THE HEAVY LIFTING

UAE, Abu Dhabi 2014 | INDUSTRY & MINING | VIP INTERVIEW

TBY talks to HE Khaled S.A. Salmeen, CEO & Managing Director of the Khalifa Industrial Zone Abu Dhabi (Kizad), on investment opportunities at the industrial zone, getting the infrastructure right, and vertical clustering.

What investment opportunities does the opening of Khalifa Industrial Zone Abu Dhabi (Kizad) present for companies operating in the GCC?

Kizad is part of an initiative to promote industrial development and diversify GDP contributions. It acts as an enabler that allows companies investing in different clusters within Kizad to add tremendous business value through innovation and economies of proximity. Aluminum is one of the key clusters available today at Kizad and opens up a number of potentials on the downstream side. In terms of clusters we have the aluminum, steel, and engineered metal clusters, with logistics, food, and mixed-use clusters also available to investors, providing a variety of industrial activity. There are three key advantages that Kizad provides to companies that have a market within the GCC and are looking to expand, or companies that are interested in the Middle East as a new market. The first is excellent access to global markets. Secondly, we insist on operating a low-cost environment, and lastly we make it easy for investors to do business with us. The minute that you are set up in Kizad as an industrial project, you are able to benefit from cost advantages in three areas. The first is that firms are exempt from all customs duties on their capital equipment. During operations, we also exempt companies from customs on the importation of raw materials that come through Khalifa Port. The most significant exemption, though, is finished products. Here, the cost of selling a product includes capital costs, raw materials, operating costs, overheads, and profits, as well as financing costs. If you are within Kizad, we are able to issue a company a certificate that exempts it from GCC market taxes as well as the Greater Arab Free Trade Area (GAFTA), where companies do not pay any customs duties to do business. That is really a key advantage. The other is that, obviously, there are no taxes on companies or on personal income, either.

What is your current progress on Stage One, and when will Stage Two begin?

The Stage One and Stage Two idea is a highly fluid one. Stage One involves 55% of the area, or 51 square kilometers. We have completed the infrastructure, including at the adjacent Khalifa Port, which is the first and only semi-automated port in the region and now completely integrated with Kizad. In just one year, Khalifa Port went from a pristine stretch of reclaimed land to a busy hub, serving 17 shipping lines, offering 18 direct services, and connecting more than 40 ports directly. As of October 2013, the container terminal at Khalifa Port handled a record breaking 100,081 TEUs. This is the highest number of containers ever handled in one month at Khalifa Port and the Emirate of Abu Dhabi. In a year-on-year comparison to date, Khalifa Port's container terminal operations are more than 12% higher than in the same period of 2012, with a total throughput of 712,342 TEUs between January and October 2013. Growth hit 27% in October 2013 compared to October 2012. This is a part of our business plan and growth strategy. It also helps with our investors' distribution costs and gives them the connectivity they require. Now, in terms of industrial zones, all of Area A, including the highways, storm water, potable water, combined waste water, seawater cooling, process water, gas networks, and electrical distribution networks—high, medium, and low voltage—are already in place and operational. The idea is that we are able to offer quality infrastructure and transportation, and offer a framework that allows investors to “plug in and play." In terms of backers already establishing facilities at Kizad, we have over 40 investors busy building and preparing their operations for launch in 2014. These include TALEX, Brasil Foods, KSB, and Polysis, to name a few.

“Kizad is part of an initiative to promote industrial development and diversify GDP contributions."

Kizad is primarily here to serve Abu Dhabi, which is only 40 kilometers away. Additionally, how can the industrial zone contribute to the Dubai and Al Ain economies?

Obviously, industrial projects do have a coverage area. The minute that you bring a factory in, you find people working from all over the UAE, so in terms of staffing the benefits are for all the Emirates. In terms of the actual industries producing out of Kizad, I am confident that the output, be it automotive alloys from TALEX or spare parts for pumps from KSB, will affect all markets positively, not only in the UAE but the whole GCC and greater Middle East region as well.

How will Kizad complement nearby free zones in Jebel Ali and Abu Dhabi Industrial City (ICAD)?

Jebel Ali is much more focused on logistics. It is all about repackaging and redistributing. Its industrial footprint over the last 10 years has been very minimal. Our zone is an industrial zone. By sheer mass, 90% of the net leasable land is for industry—heavy, medium, and light industry. That is where we complement each other. Having a logistics zone next door allows you to have all the large shipping lines calling at that port, which makes it much easier for industries to benefit from low operating costs in terms of shipping. There are key advantages in having an industrial zone right next to a logistics zone. Firms such as Emirates Aluminium (EMAL), Borouge, Emirates Steel, and all of the other major producers, are becoming very attractive to shipping lines because they are much more competitive. They can drop their price on the way in because they have revenue coming back.

How will vertical clustering in the park benefit primary industries?

Aluminum is usually made in pot lines, where it becomes liquid at 750-800 °C. After that, it goes to the cast houses, where it is made into bars or ingots. That is necessary because the client is probably not close by. The producers cannot ship it in liquid form because it cannot be kept at high temperatures. However, if you are next door, then material can be transported directly. Special crews leave EMAL, for example, using an innovative route that we call the hot material road. The types of vehicles that are able to transport aluminum in hot molten form use this road to deliver directly to the manufacturing site. Now, for example, TALEX uses the aluminum at 450 °C. It comes at 750 °C, therefore leaving 300 °C of energy that it can use. So, rather than 40% of its cost going into re-melting the aluminum and then another 10%-15% to generating heat in order to be able to produce steam and other utilities, it is saving 40% and generating other utilities to cool it. This is a major advantage.

How will the Etihad Rail network support companies operating in Kizad?

Kizad is benefiting from the first rail infrastructure in the UAE through the Etihad Rail network. From the outset our master plan has indicated rail access to a number of plots. We worked with Etihad Rail at the planning stages, and in advance of the launch of the network, Kizad built in the entire culvert infrastructure, which will eventually allow the trains to pass right through the industrial zone.

© The Business Year - November 2013