UAE links sea and sky, then reaps rewards

Investing in giant seaports and airports pays off as the UAE grabs trade from competitors

Jebel Ali is the only port outside the Far East to make it into the latest Top 10 list of the world’s largest ports. Courtesy DP World

Rising non-oil trade between the UAE and the rest of the world is the return on the country's continuing investment in logistics infrastructure. Dubai government officials boast of building the most efficient logistics corridor in the world to link Jebel Ali port and free zone with Al Maktoum International Airport, which aims to be the world's largest airport by capacity. Jebel Ali, the Dubai World Central logistics hub and the Khalifa Industrial Zone Abu Dhabi (Kizad) are all key parts of the government's Vision 2021 document. These are not vanity projects, they offer solid economic rewards.

Even as the world economy slows down, the UAE is seeing its non-oil trade figures grow, as The National reported yesterday. This is because it is diverting trade and winning business from the rest of the world. As the government makes further investment in increasing capacity, Jebel Ali and Kizad become more attractive relative to global competitors. A scarcity of alternatives also helps – Oman’s Salalah and Morocco’s Tangiers ports have also seen more business.

Trade diversion should provide a buffer against a slowdown in global demand. China’s financial crisis is likely to give way to weaker demand for commodities and lower trade. Demand for gold, which is the UAE’s main import and re-export, will suffer. The era of rapidly growing trade volumes before 2008, when the rate of trade expansion regularly exceeded the global growth rate, has come to an end.

But even as the global market stalls in the short-term, the UAE’s ports can claim a bigger slice of the action simply by being cheaper than their rivals. The country’s ports are also well-placed geographically as the world’s centre of economic gravity continues to shift eastwards.

There are parallels here with the strategy of Etihad and Emirates. High rates of passenger growth are being supported by the airlines’ ability to divert traffic away from competitors. Investment in airports is a big part of that.

For the UAE there’s an extra bonus in all of this – its ports and airports are a hedge against low oil prices, which hurt the UAE, but are good for global trade. So Jebel Ali and Kizad help to reduce the impact of the era of low oil and low commodity prices.