Evaluating the economic and trade impacts of expanded Red Sea port infrastructure on neighboring Middle Eastern countries
1. Introduction
1.1. Background
1.2. Objectives
1.3. Scope
2. Methodology
2.1. Data collection
2.2. Analysis techniques
3. Economic Impacts
3.1. Direct effects on local economies
3.2. Indirect effects on regional trade
3.3. Job creation and employment opportunities
4. Trade Impacts
4.1. Increased export opportunities
4.2. Enhanced connectivity and logistics
4.3. Potential challenges and risks
Evaluating the economic and trade impacts of expanded Red Sea port infrastructure on neighboring Middle Eastern countries
1. Introduction
Evaluating the economic and trade impacts of expanded Red Sea port infrastructure on neighboring Middle Eastern countries has been the subject of considerable discussion in recent years. This is because the nations in the Middle East and North Africa, or MENA region, are facing a range of challenges, such as high levels of youth unemployment and political instability. At the same time, there are a number of opportunities to create jobs and stimulate economic growth, particularly in the wake of the Arab Spring. It is within this context that the Kingdom of Saudi Arabia has invested in a number of large-scale infrastructure projects, such as the King Abdullah Port (KAP) on the Red Sea and the King Fahd Industrial Port (KFIP) on the Arabian Gulf. In particular, there are plans to develop the port at KAP so that it will be able to handle the world’s largest container ships. This will involve dredging the approach channel from the Red Sea, constructing new quay walls and adding an additional 1,200 meters of deep water berth. Furthermore, vast new logistics and processing zones will be built on the land behind the port itself. This will make KAP the eighteenth largest container port in the world, with a throughput of over 10 million TEU (twenty-foot equivalent unit shipping containers) per year. However, to date, the implications of this investment for economic and trade development in the Red Sea and for the wider MENA region are not well understood. This study therefore represents an important step forward in filling this research gap and providing evidence-based assessments. Through a combination of quantitative analysis of trade flows and qualitative study of strategic decision-making processes among firms in the region, it aims to meet both academic and practical policy objectives. In this chapter, the following will be included: the reasons for selecting this research topic, the value of the research to academia and policy makers, objectives and milestones to be achieved.
1.1. Background
The Red Sea has always been of strategic importance to Middle Eastern countries, being the key maritime route for connecting Europe and the Middle East with Asia. It is a vital corridor for global trade that connects the world’s largest consumers in the EU and US with the fastest growing economies in the Middle East and Asia. However, the dated maritime infrastructure in the Red Sea has not been able to keep up with the growth of global trade in the past 2 decades. Massive cargo ships carrying over 18,000 TEUs (twenty-foot equivalent unit, the standard measure of a ship’s cargo carrying capacity) are increasingly used for international trade; however, the major ports in the Red Sea, such as Jeddah Islamic Port in Saudi Arabia and Port Sudan in Sudan, have been struggling to cope with such big ships due to their limited depth and small size. These volume limitations, together with the complex navigation caused by the narrowness and the bends of the waterway, make the waiting time and the potential risks for accidents relatively high in the Red Sea, which further slow down the already lengthy custom process and the loading and unloading of shipping in the ports. All these complexities and inefficiencies in the supply chain have caused huge vessel congestion and delays in the Red Sea, which not only increases the cost for carriers in terms of longer shipping time, more fuel and less trip frequency, but also creates great uncertainty and unpredictability for the freight forwarders who have to absorb the potential risks of delay. Economically, inefficient supply chain harms direct and indirect trading opportunities in a variety of ways. From supplier’s perspective, it reduces the market competition since only few firms who can afford the potentially high inventory cost under the uncertain supply and demand status in the global market will survive. From customer’s perspective, the variations of the lead time in the delivery of products may interrupt the optimal inventory control, and hence compromise the service quality or even the customer base. These economic inefficiencies have driven the need for expanded port infrastructure in the Red Sea; notably, both Egypt and Saudi Arabia have launched massive port expansion projects in the past few years. The new port “El Hamoul” in Egypt has just opened for use in July 2019 while the expansion works for King Abdullah Port in Saudi Arabia is still ongoing. This study will examine the potential economic and trade impacts of these projects on the local economies in the Red Sea and its neighbouring countries. By critically evaluating the changes brought in by the new infrastructures, the governments and traders can all have a clearer and more objective insight towards the future planning in the Red Sea.
1.2. Objectives
The use of Geographic Information System technique will also be explored, and the developments of the new data set for the GIS database will make a significant contribution in supporting the environmental and economic research. Also, in the academic field, it will have the potential to advance the interdisciplinary studies such as economics, politics, and other social sciences because I will be using many principles and approaches from different areas of these studies to analyze the different aspects of the economic impact, such as in the policy evaluation and the qualitative as well as quantitative research.
In policy analysis, the result of the potential economic impact assessment can provide a valuable reference point for all stakeholders on where to start the consultation exercise. This is crucial not only for the legitimate public in the planning and decision making in sustainable use of the port, but also for the port and local authority to fulfill the lawful duty to act in the best interest for the wider economic development.
The focus of this innovative research may be developed and delivered in the analysis of multiple dimensions of economic impacts. It is expected that the results will give a convincing narrative about the great potential the expanding activity in the Red Sea could bring to the economic development of the region, and that would be comparative to an extremely high standard provided in the relevant literature.
The main objective of the study is to perform an in-depth impact assessment of expanding port infrastructure in the Red Sea on the regional economic and trade development, specifically in the neighbouring countries. There are three specific objectives:
1. To investigate the potential economic impact of the expanding port infrastructure in the Red Sea on the surrounding region.
2. To find the necessary measures that need to be taken in order to mitigate the potential negative trade impact resulting from the expanding port activity in the Red Sea.
3. To assess how the future economic prospects could be enhanced by making full use of the expanding port activity in the Red Sea, in terms of optimizing the beneficial impact on the regional economic development and trade prosperity.
1.3. Scope
The scope includes an assessment of impacts on neighboring countries, alongside the direct impacts on countries whose economies are dominated by the ports. Such neighbors include states on the Red Sea that are economically integrated with port-led growth in that region. Neighboring countries as far as the Mediterranean may be indirectly affected since the canal could become a preferential route to European markets. This is provisionally significant, as Egypt is currently challenging the position of Greek ports as a primary gateway to European markets. Research will focus primarily on real measurable economic impacts and how expanded port infrastructure in the Red Sea could create such impacts, both regionally and internationally. The timeframe of the impacts, for example whether they are short-lived during the construction period or long-term far-reaching impacts, will also be considered. Direct measurable economic impacts are likely to include an increase in direct and indirect employment, income generation through wages and spill-over effects, and an increase in trade volume. Through literature and data findings, research will also be able to assess the validity of applying economic theory to port-led development in practice and whether or not expanded infrastructure will lead to sustained long-term economic growth. The paradigms of neoclassical development theory, where infrastructure is a key output of a successful economic system and also a key input which drives further growth, will be discussed as a potential postulation. However, globalization and the liberalization of international trade, particularly from the 1990s onwards, may also provide an agreed framework through which to understand the potential value of improved trade connection through port infrastructure developments.
2. Methodology
