More than just a regional powerhouse

1 Apr 2020
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The UAE, like many countries around the world has been hit hard by the impact of the global coronavirus pandemic and market watchers are predicting that Dubai would certainly be exposed to any adverse impact on global growth conditions that may result from an extended outbreak of the virus.

Thaddeus Best, a Moody’s analyst, was quoted in the press as saying that as China is Dubai’s largest trading partner, and Chinese exports to Dubai will be affected by the factory shutdowns across China and the resulting impact on supply chains, “almost all of the goods that the UAE imports from China are intermediate and finished goods that are at higher risk of being affected by the disruptions to factory output and goods storage facilities”.

“The lagged effect from this will likely show up in shipping throughput data from March onwards. At the absolute minimum there will be an economic impact across the first quarter of 2020, which will likely extend into the second quarter due to lagged effects in the trade and transportation sectors. However, clearly, there is a nonnegligible risk that the impact of the outbreak could extend beyond this period,” he added.

But as maritime businesses in Dubai told SMI, during a recent visit there, while the virus was starting to affect the way companies were able to operate, Dubai had seen remarkable external growth in 2019.

“It is difficult because Dubai has grand maritime ambitions,” said Tien Tai, Partner at HFW Middle East. “The Government has created free zone clusters such as the Dubai Maritime City, port and logistics clusters and the Dubai Multi Commodities Centre (DMCC), and they realise each of these hubs feed off each other. Dubai is doing all the right things; it has a great vision but has had to duck and dive regarding the geopolitics of the region.

Expo 2020 is the big thing this year and had enjoyed a lot of PR and build-up and that has to work,” he said. EXPO 2020 is scheduled to take place from October 20 this year and run until 10th April 2021. But as at the time of writing, Expo 2020 Dubai organisers were expected to discuss a possible opening delay of up to a year due to the global coronavirus pandemic, according to officials from several of the countries involved. A year-long postponement was one of several options to be discussed on a conference call and organisers haven’t ruled out the scheduled late-October start, they said. Any final decision would have to be made by member states of the Paris-based Bureau International des Expositions (BIE), which awards the event.

But with the international strength of other maritime clusters like London, is Dubai seen as a global cluster or more or a regional powerhouse? Tien Tai again: “If you can attract the owners everything else will follow. We are suppliers and everything will follow – classification and lawyers. I came here 12 years ago, but apart from KOTC and Bahri etc there is a thin layer of medium-sized owners here with good corporate governance like  Topaz. A lot of the players here are the smaller companies that own a handful of vessels. There is a critical mass yes, but not enough to really create that maritime cluster. However, Rulers have the vision and the Government is trying to attract owners to move here and provide the stable framework and the lifestyle attractions to operate from here. But if I were an owner, there would be no real material advantage for me to be based in Dubai rather than Singapore, Hong Kong or Greece.”

Rania Tadros, Head of Ince’s Dubai office, is clear in what the differences are between a cluster like London and one like Dubai. “You have a good few owners here who are operating out of this region and then you have the representative offices of the various companies. But London is an older city with a longer history and heritage as being a leading maritime services provider. London is seen as an efficient corporate legal and financial centre for maritime services. Whether that continues post Brexit with the tax situation we don’t know. The UAE has a huge geographic advantage and the cluster is trying to take advantage of that.

“We are right in the middle of the world in terms of time zones. Based here in Dubai means it is easy to work the Asian and European markets. And communications, such as Emirates Airline, are excellent making it an accessible jurisdiction. The UAE also has an amazing ability to listen and learn from the other clusters. It recognises that is has a clean slate, and it listens to others and implements its strategies accordingly; it learns from the mistakes of others.

“We have Fujairah which is a major bunkering port, and significant offshore drilling off Abu Dhabi, so we are trying to be a cluster that offers something different than somewhere like London. These are all things that give substance to the cluster so it is more than a service centre but also an operational one,” she said.

“From a legal perspective, business coming in involves quite a lot of disputes - shareholders and non-payments etc and that is keeping contentious lawyers quite busy. On the non-contentious side there is a lot of restructuring of businesses and deals and finance. So, the work we are getting is not necessarily as a result of increased trade but is more reflective of the current situation. I thought the industry was seeing green shoots two years ago but these shoots aren’t really growing no matter how much people are surrounding them with sunshine and water. Clearly the fertiliser isn’t good enough!”

Simon Doran, Managing Director at Hull Wiper, says he would like to think that Dubai’s role as a maritime cluster is more international than regional. But as he pointed out, efforts to develop a Dubai Maritime City have not materialised as much as the authorities would have hoped for. A view shared by many in the region.

“DMC had a grand plan in the beginning; there were going to be apartments and a maritime school there, even potentially Drydocks World, was going to move. Then the financial crash happened and they also had major infrastructural problems. It is a good location and good to have small boats by the side of the ship repair yard.”

He added: “I would like to think that Dubai’s role is global but the challenge for Dubai is they are seeing competition from Ras Laffan Industrial City and Nakilat in Qatar. They have always been competing with ASRY in Bahrain but Nakilat came on line and has taken all the LNG work that would have been done in Dubai.

“Then you have Al Duqm Port & Drydock in Oman which is building up its reputation, and you have superyards being built in Saudi Arabia plus even Abu Dhabi Shipbuilding which is doing a lot for the military and the smaller vessels sectors. Drydocks World Dubai doesn’t have the stranglehold it used to have on the region.

