Jordan thrives amid Middle East unrest and ports benefit

24 October 2011

Jordan’s relative stability and its role as a gateway to the Levant and Iraq is boosting Aqaba’s position as a key transport hub. Shippers are also benefiting from closures of Syrian ports 

In numbers

27 per cent: Rise in cargo at Aqaba port in the first nine months of 2011

$235m: Value of the berth expansion project under way at ACT

Source: MEED

Jordan is planning to transform itself into a regional transportation hub and the political changes across the Middle East this year are helping its ambitions. The country’s trans-shipment business is booming, while other countries are battling civil unrest.

The protests have interrupted trade in the ports of Latakia and Tartous in Syria, and Alexandria and Suez in Egypt, and much of the container business has been redirected to Aqaba Container Terminal (ACT).

ACT was established in 2006, under a 25-year build-operate-transfer concession between Netherlands-based APM Terminals and the Jordanian government. ACT’s location in Aqaba puts it in an ideal position to act as a transit hub for shipments destined for the regional market, in particular the Levant and also Iraq and Saudi Arabia.

Bright future for Jordan’s ports

“All trade operations were affected by the recent turmoil in the region. We started the year stronger than where we are now, but we foresee a bright future for the region in terms of geopolitical stability and economic prosperity,” says Richard Davidsen, chief commercial officer at ACT.

It is true we suffered less than major ports located in conflict zones and our volumes will grow [in] double-digits

Richard Davidsen, Aqaba Container Terminal

“There are certainly going to be growing pains as the Middle East and North Africa undergoes a transition into a new era,” says Davidsen. “But if this era means more transparency, government efficiency and democratic reforms, as we believe it will, then these developments can only benefit long-term trade and economic growth in the region.

“As far as profiting from the current regional environment [goes], we may indeed see benefits in the long-term from Jordan’s record of stability throughout this period.”

Jordan has been relatively calm this year while its neighbours, Egypt and Syria have erupted in civil unrest. Such stability will be an asset to the kingdom going forward.

“It is true, we have suffered less than major ports located in conflict zones and our volumes will grow [in] double-digits this year,” says Davidsen. ACT handled 605,000 20-foot equivalent units (TEUs) in 2010 and is expected to handle about 700,000 TEUs this year. Traffic is forecast reach more than 2.5 million TEUs a year by 2030.

ACT’s business strategy is focused on strengthening its position as the gateway to the markets of the Levant and Iraq. It is expanding capacity to handle increased container volumes.

“We are well-positioned to cater to expected increased demand as regional and world markets recover,” says Davidsen. “There is no doubt that the Iraqi market constitutes an important part of our business.

“[About] 25-30 per cent of all containers now being discharged at our terminal are classified as in-transit to Iraq. We take the challenge very seriously of ensuring we are an efficient component and part of a superior supply chain through to Iraq.”

ACT is a member of the Jordan-Iraq Trade Facilitation Committee, a group of key stakeholders that work together to improve trade between Jordan and Iraq. In line with this, the business has recently taken on an Iraq representative that will help ACT further develop and strengthen ties with Iraqi traders, importers and the government.

Jordan also recently signed an agreement with Baghdad, stating that all containers from Iraq can be inspected and certified at their place of origin. This will prevent containers from being held up at the terminal and at border crossings due to regulations and on-site inspections. Davidsen says that within a short time, ACT will be moving its first Iraqi dates through Aqaba.

Jordan a regional hub

“Being the backbone of Aqaba’s economic development, we are committed to playing a holistic role in the area’s urban, industrial and tourism development. Needless to say, transportation development is an immediate concern,” he says.

“We firmly believe that Aqaba has the potential to be the preferred transportation and logistics hub solution in the region and we are doing our part to make this a reality.”

The completion of a $235m berth expansion project in 2013 will go a long way in achieving this. Once complete, the wharf will be almost double its current length. The project will double ACT’s annual container throughput capacity to about 1.5 million TEUs and will help reinforce Jordan’s strategic position as a key portal to inland markets.

ACT is working to position itself as a hub not only for incoming goods, but also for products and materials originating in the Middle East and destined for locations globally. “With more cargo coming through Aqaba on its way to regional markets and more of the region’s products and materials coming through Aqaba on its way to global markets, we see our terminal having a major impact improving economic opportunities in Aqaba and Jordan as a whole,” he says.

New port in Jordan

It is not just ACT that is working to increase trade volumes. The general port in Aqaba is also thriving. In 2010, the port handled almost 16.8 million tonnes of cargo and in the first nine months of 2011, it handled 14 million tonnes, a 27 per cent increase from the previous year. Transit traffic, which is mostly to Iraq has also risen rapidly, by more than 60 per cent.

The construction of the New Aqaba Port will further boost capacity and trade opportunities in Jordan. The first phase involves building grain silos and ro-ro berths with a capacity of 3 million tonnes a year (t/y). The planned general cargo terminal will have a capacity of 2 million t/y. The long-term plan will see the construction of four more berths that will increase capacity to 5 million t/y for the general cargo terminal and 6 million t/y for the grain silos.

The construction of the New Aqaba Port will further improve capacity and trade opportunities in Jordan

The new port was originally intended to be operational by late 2013, but this is likely to be pushed back due to delays with procurement. With the motto, ‘Turning sand to gold’, the Aqaba Special Economic Zone has been developed close to the new port and offers a low-tax, duty-free investment environment.

ACT and the port will also benefit from plans to develop a $3bn freight railway. Jordan’s Transport Ministry is trying to secure funding for the project and is currently in discussions with banks. The ministry’s potential financiers include the European Investment Bank, the Agence Francaise de Developpement and the World Bank, as well as GCC-based investment funds.

“We cannot move ahead with the tendering, the issue is financing,” said Mohannad Qudah, Jordan’s transport minister in September.

“We were hoping by this summer to sort out all financing problems, but unfortunately it looks like we need more [time]. The next three months are crucial for financing.”

The plan entails building a main freight track running from the Syrian border in the north to the New Aqaba port in the south, as well as upgrading the existing railway in Jordan. It also involves building an extension to Saudi Arabia and one to Iraq. Plans have been drawn up for a connection with North-South minerals railway in Saudi Arabia.

Future rail connections

The connection would allow improved access to the Red Sea at Aqaba. Jordan’s Transport Ministry is working closely with ACT to ensure that the proposed railway runs to the terminal, as well as the ports.

To further increase trade with Iraq, Aqaba has signed a deal with Baghdad to build a railway line connecting the two cities. In May, the Iraqi Transport Ministry signed an agreement to build a 1,150-kilometre railway between New Aqaba Port and Baghdad. It will have a capacity to transport 6 million tonnes of cargo a year.

Signifying ‘obstacle’ in Arabic, Aqaba is a fitting name given the ambitious and long road ahead in its infrastructure development. But the authorities in charge of ACT and the port are well positioned to help the area overcome the meaning of its name.

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