Kwang Poon
Geopolitical Strategist
The Red Sea Crisis is starting to affect global trade. In Chinese, the world crisis is translated into Weiji （危机）, which is a juxtaposition of both danger and opportunity.
Perhaps, the Chinese version renders a more comprehensive picture of the situation as both risks and opportunities arise concurrently amidst the Red Sea Crisis.
Even during peacetime, it is estimated that some 20,000 vessels pass by Mauritius annually, compared to nearly 100,000 expected through the Malacca Straits by 2025. The Suez Canal saw more than 22,000 ships through in 2022, which translates to an average of 60 ships per day.
The root cause of the Red Sea Crisis is the Isreal-Palestine conflict. Recently, Israel responded vigorously to attacks by Hamas.
Then, the Houthis initiated attacks on commercial ships ‘in solidarity with their Palestinian brothers’ in Gaza who are fighting the Israelis.
Mauritius has aligned itself with the UN position which called for peaceful negotiations towards a two-state solution, one for the Jews and another for the Palestinians.
Bab al Mandab Chokepoint
The Bab al Mandab Strait connects the Gulf of Aden with the Red Sea that leads to the Suez Canal. It spans about 30 km wide with Yemen on the eastern side and Djibouti on the western side. In Arabic, Bab al Mandab means the Gate of Grief and is thus also sometimes called the Gate of Tears, which is quite fitting at the moment.
It is one of the chokepoints for maritime trade and accounts for 15% of global trade. It is a vital sealane for Energy Security with 12% of oil and 8% of LNG passing through it. As a shortcut between Asia and Europe, it accounts for nearly one-third of global container traffic.
Suez Route v/s Cape Route
Taking the Singapore to Rotterdam maritime route as the benchmark, the distance via the Suez Canal is 8,440 nautical miles, whereas going around the Cape of Good Hope – which passes by Mauritius — extends the journey by 3,280 nautical miles to a total of 11,720 nautical miles.
The extra distance adds 10-15 days extra to the route and bumps up the cost by an extra 30-40%, depending on weather and sea conditions.
However, certain ultra-large ships are too wide to navigate through the narrow Suez Canal and have no choice but to take the Cape Route. These ships are categorised as Capesize and the infamous bulker Wakashio was one such vessel.
Rerouting to Avoid Houthi Attacks
In view of the frequent attacks, all the major shipping lines have decided to reroute their ships in order to avoid the dangers of navigating through the Red Sea.
The rerouting adds delay and cost to the maritime transport. Already, the stock price of the shipping companies have jumped in anticipation of extra revenue.
Thus, the Drewry’s World Container Index displayed an uptick following the upwards price revisions by shipping companies due to high risk incurred while travelling across the Red Sea.
Operation Prosperity Guardian
On 18 December 2023, US Defense Secretary Lloyd Austin announced Operation Prosperity Guardian by setting up a multinational maritime task force to ensure the safe passage of commercial vessels through the Red Sea.
Seychelles was the only African country in the coalition while other large shipping nations, notably China, declined the invitation.
Following an attack on its ship in the Arabian Sea, India finally decided to deploy some naval and aerial assets in the region.
Opportunities in Crises
The case for transforming Port Louis into a world-class Maritime Hub has been bobbing up and down the seawaves for some years now. From memory, the Mauritius Ports Authority had talks with the Port Authority of Singapore, Dubai Ports World and COSCO.
The top shipping lines including MSC, Maersk, CMA-CGM, COSCO, Hapag-Lloyd, Evergreen and ONE have all taken note of the potential of Mauritius to act as a Transhipment Hub along one of the key SLOC in the Indian Ocean.
According to the Mauritius Ports Authority, nearly two thousand ships stopped by Port Louis for refuelling services, requiring nearly 600,000 tonnes of bunker fuel, during the financial year 2021-2022.
Geopolitical Rivalry
The Government has instituted a high-level committee to look into the implications of the Read Sea Crisis with a view to reinforce Mauritius as a Maritime Hub.
Since Mauritius has not joined the Belt and Road Initiative (BRI), China has focused its investment primarily in Sri Lanka which lies on the Asia-Europe maritime route and has been identified as a key note on the 21st Century Maritime Silk Route.
Actually, some analysts have gone so far to say that Port Louis has become a mere Spoke off the Colombo Hub whereas it aspires to be the Hub in the Indian Ocean.
