|17 October, 2018

Following port privatisation plans, foreign companies can apply for Saudi port shipping agent licences

Now shipping agents will be able to operate independently on the back of Saudi Arabia’s ambitious privatisation plans

Image used for illustrative purpose. A cargo ship unloads wheat at the Red Sea port of Hodeida, Yemen October 1, 2017.

Image used for illustrative purpose. A cargo ship unloads wheat at the Red Sea port of Hodeida, Yemen October 1, 2017.

REUTERS/Abduljabbar Zeyad

Foreign shipping agencies will soon have the right to operate independently at Saudi Arabian ports rather than work with a local investor.

The move follows plans to privatise the kingdom’s ports and could prove particularly attractive to Gulf-based shipping operators. 

The port privatisation plans are part of 14 public-private partnership (PPP) investment initiatives announced by the official Saudi Press Agency in April this year, according to Reuters. These initiatives are worth up to 28 billion Saudi Arabian riyals ($7.46 billion) and could create 12,000 jobs and generate up to 40 billion riyals ($11 billion) in non-oil revenue.

The change in shipping licences, a small part of the kingdom’s ongoing efforts to attract foreign investment, is still in its infancy, and has not yet been widely publicised, but the first licences for foreign-owned shipping agencies could be issued as early as next year, according to Riyadh-based lawyer Khurram Ali. 

Ali said a letter from the kingdom’s Ministry of Commerce and Investment to the Saudi Ports Authority in August stated there is now no legal objection to granting foreign investors shipping agency licences.

The kingdom’s ports are currently operated by Saudi Ports Authority, also known as Mawani. 

“Foreign investors are being encouraged to come in and take over the operations of the ports, and the agency services are added on to that,” said Ali, legal director and head of international trade and transportation, at Clyde & Co.

Shipping agency duties include a range of services from clearing vessels, bringing them into berth, paying port dues, arranging husbandry and stores and supplies for the vessels, as well as changes of crew, as well as booking cargo to be carried in and out of the kingdom, Ali explained.

“On the back of that, the Ministry of Commerce and Industry and Mawani themselves have laid out the procedure saying, yes, foreign investors can apply for these licences – the only things they cannot apply for is customs clearance and supplying fuel to vessels,” he said.

It is thought that the decision to issue the licences is unlikely to affect Bahri, Saudi Arabia’s national shipping company which operates for the most part as a carrier, but it is likely to be of interest companies already operating at other gulf ports, including those in the United Arab Emirates.

Ali suggested DP World, which already operates a terminal at the port in Jeddah could operate a shipping agency as an add-on service.

Michael Vertigans, senior communications manager for DP World, which currently operates in 78 countries globally, including a terminal at Jeddah Islamic Port, said in response to an email query from Zawya that “We look at all opportunities when they arise”, but he declined to comment further.

The change could also impact on Saudi-based shipping agencies already operating in the kingdom, such as Kanoo Shipping, Barwil Agencies, Haji Abdullah Alireza & Co Ltd, and  United Enterprises Co. Ltd (UNENCO), said Ali, as they currently enter into contracts to allow external players to operate in the kingdom.

International companies, for example, Maersk, could now have their own independent licences, said Ali.

“At the moment you have got a few companies which have the monopoly in the kingdom and that will potentially change,” said Ali. “I would not be surprised if other groups and some of the companies in Dubai saw this an opportunity, because the market in the UAE for the ship agencies is very competitive, and there is a lot of players. I would not be surprised if some of the ship agencies in the UAE thought: ‘why can’t we do this in Saudi Arabia?’”

(Reporting by Imogen Lillywhite; Editing by Michael Fahy)

(Imogen.lillywhite@refinitiv.com)

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© ZAWYA 2018

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