Saudi Aramco World / March-April 1992
By Larry Luxner
Many years ago, when port official Sultan Ahmed Bin Sulayem's grandfather was a pearl diver, the people of Dubai knew nothing about containerized shipping or free zones. But they did know about international trade.
"We are merchants, and we've been trading since the days of our ancestors," Sulayem says. "Our country was on the maritime Silk Route to China, and we moved goods to and from Africa. Our forefathers used to dive for pearls for three months during the summer and then take them to India fo sell. But then the Japanese discovered cultured pearls, the maharajahs were forced out of power in India, and that industry was destroyed."
After that, says Sulayem, "the trade and the port became our business."
Sulayem is today president of both the Jabal 'Ali Free Zone Authority and the Dubai Ports Authority. His spacious office is decorated with large potted plants, black ergonomic chairs and a framed letter of congratulations for making the dean's list at Temple University.
As the up-and-coming young executive will attest, trade is still very much Dubai's business. In 1990, re-exporting activities by this member of the United Arab Emirates (UAE) amounted to 18.5 percent of Dubai's total $11.3 billion in non-oil trade. Of the $2.1 billion in re-exports, Iran - right across the Arabian Gulf from Dubai – was the emirate’s best client, accounting for $527 million. Other big customers were Saudi Arabia ($161.7 million in 1990), Qatar ($145 million), Germany ($133.7 million) and Singapore ($120.5 million).
Before the Gulf War, in fact, Dubai officials were urging Kuwaiti and Saudi businessmen to transfer funds here, promising that their investments would be safe from the impending hostilities. Once the war was over, Dubai's businessmen quickly took another tack - emphasizing how close the commercial capital of the United Arab Emirates was to Kuwait, making it the logical place from which to direct massive reconstruction efforts.
It appears that Dubai and the 10,000-hectare (25,000-acre) Jabal 'Ali Free Zone have benefited from both arguments
"Even during the war, with Dubai being only 1000 kilometers [600 miles] from the front line, there were investors moving in, including those from Kuwait and Bahrain, as well as Europeans," says Patrick McDonald, deputy chief executive of the Dubai Commerce and Tourism Promotion Board.
McDonald said that most of the nearly 160 Kuwaiti-owned companies in Dubai came as a direct consequence of the Gulf conflict, but that some 120 of them have since decided to maintain a local presence. Many are based in Jabal 'Ali, which was built between 1976 and 1979 at a cost of about some $2.5 billion.
Says Sulayem, "We are talking with major companies that want to use our port as a staging area to repair refineries and other infrastructure. Jabal 'Ali is probably the only place that could play a role in the reconstruction of Kuwait, because it's vast, quick and ready for equipment to be shipped as needed."
On a typical day, dockworkers can be seen loading and unloading cargo at the Free Zone's sprawling port, reached from Dubai Municipality via a 28-kilometer (17-mile), four-lane highway, presently being upgraded to eight lanes at a cost of about $165 million.
The dock itself boasts 67 berths, more than 15 kilometers (nine miles) of quay, and a modern container terminal operated by Sea-Land Service Corporation. Companies can also import and export goods through Port Rashid, some 35 kilometers (22 miles) away, or at one of the ports in Sharjah, another emirate up the coast.
At the end of 1991, the Dubai Ports Authority (DPA) - whose writ includes both the Port of Jabal 'Ali and Port Rashid - celebrated handling a record 1,200,000 cargo containers in one year. The DPA now ranks as the busiest port in the Middle East, and among the top 20 in the world in container throughput.
Sulayem said the DPA has signed an agreement with Kuwait Petroleum Company to rent 750,000 square meters (8,000,000 square feet) of land for office and warehouse space.
And recently, the director-general of Kuwait's Customs Department, Ibrahim al-Ghanem, announced that most of his country's imports would be transshipped at Jabal 'Ali Port until Kuwait's own ports had been fully restored. Large ships would unload consignments at Jabal 'Ali for transshipment on smaller vessels of up to 20,000 tons to Shu'aybah Port, south of Kuwait City.
