Port in a storm

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DP World is aiming to expand in Africa.

Jamal Majid Bin Thaniah, the executive vice chairman of Dubai-based marine terminal operator and developer DP World and the Group CEO of Ports & Free Zone World, talks to Kat Slowe about piracy and falling global trade.

"Up to September 2008 there was a severe congestion almost all over the world," CEO Jamal Majid Bin Thaniah says. "The ports were full... shipping lines wanted to access capacity, but unfortunately capacity was not available."

But not all was as it seemed. According to the Dubai shipping mogul, the signals of the ensuing global economic crisis were by this point already present, even if ‘nobody took this warning seriously.'

A Dubai-based Emirati, Bin Thaniah has a title longer than most people's resume. He is the group chief executive officer of Ports & Free Zone World, the holding company for DP World, Economic Zone, P&O Ferries and P&O Maritime. He is also the acting vice chairman of Dubai-based ports operator DP World and executive director Dubai World, the development arm of Dubai.

Bin Thaniah surveys many of the businesses he controls from the floor to ceiling window of his office at Emirates Towers, where a vast view stretches out to a dusty horizon. UAE Vice President, Prime Minister and Dubai Ruler, HH Sheikh Mohammed bin Rashid al Maktoum's palace grounds stand out, a cheerful splotch of green amid a desert of beige. Apparently the Sultan - the chairman of Dubai World, Ahmed Bin Sulayem - keeps a telescope in his office.

"In the shipping industry no one predicted what would happen from 2009 onward and we took it that demand would continue to be on top of the cycle," Bin Thaniah says. "We also assumed that any sort of decline in demand would not be that severe. I mean a decline from double digit growth to a single digit growth.

"All of a sudden now the boom growth has disappeared and the decline in economy and trade has resulted in a negative growth. [The year] 2009 is a case where we have seen a minus in trade."

DP World, the world's fourth biggest container port operator, reported an eight percent drop in trade volume in the first two months of 2009, a reflection Bin Thaniah says, of a global drop in consumer demand. In a recent report, the World Trade Organisation (WTO) predicted that global trade would decline nine percent in 2009 and the bad news does not end there. US shipments abroad are reportedly at their lowest since 2006, according to the WTO, and the last six months of data shows a 51 percent decrease in the country's imports.

The rest of the world isn't doing much better. Overseas shipments from China, states the report, dropped a record 26 percent in February. This occurred despite a 28 percent decline the previous month. Bin Thaniah says it was China's shrinking demand post-Olympics last year that acted as one of the primary indications that the boom years could be at an end.

"China is producing almost everything to the world today," he says. "You notice that the Chinese trade started to decline, almost to a plateau, post-Olympics. The question remains, was it the Olympics?

"To go for the Olympics in China you need three years of planning and there was a high demand on steel, high demand on water in order to upgrade their infrastructure... After the Olympics I think we realised that the trade had started to - not to decline - but to run into a much lesser growth than expected."

The drop in Chinese trade was not the only sign Bin Thaniah saw in 2008 that indicated troubled water ahead: "During 2008, also, the oil price hit $146 per barrel - that killed any profitability for the shipping line. All the signals led to one thing: that business in that particular sector would deteriorate, but nobody was expecting something to happen transatlantic in the United Sates that would lead to a global recession."

Piracy threat

But the recession is not the only scourge to hit the shipping industry this year. One of its biggest challenges is how to cope with the increasing phenomenon of piracy. While Bin Thaniah claims that this criminal activity does not directly affect DP World, he nonetheless vents his outrage on
the subject.

"Piracy is a very ambiguous subject," he says. "I mean for someone to believe that piracy happens in the 21st century is something abnormal.

"Despite the piracy crisis, the shipping lines continue to use the Red Sea trade lane. We certainly have not been impacted trade or business wise by the piracy, but we are extremely concerned about this phenomenon. I think it should disappear.

"We don't have any answers why this strange phenomenon exists in the 21st century. We need to address the causes and we need to take immediate reaction for safe navigation of the shipping line and the east to west trade."

While piracy might not directly impact DP World, Bin Thaniah admits that 2009 will be a challenging year for the company. This, he explains, is because it did not see the crisis coming and ‘for the last 30 years' the company did ‘not see a decline in growth.'

Yet despite these concerns, Bin Thaniah remains very optimistic that trade will soon recover and that this quarter will see it ‘bottom up.'

"The recession has come very quickly and I believe it will disappear - okay painfully - but hopefully quickly too," he says.

"Some error happened in the system that has led to this decline, of which immediate action has started to take place, both at a regional level and a global level... I am optimistic that by Q3 or Q4 we will start. I mean the recession will bottom up in Q2 and it will eventually start to pick up slowly from Q3."

And yet Bin Thaniah does not take everything on faith. He is also instigating a series of cost cutting initiatives to ensure that business is operating at maximum efficiency.

As a service-based industry where emphasis is largely placed on the human element; in airports, airlines or the ports, redundancies, he says, could be on the cards.

Many of these have already taken place. In Southampton, for example, the firm was forced to lay off 60 people. He adds there could be more to come. "Redundancy is a key element, but it is one of the recession features. You need to address your cost.

"[The human element] is your core and because of the slowdown we have mandated each region to review their operating model and to react to the demand. If there is a demand then you have to move on with the demand. If there is a decline in the demand then you also have to adjust your cost emissions. Unfortunately redundancies have been pushed to the head of regions to consider carefully and to move on with the cost cutting when necessary."

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