The Red Sea crisis remains severe and is likely to drag on.
Tensions in the Red Sea have escalated since November 2023, when Houthi rebels in Yemen launched a series of missile and drone attacks on cargo ships. At least 70 cargo ships have been attacked, prompting major powers like the United States and the United Kingdom to retaliate with airstrikes against the Houthi rebels.
The Red Sea crisis has forced cargo ships to change their shipping routes.
The Red Sea is a vital global shipping lane connecting Asia and Europe via the Suez Canal to the Mediterranean Sea. The World Trade Organization (WTO) estimates that trade transported by sea through the Red Sea accounts for approximately 15% of global trade. The crisis has forced cargo ships to bypass the Red Sea and the Suez Canal, bypassing Africa via the Cape of Good Hope.
The Red Sea crisis poses a threat to the global economy and trade.
It causes cargo ships to experience longer transit times of 10-14 days, resulting in delivery delays and increasing international shipping costs by more than three times.
Furthermore, the Red Sea crisis could also lead to low economic growth and high inflation, or “stagflation.”
The Red Sea crisis has slowed down ASEAN trade, and ASEAN must be wary of losing export markets such as Europe.
The fact that cargo ships from Asia have to around the Cape of Good Hope instead of through the Red Sea to reach Europe has resulted in a shortage of ASEAN goods in the European market. This may cause importers of ASEAN goods in Europe to reduce or delay imports and may turn to importing goods from other countries instead of ASEAN.
ASEAN can turn the Red Sea crisis into an opportunity.
This will be a crucial chance for ASEAN to review its long-term sustainable supply chain and logistics management, increase rail and air transport options, diversify export and import markets for raw materials, especially in countries close to ASEAN and Thailand, and increase the use of local raw materials to reduce transportation times and mitigate risks amidst increasing global uncertainty.
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