They’ve struck again. And again. And again. In fact, in a period of two weeks last month the brazen pirates off the coast of Somalia tallied nine hijacked ships alone. They can now claim their largest take, in capturing the Saudi supertanker Sirius Star some 450 miles off the coast of Mombasa. The vessel owned by Saudi oil giant Aramco was heading for the US via the Cape of Good Hope at the southern tip of Africa, instead of heading through the Gulf of Aden and the Suez Canal.

“The world has never seen anything like this. The Somali pirates have hit the jackpot,” says Andrew Mwangura, coordinator of the East African Seafarers’ Association.

“The supertanker was fully loaded, so it was probably low in the water and not that difficult to board,” said Mwangura, adding that the pirates probably used a ladder or hooked a rope to the side.

Consider that this year, Somali pirates have attacked 90 ships, more than double the number in 2007, according to the International Maritime Bureau, and are still holding 16 ships and more than 250 sailors.

“We can confirm the ship is anchoring off the Somali coast at Haradheere,” said Lieutenant Nathan Christensen, a spokesman for the US Fifth Fleet.

Prince Saud al-Faisal, Saudi Arabia’s Foreign Minister called the hijacking of the Sirius Star an outrageous act and promised to back an EU-led initiative to step up security in shipping lanes off Africa’s east coast.

“This outrageous act by the pirates, I think, will only reinforce the resolve of the countries of the Red Sea and internationally to fight piracy,” he told reporters in Athens.

In a move likened to feeding alligators, Russia recently conceded to demands and paid a ransom of US$1 million for the return of a captured ship. The question at this point is – What else can be done?

The hijacking occurred despite an international naval response, including from the NATO alliance and European Union, to protect one of the world’s busiest shipping areas.

US, French and Russian warships are also off the Somali coast.

Consequently, the pirates have driven up insurance costs, forced some ships to go round South Africa instead of through the Suez Canal and secured millions of dollars in ransoms.

Based on the recent escalation in piracy, one might conclude that such actions to date have proved ineffective. With the exception of India’s navy claiming to have sunk a mother ship last month, it appears that governments’ resistance to piracy has been minimal and insufficient.

My question is this: Don’t these affected countries have militarised special forces, such as the US’s Navy Seals or UK’s Special Air Service? Where are these units when pernicious pirates strike? Operations could be launched in the dead of night and one assumes they are trained in such matters already.

Are these primitive pirates so advanced that their defenses are impenetrable? Or, is it the risk of life that could be lost, should such actions prove unsuccessful? The world is waiting to see what the appropriate response will be.

Alright ladies and gentlemen, class is now in session. Today, the University of Dubai is offering the internationally recognised Chartered Institute of Purchasing & Supply (CIPS) qualifications to those seeking to enhance their industry credentials. Though attendance will remain optional, anyone and everyone within the procurement and purchasing-supply industries are highly recommended to not only attend, but to use this class as a catalyst to create more value for themselves and their respective companies.

Why? Because as a profession, purchasing and supply is increasingly being seen as a strategic business discipline, involving a growing number of highly specialised roles. The supply chain is becoming ever more complex, presenting those in the profession with many new challenges, from changing market structures ushered in by globalisation and the growing economic strength of developing countries, to technology, global events and trends towards ethical and fair trading.

As the job market is becoming increasingly competitive, internationally recognised standards are becoming the norm. Quite simply, those who may have experience, but no standardised qualifications, are being left behind. The programme has proved popular amongst supply chain professionals throughout the Middle East, as the course structure is flexible and tailored to allow students to maintain their day jobs.

Offering an International Certificate qualification as well as an International Advanced Certificate, the University of Dubai wants industry insiders to progressively step up their game. The International Certificate qualification is awarded to students who have knowledge of the main concepts and principles associated with the area of study. Upon completion, they will be able to identify and describe the main concepts and principles, present and/or interpret qualitative and quantitative data, and communicate clearly in written English, using diagrams and charts as required. Sounds straight forward enough.

Currently, there are no entry requirements to commence studying for the International Certificate in Purchasing and Supply. However, you must complete the International Certificate programme before starting the International Advanced Certificate. For Advanced Certificate acquisition, you must successfully suggest solutions to a range of problems, analyse data and make reasoned judgements, as well as develop lines of argument. This is the foundational understanding for those who wish to ascend the corporate ladder within their respective business.

As topics introduced at the Certificate level are developed in the Advanced Certificate, the awards are progressive. Each award has five compulsory units. With each unit designed for a minimum of 15 hours direct tuition, it is expected that students undertake an additional minimum of 15 hours self study per unit. This equates to approximately 150 to 200 hours of study for each certificate, including a minimum of 75 hours of direct tuition.

