Research and analysis

UAE Global Hub - Ports And Airports: “If you build it, they will come"

Published 3 July 2014

0.1 Detail

Airports: A Strong Tail Wind

A third of the world’s population live within a four hour flight of the UAE, and two thirds within an eight hour flight, which explains why a country with a population of 9.5 million has seven international airports. Year on year, Dubai International Airport’s (DXB) passenger and cargo traffic increases by 10-15% and it is predicted to overtake Heathrow as the world’s busiest airport in 2015. By 2019 the aim is to reach capacity, servicing 100 million passengers. DXB also has a 2.5 million tonne cargo capacity and saw 2.4 million tonnes shifted in 2013 (an increase of 6.8%).

In order to keep up with demand in passenger and cargo traffic, Dubai Emirate has broken ground on Al Maktoum International Airport (DWC). Although still under construction, the airport opened for cargo transportation in 2010 (shifting 210,000 tonnes in 2013) and last year saw inaugural passenger flights – by 2050 their aim is a staggering 220 million passengers per annum. Further down the Sheikh Zayed Road, is Abu Dhabi’s International Airport (AUH) which caters to 40 international and regional airlines, flying to 54 countries. AUH is expanding too, with a new multibillion dollar passenger terminal which will be 1.5 times the size of Heathrow Terminal 5 (due to open in 2017), accommodating 30 million passengers annually (the current rate is 12 million).

Ports: Any Port In A Strait

An estimated 90% of global merchandise and commodity freight goes by sea, which has been hugely profitable for the four main ports in the UAE: Jebel Ali, Khalifa and Ras al Khaimah Ports (on the Gulf Coast) and Fujairah Port, just outside the Strait of Hormuz. Jebel Ali Free Trade Zone is the largest in the world and is connected to DWC Airport, allowing for sea freight to be transferred onto cargo planes, thus only enduring one set of customs. Hundreds of UK companies are resident at the facility, including Unilever (their largest tea packing facility) and a huge operation for Aggreko, the power plant provider. Khalifa and Ras Al Khaimah’s Ports are important (and growing) trade routes for those particular Emirates. The former of these, and its associated free zone, have a sub strategy with a focus on heavy industry.

However, Fujairah Port gives the UAE a real strategic edge. Given the pipelines leading from the oil and gas fields of Abu Dhabi to Fujairah Emirate, Fujairah Port is now the world’s second largest bunkering port (behind Singapore) with 700,000 - 800,000 barrels of oil flowing from Abu Dhabi daily - and this is only at half capacity. The importance of this port is increased if traffic through the straits is choked for any reason.

Internationally, the purchase of P&O Ports by DP World, who operate Dubai’s ports, made it the third largest marine terminal operators globally. DP World spent £1.5 billion developing London Gateway with the objective of making it the busiest container terminal in Europe. During the first quarter of 2014 DP World, globally, handled more than 14 million containers.

What This Means For The UAE Economy?

With the exclusion of oil and gas, the UAE’s indigenous exports are small. The driver for the expansion of ports (and air freight) is to capitalise on their strategic location and offer a modern Silk Road for east/west trade. And the UAE is predicted to increase exports to India and China by 10% annually by 2030. There are also increasing volumes of trade with Africa (for example the UAE is Uganda’s third largest trade partner). £250bn of non-oil related goods passed through the UAE in 2013, amounting to 200 million tonnes annually and 103,000 tonnes an hour. As demand from Asia continues, and potential easing of sanctions on Iran, the UAE’s stake in the re-export market will increase still further.

Risks

There are two key risks that may threaten the UAE’s status as a Global Hub – terrorism/regional volatility and airspace management. A key element of the UAE’s brand is as a safe place in a troubled neighbourhood.

On airspace management, 40% to 60% of GCC airspace is controlled by the military (49% in the UAE). Coupled with the general boom in commercial air traffic throughout the Gulf, the skies are becoming increasingly congested and taking a toll on the efficiency of airline and airport operations. The UK’s National Air Traffic Systems, is offering the region an airspace management solution, modelled on the work they have done delivering the “Single European Sky” ATC solution for European airspace management. This would ensure smooth transitions across national borders and between military and civilian flights, but requires regional agreement

What Does This Mean For The UK Economy?

An economically vibrant UAE with booming ports and airports has benefits for us - especially when coupled with our aerospace and shipping expertise. The estimated accessible value for British companies, from airports alone, is in excess of £9 billion. The UAE is the UK’s 6th largest export market, in part because of the re-exports to Asia. The required infrastructure expansion also offers huge opportunities for well established UK firms.

0.2 Comment

We are making good use of UKTI’s HVO and strategic relationship management programmes to ensure opportunities are realised. . For HMG, the challenge is to ensure that strategies and plans around international trade take into account the UAE’s role as a global hub, and that we are poised to exploit any opportunities, supporting the entry of UK businesses to build and use the hub.

0.3 Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.