Shanghai, Mumbai, Dubai or Goodbye

A visit to Jebel Ali port in Dubai is like looking under the hood of globalization.

The Geo-Economics of the United Arab Emirates

Vol 1 - Shanghai, Mumbai, Dubai or Goodbye - A View from Jebel Ali Port in Dubai

“Do you own a glass building?”

“Well, no, unfortunately I do not,” I told the bright-faced and enthusiastic Chinese woman whom I had just met a few minutes earlier.

“Mabel” – her Westernized name – represented a Shenzhen-based company that specializes in light and writing displays on the front of glass buildings. We met in the bustling lobby of a building located in the sprawling complex of Jebel Ali port in Dubai, one of the most globally connected shipping hubs in the world.

“Well, take my card anyway,” she said, holding it in two hands, bowing slightly as she handed it to me, seemingly undaunted by the minimal business prospects I presented to her. “We can stay in touch,” she chirped, before drifting away to rejoin her team for a group selfie.

I was visiting the headquarters of DP World, the Dubai-based logistics and global ports operator and owner of the Jebel Ali port and its associated free zone. The port is the 10th busiest container terminal hub in the world and a major hub for East-West trade flows. The port feels like the epicenter of globalization with containers stacked over the horizon as far as the eye can see, cranes quietly lifting the branded boxes - Maersk, Hapag Lloyd, COSCO, MSC, CMA CGM - that fuel global trade.

This was my fourth - or maybe fifth visit to Jebel Ali port over the years. I worked as a Dubai-based correspondent with Reuters in the late 1990s, and have visited the city on a sustained basis over a quarter of a century - and have written about Dubai widely, including this 2009 FT piece in which I pushed back against those who were writing Dubai’s premature obituary.

Given the news from today’s Dubai, of global hedge funds, tech professionals and multi-millionaires flocking to the city, real estate prices skyrocketing, and the city hosting one of the most consequential UN environmental conferences in history shortly after delivering a major global expo, few people are predicting its demise today.

The city’s resilience owes, in no small part, to its emphasis on trade, and DP World sits at the apex of Dubai’s trade story. Beyond Jebel Ali, it’s the fifth largest ports operator in the world with operations across more than 75 countries from the Americas to Africa to Asia to Europe and beyond.

It’s hard to find a place in the world that DP World does not reach from South Carolina to South Asia. All told, more than 9% of all world trade passes through DP World’s global ports. Beyond the water, DP World is also a major investor in inland logistics and special economic zones around the world.

See chart below from a DP World Investor presentation.

DP World’s flagship operation, the Jebel Ali port and Jebel Ali Free Zone, collectively account for some 35% of Dubai's GDP -- including trade facilitated jobs supported both directly and indirectly by the 10,000 companies operating out of the free zone, according to a 2021 study by Oxford Economics and cited by the company.

Frankly, I don’t think it’s possible for anyone to understand the Dubai story - or even the broader UAE story - without a visit to Jebel Ali port. The visit might also make you re-think “the end of globalization” narrative that has attracted the attention of so many (although your humble correspondent has long challenged that notion, in Forbes, and in these pages here.

At Jebel Ali port, it certainly did not feel like the end of globalization as our car drove on Free Trading Street - yes, that’s the name – past miles of warehouses and containers and cargo trucks. It felt like I was looking under the hood of globalization, exploring the pipes and valves that pump blood into the arteries of the vast $30 trillion+ world trade machine.

Jebel Ali Port, in many ways, embodies the commercial spirit at the heart of Dubai, though the idea of the port was initially met with skepticism. When the late Sheikh Rashid bin Saeed Al Maktoum, Ruler of Dubai, unveiled plans for Jebel Ali Port in the 1970s, critics dismissed it as a “white elephant,” fearing it would overshadow the recently opened Port Rashid, which had debuted in 1972.

Tony Restall, a pioneer in creating free trade zones worldwide, recalls the mood concerning Jebel Ali:

I recall everyone criticising the old Ruler of Dubai for even constructing Jebel Ali Port and USD $2.5 Billion Dollars that left the Dubai Government with very little in the bank balance. Even when I joined leaving a wonderful jobs at Sharjah Ports everyone said I was mad and stupid leaving a good job to join a predicted 'White Elephant Project'. Driving through the Jebel Ali Port Gates in 1984 I did i have second thoughts at the remoteness of Jebel Ali from Dubai City and the even bigger emptiness of Jebel Ali Port - NO SHIPS - NO CUSTOMERS and nobody wanting to get out of their comfortable life in Dubai City. Even influential locals (The Big Business Players) were against Jebel Ali and threw complete fits of anger when the Free Zone was announced in 1985. NO LOCAL PARTNER and 100% Foreign ownership. I was party to the attempts to scuttle the launch of Jebel Ali Free Zone and how they nearly succeeded.

