One dollar in every 10 being invested in Middle East and North African ports is spent in the UAE. Each of the seven emirates already has at least one major commercial port and, if they are going to get a decent return on their planned $4.6bn outlay, the UAE’s port developers need to be sure they have a strong business case.
But what that business case should be is not always clear. With levels of international trade currently dampened by the economic downturn, there is already plenty of spare capacity in the region. Yet all the other GCC states are planning major port expansions that could take cargoes further up the Gulf, away from the UAE.
Anyone with an eye to the recent past will remember the congestion that some of the region’s major ports experienced last summer, and it makes sense to prepare for a return to growth in the coming years. The danger is that the UAE’s many port developments will fail to differentiate themselves from their rivals.
The fact that Dubai’s DP World will run three of the biggest sites – Khalifa Port in Abu Dhabi, Jebel Ali in Dubai, and Fujairah Port – could help to ensure that they will complement, rather than compete with, each other. Fujairah, for example, has been developed as the world’s second-largest refuelling port. But it will be harder to establish a distinct strategy for Khalifa Port when it opens in 2011 just 40 kilometres up the coast from Jebel Ali.
This is not just a UAE problem. All ports face greater pressure on their fees and levels of efficiency, making the search for a viable niche market an essential task. The UAE needs to be clearer on how it will cope with these competitive pressures before investors can be sure that all the planned developments make sense.