Never mind luxury tourism and real estate. Shipping is now Dubai's latest success story
Dubai - The UAE office of the Transworld Group seems, at first glance, more like a spa than the international headquarters of a shipping conglomerate. Set in the middle of the Jebel Ali Free Zone, an otherwise drab industrial park, the interior of the Transworld building features huge original oil paintings and ornate carved-wood wall hangings. Then there are the glass etchings. On high, adorning the 50-by-14-foot glass front wall are quotes from various major religions, including Islam, Christianity, Buddhism, Sikhism and Hinduism.
"Many of our business associates spend more time reading or commenting on these sayings than doing anything else," says Transworld general manager P. Hariharan. The company's global chairman, Ramesh Ramakrishnan, says most of the artwork comes courtesy of his wife, an artist herself. "It's just an attempt to make things homey," he says.
Make no mistake, though: when it comes to shipping, Transworld is all business. The company, with some 1,500 employees around the globe, has seen its profile rise along with that of the Dubai Ports Authority, which in 2004 clocked a record 25 percent growth in the total number of containers handled at Port Rashid and Jebel Ali Port. "Dubai's entry has been fast and aggressive," says Chua Hak Bin, an economist in Singapore, which recently overtook Hong Kong to take the title of the world's busiest port.
Transworld's revenue has similarly been growing at over 30 percent per year since 2003, ringing in at $148 million in fiscal year 2005. When you add other revenue from freight trading, that number rises to $200 million for 2005. This year the company invested in a state-of-the-art logistics center to complement its shipping liner business.
Transworld is just one of more than 10,000 companies contributing to the UAE's unglamorous but growing shipping industry. While it's true that shipping has always been a staple of the Gulf's oil trade, the news here is that, in the UAE, shipping has matured far beyond sending energy to the world. Maritime shipping and related service industries - such as repair and maintenance, insurance and law - are entering the local market in droves. The rising purchasing power coming from India and Asia are making Dubai a desirable storage locale for all ranges of products. Sony, Aiwa and LG are all taking advantage of the incentives of locating within the Jebel Ali Free Zone. Other major maritime shipments include construction-related equipment and products and foodstuffs.
But Dubai, which has a penchant for wanting to be "the biggest" in every sector it enters, is not yet satisfied with its current ranking and has set its sights on further expansion. According to Jeen Joshua, project manager of the Ship & Port Arabia conference and exhibition, some $3.5 billion is currently being invested in UAE port expansions and the Dubai Maritime City project.
"The port authorities here have the ambition to be in the top five of all ports in the world in the next few years," says Transworld's Ramakrishnan. "Today they are in the top 10. So they need a lot of support within the shipping industry. They have set their sights high, but I am sure they will be able to get there. [Dubai] has the distinct advantage of servicing so many different countries around this region, whether it's India, Pakistan, Iran, Kuwait, Iraq or the African market, which is huge. The numbers are very, very big."
According to longtime industry observer Chris Hayman, the managing director of Britain's Seatrade, while the "Middle East is absolutely crucial due to energy transport, the much more recent trend is towards other types of maritime shipping. With all the economic development shipping needs, maritime has really grown. We are in the midst of a boom."
The Dubai Ports Authority, with 106 berths, grew by a quarter in 2004 and is on track to see over 26 percent growth for this year, according to CEO Jamal Majid bin Thaniah. In 2004, the DPA handled 6.42 million 20-foot equivalent units (TEUs), which placed it as the 10th largest port in the world, according to Dyna Liners, a newsletter on the worldwide liner trade. To put the numbers in perspective, consider that in 1991, the DPA handled 1.3 million TEUs. From 1991-2001, average annual growth was about 14 percent. According to Dyna Liners rankings, only Shanghai Port and Shenzhen Port have grown at faster rate than Dubai - and they are serving China, the world's fastest-growing economy.
Bin Thaniah says the difficulty in Dubai is now keeping up with demand. "Port Rashid has a capacity of 1.5 million TEUs and Jebel Ali has capacity of 9.5 million. We are anticipating that we'll have 7.8 million TEUs this year, so we are getting closer to capacity." By July 2007, terminal two at Port Jebel Ali should be complete, giving the emirate an additional capacity of 5 million TEUs. "Everything is moving according to plan," says bin Thaniah.
Hayman, whose Seatrade hosts two shipping conferences a year in Dubai, says that while the industry is indeed in the midst of a boom, he has no numbers to back it up. "Right now we are in one of the strongest bull markets for the shipping industry since I began watching 20 years ago," he says. "I have not seen exact figures, but one of our objectives is to try to quantify what is going in the industry [in the Gulf] in terms of volume. Anecdotally, we're seeing a tremendously rapid expansion in interest in maritime shipping in the region. There's more Arab investors, who traditionally invest in real estate, but with the current bull market, the returns have been excellent."
Hayman says the majority of the regional growth is happening in the UAE, with Qatar coming in second with its liquefied natural gas shipments: "We are seeing in Dubai the creation of a very strong maritime services infrastructure, such as maritime law, finance, insurance, all to suit the needs of the maritime community. Plus, Dubai Maritime City will be a hub for the region, which we think is a major development. In terms of maritime services, Dubai is doing a lot of things right to create a sophisticated maritime sector."
Dubai Maritime City, a 216-hectare manmade peninsula, will be home to some 900 companies dealing with maritime management, services, retail and recreation, education and research, repair and maintenance, yacht repair and maintenance and yacht manufacture. Its first phase is set to open in 2006 - the final completion date is scheduled for 2009.
Under pressure. By all accounts, Dubai is proactively marking its territory in the industry, but it also owes a big debt of gratitude to China. "There is a lot of pressure on ports worldwide right now, especially in northern China and Southeast Asia, to keep up with the current demand," says bin Thaniah. "As everyone knows, China is opening up and products are moving out of China into Europe, the United States, Africa and the Middle East. And, of course, the Chinese are buying more oil."
Stocks in shipping firms and port operators listed in Hong Kong have seen gains of 40-62 percent. And according to Asian press reports, ports in Shanghai, Xiamen and Dalian all plan IPOs, while ports in Shenzhen, Ningbo and Qingdao have expansion plans.
Dubai has gotten in on the Asian action by buying the international terminal business of US-based CSX Corp. In 2004, Dubai Ports International spent $1.15 billion to gain control of nine terminals with 24 berths, with a combined capacity of 14.6 million TEUs. Most importantly, it has given Dubai a solid footing in both the Asian and Latin American markets.
While Dubai has truly become a global player, to even be mentioned in the same category as the Chinese ports is an accomplishment: the Asian giant, together with Hong Kong, controls some 23 percent of the world's shipping industry, clearing 83 million TEUs last year alone. And while the UAE won't be able to displace China from its top spot anytime soon, it should continue to climb the global rankings ladder. Barring unforeseen circumstances, the only way Dubai's ports are headed is up, with profits growing every bit as fast as a rising tide.
By Farid al-ittihad
Arabies Trends 2005
