The Banking Executive Magazine - August Issue

Red Sea Governance tourism infrastructure. UNCTAD is pushing for digital customs and logis- tics systems to reduce delays and im- prove resilience. The United States, United Kingdoms, and allies have formed maritime coalitions to protect shipping lanes, but tensions remain high. Expanding influence through port investments and military pres- ence in Sudan and Djibouti. The Red Sea Council may evolve into a more active platform for conflict resolution and trade coordination. Longer deliv- ery times and higher costs are feed- ing into global inflation, especially in Europe and Africa. Companies are investing in nearshoring and alterna- tive transport modes to reduce de- pendency on Red Sea routes. To enhance the future trade infra- structure and technologies of the Red Sea, we hereby propose a blend of strategic investment, innovation, and regional cooperation, including: • Modernizing Port Infrastructure by expanding and rehabilitating key ports to handle larger container volumes and improve efficiency. • Ports should adopt smart technolo- gies (Artificial Intelligence AI and Internet of Things IoT Integration) for cargo tracking, predictive main- tenance, and automated customs clearance. • Secure digital ledgers and blockchain can be piloted to streamline documentation and re- duce fraud in cross-border transac- tions. • Embedding ESG standards into in- frastructure planning. Solar and wind power can be used to reduce carbon footprints of port opera- tions. • Regional Collaboration and Secu- rity Coordination should be en- hanced to secure Red Sea shipping lanes from piracy and militant at- tacks. A platform for Arab and African coastal states is needed to coordinate trade, security, and en- vironmental governance. TOWARDS BETTER GOVERNANCE OF THE RED SEA AND ARAB BANKS ROLE The Red Sea is not owned by any sin- gle country, it is a shared maritime space bordered by several nations, each with jurisdiction over their re- spective territorial waters and Exclu- sive Economic Zones (EEZs). While no one "owns" the Red Sea, several powers exert influence: • Saudi Arabia: Through the Red Sea Development Company and Vision 2030, it’s in- vesting heavily in tourism and in- frastructure along its western coast2. • Egypt: Controls the northern gateway via the Suez Canal, a vital global trade artery. • Djibouti: Hosts multiple foreign military bases (U.S., China, France, Japan), making it a strategic hub. • UAE: Funds port developments in Berbera and Bosaso, embedding military infrastructure to secure en- ergy routes3. • China & U.S.: Compete for influence through naval presence and infrastructure investments. Arab banks can play a transformative role in Red Sea governance, as the region grapples with geopolitical ten- sions, maritime insecurity, and eco- nomic instability: Financing Regional Infrastructure and Connectivity • Ports & Logistics: Banks can fund upgrades to Red Sea ports and intermodal transport systems, improving trade efficiency and resilience. • Digital Infrastructure: Investment in fintech and digital banking across littoral states can enhance financial inclusion and cross-border commerce. • Green Projects: Support for sustainable energy and climate-resilient infrastructure can align with global ESG goals. Supporting Multilateral Institutions • Arab banks can provide financial and technical support to the Coun- cil of Arab and African Coastal States of the Red Sea and Gulf of Aden, helping it evolve beyond a security-focused body into a mul- tidimensional platform. • Through development finance and economic diplomacy, banks can help reduce tensions by promoting shared prosperity. Cross-Border Investment and Development • SME Financing: Facilitating access to capital for small and medium enterprises in coastal states can stimulate local economies and reduce depend- ency on foreign aid. • Public-Private Partnerships (PPPs): Banks can co-invest with govern- ments in strategic sectors like tourism, fisheries, and renewable energy. Enhancing Maritime Security through Economic Stability • Arab banks can collaborate with insurers to develop tailored marine risk products for Red Sea shipping routes. • Strengthening compliance and monitoring systems. Data and Intelligence Sharing • Banks can provide macroeco- nomic insights to help govern- ments and regional bodies anticipate shocks and plan coordi- nated responses. • Promoting financial transparency can help reduce corruption and improve governance across Red Sea states. the BANKING EXECUTIVE 12 ISSUE 200 AUGUST 2025