Celebrating the 25th anniversary of operations at Jebel Ali Free Zone with Salma Hareb, chief executive officer of Economic Zones World (EZW).
Celebrating its 25th anniversary of operations in 2010, Jebel Ali Free Zone has established itself as a global superhub for logistics operations and perhaps the most valued asset in the Middle East's portfolio of warehousing hubs. Even during the peak of a global recession, the flagship development of Economic Zones World (EZW) welcomed an impressive 484 new companies in 2009, bringing the total number of tenants with operations at the free zone to 6402.
"It has been an eventful year for Jafza and the result of our achievements is reflected with the number of new entrants into the community and the level of growth achieved by our existing clients," states Salma Hareb, chief executive officer of EZW. "We have a lot more expansion plans for the future too, which will drive us to the goal of becoming the number one free zone in the world."
Looking at the start of this 25 year journey, Jafza was created around the Jebel Ali port in Dubai to help boost the port's business. And within a few years, the free zone had transformed 25 acres of desert into a world-class business environment, initially encompassing 70,000m² of warehousing and 850,000m² of covered areas. "After creating the port during the late 1970s, it became apparent the operations needed an industrial area to boost business," explains Hareb. "As a result, the free zone was created in 1985. It successfully increased business at the port, but the port also boosted the free zone operations. It's definitely a win-win situation."
Through the years, Jafza has benefited from major investments in its infrastructure and the free zone's growth has exceeded all expectations. The organisation offers simple administration procedures, zero duties on import and export goods within the zone, and excellent support services. "It has developed in a fast way," says Hareb. "Over the past ten years, Jafza has seen uninterrupted year-on-year growth in the number of companies as well as the number of their employees. In 2001, a total number of 56,663 people were employed by the 1537 companies then operating from Jafza. The number has risen to 139,000 people in 2009."
Jafza is constantly revamping its business model to remain innovative. The logistics industry itself has changed considerably over the past ten years and Jafza has successfully kept pace with alterations in customer demands. "We are doing something right," Hareb says with a smile. "There are many free zones around the world, and several of them have failed. Sometimes it becomes difficult to pinpoint the exact reasons for Jafza's success. However, our comprehensive business model has played a major part in attracting companies. The more we develop the business model, the better package it becomes for investors."The female chief executive joined the organisation in 1997 as a planning officer, later promoted to chief planning officer. However, it was Hareb's promotion to CEO that grabbed headlines around the Middle East, and indeed the world. Despite being the first female CEO of a free zone in the region, and possibly the globe, Hareb remains unfazed about working in a male-dominated industry. And she admits her pioneering management technique is probably different compared to her male counterparts. "I have learnt there are different sensitivities between a woman handling this job and a man handling this job. I believe men are very much attached to their work, while women are more attached to family and the home," she states. "I'm competing with people who would die for their jobs and eventually it starts getting hard. But, once you acknowledge the situation, it is possible to find a balance between personal and professional life."
While touring the Jafza building and meeting various employees from the organisation, it becomes apparent Hareb is highly regarded by her personnel. And she admits to sharing a close bond with the senior management team. "I have a great relationship with my staff, I feel quite loved," she says. "A big group of the senior management are friends of mine because we have worked together so long. This creates a positive environment which makes me feel very comfortable indeed."
The massive development witnessed by Jafza shows no signs of slowing down. In particular, its south zone is being expanded to meet high levels of demand. The huge project aims to develop specific industry sectors through various clusters, with an estimated cost of more than AED 2 billion (US$544 million).
Despite the continued growth, the economic downturn - which saw six percent declines in Jebel Ali port's volumes during the first nine months of the year - has slowed down operations for free zone companies. Not that Hareb is too downcast. "Nowadays I think we are a bit relieved that we can cope with the demand," she admits. "We were really breathless trying to cope with demand but now the demand can be kept by normal supply."
Hareb has made a number of key changes at Jafza to better cope amid the downturn. The timeframes in which new companies must start building their own facilities onsite have been extended slightly, while others have managed to renegotiate contracts that were signed at peak 2008-prices. "We tried to go easy on the customers. We have rules [such as] you have to build within six months so we gave them longer periods in which to build. That helped to keep the facility without putting money into it. Some customers were offered use of the land as temporary storage so rather than building their own facility, they used it to store their goods for a while until they are asked to build a facility," explains Hareb. "We also negotiated some contracts that were offered at the peak of the market. Not for existing clients but for new clients who were offered higher rates. [This was done] on a case by case basis... We are not a real estate company but we try to make it easier for customers to come and establish."
In November last year, Dubai World, Jafza's parent company, announced it would ask its creditors to accept a delay in all repayments until the end of May 2010. The news sent shock waves across the world; markets plummeted from London to New York and Dubai came under a huge amount of criticism in the international press. Through their association to Dubai World, both Jafza and DP World had their credit ratings downgraded by global agencies, Moody's and Standard & Poor's, despite statements that the two were exempt from the restructuring.Hareb says both DP World and EZW have enough cash to meet their finance and investment needs for the foreseeable future. "There is no concern whatsoever for the operations of DP World and EZW. The payments are being paid and the cash flows of the companies can take them forward to a few years with the existing financial plan."
She adds that two days after Dubai World's announcement, Jafza made a coupon payment on its $2.04bn Islamic bond (sukuk). According to Dow Jones analyst calculations the sukuk's payment is estimated to be between $34-36.7 million.
Asked if she is concerned about the effect the lower credit ratings will have on business in the future, Hareb answers: "Our sukuk will not be affected because the terms are not built on ratings... We paid our coupon on time, all the time and we expect to [continue to] pay it. Dubai World will also work it out under the restructuring. Don't forget this company has contributed to building a city as well so that's quite important and people should not forget about that."
Although she does believe that this has been forgotten, Hareb also says she can understand why Dubai came under such attack. "You can understand with the celebrity that was focused on [it] all of the time. People want to pinpoint mistakes and try and find something [but] Dubai is very successful and what Dubai has done no one else can make in the [same] short time."
Despite last year's slowdown, Jafza's continued growth is likely to see it hit target this year. "In a downturn we are still growing... For example, we put a lot of effort in to attract American companies unlike European and Far Eastern companies who come easily [and] this year we had more American companies than we expected," says Hareb.
She adds her own theory to the continued growth. "There were many investors in Dubai that just wanted to invest [but] because the real estate went through a downturn... they thought that this was a good area to invest while they wanted for the real estate to hit bottom," she concludes.