Dubai maps way back to future as trade hub

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Henry Meyer (Bloomberg)  www.khaleejtimes.com

At Lipton Tea factory near Dubai’s main port, rows of machines convert leaves from Kenya and India into tea bags an hour destined for breakfast tables from S. Africa to Canada.

Dubai
Dubai

“By bringing in tea here, we are close to the market, so we blend it fast, pack it fast,” said Sanjiv Mehta, Unilever’s chairman for North Africa and Middle East, in an interview at the factory, the world’s second-biggest. “And because of the logistics here being very efficient, we’re able to quickly move it to the consumer markets.”

Dubai is spending $13 billion on building a new international airport and expanding existing air and shipping terminals. The government is focusing on the emirate’s traditional strength as a trade hub.

“What I really want to concentrate on is what is the core business,” Shaikh Ahmed bin Saeed Al Maktoum, Chairman of the financial decision-making body, the Supreme Fiscal Committee, said in a March 16 interview. The emirate put too much emphasis on real estate as prices soared, he said.

Capital of Commerce

Still on track, though, are investments aimed at enhancing the blend of geography and good facilities that transformed Dubai from a fishing village to a capital of global commerce. Located mid-way between Europe and Asia and Africa, it’s been a crossroads for trade linking the Gulf, India and East Africa since the early 20th century.

Dubai is already home to the largest port in the Middle East and the biggest Arab airline, Emirates. In June it will open an initial cargo terminal at Al Maktoum International Airport near Jebel Ali, cutting the time it takes to transfer goods between ships and aircraft to four hours from at least 16.

When completed, Al Maktoum International Airport will have five runways, four passenger terminals able to accommodate 160 million arrivals a year, and 18 cargo terminals with a capacity of 12 million tons. A 21.5-square kilometre logistics centre will link the airport with the Jebel Ali Port, which has laid the foundations for a third terminal that could more than triple shipping capacity.

No Constraints

Dubai’s current airport, Dubai International, hosted 40.9 million passengers last year and is being expanded to accommodate 75 million by 2012 and later 90 million. That’s not enough to cope with expected growth in trade and tourism, says Andrew Walsh, vice-president for cargo and logistics at Dubai World Central, which is building Al Maktoum International Airport.

“We need an area that doesn’t have the same constraints as now,” Walsh said in a March 23 interview.

The global recession has slowed construction of Al Maktoum, postponing the opening of the cargo terminal from last year. Emirates announced this month that it may delay moving to the new airport until 2030.

Still, the plan makes economic sense, said Philippe Dauba- Pantanacce, an economist at Standard Chartered Plc in Dubai.

‘No Equal’

“They are really succeeding in that strategy in becoming the major transport hub for the region,” he said. “Compared to all its neighbours, Dubai has no equal.”

Dubai is within eight hours flying time of two-thirds of the world’s population. Sixty per cent of the Middle East’s imports pass through the emirate. The World Bank said the UAE has the best logistical services in the Middle East in its 2010 global ranking.

Dubai’s infrastructure today stems from decisions made beginning from the late 1950s by then-ruler Shaikh Rashid, father of His Highness Shaikh Mohammed bin Rashid Al Maktoum, Prime Minister and Vice-President of the UAE and Ruler of Dubai.

Rashid ignored objections from Dubai merchants to build Jebel Ali, the world’s largest man-made harbour, on an empty beach almost 35 kilometres from the city, according to “Dubai, the World’s Fastest City,” by Jim Krane.

The port is now linked to a free trade zone for manufacturing and distribution in which goods for re-export are exempt from all duties. Almost 6,400 companies from more than 120 countries operate at Jebel Ali, including Unilever.

“Where people in the last few years went wrong is that they started believing that real estate could become a real driver of economic growth,” said Unilever’s Mehta. “If you look at the brand of Dubai, it stands for free trade and commerce.”

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