'Sensitive assets': how ports are advancing the GCC's strategic interests
The Gulf’s oil bonanza and resulting economic windfall has in recent years placed unprecedented burden on the region’s transport infrastructure, impacting its ability to trade efficiently with the outside world, writes Simon Hallett in an article in The Gulf, our sister publication.
The six states have allocated billions of dollars to new cross-border transport projects, including ports, which link directly into new industrial parks and economic cities with the promise of long-term benefits.
Priority has been given to not only modernising ageing port facilities, but also building new facilities on greenfield sites across the region. An estimated $35 billion is currently being spent on port projects in the Gulf, as states seek to leverage greater economies of scale that come with greater capacities, while enhancing their appeal as trans-shipment hubs.
Gulf ports have become much more than just entry and exit points for consumer goods and manufactured exports. Taking a leaf out of Dubai’s Jebel Ali Port - a major international trans-shipment hub and its adjacent free zone - the world’s largest park of its kind which was established in 1985 - regional ports have become economic ecosystems in their own right, making vital contributions to national revenues and creating much-needed jobs in local communities.
Oman, one of the Gulf’s least developed states, makes arguably the most interesting case study in how ports can help influence economic policy and even political direction.
In February and March 2011, the town of Sohar, north of the capital Muscat, saw a wave of anti-government protests, some violent. Among the demands of the protesters were jobs and an end to government corruption. The entrance to the port was blocked temporarily, disrupting the local economy.
Calm has returned to Sohar, and along with it a sense of economic uplift, with the port at its heart. To date the town’s free zone, which started operations in 2009, has attracted more than $15 billion in investments.
This figure should rise significantly.
Fresh capital injections have been earmarked by the authorities to expand terminal capacity at Sohar. The authorities hope this will, in turn, stimulate further investment - including foreign money - into industrial projects and the free zone in the port’s vicinity.
The $130 million infrastructure upgrade at the port will see handling capacity of the Oman International Container Terminal (OICT) doubled to 1.5 million TEUs (containers) per year, enabling it to cope with a rapid growth in volumes. Sohar Industrial Port Company, which manages the port and free zone, announced that the port had achieved an aggregate cargo throughput of about 50 million tonnes last year.
But arguably the jewel in the crown of the town’s broader long-term economic vision will be a $6.5 billion refining and petrochemicals project. The so-called Expanded Petrochemicals Cluster, located next to the port, is a venture by state-run Oman Oil Refineries and Petroleum Industries (Orpic), and its parent company Oman Oil Company. The project blueprint calls for three major refining and petrochemical complexes to be built over the next five years. One of the many goals of such an ambitious plan will be to create more jobs for citizens in the remote location some 230km northwest of Muscat.
A similar strategy is being adopted in southwest Saudi Arabia, where another of the kingdom’s large economic city developments is slowly taking shape, and where again a revamped port will take centre stage.
Remote Jizan Province, close to the volatile border region with Yemen, is one of Saudi Arabia’s least developed regions. The government hopes that the project could create hundreds of thousands of jobs one day.
Like those in Oman, Jizan’s port already enjoys a favourable location - close to east-west shipping lanes serving Europe, Asia and East Africa. It also avoids the geopolitical gauntlet vessels calling at Gulf ports must run while passing through the sensitive Strait of Hormuz.
While economic growth and job creation will be the underlying drivers of GCC port development strategy, much will also hinge on how these strategic assets integrate into new, efficient transport networks being built.
Across the GCC, long-term economic master plans envision ports, free zones and industrial parks being linked by state-of-the-art airports and high speed rail networks. Across the GCC, roughly $250 billion has already been committed to the laying down of 67,000 kilometres of rail track. In the UAE, work is progressing rapidly on a national rail network, which will eventually plug into regional lines.
