DUBAI INC. DRIVES REGION FORWARD

What lies behind the growth and what is being done to sustain and nourish it? And can Dubai’s extraordinary success be repeated elsewhere? Nick Elliott reports.

The Gulf represents an interesting strategic case study with super-developed Dubai on the one hand and aspiring neighbour states eager to play catch-up, on the other.

Without question the major economic driver in the region is Dubai Inc. “In Dubai you will see development in every conceivable form, ” says Gulftainer’s marketing manager, Keith Nuttall. “Whether it’s the media city, sports extravaganzas, rock concerts, shopping festivals in the off-peak season to attract more tourists, or new trade initiatives at Jebel Ali Free Zone, not a week goes by without some new scheme. The scale of change and development in Dubai is phenomenal, ” says Nuttall.

“The government spends a great deal of time and effort thinking of big new ideas to continue this expansion, ” he continues. “They are building on their history as the biggest trade entrepot in the region.

They have galvanised themselves to benefit from this with the free trade zone and encouraged people to come and establish their regional offices.”

Dubai thus generates its own import/export flows and thereby also supports its other attribute as a transhipment hub, in much the same mould as Hong Kong and Singapore upon which Dubai cleverly modelled itself some 20 years ago.

Elsewhere in the region, the Iranian economy is still driven by oil revenues, Saudi Arabia has diversified with downstream petrochemicals and agriculture but it is still oil money that runs the economy. And the Indian and Pakistani economies have also been flourishing in recent years, so inevitably trade between these neighbours and Dubai has grown.

Then there is the Iraq issue with the inevitable post-conflict and reconstruction initiatives underway or still ahead. Most of the materials for these efforts are and will be transhipped over Dubai or indeed one of the other regional hubs. “The rebuilding of Iraq is not happening as fast as everyone expected but there is a lot of effort going into that now and it’s slowly gathering momentum, ” says Nuttall Anwar Wajdi, executive commercial director of Dubai Ports Authority (DPA), says the 23% growth achieved in 2003 over 2002 came from all aspects of their business. “Dubai is growing fast with many construction projects underway. And there is a noticeable growth in regional economies.” Between January and May this year the port had already chalked up 2.426 million TEUs. Interestingly, last year 51% of Dubai’s business was transhipment volumes and Wadji expects that ratio to continue.

Earlier this year the DPA, which was created by the merger of Port Rashid and Jebel Ali in 1991, suffered serious congestion caused by a shortage of berths and handling equipment. The problem arose understandably as a result of the region adopting a conservative, not to say pessimistic, position as a result of 9/11, the Iraq war and political tension around the region. This in turn affected forecasts.

“Taking into consideration the overwhelming surge in business we experienced, ” explains Wajdi, “only smaller and feeder ships were relatively delayed but certainly not main line vessels. DPA was transparent with its customers about this short period situation, which has vastly improved since last June with no congestion at the moment. Exceeding others, we have been proactive and responsive to this rapid growth by procuring more equipment, expanding our facilities and adding more space.”

The crisis prompted an urgent procurement exercise followed by the formulation of a 20-year investment plan forecasting growth up to 2020. Now the port is planning for at least 25% extra capacity in Jebel Ali in the future and by 2020 DPA expects to be handling 20m TEUs a year.

The development phase of Berth 11 at Jebel Ali Terminal and the expansion of its container yard have now been completed adding 116,000 square metres. Development work commenced on Berths 10 and 10A in March this year with completion due in January 2005.

This will add 150 metres of quay length. Around 120,000 square metres was also added to Berths 22 and 23.

“Our master plan has progressed further as the first phase of development work on Berths 18, 19, 20 and 21 commenced in the middle of this year, ” says Wajdi. “The reshaped Quay 4 will add 400 metres of quay length with a draught of 17 metres, and 150,000 square metres as additional yard storage area.” And work has started on developing and dredging general cargo berths following completion of a 246,000 sq metre empty container storage yard.

At Jebel Ali four STS gantry cranes have already been installed this year and four more are due before year-end. Meanwhile Port Rashid is expecting two to be delivered this year. Next year Jebel Ali will receive 10 more STS gantries and 52 RTGs. Other enhancements include new reefer points in response to a 34% increase in frozen cargoes in the first six months of this year.

Wajdi is satisfied that the DPA’s multiphase master development plan is on track and adds: “We have also formed a team of in-house and external experts to plan and commence work on Container Terminal 2 at Jebel Ali Port. Our strategy remains to stay ahead of the game in terms of first, adopting state-of-the-art equipment and systems; second, expanding our infrastructure to meet the growing needs of our customers; and third, our customer care initiatives.

“The Jebel Ali Free Trade Zone continues to build more offices and warehouses to accommodate demand and more plots of land are being developed in the new expansion area south of the existing zone, ” says Wajdi.