Today, few question the efficacy of Jebel Ali port. It’s the tenth busiest container hub in the world. See chart below:

The Jebel Ali port sees 180+ shipping lines connecting it to more than 150 destinations across Africa, Asia, the Middle East, Europe and the Americas. The Jebel Ali Free Zone hosts some 10,000 companies, engaged in trading, logistics or light manufacturing.

If you bought a Zara shirt manufactured in Bangladesh recently, there’s a good chance it flowed through Jebel Ali port. Your morning beverage may have flowed through one of the fastest growing coffee and tea trading hubs in the world — The Dubai Multi Commodities Centre (DMCC) Coffee and Tea Centre, located in the Jebel Ali Free Zone. From specialty spices to heavy trucks to Nespresso pods, the thousands of products that flow through the port represents a snapshot of global trade every day.

If you are looking for a reason why the UAE posts such massive trade numbers for a country of its modest size (10 million), look no further than Jebel Ali port and the Jebel Ali Free Zone.

According to the WTO, the United Arab Emirates total international trade approaches $1 trillion. This is a startling number given the country’s relatively small population size. With roughly .13% of the world’s population, the UAE accounts for roughly 2% of all world trade. When looked at through trade by sea, the number is even higher: UAE ports account for 2.36% of world container throughput, according to UN figures. (See UN Trade and Development Data Hub - UAE)

These kinds of trade numbers rank the UAE ahead of Brazil or Indonesia or Turkiye in terms of international trade weight - countries with vastly larger populations - and in the same league as Singapore and ahead of Spain. Or to look at it another way, the UAE (population 10 million) conducts roughly the same amount of international trade as Egypt, Nigeria, Pakistan, and Morocco combined (population: 612 million).

While Jebel Ali is the flagship in the DP World port network, the company has become one of the most active investors in trade logistics worldwide. Take a closer look at the map below to see where they are active.

DP World’s global capacity of more than 100 million TEUs (the most recent numbers) rank it in fifth place worldwide as a ports operator, though none can match its presence in Africa and India.

New developments and major expansions include projects in London, Cochin (India), Dar es Salam (Tanzania), Callao (Peru), and Senegal. DP World’s $1.2bn investment in Senegal aims to build a brand new port at Ndayane, 50km from Dakar. In Callao, Peru, DP World recently doubled the capacity of the port. There’s also a $510 million project to build a 2.19 million TEU/year mega container terminal, Tuna Tekra in India's Gujarat state.

Further east, DP World aims to increase capacity at Indonesia's Belawan New Container Terminal (BNCT) to 1.4 million TEUs a year, up from 600,000 TEUs currently. It will create Indonesia’s most direct link with the Malacca Strait, one of the world’s busiest shipping routes. The ports operator is also developing a major economic zone in South Carolina and recently announced a $1.3 billion investment to expand its London terminal.

Dubai - or more precisely DP World (more on ownership later) – has seemingly leveraged a depleting resource, its geography, and built a global trade and logistics machine at home, and seems intent on doing the same across the world.

Clearly, the UAE is a trade powerhouse and Jebel Ali port is not a showpiece. The Associated Press called Jebel Ali “the crown jewel” of DP World’s operations in an article noting that a major Canadian pension fund, CDPQ, took a 22% stake in the port and free zone with an investment of $5 billion. The Saudi pension fund, Hassana, also invested approximately US$2.4 billion for a strategic minority stake in three of DP World’s assets.

One of the more striking examples of DP World’s reach is India.

Take a look at the DP World map of India.

DP World has invested some $2.5 billion in India logistics over the past two decades and recently announced a $3 billion commitment to invest in western Gujarat state.

India-UAE ties are historically strong, but they seem to have gone into overdrive in the last few years, notably with the rise of Narendra Modi as Prime Minister. It is also remarkable that the two sides completed a free trade agreement in less than 90 days - no small feat given India’s notorious bureaucracy.

The UAE has been doubling down on free trade by signing a series of what they call Comprehensive Economic Partnership Agreements (CEPAs) - 19 and rising. Here’s a slide from a recent DP World presentation.

Fittingly, the first one signed was with India.

For several decades, the Indian community in the UAE, Dubai in particular, have played a prominent role in the city’s rise. From construction sites to C-suites, Indian nationals are enmeshed in the Dubai geo-economic story. There are so many success stories of Indian merchants and business leaders that the Dubai-based magazine Arabian Business, publishes an annual round-up of the richest Indian business leaders, complete with a ritzy gala to announce it.

Over the years, I have enjoyed interacting with the Indian community and come to appreciate their outsized impact on the Dubai story. I will never forget a wonderful dinner at the home of former Indian consul general to Dubai Dr. Aman Puri, who introduced me to some of the leading figures of the Indian business community, many of whom had been living in Dubai long enough to remember engaging with Sheikh Rashid, the father of modern Dubai who passed away in 1990. They regaled me with stories of the “old Dubai” of the 60s and 70s which seemed to be a place of considerable entrepreneurial energy even back then.

