Unrest in West Asia may hit trade

Written by Nikita Upadhyay | Nikita Upadhyay | New Delhi | Updated: Feb 22 2011, 04:54am hrs
The tensions in the West Asia has had minimal impact on trade and shipping between the region and the Indian subcontinent so far, but if they were to continue for a few more weeks, it could impact business significantly, experts said.

Concerns of freight movement through the Suez Canal has abated but prolonged uncertainty in the region can lead to port congestion.

Data compiled by the department of commerce shows total trade between India and the West Asia in the year 2009-10 was worth Rs 6,00,000 crore.

"The impact of persistent unrest in the West Asia may trickle down to trade affecting Indian exports to the region, especially meat, says Gagan Seksaria, associate director-transport & logistics, KPMG. Traders, liners and ports should be prepared for unforeseen circumstances, including order cancellations or disruptions in ocean supply chains, he added.

Most of investor concerns relate to the flow of oil through the Suez Canal, an important transit route across Egyptian territory. "Almost 20% of India's exports go through Suez Canal and about 9% of the global seaborne trade is transited through this route. About 15-20% of the traffic through this canal accounts for crude oil whereas about 50% traffic is of container ships. We import minimal crude through this route. Security is increased and hence the fear of collapse in trade is reduced, said Mahendra Patil, senior manager, corporate ratings, CARE.

According to Srinath Manda, programme manager, transportation & logistics, Frost & Sullivan, India and China together contribute 60% of cargo transversing through the UAE. The unrest in Algeria and Yemen are feeble efforts when compared to Egypt. Business sentiment is stable. Revolt is now more from working class for better wages, which hardly threatens trade, he said.

Indian shipping companies see no impact on freight rates. Contribution of West Asia to India's entire sea-borne trade is minimal. The military has taken control and the fear of closure of Suez Canal has subsided, said a spokesperson from GE Shipping.

An excess supply of vessels in the market is also bound to rein in freight rates.