GCC Seaports: In dire need to ramp up capacity


Kuwait Financial Centre “Markaz” recently published the executive summary of an updated version of their GCC infrastructure series covering: Power, Airports, Seaports, Roads & Railways, ICT and Water. In this installment, Markaz tackles the GCC Seaports industry in terms of highlighting growth drivers and volume trends in addition to major projects.

The GCC countries have 35 ports in all; some of these ports are currently undergoing expansion to meet the increasing demand. Volumes have witnessed robust growth: increasing at an estimated 8% six-year CAGR to 25 million TEUs in 2010. The UAE ports have the highest share of volume in the GCC at 59%.

Some container ports in the GCC rank favorably among their global peers. Dubai was ranked seventh in the world in 2009, handling 11.1 million TEUs. It moved down in rank to ninth in 2010 (mostly due to the growth of Chinese ports), nevertheless handling 11.6 million TEUs—a 4.5% increase. Salalah (Oman) ranked 32 in 2010 with 3.5 million TEUs. Jeddah port (Saudi Arabia) ranked 30 with an annual throughput of 3.8 million TEUs in 2010.

There is a robust growth in investments on seaports to increase capacity. So far, the highest investments have come from Dubai and Abu Dhabi. The other GCC countries are also all set to improve their ports.

The GCC is well known for its oil trade. However, a shift in the direction (and nature) of trade is taking place between the GCC and the world. About 30 years ago, the OECD accounted for 85% of the GCC’s trade. By 2009, the emerging markets accounted for 45%. Trade growth with the emerging markets have been rising at 11% annually between 1980 and 2009, whereas the annual growth with the OECD was only 5%.

The emergence of India and China has presented the GCC with substantial opportunities as hubs. Therefore, the GCC ports need to ramp-up capacity, not only to cater to their own increasing needs, but also to develop a hub strategy. Most of them are ideally placed as a trade platform between Asia and the Far East on one hand and the West, Central Europe, and Africa on the other.

The GCC needs to greatly modernize and simplify its way of doing business especially in the ares of customs, immigration, and other business processes if it is to capitalize on this opportunity. Other forms of transportation upgrade are happening or being planned in air, roads, and railways. Seaports cannot lag behind.

There is some catch-up to do in terms of port development. Last year, the UAE accounted for 59% of the GCC’s throughput, compared to only 21% for Saudi Arabia, even though Riyadh’s economy is twice as big and its population five times as large as its neighbor.

By compiling the list of seaport projects from Meed Projects, we arrive at a current total spending of US$15 billion for the GCC. These projects are all due for completion within the five-year period from mid-2011 to mid-2016.

Abu Dhabi has the most ambitious project, valued at US$10 billion. It competes with Dubai, and this may create overcapacity. Qatar has witnessed various delays but now shows the first signs of catch-up with its Phase I of the New Doha Port signed in March 2011. Kuwait is progressing fast on its new Bubiyan Port project. Oman, after the unrest, has started 2011 by consolidating on its past maritime success.

Dubai is the foremost GCC port by container volume and is ranked at the ninth place among the top 10 world container ports in 2010. Dubai had been ranked as high as seven in 2007 and 2009.

The region's favourable geographic location provides it with a strong opportunity to establish one of the world's most important transport and logistics hubs: not only along the Europe–Asia shipping lanes, but also for northern and central Africa.

The large volume of hydrocarbon export by sea has ensured the development of ports in all the Gulf countries. The countries together have almost 38% of the world's reserves of crude oil and approximately 22% of global natural gas reserves.

World trade was strongly affected by the crisis, showing a major dip in 2009 after a sustained period of growth in the past decade.

As a percentage of world trade, the GCC represents around 3% of imports and almost 5% of exports.

The GCC is heavily reliant on exports of bulk goods but needs varied heavy imports, especially “machinery”—this item includes transportation.

The direction and nature of shipments are also changing. Traditionally, the region has seen two boxes imported for each exported. In 2009, the ratio reduced to a level of about 1.7, followed by a decline to 1.4 in 2010 and could go as low as 1.2 in 2011.

A recent report from global analysts EC Harris has ranked the GCC as the most attractive region in the world for investment in port developments. Spurred by mega-projects such as Khalifa Industrial Zone, Abu Dhabi (KIZAD), and Oman’s Al Duqm, the survey assessed expected FDI growth and the ease of entering and doing business across a number of markets. However, the report also quoted a lack in cross-border agreements between member states. It also mentioned that until a transport network is extended across the entire GCC, the region will not be able to fully capitalize on this investment. A clear example can be seen in Europe where the interconnected rail network has helped to open up lucrative trade routes for even the smaller member countries.

There are 35 ports in the GCC, some of which are currently undergoing expansion to meet the increasing trade demands.

A number of projects are currently under way in the respective countries to develop and expand existing ports as well as set up new ports to meet the rising cargo traffic. Investments for port development projects are expected to be US$15.3 billion during the period 2011–2016.

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About Kuwait Financial Centre “Markaz”

Kuwait Financial Centre S.A.K. 'Markaz', established in 1974 with total assets under management of over KD 906 million as of June 30th, 2011, is the leading and award winning asset management and investment banking institution in the Arabian Gulf Region. Markaz is listed on the Kuwait Stock Exchange (KSE) since 1997 under ticker Markaz.