The development of political and economic links between emerging markets is providing the shipping and ports industry in the Gulf of Arabia with a welcome boost. The growth of the so-called ‘Global South’ trade – especially that between the BRICS group of countries – has led to new shipping routes opening up, many of which include Gulf ports. Whilst the region remains a global hub for flows of goods from Asia to Europe and North America, it is increasingly important part of regional networks connecting sub-Saharan Africa, India, South East Asia and Eurasia.
From uncertain beginnings in 2005 with just three members – China, Russia and India – the BRICS group has now become an increasingly powerful association of countries. It presently consists of ten members, including the UAE (but not yet Saudi Arabia, although it has an invitation to join) and, according to the International Monetary Fund, accounts for 40% of the global economy. The group’s GDP is forecast to grow at 3.4% in 2025, compared to just 1.2% for the G7 advanced economies. More importantly from the perspective of regional trade flows is the growth of trade within the group. The UN says that, ‘BRICS made progress towards forming its own network of complementary supply chains and diversifying its trading relationships which presents an attractive alternative cooperation for developing countries to advance their global value chain.’ As a result of investment and enhanced political links, growth of intra-BRICS trade has been faster than that of many other countries. The power of the bloc will only increase when markets such as Turkey, Nigeria, Colombia and Vietnam become full members.
As the BRICS largest economy, China will obviously be a key beneficiary of the expanded group. Much of the merchandise trade will be directed through its ports. However, within the lattice of ‘South-South’ trade routes which is developing, the advanced ports and airports in the Gulf States will also become critical elements of the infrastructure connecting the BRICS members and partners.
One such example is a new service operated by UAE-based shipping line, Cstar Line, which will link UAE with India, Turkey, Russia and Saudi Arabia. Operating primarily through the Red Sea, the company has been able to take advantage of the gap in the market created when other major shipping lines diverted due to attacks by the Yemen Houthis. The line operates a fleet of smaller vessels (up to around 2,500 TEU) which provides it with flexibility to take advantage of new opportunities and serve smaller, local ports as well as major gateways. This will become an increasingly important feature as volumes regionalise.
As well as this, Emirates Shipping Line (ESL) and Taiwan’s Wan Hai Lines have jointly launched a service between India, Saudi Arabia, Egypt and Turkey saying that it will bridge key ports across the region and improve economic integration. As a Gulf-based shipping line, ESL will play an important role in creating a dense network of shipping services, increasing frequency and range of destinations which will be critical to developing robust logistics links. Even the largest shipping lines have recognised the opportunity. The Gemini cooperation involving Hapag-Lloyd and Maersk announced earlier in the year a service linking Saudi Arabia, Oman and the UAE with Egypt, Morocco, Spain, Jordan and India. The eventual re-opening of the Red Sea will see the range of services available to the region’s shippers increase significantly.
Inevitably, President Trump’s attempts to re-structure global trade will also have an important impact on shipping routes, although not one which he may welcome. His decision to raise tariffs on imports, will only encourage BRICS members to look for alternative markets for their goods and regional trade will grow as a result. As the Carnegie Endowment puts it, BRICS has become a ‘safe haven’ for non-Western countries which feel marginalised by transnational institutions (such as the World Trade Organization and World Bank) and vulnerable to the vagaries of US and European trade and investment policy.
Whilst in political terms it would be easy to overstate the potential for such a diverse group of countries to challenge the Western hegemony, as far as trade is concerned there are signs that BRICS will become an effective platform for multipolarity in the emerging world. The investment which the Gulf States have made in transport and logistics infrastructure will be critical in providing the ‘glue’ for this international trade. The GCC’s ports will only become more important as new countries are added to the group.
Author: John Manners-Bell
Source: Ti Insight
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