An integrated approach: The new port and industrial complex is designed to aid diversification

One of the largest projects currently under way in Abu Dhabi concerns maritime transport. Khalifa Port (KP), a new facility to replace the emirate’s current main port of Mina Zayed, opened in September 2012, together with a new integrated industrial complex known as Kizad. These facilities are aimed at revolutionising Abu Dhabi’s transport and industrial system upon completion in 2030. The zone will cover 417 sq km and is projected to account for up to 15% of the emirate’s non-oil GDP, as well as providing as many as 100,000 jobs.

MORE TRAFFIC: The maritime segment still accounts for a big part of total transport, largely in goods. Although no official figures for the economic contribution of sea transport (as opposed to transport overall) were available at the time of writing, figures from the Statistics Centre – Abu Dhabi (SCAD) show that six out of the emirate’s top 10 non-oil export destinations were non-GCC countries, with exports to two of the top three in 2011, Canada and Brazil, highly likely to go by sea.

However, the makeup of Abu Dhabi’s maritime traffic has been changing rapidly in recent years. When the existing port of Mina Zayed was built in the 1970s, its primary function was as an import terminal, serving an island city designed with a maximum population of 600,000 in mind. Not only has the population of Abu Dhabi City grown since then to around 900,000, but the emirate has embarked on a series of industrial investments that have generated significant export traffic.

At the same time, continued economic and population growth has led to a rise in demand for imported goods, which has put pressure on the facilities at Mina Zayed. According to Martijn van de Linde, the CEO of Abu Dhabi Terminals (ADT), the new port will help to address this. “Traffic in Mina Zayed is growing significantly year-on-year. This reinforces the necessity of KP to accommodate long-term organic growth. Operations will be much more efficient and cost-effective at the new facility,” Van de Linde told OBG.

Thus, the government has embarked on work to build a new integrated port and industrial complex which will enhance the emirate’s competitiveness as well as expand the existing industrial base. KP features new container and bulk terminals built on an artificial island 4.5 km offshore, with Kizad developed on the mainland, at Taweelah, a site roughly equidistant between Abu Dhabi City and the port of Jebel Ali in neighbouring Dubai, currently the biggest port in the Middle East and a leading logistics centre in its own right.

Abu Dhabi Ports Company, a public firm in which the government of Abu Dhabi is the sole shareholder, is building the port and will retain ultimate ownership. ADT is a private joint stock company owned by Abu Dhabi Ports Company, Mubadala and Mubadala Infrastructure Partners; it already operates Mina Zayed and will run the container terminal at KP, which will be the first automated container terminal in the Middle East.

CAPACITY & INVESTMENT: While Mina Zayed handled just under 800,000 twenty-foot equivalent units (TEUs) in 2011, according to ADT, KP will have an initial capacity of 2m TEUs when it opens, although the port has been built in such a way that this can be more than doubled to 5m TEUs within one year and will ultimately reach 15m TEUs by 2030. It will have further capacity for 15m tonnes of general cargo, as well as bulk and liquid terminals, while large factories at Kizad will benefit from their own terminals at the port.

Figures for the total investment going into KP/Kizad vary, with some infrastructure investment on other departments’ books (for instance, Abu Dhabi Water and Electricity Authority is installing a 2000-MW power plant on the site, but it will be used for the Abu Dhabi power grid generally, rather than just KP/Kizad), with estimates ranging from Dh14bn ($3.8bn) to Dh26bn ($7.1bn). Civil works at Kizad are ongoing, but anchor tenants such as Emirates Aluminium, also known as EMAL, have been operating at the site since 2009. In addition to its clustering approach, Kizad offers a number of incentives to investors, including low land rents, utility costs and in some parts of the complex, free zone status (which in Abu Dhabi enables businesses to import materials and export goods free of Customs duties, as well as allowing 100% foreign ownership and free repatriation of capital).

CLUSTERS OF INDUSTRY: However, the main competitive advantage, for both the port and the industrial zone, is the overall integration of the entire complex. It aims to attract both heavy, basic industries and lighter, downstream industries which contribute to the value chain, arranged around key clusters in aluminium, steel, engineered metal products, chemicals and petrochemicals, pharmaceuticals, food, paper, print and packaging, and logistics. Downstream industries cluster around the basic industries which are significant suppliers of raw material, while the proximity of the port allows for the easy importation of raw materials as well as the export of finished products. KP/Kizad integrates with the E11 motorway, providing fast access to Jebel Ali and Abu Dhabi, each 45 km away, as well as the Abu Dhabi and Dubai airports, both of which are major air hubs. Additionally, Etihad Rail, which will eventually join up with the wider proposed GCC Railway, will pass through KP/Kizad. Upon completion in 2018, this connection will offer significant freight cost savings to industries based around Kizad, as well as improved access to the wider Gulf market of about 50m people.

AIMING FOR THE MAINLINE: KP has been designed to accommodate the largest ships currently used (Mina Zayed is restricted to Panamax class), and the sheer scale of the new port and adjacent industrial complex constitutes both a significant part of its commercial strategy and a source of competitive advantage. The port’s size makes it more commercially viable for ships to call on KP as a mainline destination, as opposed to a feeder port such as Mina Zayed. In turn, this makes for shorter lead times and cheaper shipping rates, creating a virtuous circle as industries choose to locate in Kizad due to increased shipping connections and the presence of so many potential industrial customers. Van de Linde told OBG, “The new port will give Abu Dhabi the opportunity to go from a feeder port to a regional hub. The new port, because of its size and capacity, will help ensure that Abu Dhabi becomes a mainline destination. Additionally, the move will decongest the city centre as Mina Zayed traffic will decrease.”

COMPLEMENTARITY: KP is just 45 km from Jebel Ali, although the two ports are designed to complement each other rather than compete head to head. KP is very much an industrial port whose selling point is the size and variety of the adjacent industrial cluster, while Jebel Ali has cornered the regional market as an entrepôt and trans-shipment centre, and its facilities will also be available to industries based at Kizad. While some trans-shipment business may come to KP as its international connections increase, this is not the port’s primary business activity or target market. Rather, the port is intended to strengthen the ongoing diversification of the emirate’s industrial base, as well as boost its competitiveness in the world market in the long run.