One of the business figures recounted to me an oft-quoted phrase of Sheikh Rashid. “What’s good for the merchants is good for Dubai,” he once said. “This has been true for many of those Indian business people in this room,” he said.

It has also been true for several UAE private companies. A good example is the Al- Futtaim Group, a sprawling conglomerate founded in the 1930s, that has developed into a major regional player in automobiles, retail, real estate, financial services, electronics and logistics.

Al-Futtaim Logistics - one branch of the company - operates out of Jebel Ali port. They provide wide-ranging logistics services to companies worldwide, including the movement of about a million cars per year. A video from the company site offers a useful glimpse into how a major logistics provider leverages Jebel Ali and its free zone.

A key part of the Dubai playbook has been: Build it, and they will come. In the case of Jebel Ali port, it was a success, but this is not always so, and the 2007-8 real estate crash in Dubai was a reminder that overbuilding and over-leveraging can come back to bite. In late 2008, the government of fellow emirate Abu Dhabi provided a critical loan to support some of the debt obligations of Dubai World, the holding company that operates many of the city-state’s businesses.

Another key ingredient has been the use of state-owned enterprises that operate on commercial terms. DP World is a good example. The scholar Steffen Hertog from LSE has written broadly on this topic. In a 2010 academic work, he describes the “striking puzzle” of why several Gulf state-owned enterprises, including DP World, “have been surprisingly successful.” Several of these SOEs, Hertog wrote, are “proving themselves to be competitive both in a liberalized domestic setting and in international markets.” They have also “realized impressive returns and acquired a reputation for capable management.”

He describes the key to their success as being “driven by a profit- and market-oriented management that is autonomous in its daily operations, hence insulated against political and bureaucratic predation, and that receives clear incentives from a strictly limited, coherent set of high-level principals in the political regime.”

DP World is clearly not Novorisisk Soap Factory #11.

Shorty before the Dubai crisis in 2008-9, I first heard the catchy term - Shanghai, Mumbai, Dubai or Goodbye. A London-based banker used the phrase to describe why he was in Dubai and looking more closely at emerging markets. The direction was clear. The world’s growth was happening in the emerging world, and it was a train with many more miles to go.

Since then, the bumps in the tracks have knocked this narrative off course. China is not the world-beating growth machine it once seemed, and the term “emerging markets” is too broad to capture the range and complexity of the some 85% of the world’s population that it encompasses.

Still, seen from Dubai, particularly from Jebel Ali port and DP World headquarters, a place where globalization is thriving and New Silk Roads of trade and investment are forming across the emerging world, “Shanghai, Mumbai, Dubai or Goodbye” remains alive and well.

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Post-Script - Bollywood in Dubai

(Photo: Bollywood Parks, a theme park celebrating Bollywood films, in Dubai_

I’ll write more on the growing UAE-India relationship, but one of the more striking aspects of the Dubai and Abu Dhabi billboard scene is the number of Bollywood stars that are deployed to sell new real estate developments or attract people to the latest shopping malls. City tourism authorities have followed the private sector and gotten in on the act.

A prominent ad campaign run by Dubai’s Tourism authority in 2016 featured Bollywood star Shah Rukh Khan. In the ads that went viral, the Bollywood legend turns up unannounced in unlikely places - as a waiter in a restaurant, a fellow amateur skydiver, a shopper in a glitzy mall, a beach goer wanting to join a volleyball game. In each case, he was recognized immediately by star-struck fans - many of whom were Indian nationals or expatriates. Throughout the ad, Khan referred to the city as “My Dubai” and he declared: “Be My Guest.”

The ad campaign was not just clever marketing (it won numerous international awards), but it also revealed something important about Dubai. It demonstrated the city’s embrace of its relationship with global Indians, one that is deep and growing.

It also did something quintessentially Dubai: it generated buzz that drove revenues to the city (tourism numbers from India, already high, reportedly spiked after the campaign).

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Coming soon…

The Geo-Economics of the United Arab Emirates

Vol II - The Capital of Capital?

In the next part of this series, I’ll explore how both Abu Dhabi and Dubai are emerging as rising hedge fund and finance hubs. The multi-trillion dollar might of Abu Dhabi’s own sovereign wealth funds are well-known, but the city that bills itself as the “capital of capital” is attracting some big names in international finance to set up shop in its new financial free trade zone: Abu Dhabi Global Market. Their most significant competitor in attracting top players? Their fellow emirate, Dubai.

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“Oh threats of Hell and Hopes of Paradise!
One thing at least is certain - This Life flies;
One thing is certain and the rest is Lies -
The Flower that once has blown forever dies.”
― Omar Khayyam, Rubáiyát of Omar Khayyám