At a cost of AED11,500 (US$3,126) per year, the University of Dubai’s CIPS programme is not for the faint of heart. However, those interested in attaining such qualifications should make their employers aware of their intent, and request possible financial assistance. One would assume companies would be more that willing to invest in their employees, as it proves to be a win-win scenario for all parties.

The region’s airports are something to watch

These days, the GCC is getting downright dusty. Ever notice how the sky just refuses to be blue, preferring rather an opaque haziness? Some attribute all this dust in the air to “construction induced pollution”. This, they say, is the price of progress. Dubai is no exception, as the colossal undertaking of building the Al Maktoum International Airport is certainly swirling up dust and sand particles. Rather than look to bluer skies, we decided to check out all the new airport construction in the region, to see what’s happening.

Al Maktoum International Airport With a price tag checking in at US$82 billion, the Al Maktoum International Airport (JXB) will be a record breaker. Just to give you an idea, prior to JXB, the Hong Kong International Airport (HKG) was the most expensive airport to construct, and cost US$62 billion less, at a mere US$20 billion. The numbers on this still uncompleted project are staggering, and when the dust settles on construction, JXB will be the world’s largest passenger and cargo hub, sitting 10 times larger than Dubai International Airport (DXB) and Dubai Cargo Village combined.

Consider that with 16 cargo terminals and an annual capacity of 12 million tonnes, JXB will have more than three times the handling capabilities of Memphis International Airport (MEM), today’s largest cargo hub, and a passenger capacity of more than 120 million – almost 30 percent more than Hartsfield-Jackson Atlanta International Airport (ATL), currently the world’s busiest passenger airport. It will have the required volume to handle all next-generation aircraft, such as the A380 and Boeing 787, and will be able to facilitate up to four aircraft landing simultaneously, 24 hours a day, which should minimise in-air queuing.

Meanwhile, construction of the airport’s approximately US$75 million cargo terminal is more than 50 per cent complete. The first phase of the project will see the terminal initially handle 700,000 tonnes per annum. By 2013 it is expected to become the largest of its kind in the world, at full capacity and handling 12 million tonnes of cargo annually.

According to reports, JXB will be open to all foreign carriers. Emirates operations (both passenger and cargo) will remain exclusively at DXB. Plans call for a link between the two airports through a high-speed express rail system. “A customs-bonded road and rail corridor between the two airports will enable fast cargo and passenger movement,” says H.H. Sheikh Ahmed Bin Saeed Al Maktoum, President of the Dubai Civil Aviation Authority and Chairman of Dubai Airports.

In addition to the express rail, the Dubai Metro and designated light railway throughout Dubai World Central will also facilitate traffic in and out of JXB.

JXB Specifics- Al Maktoum International Airport will have six parallel runways, 4.5 kilometres in length, each separated by a distance of 800 metres (2,600 ft). It will also have over 100,000 parking spaces (most likely underground) for airport staff and passengers.

New Doha International Airport Built over 22 sq kilometres, half of which is reclaimed land, the New Doha International Airport (NDIA) airport will feature some 40 contact gates, 22 remote gates. NDIA’s hub will have a runway of 4.2 kilometres and a second one at 4.8 kilometres in length, each capable of handling the superjumbo A380s and 787s.

“The core business of the airport would be the transfer of passengers. We will definitely reach the 24 million-passenger mark in 2010,” says Abdul Aziz Mohammed Al Nuami, Chairman of Qatar’s Civil Aviation Authority.

Eventually, NDIA’s cargo facilities will be capable of facilitating 750,000 tonnes of cargo movement per year. One major staple of the project will be the multiple cargo aircraft maintenance centres, worthy of hosting aircrafts of all sizes. This capacity expansion seems to be the regional trend, as carriers’ ever-increasing size dictates such infrastructure upgrades.

An additional expansion phase, planned between 2020 and 2025, expects an ultimate airport capacity of 48 million passengers and 80 contact gates.

Abu Dhabi International Airport For the past few years Abu Dhabi International Airport (AUH) has been undergoing expansion. And with the proposed midfield terminal, they have no intention of stopping.

The new US$6.8 billion Abu Dhabi terminal will be opening in phases, beginning at the end of 2011. Once phase I is operational, the new airport will be able to accommodate 20 million passengers per year. Upon the completion of phase II, capacity is expected to increase to 40 million passengers.

“When it opens, the new midfield terminal at Abu Dhabi airport promises to be one of the finest passenger buildings in the world and as it is the first impression for visitors flying into the capital city of the UAE,” says Greg Brennan, Etihad’s Project Manager for the new midfield terminal. “The challenge will be to deliver this massive development on time, within budget and to the very highest of standards.”

One of the first parts of the project will be the construction of a second category III runway 2,000 metres north of the current runway. The new 4,100 metres parallel runway and taxiway will be able to cater for the latest generation of superjumbo aircraft. The development master plan also includes a large (mega) terminal building, a new 110 metre Air Traffic Control (ATC) tower, a cargo and logistics centre, maintenance facility and commercial area incorporating a free zone and associated retail development.