Last spring, Union Carbide Chemicals and Plastics Company announced it would construct a latex manufacturing plant in the Jabal 'Ali Free Zone, capable of making 10,000 tons a year of latex polymers for use in paints, coatings and adhesives, which will be exported throughout the Gulf Cooperation Council (GCC) countries as well as to Iran, Yemen, Jordan, Egypt, India, Pakistan and Sri Lanka. Also, Danish industrial pump manufacturer Grundfos said it would open a 2000-square-meter (21,500-square-foot) factory in the zone to produce water pumps for distribution throughout the Middle East. And International Bechtel Inc. has already established a procurement office at Jabal 'Ali to supply materials needed to reconstruct Kuwait's devastated oil facilities.
Meanwhile, electronics distributor Aiwa Gulf Company will double its Jabal 'Ali warehouse space to 6000 square meters (65,000 square feet), and French Gulf Air Conditioning, maker of Airwell air conditioners, plans to triple the size of its production plant in Jabal 'Ali during 1992. And last November, the Mitropa Institute, a Vienna-based consulting firm specializing in projects in the formerly communist countries of Eastern Europe, chose Jabal 'Ali as the site of its new regional office in the Middle East.
Among the many advantages offered by Jabal 'Ali to companies considering basing themselves there are various forms of exemption from taxes and duties, and laws permitting investors to repatriate both their profits and their capital. All told, more than 350 companies - 80 of them arriving in 1991 alone - operate in the zone; together, they represent more than $600 million in investment. About a quarter of the companies are headquartered in India. Another 25 percent are companies based in the six GCC countries - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE - and the rest are from the United States, Western Europe and the Far East, Sulayem says.
Among the American firms are Johnson & Johnson, Union Carbide, Cleveland Bridge & Engineering and air conditioner manufacturer York International.
One man who knows about investing here is Jaguish N. Patel, finance manager of TG Industries, which makes some 150 leather jackets a day for export to Germany, France and Spain.
"About 90 percent of our 120 employees are Pakistani," Patel says. "We provide food and accommodations. Our factory employs professional people. If they make one mistake, we have to start over."
Patel, who's been at Jabal 'Ali since February of last year, says the plant's raw materials - like its employees - come from Pakistan, and that his is one of 10 garment manufacturing plants that enjoy tax-free operations in the zone.
Yoshio Kubo, managing director of Sony Gulf, says his company's sprawling Jabal 'Ali operation supplies televisions to clients all over the globe. In fact, he says, "during the World Cup [soccer tournament], Eastern Europeans desperately wanted color TV's. So thousands of TV sets were exported from Japan to Dubai, and sent by jet from Dubai to Moscow.
"At the same time," Kubo adds, "we sell from this warehouse to Iran. That's our biggest market."
Indeed, Iran's Kish Island is emerging as a major customer of the Jabal 'Ali Free Zone. Located right across the Gulf, the 90-square-kilometer (35-square-mile) island is becoming a magnet for Iranians eager to buy electronic and consumer goods made in Japan and South Korea. "Most of the goods in Kish come from the Free Zone," says Sulayem, adding that "Iran used to be our number-one re-export market before the war. Now they're coming back."
Less than an hour's drive from Jabal 'Ali is Dubai International Airport, which opened a $75 million air-cargo complex last July that effectively doubled the airport's cargo capacity to 250,000 metric tons a year (See page 38). Much of that cargo will be destined for Kuwait, in addition to seasonal apparel and other high-value goods produced at Jabal 'Ali for export to Western Europe and the United States.
Lawrence Mills, president and chief executive of Dubai's promotion board, calls Dubai a "sensible place" from which to rebuild Kuwait, adding that other locations along the Arabian Gulf "don't have the same level of facilities we have." His office has collected its arguments in a special report called "The Case for Dubai as a Logistics Base For All Matters Connected With the Reconstruction of Kuwait," which is selling well to interested businessmen at 300 dirhams ($83) a copy.
"Jabal Ali is very much geared to providing a hub for the work and goods needed for Kuwait's reconstruction," Mills says. "It's nothing more than an expansion of our normal business. A number of companies in Europe and the US, though they'd like to be involved, aren't sure how to go about it or where to do it from."
Over the next 15 years, Mills predicts, reconstruction costs in Kuwait and other nearby countries will run into the hundreds of billions of dollars, and he hopes that Dubai and the Jabal Ali Free Zone will benefit from a portion of that business.
If they do, as Sultan Ahmed Bin Sulayem can attest, it will be the continuation of a millennial tradition of merchant activity that still joins nations and cultures with ties of trade.