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Port of Aqaba may get its day in the sun
Journal of Commerce / March 6, 2000

By Larry Luxner

AQABA, Jordan -- From the docks along the Port of Aqaba, an observer can gaze out on four Middle Eastern nations simultaneously: Egypt, Israel, Jordan and Saudi Arabia.

Also in plain view at the port are Hebrew-marked shipping containers belonging to Zim Israel Navigation Co., an everyday sight that would have been unthinkable 10 years ago.

In fact, up until the 1994 peace treaty signed between Israeli Prime Minister Yitzhak Rabin and Jordan's King Hussein, Aqaba was forbidden to Israelis, while Israel and its Red Sea port of Eilat -- only a few hundred meters across the gulf from Aqaba -- was off-limits to Jordanians.

These days, ideas for bilateral cooperation between the two former enemies seem to be popping up all over, with many of these proposals centered on the Aqaba-Eilat area.

For the first time, Jordanian highway signs in English and Arabic now point the way to Eilat, which is linked to Aqaba via a new border crossing in the desert, about three miles north of the two port cities. Likewise, Aqaba's international airport -- in an effort to relieve pressure on Eilat's crowded airport -- now receives wide-body jets filled with sun-starved tourists on charter flights from Scandinavia. Amid heavy security, the tourists are then bussed over to beach resorts on the Israeli side.

And in mid-February, Jordanian aviation officials began allowing Israeli domestic airlines serving the Tel Aviv-Eilat route to fly over Jordan's less congested airspace.

"We really believe in regional cooperation," says Marwan Khoury, managing director of the Jordan Tourism Board (JTB). "Tourism is a vehicle for peace. It's in both parties' interest. This is business."

Whether similar cooperation will extend to the shipping industry is another story.

"The container business is relatively good, with traffic increasing by 15% a year," says Amin Kawar, deputy general manager of Amin Kawar & Sons Co., one of Jordan's largest shipping companies. "But those who compare it with the heydays of the Iran-Iraq War will of course be disappointed."

Indeed, during most of the 1980s, Aqaba served as a major transit point for supplies bound for Baghdad and the Persian Gulf. But business took a dive in 1991, when the UN imposed economic sanctions against Iraq for having invaded Kuwait. Through it all, Aqaba has remained Iraq's chief commercial outlet to the rest of the world.

The Jordanian port is also becoming important for Israel's Zim, according to the Zim agent in Aqaba, Petra Navigation International Trading Co. Ltd.

Yousef Naji, assistant operations manager for Petra, says he's handling 50 to 100 containers a month for Zim, and that "day by day it's increasing." The lion's share of Zim's business in Aqaba, however, is the delivery of Japanese and Korean automobiles to Jordan directly from the Far East.

"After discharging several thousand autos in Eilat for the Israeli market," said Naji, "the same car carrier goes to Aqaba for four or five hours, where it unloads 200-300 cars for Jordan, then continues back to Asia."

Interestingly, Jordan's peace treaty with Israel and the resulting ease of traveling between the two countries has sparked a tourism boom in Aqaba. That's led to demands that the port be moved farther south toward the Saudi border to accommodate all the new beach resorts and diving centers now rising along Jordan's very limited Red Sea coastline. No one knows how expensive such a project might be, though published figures indicate that moving the facilities could cost between $130 million and $1 billion.

Kawar says that's a "silly idea," along with another one that would turn Aqaba into a free port much like Panama's Colon Free Zone or Subic Bay in the Philippines.

"It sounds great, because of Aqaba's location," said Kawar, whose company and its subsidiaries, Aqaba Shipping Co. and Red Sea Shipping Agency, control 30% of Aqaba's container traffic. "Some proponents have even suggested that instead of having it in Aqaba, it should be located close to the Saudi border. But that's not such a great idea. Although Aqaba is on the edges of four countries, it's a long way from the population centers of all four."

Adds JTB's Khoury: "I don't like the idea at all. If Aqaba becomes a free port, forget tourism. You'd be talking about factories and warehouses. We have a small outlet to the sea. It should be left as it is now, but with better infrastructure. Moving the port is also a stupid idea. We have to have a better vision for Aqaba, and not only for tourism, but industry as well."

While few people in government advocate an outright privatization of the Port of Aqaba, rapid growth of the Jordanian economy in recent years has led to greater demand for port handling services for both inbound and outbound bulk shipments. In fact, the existing facilities are overloaded by the current volume of shipping, and with only one jetty available, Aqaba's bulk facilities won't likely be able to handle the future traffic.

The government has recently floated a tender for the construction of a $25 million industrial port that would ease pressure on the main port by handling the increasing import-export traffic. Within a month, the government will likely award the project to one of five international firms have qualified to bid on the financing, management, operation and maintenance of the port.

Jordan's Transport Ministry may also amend the Ports Law to authorize the private sector to take over some duties previously carried out by the government. The ministry recently formulated a detailed plan with specific instructions for achieving greater private-sector participation in the development of Aqaba -- a town of 30,000 which has been an Arab port ever since the Abbassid Period in the 8th century A.D.

"The involvement of the private sector will improve the efficiency of the port, providing a necessary ingredient in Jordan's development, an unnamed ministry official told the English-language Jordan Times. "The greater this involvement becomes, the higher the benefits will be to all parties involved."

The Port of Aqaba was established by royal decree in 1952, four years after another important event -- the birth of Israel -- denied Jordan the use of the Mediterranean ports of Haifa and Jaffa. Aqaba started very modestly, with one 150-meter wharf, one warehouse and 15 employees. The coastal area was very narrow until the mid-1970s, when Saudi Arabia gave Jordan a strip of land extending 19 kilometers to the south in exchange for 6,000 square kilometers of eastern Jordanian desert.

Kawar, who serves on the board of the Jordanian-American Business Association, says that since the 1994 peace treaty, Israeli officials have hinted that they'd like to strike a deal with Jordan to exclusively use Aqaba for handling Far East trade with both countries, thereby preserving Eilat's coastline for tourism development. In return, Haifa would be used exclusively by both countries for U.S. and European traffic.

He said that while the idea might make sense for Israel, it wouldn't help Jordan much.

"Shipping lines are coming anyway," he said. "Aqaba has its own strategic advantages -- ease of handling, low trucking costs and good road access. Haifa has not taken away much business from Aqaba. If borders really open up here and the Middle East becomes like Europe, Haifa might die in importance and Aqaba would improve."

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