DP World to invest up to Dh1bn expanding Jebel Ali in 2019

Dubai-based global ports operator open to new acquisitions, while adopting 'cautious' approach, chairman says

Jebel Ali Free Zone. DP World is expanding operations there. Pawan Singh / The National

DP World, the global ports operator, plans to spend between Dh500 million and Dh1 billion to expand Jebel Ali free zone this year and seeks new acquisitions following a deal to buy a Chilean ports operator last month.

“Dh500m is what the free zone and board is committing to expansion in 2019 – this could be more equipment, warehousing, accommodation, land development or more roads,” DP World chairman Sultan Ahmed bin Sulayem said on Sunday.

“However, if [the board] comes to us in June and says, we think that Dh500m is going to be Dh1bn, we have a flexible budget.”

Jebel Ali, or Jafza, Dubai’s oldest port and free zone which houses around 7,500 companies, accounted for 33.4 per cent of the emirate’s gross domestic product and 10.7 per cent of the UAE’s GDP in 2017, according to an Oxford Economics analysis published by DP World on Sunday.

Jafza-based companies contributed 23.9 per cent to Dubai’s foreign direct investment flows that year, according to the most recent figures available. “We will continue to expand the free zone in 2019,” Mr Bin Sulayem said.

Meanwhile, the fifth-largest ports operator in the world is on the hunt for new global acquisitions this year, while adopting a “cautious” approach to investment, the chairman added. “We are watching our money; that said, anything good, we will buy it, like [in] Chile.”

In January, DP World agreed to take a 71.3 per cent in Santiago-listed Puertos y Logistica (Pulgosa) from Minera Valparaiso and other shareholders associated with the Matte Group, for a proposed investment of $502m. The deal, which has yet to be completed, would give DP World access to five regional ports as it expands its footprint in South America.

DP World operates container terminals in Peru’s Port Callao and Brazil’s Port of Santos, as well as Argentina’s Terminales Rio de la Plata in Buenos Aires.

Mr bin Sulayem named the US, India and Asia as high-growth markets for new acquisitions, and said he was unconcerned by either the China-US trade war or Chinese economic slowdown. The Asian superpower reported its slowest GDP growth since 1990 in the fourth quarter of last year and its government is adopting fiscal measures to compensate.

However, uncertainty over the UK’s potential departure from the European Union could “confuse” the markets. “[UK officials] need to plan themselves,” he said.

In October, DP World said the near-term outlook for Dubai’s Jebel Ali Port remained challenging in terms of container volumes, and Mr bin Sulayem maintained this outlook on Sunday. Improving regional economic growth and the forthcoming Expo 2020 Dubai will boost business transactions in the year ahead, but DP World will take a “cautious approach with regard to our supply chain and investments”, he said.

DP World reported a 0.5 per cent annual decline in shipping container volumes in the third quarter of 2018, attributed to a tougher macro-environment, loss of lower margin cargo and softer volumes in the UAE – where Dubai container volumes declined 6.7 per cent year-on-year.

The company has a majority stake in Virgin Hyperloop One, the futuristic transportation company owned by UK billionaire Sir Richard Branson. In 2016, DP World was reported to be in feasibility talks to develop a Hyperloop connecting Jafza port with the rest of the free zone and, eventually, to other parts of Dubai.

Mr bin Sulayem told reporters the company has decided it is not feasible to build a Hyperloop link to connect short distances within Jafza, but that an announcement about the project would likely be made during the Expo.