SHARJAH BATHES IN DUBAI’S GLOW Given the competition it is perhaps surprising that neighbouring Emirate, Sharjah, should also be so upbeat. Khorfakkan Container Terminal (KCT) on Sharjah’s Indian Ocean coast and its sister terminal at Port Khalid, Sharjah Container Terminal (SCT) on the Gulf Coast, are operated and managed by Gulftainer on behalf of the Sharjah Ports Authority. 2004 half-year throughputs at both terminals are up 26% on the first six months of 2003 and KCT passed its millionth TEU in mid-July, nearly a month earlier than 2003.

KCT’s phase one expansion comprises a 400-metre berth with 16 metre draught and four super post-Panamax twin-lift STS gantry cranes. “KCT has to be ready by the end of 2005 to accept 8,200 TEU vessels, ” says md Barry Coughlan. “CMA-CGM already have them but Hanjin and Norasia are both constructing this generation of vessel as well.”

Gulftainer is well pleased with its new ICD too. “The volume of bonded movements that used to move from Khorfakkan to the old terminal in SCT has reduced considerably because they now go to the ICD keeping this heavy traffic out of the city which is good news, ” says Keith Nuttall.

The ICD, opened in April, is already handling 9-10,000 gate moves monthly. Located outside Sharjah city the facility accepts all KCT local cargo for distribution and attracts business from industrial areas in Sharjah and Dubai. And SCT terminal manager Steve Ogden says:

“Three times this year APL have picked up record shipments of boxes for distribution in the Far East while other majors, such as Maersk Sealand and MSC are also raising their games. Boxes that were previously moved from Khorfakkan over the Mini Bridge to Sharjah are now handled at the new facility.

“This new arrangement released space back to us and consequently, with the yard equipment we have – four RTGs able to lift boxes one over five high and Kalmar empty stackers, which can stack containers six high – we have room to breathe and that translates to being more efficient with faster and more accurate working.”

For SCT itself, Gulftainer is evaluating with the Sharjah Port Authority, deepening the port entrance, basin and alongside depth by 1-1.5 metres and the introduction of Panamax STS cranes.

SALALAH PUSHES ITS LOCATION Salalah Port Services (SPS), owned 30% by the AP Moller Group with the balance of shares held by the Omani government, Omani companies and pension funds, has a 30-year concession agreement to manage the terminal and last year achieved a staggering 65.29% increase in TEU throughputs over 2002. The terminal is forecasting a further 20% growth this year.

Ceo Jack Helton makes his case: “For vessels serving the Gulf, Indian Ocean Rim, Red Sea and East African regions and the Europe/Asia shipping lane, using Salalah as a relay hub affords significant time savings over many other ports. It is estimated that a carrier operating on the Europe to Asia route, calling on Salalah rather than the Gulf represents a 3.5-day reduction in sailing times.

If served in both directions, east and westbound, the saving amounts to one full week, which translates into a saving of one mainline vessel per linehaul service.

“The same concept applies to serving the Indian Subcontinent. With multiple strings using Salalah today, it brings a wide range of new markets and opportunities within competitive transit times to the exporters and importers of this region, not to forget the ‘Intra-Indian Ocean Rim Market’. When lines look at their vessel networks they will take many things into consideration. One of the major factors is cost and maximizing their investment in today’s mammoth container vessels by covering more markets with fewer but larger vessels.

“To achieve this there have to be safe, strategically located hubs on the major trade routes and with access to sizeable markets.” SPS declares that in the event of political unrest that might threaten shipping activities, the port is an ideal facility from which neutral carriers can perform feeder relays into the politically sensitive Gulf.

A $249m expansion plan to construct a fifth and sixth berth increasing the port’s capacity to approximately 3 million TEU’s per annum is underway at Salalah. (see Figure 2). The first phase is to extend the breakwater by 2.5 km. The expansion will provide over 600 new jobs.

Other planned developments include additional container berths; bulk handling terminals for grain, cement and oil; conveyor belts, silos and additional warehousing; vehicle transhipment facilities, a tank farm and of course a free trade zone (see box).

FROM PORT SAID TO PORT QASIM Across the broader swathe of the Middle East from Suez to the Arabian Sea, ports are pushing ahead with developments which will do much for the growth of a region sorely in need of economic nourishment and social stability. But does over-capacity loom?

In June, 33 tractors, 18 trailers, 12 roll-trailers, two reachstackers and two empty handlers arrived for the Suez Canal Container Terminal (SCCT) at Port Said East. “SCCT has just received its third quay crane, as well as the 11th and 12th yard cranes, ” says md Philip Littlejohn, “and the completed paving area has surpassed 50,000 sq metres. Hiring and training of staff is progressing rapidly, ” he adds. “A number of engineering and operations staff are overseas for practical training at present.” All this in readiness for the AP Moller Group-managed terminal’s opening in October.

“I am at this stage unable to announce specifics concerning customers but can say that we hope to achieve some 400,000 moves in 2005, ” says Littlejohn cautiously. He continues that the terminal will offer “major network advantages to carriers shortening feeder distances and reducing overall transit times to emerging east Mediterranean markets.

Furthermore southbound container vessels will be able to make effective use of waiting time prior to Suez Canal passage.”

