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His Highness Sheikh Mohammed Bin Rashid Al Maktoum

Port of Call

TBY talks to Sultan Ahmed Bin Sulayem, Chairman of DP World, on the creation of DP World, its international capacity, and the London Gateway project.


THE BUSINESS YEAR What is the history of DP World?

SULTAN AHMED BIN SULAYEM Formally established in September 2005, DP World was the result of a merger between the Dubai Ports Authority and Dubai Ports International (DPI). The companies had begun expanding outside of the UAE, and also decided to purchase CSX World Terminals earlier in 2005. We built our portfolio further with the purchase of P&O in 2006, and the company has continued to grow since then, becoming the third largest port operator in the world. We began operations in 1972, when Port Rashid was completed and just a few months after the UAE was established. Encouraged by the success of Port Rashid and the region’s development potential, the late ruler of Dubai, HH Sheikh Rashid bin Said Al Maktoum, gave instructions for an even more ambitious project; the construction of the world’s largest man-made harbor at Jebel Ali. It was completed in 1979, with the Jebel Ali Free Zone added in the following years. His visionary leadership and business acumen set the pace for Dubai’s unprecedented economic development. It was a brilliant strategy to integrate trade, logistics, and industry. Today’s Dubai is living, thriving proof of Sheikh Rashid’s dream becoming reality, taken forward by another visionary, HH Sheikh Mohammed Bin Rashid Al Maktoum. Historically, ports have played a pivotal role in establishing and sustaining communities throughout the world, and DP World has supported the nation’s growth as a gateway for the GCC, the Middle East, the Indian subcontinent, and Africa. The company is now playing a critical role in the economic development of the wider region and its 2 billion inhabitants.

 

What factors led to the successful creation of this international hub in just a few decades?

Maritime trade has been at the heart of Dubai for generations upon generations, and it was only natural that the Emirate focus its energies on this core strength, fuelled by the trust, support, and encouragement provided by HH Sheikh Mohammed bin Rashid Al Maktoum. Both he and his father realized very early that Dubai could succeed by leveraging its geographical location at the crossroads of East-West trade and offering outstanding supply chain services that would ensure it became a hub. Focusing on customers and investing to ensure that their growing needs are met has driven our international expansion. To date, we are operating more than 60 marine terminals around the world with a global team of 30,000 personnel.

 

What is the focus of DP World’s 11 new projects, and what do they represent for the future of the company?

We invest in markets where we see the potential to contribute to economic growth. With an average concession of around 40 years, we invest for the long term. Around 75% of our business comes from emerging markets, which have proven resilient during the global recession. Currently, three-quarters of the cargo we handle originate from or is destined for the markets in which we operate, known as origin and destination (O&D) cargo. We will continue to focus on these two areas in the future, investing in direct response to our customers’ needs. In 2011, we saw volumes in the UAE region rise to 13 million TEUs. This means that utilization is extremely high at our flagship Jebel Ali Port, which has continued to deliver strong volume growth and handled 3.2 million TEUs in the first three months of 2012, 8.5% ahead of the same period last year. It was clear from listening to our customers that growth in demand would mean Jebel Ali would soon be under considerable capacity. It was this that led us to announce plans last year to add 1 million TEUs to Terminal 2 to take its capacity to 6 million TEUs, and to develop a new terminal, Terminal 3, at an investment of $850 million, with the capacity for 4 million TEUs. Together they will take Jebel Ali’s total capacity to 19 million TEUs by 2014. The new Terminal 3 will be capable of receiving the next generation of mega container ships that can carry as many as 18,000 TEUs, support the continued growth of Dubai and the UAE, and enhance the country’s status as the trading center of the Middle East. In addition, the Dubai Logistics Corridor, which opened in 2010, is a positive force for growth. It is one of the world’s largest sea-land-air transit bridges, with integrated customs and security facilities. Al Maktoum International Airport is just 20 minutes away from Jebel Ali Port, providing the supply chain sector with one of the most efficient multimodal platforms anywhere. While we are adding significant capacity to Jebel Ali over the coming two years, building a new terminal in Brazil and expanding our capacity in China, we are also pushing ahead with London Gateway and the new Maaslvakte 2 terminal in the Netherlands. The new developments and major expansions will give us the flexibility to increase capacity to around 103 million TEUs by 2020, in line with market demand.

 

How is the development of the London Gateway port project progressing? What makes this market attractive for DP World?

London Gateway is progressing extremely well and will be open for business by 4Q2013, with an initial capacity of 1.6 million TEUs. Like all of our projects, we are investing for the long term. London Gateway is set to become Europe’s largest logistics park, situated on London’s doorstep and located at the heart of Europe’s largest economic zone. It will benefit businesses in the UK immensely by allowing both importers and exporters to take advantage of a more cost effective and greener way to transport the nation’s goods as well as saving hundreds of millions of pounds a year. The project has already created more than 600 jobs since January 2010, when major construction work started at the site. Additionally, it will create 1,000 additional new jobs in the UK; 700 in the construction sector and 300 at the port. Estimates predict that as many as 36,000 jobs will be created in the long term, injecting some £3.2 billion into the UK economy each year and making London Gateway the largest job creation project in the country’s history.

 

How key are strong security measures in DP World’s daily operations?

We regard security as a baseline service for our customers. The nature of our operations exposes us to various operational, health, safety, and security risks that can impact our people, our customers, and our business operations. To mitigate such risks, we have implemented stringent security, safety, and health measures, including rolling out the independently audited ISO 28000 security management standards throughout our network. Currently, 38 of our facilities are certified. We are the only global marine terminal operator to be invited to become a member of the US Customs-Trade Partnership Against Terrorism (C-TPAT), and we have 15 terminals participating in the US Customs Container Security Initiative—the largest number among the other operators. We are also a Principal Partner in the US Integrated Container Scanning Pilot Projects. Furthermore, we adhere to European security measures.

 

What does the repayment of DP World’s existing $3 billion loan represent for the company’s long-term strategic approach to capital allocation?

We decided to repay our $3 billion revolving credit facility due by October 2012 six months early. The premature cancellation of our original facility concept and the establishment of a new facility is prudent capital management. The new facility allows us to draw down and pre-pay cash as needed, providing timely and flexible access to cash as we continue to invest in our global portfolio to deliver profitable growth.

 

What is your outlook for DP World and the wider economy in 2012?

In the first quarter of 2012, we witnessed a 9.5 % increase in gross volumes. Analysts’ latest forecasts for growth across the industry are around 5.5% volume growth for the year. Historically, DP World has outperformed the industry as a whole.

 

This interview will be published in 'The Business Year: Dubai 2012'. To pre-subscribe please e-mail us at info@thebusinessyear.com


© The Business Year - May 2012

UAE, Dubai 2012

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UAE, Dubai 2012

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