While China celebrated the 10th anniversary of BRI in 2023, India has SAGAR and the USA has its Indo-Pacific Strategy.
Roadmap for Maritime Hub
It is clear that bold reforms and strong political will are necessary to modernise the seaport in order to uplift it into a world-class Maritime Hub. Transit time and container moves per hour are some of the KPI used to evaluate port operations.
Recently, there have been some positive signs. In particular, the official opening of the Cruise Terminal provides a modern and pleasant environment to welcome tourists from cruise ships.
The Bunkering Hub is in the pipeline fuelled by renewed interest. The Seafood Hub could be revived if we take inspiration from the Tsukiji and Toyosu Seafood Markets.
The Island Terminal is still on the drawing board stage, but it is noteworthy that it included a breakwater structure to allow operation even in bad weather.
In terms of container traffic, 233,971 TEU had Port Louis as their final destination while 174,174 TEU were transhipped during FY 2021-2022. Thus, Port Louis processed nearly half a million TEU annually. There appears to have quite a bit of room for growth considering that Singapore tranships nearly 40 million TEU annually.
Global Supply Chain Resilience
The COVID pandemic disrupted the Global Supply Chains (GSC), pushing prices up and making the world more acutely aware of Food and Energy Security issues.
In 2021, the Ever Given ULCC blocked the Suez Canal for one week and the world economy almost came to a standstill, as losses of more than one billion dollars per day accumulated as a result of the blocking of this critical passage.
Now, the Red Sea Crisis is again laying bare the vulnerabilities of Global Supply Chains.
Therefore, Mauritius is trying to mitigate GSC risks by having its own fleet. At the same time, it must diversify its supply sources for essential commodities such as edible oil, rice, wheat, fertilisers, petroleum and pulses to avoid being caught off-guard.
Thus in the National Budget 2022-2023, Finance Minister Padayachy announced the acquisition of two regional feeder vessels. Moreover, the Mauritius Shipping Company welcomes MV Peros Banhos in replacement of MV Trochetia to serve the outer islands.
Path of Least Pain
There are several options possible. The first choice is to look for a ‘strategic partner’ which will bring the financial and technical expertise to upgrade the port.
Like for the airport, the Government may consider consolidating the port operations and management into a supercorporation. However, this type of arrangement is not without its disadvantages as interests can become entrenched. Such a large corporation could turn into a ‘huge cumbersome beast’ which is difficult to manage.
In line with best practices elsewhere, it might be necessary to set up two companies which are both state-owned but compete against each other. A regulator will act as a watchdog in order to improve efficiency and service through healthy competition.
Dual-Seaport Ponderation
In addition to performance improvement thanks to healthy competition, the establishment of two port operators implies the creation of at least two ports. In that context, the redevelopment of Port Sud-Est or Port Mathurin are options to be explored.
One company could have a Western company as a strategic partner while the other could partner with an Eastern one. Needless to add, this would require some diplomatic gymnastics and require superb skills to balance the sensitivities of one partner with the ambitions of the other.
Timing is Everything
At the height of the COVD pandemic, the borders of Mauritius were closed with only emergency flights allowed. The Government seized the opportunity to undertake needed reforms of Air Mauritius and consolidated all the flight and terminal operations under Airport Holdings Ltd.
In the case of the seaport, Mauritius finds itself in the enviable position of having to cater to a surge in demand. It is clear that reforms would demand some drain to attain the potential gain.
Given that General Elections are expected in 2024, the Government might refrain from undertaking painful reforms that might antagonise voters. Therefore, taking into account electoral considerations, such reforms might be best left to after the General Elections.
To secure the mandate of the people, the Maritime Hub could be inserted in the upcoming campaign manifesto.
Conclusion
The Maritime Hub is a large program consisting of several projects including the Island Container Terminal, Transhipment Hub, Cruise Terminal, Seafood Hub and Bunkering Station. The jewel of the crown is the Transhipment Hub but many pieces need to fall into place to make it happen.
The Middle-East will remain a volatile region as long as the tension between Israelis and Palestinians or the Sunni-Shia divide persists.
Given the great power rivalry playing out in the Indian Ocean, Mauritius must know where its national interest lies and learn to ‘swim with the sharks’ in the highly contested waters and geostrategic space.