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The crisis in Egypt can soon turn from a political uprising to an economic catastrophe and humanitarian emergency if things don’t return to normal operation soon.
Shipping
In the port of Alexandria, among others, army tanks stand guard to ensure no one enters the area. Good plan, except that hardly anything is going out, including exports that are crucial to the country’s economy. Though reports claim that some ports are closed, the Suez Canal is apparently open to shipping traffic. Shipping companies, however, are hesitant to enter the area. If the Suez Canal should close, it would not only spell disaster for a country already in serious turmoil, but it would also mean a worldwide shipping disruption.
Production Plants
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Nissan: the automaker suspended operations Sunday until February 3rd.
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Unilever: the multinational corporation’s offices in Cairo have been closed since January 28th.
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General Motors: the car maker’s plant near Cairo has not produced vehicles since January 28th with production estimated to resume Friday, February 4th.
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Lafarge SA: the a French building materials company has temporarily stopped operations due to the situation. The company has six production sites in Egypt, six quarries and 62 ready-mix plants and employs 8,172 Egyptian workers.
- Heineken NV: the Dutch brewer has halted operations and told its 2,040 employees in Egypt to stay home.
Tourism
The nation’s tourism sector has taken a huge hit that is expected to last for some time.
Foreigners are struggling to flee the country, tour and cruise companies are seeing cancellations and a growing list of Western and Arab nations are sending in flights to evacuate their nationals. The tourism sector is vital for Egypt — and is among one of the four top sources of foreign revenue for the country.
Tourism accounts for 5 to 6% of the country’s GDP, while Cairo International Airport is the second largest airport in Africa, after Johannesburg, handling 15 million tourists per year.
Call Centers and Online Retail
Egypt is home to numerous call centers and IT outsourcing companies. But little can be done when the government cuts internet access throughout the entire nation. Microsoft is just one of the 120 companies in Cairo’s Smart Village, an area built for major multinational and local, high-tech companies.
Asked about the situation in Egypt, Microsoft said in a written response to a query that it “is constantly assessing the impact of the unrest and Internet connection issues on our properties and services. What limited service the company as a whole provides to and through the region, mainly call-center service, has been largely distributed to other locations.”
Hewlett-Packard is another company with operations in the Smart Village. They have asked their employees there to stay home. Though President Obama has urged the Egyptian government to restore internet access, little has changed for fear that protesters will use social networks to organize further riots. For a country that has taken pride in its growing outsourcing and call center business, the suspension of internet access is taking a huge toll.
All of the above have affected financial markets worldwide. And with a “million man march” planned for tomorrow in the Arab world’s most populous nation, little is expected to change in the near future.
Risk Management Magazine and Risk Management Monitor. Copyright 2013 Risk and Insurance Management Society, Inc. All rights reserved.
