Thursday, May 02, 2013
CAIRO (Zawya Dow Jones)--Cash-strapped Egypt has hiked the amount of tolls it charges ships that transit through the Suez Canal, raising the ire of a shipping industry already feeling the pinch from rising fuel prices and depressed freight rates.
The Suez Canal Authority said it will now charge tankers and petrochemical carriers an additional 5%, while other container ships which include roll-on and roll-off vessels will be taxed 2% more than before.
Last year, the authority increased toll fees by 3% after freezing previous planned hikes due to the global economic crisis and its likely impact on international trade.
"It is not possible that this small increase will scare away investors," Tarek Hassanein, the spokesperson for the Suez Canal Authority told Dow Jones Newswires.
The announcement, however, has spurred some complaints from international shipping bodies who say the industry has already been hit hard by increases in fuel prices and a decline in global economic activity.
"Collectively, the industry is very unhappy with these toll increases," said Simon Bennet, external relations director at the London-based International Chamber of Shipping.
The canal, which links the Mediterranean and the Gulf of Suez is known to be the fastest route between Europe, Asia, and North Africa. Because of its prime location, the 193-kilometer waterway brings in more than $5 billion every year for Egypt, according to Mr. Hassanein.
Most shipping carriers have very few alternatives and will continue to use the canal for transit, but other companies will now seek different routes, Mr. Bennet told Dow Jones Newswires.
"Some companies will find it cheaper to take the Cape route as its more attractive because they can avoid the pirating areas in the Indian Ocean," he added.
The Suez Canal is one of Egypt's main sources of revenue and foreign currency. Since an economic crisis hit the country following the ouster of former leader Hosni Mubarak two years ago, Egypt has lost a larger portion of its tourism and foreign direct investment. Struggling to pay for imports, the country has bled through $36 billion since January 2011, holding only $13.4 billion in foreign reserves as of March.
Over the past few months, much of the anger and protests directed at Egyptian president Mohamed Morsi and his Muslim Brotherhood government has taken place in the port cities of Suez and Port Said, fanning the security concerns of international shipping companies.
Magdy Sobhy, an economist at the state-run Ahram Center for Political and Strategic Studies, said the issue of securing the Suez Canal and other port cities in Egypt is an important one for Egypt's military.
"The army takes securing these areas very seriously, that's why the head of the Canal Authority always comes from a military background," he added.
Last year, about 17,225 ships used the canal, down from 17,799 in 2011. Revenue from the Suez Canal in March amounted to $398.5 million, according to a recent statement made by the authority.
Write to Reem Abdellatif at reem.abdellatif@dowjones.com
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(END) Dow Jones Newswires
02-05-13 1307GMT