“Now purchased by DP World, they have the P&O guys in there and can start to see a management and thought process change. But it will be a long road if they want to get back to their past dominance in this region because globally, they are competing with Singapore and everywhere. There are key locations and DDD used to be a key location and I am not sure they still are.

Richard Strub, fellow Partner at HFW, added to the debate. “Dubai is a good location to attract work on the litigation side. We do everything to do with shipping and maritime here. There have been a lot of bumps and scrapes. We tend to work for owners and P&I Clubs but we get a lot of work from owners and charterers, especially from the businesses in the DMCC.”

HFW has offices in Dubai and Abu Dhabi – a factor that is important in serving the specific needs of the region. Mr Strub: “The two markets are different and if you want to be doing business in Abu Dhabi then you should have offices there.”

So are there a lot of opportunities in the region, considering the geopolitics of Iran and Iraq, and Qatar. “The infrastructure and rebuilding bring projects and investment and transactions. And then you have Saudi growth. One to watch very closely,” said Mr Strub. “On the litigation side, the situation in the wider region can bring risk. For example, the vessels that were targeted by bombs of Fujairah, in which we acted for one of the owners, followed by the two that were hit in the Gulf of Oman. This caused the Gulf to be declared a high-risk zone subject to additional premium and caused clients to seek advice on safety and what happens if the Straits of Hormuz were to shut.”

“I have to be careful about sounding like an ambulance chaser but those three vessels that were targeted by bombs of Fujairah, we acted for the owners there. Two that were hit in the Gulf of Oman and you end up gives advices on what if the Straits of Hormuz is shut. The problems in the region breed risk.”

Svein Eloff Pedersen, CEO of Noah Ship Management, agrees that Dubai is now recognised as a maritime hub but the problem will be to keep it growing and moving. As he told SMI, there has been an influx of companies into the region but “I am sure the Government would like to see even more such as banking and finance. There is still no shipping bank in the UAE; there are some parts missing.” 

Mr Pedersen has been in shipmanagement for many years, often in very senior positions, but he still feels that the hands-on and personal approach is the best. A practice he employs with his senior seagoing crew at Noah Ship Management, a thirdparty shipmanagement company he founded 10 years ago.

“Every time we change senior officers they always come to our office. I speak with every Captain and Chief Engineer and I try and involve them in the workings of the company. It is what we used to do in the good old days. We have a very hands-on involvement with senior staff. The ship should be a mirror of the office.

Noah Ship Management was  inaugurated in May 2010 with the aim of strengthening shipmanagement services out of Dubai for both the offshore segment and the normal seagoing vessels.

“We are a small company, but we have a lot of expertise and we have more time to see the principals. Some of the larger ship managers might not see a client for three years because they can’t get around to seeing them,” he said.

But what are the big issues facing managers at the moment? “Certainly, Big Data and digitalisation and while you should use digitalisation, you can’t have it to control the way you operate because you need to have your finger on the pulse. The guys onboard aren’t getting less competent, but they think differently because they are a new generation but we shouldn’t use this as an excuse to move the decisionmaking from the ship to shore. Ships often operate far away, and the crew have to be able to deal with problems onboard ship.”

Saifuddin Hassanally, Director of Adamallys in Dubai, said it was not surprising that many of the other states in the UAE started to follow the successful Dubai model. “Well it started with Port Rashid, then Jebel Ali and the region quickly became a transhipment hub. But following the success of Dubai, other states started to follow the Dubai model. After all you have ASRY in Bahrain, the dry dock in Oman as well as Abu Dhabi Ship Building.

Established in 1970, Adamallys is one of UAE’s pioneer suppliers of products and services to the marine, offshore, oil and gas, power generation and industrial production sectors. With over 40 years’ experience in the UAE and the Middle East, Adamallys is recalled as a solution provider, rather than a mere supplier by its customers. One of our primary services is ship chandling including the complete range of deck & engine stores, spare parts and provisions to ship owners and shipmanagement companies. The core of our operations consists of import, export, warehousing, marketing and distribution.

Adamallys is an authorised stockist and distributor for the leading brands in the industry. End-users rely on our extensive inventory of equipments and parts which in nexus with our facilities is known to be the gateway to the best developed air-searoad supply chain infrastructure in the region.

One company that is using its in-house resources well is Mubarak Marine – a highly diversified marine and offshore services company based in Dubai.

Offering a variety of services from Emergency Response and Rescue; Offshore Piling & Marine Construction Projects; Salvage and Wreck Removal; Rig Re-location and Towage Operations; Heavy Lift Operations; Anchor Handling and Mooring Operations; Oil Terminal Operations, Inspection & Support; Deep Sea Towing; Hook-up Work Accommodation Barges; Movement of Project Cargo & Landing Crafts; Tanker Berthing and Pullback Operations as well as coastal Harbour Towage and Port Berthing Assistance.

The company’s fleet has grown to a diverse fleet of over 40 vessels with more newbuildings in the pipeline. But according to Zia Ansari, one of the senior managers at the company, Mubarak is using its Dubai Ship Building & Engineering arm to build vessels for its own use – a series of highly niche multi-use anchor handling, towing, survey and diving catamarans that are ideally suited for operating in the shallow waters of the Gulf. “These vessels are built to our specific design, can accommodate 12 people and have DP capability. We have our own building capacity so why not build for our specific needs,” Mr Ansari said.

Source: Ship Management International