For centuries, the coastal communities of the Gulf have turned their back on the desert and relied on the sea for their livelihood. Today, with oil and gas production at new heights and export-oriented industries expanding rapidly, governments are working hard to expand and upgrade their ports.

Global factors are also driving expansion plans. According to a report published late last year by London-based Drewry Shipping Consultants, the rise of the Chinese economy has galvanised the shipping industry as a whole, with 'charter rates up 60 per cent on last year; container freight rates for Asia-Europe [up by] 40 per cent Capesize tonnage up; Panamax rates up; Handymax up; oil tanker freight rates up; vessel values up, up, up.'

Boom

Demand has soared for transhipment cargo capacity in the last three years, and governments and the few private port operators in the Middle East are taking tactical advantage of the boom. But strategic considerations are also driving investment. Competition between regional ports is growing. Southern ports such as Salalah and Aden threaten the livelihood of the more inaccessible transport hubs of the Gulf. Even Egypt's industrial ports, long neglected but ideally situated to the north and south of the Suez Canal, are beginning to claw back a share of the traffic.

The old role of ports as windows to import-hungry economies is also changing. Minerals, metals, liquefied natural gas (LNG) and petrochemicals are now finding their way out of the region to Europe and the Far East. In the next five years, up to 50 per cent of the world's new olefins and polyolefins capacity will be installed in the region. But the Gulf remains a problematic market for many shipping companies due to the trade imbalance. Ocean-going traffic still tends to comprise bulk cargo heading in through the Straits of Hormuz and oil tankers heading out. And even though there has been a sharp increase in demand for chemical tanker tonnage, freight rates for petrochemicals have to reflect the availability of return cargo, which in turn reflects demand in the Middle East for goods on which shipping companies can turn a profit.

In short, the business demands of the shipping industry tend to amplify the highs and lows of the regional economic cycle. Ports are currently doing a roaring business, but there is a greater awareness of the long-term need for sustainable growth. As a result, governments are once again looking inland, to see how ports can not only help encourage industrial development, but also act as part of a wider integrated transport network.

But the first priority is to keep up with current demand. The list of ongoing port expansion projects in the region is as long as the list of ports. Inevitably, most of the activity is focused on the Gulf. At Jebel Ali, the region's biggest container terminal, tendering is under way for a three-year programme to expand capacity to 8 million-9 million 20-foot equivalent units (TEUs). And this expansion comes hard on the heels of another project to bring capacity up to 5.7 million TEUs by the end of this year. Smaller players are also getting in on the act. Along the coast in Ras al-Khaimah, the government is considering plans to invest about $1,000 million in developing container and cargo facilities, primarily at Al-Jazeerah al-Hamra, but also at Mina Saqr, Ras al-Khaimah itself and Ras al-Dar