. In the aftermath of one of the most extraordinary uprisings in modern history, a far wider struggle is taking shape to achieve prosperity in a nation blessed with natural resources, yet one in which almost half the population lives below the poverty line.

Chief among these geographical assets is the Suez Canal, a nearly 200km passage dividing Africa from Asia that has long enjoyed an influence over world affairs wildly disproportionate to its modest size. Carved out of the desert from 1859-1869 to provide a more direct maritime route for vessels transiting between Asia and the Gulf on one side, and Europe and America on the other, the canal processes 3.35m tonnes of cargo every day – that’s 7 per cent of all the sea-transported trade in the world.

By offering an alternative to a long and expensive course around the Cape of Good Hope, Suez has transformed the international exchange of goods over the past century and a half. It has also provided a financial lifeline to the most populous country in the Arab world. Shipping companies pay on average $250,000 (€184,000) to make a single trip between the Red Sea and the Mediterranean, and the revenue – around $400m (€291m) a month in 2010 – is a crucial source of income and foreign currency for Egypt.

Yet beyond its important strategic and economic value, the canal – a thin blue vein in the Sinai sand – means something else to Egyptians. “It’s part of our identity, woven into the fabric of who we are as a country,” says one former sailor who used to pilot tankers through Suez. “Without it, we’re nothing.”

The history of the canal provides a kaleidoscopic window on to the trials of modern Egypt, from its messy entanglement with European colonialism to the vast wars that have shaped the country post-independence. Even this year’s revolt can trace its roots partially back to Suez; in the early days of the anti-government unrest some of the fiercest fighting took place in Suez City, leaving at least 38 people dead.

Not too far from the epicentre of that violence is Port Tawfiq, a tree-lined neighbourhood where mega-tankers glide ethereally through the town, threading their way past low-rise bungalows en route north to the Mediterranean. Sitting in one of the old coffee shops there and talking to those who used to ply these waters, it’s not hard to understand why the canal enjoys a unique place in contemporary Egyptian consciousness.

But despite record profits last year, Suez’s prospects are looking anything but rosy. A perfect storm of shifting trade patterns, widespread piracy and rival sea routes is blowing ominously in the canal’s direction – and behind the public smiles Egyptian officials know that whatever sort of government takes shape in the post-Mubarak era, some tough decisions about Suez will be top of the to-do list. In fact, an unprecedented programme of new development in the canal zone is already under way – one that could forever change the face of this august region.

Follow the road south of Suez City as it swings away from the ocean and plunges into the desert, and you’ll see something strange on the edge of the highway – posters in Mandarin. They are adverts for a new $1.5bn (€1.1bn) industrial district where investors from the Chinese region of Tianjin can build factories and take advantage of Egypt’s preferential trade deals with Europe and the US. And they’re not alone: a Malaysian zone is under construction nearby and, until its overthrow in February, the Mubarak regime was courting investment from India and Singapore as well. The huge sandy expanses earmarked for these districts will be the biggest building projects here for generations. The hope is that Suez will be transformed from a mere crossing point into a global export gateway of its own. “It’s a big transition for Suez,” says Simon Kitchen, an analyst with the Egyptian investment bank EFG-Hermes, “because you’re moving from a situation where the canal is just a useful earner of foreign exchange for the state, to a situation where it becomes a focus in its own right for private sector industry and starts generating its own momentum.”

The trigger for this reimagination of the canal’s basic function lies in the need to protect it from the volatile oscillations of global trade, upon which present-day Suez depends. If shipping companies have less to carry – or can find ways of carrying it that bypasses Suez’s expensive tolls – then the financial health of the canal instantly takes a battering. And at the moment omens aren’t good.

To the east, the changing composition of global oil demand is increasingly directing tanker traffic towards China and India, threatening one of Suez’s main sources of income. To the south, the omnipresent threat of piracy in the Gulf of Aden continues to dissuade some ships from approaching the canal at all. And to the north, perhaps the greatest menace of all to the Suez’s viability is lurking within the Arctic ice cap. Last August a Russian vessel, the Baltica, docked in Shanghai to deliver the first-ever commercial supertanker shipment between Europe and Asia via the Arctic Ocean. Treacherous ice in the Arctic waters has long made the Northwest ­Passage off-limits to most ships but now rising temperatures are making it possible. Eventually climate change could doom Suez; whereas a ship travelling from Murmansk to Shanghai would take more than a month if it went through the canal, the Baltica – escorted by a nuclear-powered icebreaker – made its journey in just 22 days, saving $1m (€734,000) in fuel costs alone.

“Global warming will facilitate this new route by 2030,” warns Wael Qadour, a former board member of the Suez Canal Authority. “This will definitely affect the Suez Canal.” The authority is headquartered in the 19th-century waterside town of Ismailia and each morning in the mist, hundreds of locals come down to the canal’s banks and wade in to sift the mud for clams to sell in the market. It’s a ­reminder of how many livelihoods depend on the channel – and how many could be affected.

And so a brave new world of chimneys and cranes is rising up near the canal’s banks, all in an effort to make Suez an economic powerhouse in its own right and insulate it from any drop in toll fees. Places that were once far removed from the hubbub and buzz of the canal’s three major cities are now hives of activity. At Sokhna port, 45km south of Suez, new investment by the Dubai ports giant DP World is bringing livestock pens, sugar refineries and freshly dug docking basins to the desert. “Suez is becoming an industrial hub in its own right,” says Sayed Mohamed, the port’s commercial manager.

But amid all the excitement, many are worried that the canal’s traditional urban centres, which count among the most colourful in Egypt and have always reflected the rhythms of the waterway, are being left behind. In the frontier town of Port Said, for example – where local traders flog goods from around the world at market stalls – many people used to make a living by rowing out to mega-tankers on the canal and selling their crew cigarettes. But the construction of a new port to the east of the city has ended this practice and left the community feeling isolated from the trade on which their town was built.

Port Said’s former MP, El-Badri Farghali, says his city is in an “economic and social crisis”, and the same is true of Suez City as well, where boats rarely dock any more and will do so even less as attention switches to the industrial development in the desert areas instead. “The canal used to be the source of life in Suez,” remembers one dock worker there. “We’d head out into the water in our feluccas and fish in the morning, then work as porters for the passenger vessels arriving in the afternoon. All that is gone now – fishing in the canal is banned for security reasons and the passenger ships don’t even stop here any more; they just go straight through to the Mediterranean.”

Egypt is waking up to a new dawn of possibilities, and the fate of the Suez Canal will play a crucial part in determining which of them takes precedent. The country’s next government needs to reposition this remarkable asset to stop it being cast adrift in troubled global waters. The challenge now is to find a way of doing so that ensures the people of Suez – who have played such a vital part in its past – are not left behind in its future.