Such networks are vital to remote towns like Salalah, about 1,000km south of Muscat in Oman. The port city is currently either a long drive or sea voyage from major markets on the Arabian Gulf, hampering its potential. However, by 2018 it should be the southern terminus of a rail line connecting it to the rest of Oman and beyond. Journey times to the Gulf will be cut dramatically, opening up new business horizons for the port, currently undergoing a $143 million expansion of its general cargo terminal and construction of a new jetty.
“We are looking forward to the supply chain advantages the link will provide,” Ahmed Akaak, the Port of Salalah’s deputy chief executive, recently told The Gulf. The rail link will, he claims, deliver major benefits to port customers for whom schedule integrity and fuel costs are major considerations.
“It will certainly change the dynamics of the supply chain network. Shipping customers will be able to save four to five days getting products into the upper Gulf by rail as opposed to sea. The cost and time savings potential is huge,” Akaak explained.
A railway link will also be vital for Sohar, whose strategic national importance is growing as it now handles commercial traffic once processed at Muscat’s Port Qaboos.
“As one of the world’s largest port development sites, and the cornerstone of Oman’s global trade ambitions, we have seen steady growth in the demand for distribution and freight services,” Sohar port’s executive commercial manager Edwin Lammers recently told a regional rail conference in Muscat.
“Connecting Sohar to rail networks, therefore, becomes an obvious choice from a customer service perspective and will allow us to capitalise on rising trade volumes and drive down the cost of doing business in Oman,” he added.
Ports on the shores of the Gulf are also eagerly awaiting the arrival of rail links. That reality could come soon for Abu Dhabi’s $7.2 billion Khalifa Port and Khalifa Industrial Zone Abu Dhabi (Kizad), where the nationwide Etihad Rail will connect the emirate’s largest ever infrastructure project with markets not only elsewhere in the UAE, but also the rest of the Gulf and beyond.
Abu Dhabi Ports Company (ADPC)’s chief executive Mohammed al Shamsi told The Gulf that once all phases of the development of both sites (Khalifa Port and Kizad) were complete, they would have the potential to contribute up to 15 per cent of the UAE’s non-oil and gas annual gross domestic product.
This impressive economic figure will be partly achieved by the phased expansion of Khalifa Port, which currently has a capacity to handle 2.5 million TEUs (containers) and 12 million tonnes of general cargo. ADPC says this will eventually increase to an annual capacity of 35 million tonnes of general cargo and 15 million TEUs. The industrial zone next to the port is already host to a cluster of large facilities, including the world’s biggest single-site aluminium smelter at Emirates Aluminium.
Not all port projects have progressed as smoothly or with as much high level commitment as those in Oman and the UAE. In Kuwait, where the progress of mega projects is often at the mercy of domestic political wrangling, work continues slowly on the controversial $1.1 billion Mubarak al Kabir port project, at the northern extremity of the Gulf.
The project is controversial because it is located on Bubiyan Island, close to Iraq’s Umm Qasr port, a vital economic lifeline for the conflict-ravaged country. When the Kuwaitis announced they would build Mubarak al Kabir several years ago, the Iraqis were worried that it would overshadow their own plans for a new terminal, called Grand al Faw.
While the one-time bitter foes have apparently buried the hatchet on this issue, it served as a reminder that - political legacies aside - the growing economic importance of ports makes them highly strategic, and therefore sensitive, assets, and none more so than in the Gulf.
- UAE and China reach for the stars with MOU on outer space research
- United Airlines to end Washington-Dubai route: a case of sour grapes?
- Qatar seals $7.02 billion deal for French Rafale fighter jets
- A year later: how safe is flying after the Malaysian airlines' disasters?
- Nationalist glory or economic revival? Why Egyptians are rushing for two-way traffic in the Suez Canal
- New drive to upgrade Iraqi ports
- Algeria allocated three billion dollars to infrastructure development
- His Highness Sheikh Khalid, Crown Prince and Deputy Ruler of Ras Al Khaimah, Announces a Detailed Plan to Protect Ports and Secure Borders Against In
- Windfall for UAE government coffers continue
- Dh1.14b Allocated to Upgrade Morocco’s Northern Railway Lines