On plans for an industrial free zone adjacent to the terminal, Littlejohn comments: “The industrial area south of Port Said East Port is not developing as fast as expected. Fortunately SCCT does not rely on this for its Egyptian cargo base, which is more the Cairo area and surrounding industrial areas.

“We initially expect that the vast majority of boxes handled will be transhipment containers, ” Littlejohn concludes, “however the percentage of Egyptian import and export cargo should grow rapidly once a pattern is established for this.”

ADEN FIGHTS BACK Following the termination last year by PSA Corp of its concession agreement for the operation of Aden Container Terminal (ACT), the government of Yemen has said it will announce a new management contract for the terminal by April next year.

Rotterdam Maritime Group (RMG), as consultants, and the World Bank are preparing the terminal for the bidding process and RMG is due to present its report this month. What is not clear yet is whether the port of Ma’alla will be included in the bidding.

Under the interim management of Overseas Port Management, ACT’s fortunes have recovered somewhat with big reductions in the war risk premiums imposed following the attack on the French tanker LIMBURG two years ago which increased the cost of a vessel’s call by over $300,000. During the first half of this year monthly throughputs have risen from 6,000 to 26,000 TEUs.

Aden’s loss was Salalah’s gain and it now remains to be seen whether the scales will be rebalanced once permanent managers have got their feet under the table next year.

KUWAIT FORESTALLS CONGESTION Gulftainer has been appointed by Kuwait Port Authority (KPA) as official advisors/consultants for the development of Shuweikh and Shuwaiba ports.

The KPA will construct a new container terminal on a greenfield site 1,200 metres long consisting of four berths with an alongside draught of 14.5 metres in Shuweikh. The new berths will be constructed in two phases to ensure that two berths with 600 metres of frontage will be available by the beginning of 2006 whilst the second phase will be completed by 2007.

Initiallly six quay cranes will be installed on the first six hundred metres of berth and further cranes added as the second phase is completed.

The KPA says the terminal will be the quickest solution to alleviate foreseeable congestion due to increasing cargo volumes and plans for it to serve the country’s needs for the next 30 years. The authorities have been working in conjunction with Gulftainer to prepare a master plan for both ports.

BAHRAIN SEEKS OPERATOR Bahrain’s new ports are to be operated privately. An invitation for tenders to operate Mina Salman and the Shaikh Khalifa bin Salman ports was published recently. Tender invitations were also sent to 21 global terminal operators companies selected by project consultant KPMG.

The ports directorate is expecting to receive the companies’ offers within the coming three months whilst a specialised evaluation committee will select the pre-eminent tender by March next year. The contract winner will have six months to create a Bahraini company, to start operations by October 2005. Port development work is expected to be finished by the end of 2006.

CHABAHAR SPOTS ITS NICHE Iran’s Ports and Shipping Organisation (PSO) has signed a $100m contract with a consortium of Indian companies to set up a container terminal at the Iranian port of Chabahar. The consortium is led by Chennai-based Ashok Leyland Project Services (ALPS). The deal is part of a $500m project signed between the Iranians and ALPS to connect Chabahar with Afghanistan. The port project is likely to start in the next six months and be completed by mid-2007. Access from Afghanistan to Chabahar is difficult. Goods are either driven from Herat in Afghanistan to the Iranian city of Mashad, and then sent by rail from Mashad, or dispatched by road all the way.

GWADAR PHASE TWO GETS THE NOD The Pakistan government is to start on construction of the second phase of Gwadar Port in May 2005 at a cost of $865m, following completion of phase one. The second phase will be completed by 2010 by the private sector to accommodate 50,000dwt container ships, 100,000dwt dry bulk carriers and up to 200,000dwt tankers. Three container terminals (2,010 metres quay length), one bulk cargo terminal (305 metres), one grain handling terminal (305 metres), one twin-pier oil terminal (688 metres), a 600 metre breakwater and a 16-20 metre deep approach channel, are all on the drawing board.

Phase one is being built by the public sector with Chinese assistance at a cost of $298m. It includes three multipurpose berths (602 metres quay length), one service berth and a 4.35km navigable channel (11.6-12.5 metres deep).

The government says the completion of phase two will help meet strategic needs and act as a standby facility to Port Qasim and Karachi in case of emergencies. The construction of phase-two will be completed on BOT or BOO terms.

FIGURE 1: TEU THROUGHPUTS OF PRINCIPAL MIDDLE EAST TRANSHIPMENT HUBS (MILLION) PORT 2001 2002 2003 2004<$>DUBAI 3.502 4.194 5.152 6.000<$>SHARJAH (KCT/SCT) 1.090 1.266 1.601 2.000<$>SALALAH 1.188 1.212 2.000 2.400 (Forecast)

TABLE 2. SPS EXPANSION PLAN Infrastructure / Government: Berths 5 & 6 $ 67.5 Million 2.5Kms Breakwater $ 98.9 Million Superstructure / SPS: Equipment $ 82.8 Million<$>Equipment Breakdown:

Quay Cranes – 6<$>Mobile Cranes – 2<$>RTGs – 23<$>Reach Stacker – 11<$>Tug – 1<$>Total Project Costs $ 249.2 Million