Kuwait International Airport Cargo operations at KIA are really flying high with the introduction of upgraded facilities dedicated to meeting the needs of Kuwait’s freight community. Already handling in excess of 126,000 tonnes of cargo annually, the launch of the new consolidation facility has boosted throughput by roughly 10 percent,enabling local forwarders to improve efficiency. The new facility is just one of a series of upgrades to the airport’s 8,000 cubic metre cargo complex, to ensure it doesn’t get left behind in the Gulf freight community. While in comparison to other regional airports it seems minimal, over KD1 million (US$3.1 million) has been invested in the last few years to modernise and expand KIA.

In addition to large quantities of belly hold cargo carried on scheduled passenger services, several airlines operate regular freighter flights to and from Kuwait. Comprising a 5,600 cubic metre import warehouse and 2,300 cubic metre export facility, KIA’s cargo terminal is equipped to handle a diverse range of traffic. With capacity for up to 600 tonnes of freight, the cargo complex boasts a range of specialised facilities, in addition to general storage, enabling it to handle any kind of consignment.

Kuwait International Airport can currently handle six million passengers a year and has a new terminal under construction that seeks to increase the annual passenger handling amount to 14 million. Terminal II is due for completion by the end of 2010.

The region’s rail plans are best described as immense

These days, the GCC’s rail sector is receiving global attention. And for good reason. The plans are ambitiously immense, as well as being a lucrative incentive for private investment. It is no wonder then, that updates on the ongoing projects are being received with open ears.

These days, the GCC’s rail sector is receiving global attention. And for good reason. The plans are ambitiously immense, as well as being a lucrative incentive for private investment. It is no wonder then, that updates on the ongoing projects are being received with open ears.

From Saudi to Sharjah, rail initiatives are materialising almost daily, seeking to lessen the congested roads as well as facilitate borderless trade. Some plans are local, like light rail and automated metro systems, to regional, which include an international GCC line, similar to Europe’s Eurorail. Once completed, this GCC line will provide a direct link between ports on the Arabian Sea and the Gulf.

Regarding the GCC line, there are issues still to be worked out however, as countries have not reached consensus on the cost structure of the project. “If each state built its share of the rail network, it would be a very feasible project,” says Abdullah Alkatheeri, Director of the land transport department at the National Transport Authority. “I think it’s a political project and I think it is something we have to work on to tie the economics.”

“Final recommendations for the GCC line should be expected within the next six months,” says Dr. Ramiz Al Assar, a senior transport analyst at the World Bank, who has been advising the GCC secretariat on establishing rail links.

Saudi Arabia and the UAE have continued to drive the region in terms of rail progress. Aside from the GCC project, each is exercising its own initiatives. Saudi’s desire to diversify its economy away from oil remains a crucial role in the Kingdom’s upcoming North-South line. With an abundance of natural resources in the mining sector, specifically phosphate and bauxite, the North-South line is forecasted to handle 10 million tonnes of mineral deposits annually. By October 2010, Saudi expects to have the mineral line operational, with an initial 780 wagons set to go. Through time, additional traffic will include petrochemical and agricultural products, and eventually make way for passenger travel.

When complete, the North-South line will span a distance of 2,380 kilometres, consist of 107 bridges and 2,679 culverts. To say the line’s construction is a large assignment, would be an understatement. In terms of earthworks, the project is unprecedented. Official figures have calculated that 497 million cubic metres of sand must be removed to make way for it. Consider that when the pyramids of Egypt were constructed, some 2.6 million cubic metres of sand was relocated. The Great Wall of China required 322 million cubic metres of soil removed. These were enormous projects, that took centuries to complete. Factor in Saudi Arabia’s unforgiving climate, and the timely supply of goods in such desolate regions, and the size and expediency of the project remains unparalleled.

In the UAE, Dubai and Abu Dhabi continue to implement their own individual light rail systems, as well as a cohesive trans-Emirate network. The requirement for a rail link in the UAE remains motivated by the need to move freight faster and cheaper, and in time, passenger services will lessen the congestion on the Emirates’ roads.

Dubai’s rail and master plan will tie together all future light and railway networks with existing projects, such as the metro and Al Sufouh tram system, each designed to take the strain off the city’s congested roads. It will also integrate these with the proposed national railway network traversing the UAE. The first phase of the UAE’s rail network will have a double track railway built from Ruwais in Abu Dhabi and stretching to Fujairah. Eventually, there would be about 900 kilometres of track running from the Saudi border to the northern UAE coast.

Some of Abu Dhabi’s current plans indicate a metro with stations on Abu Dhabi island, connecting to Musaffah industrial zone, the planned cities of Capital City and Masdar, Abu Dhabi International Airport, as well as various islands under development, including Yas Island, the future home of the Formula One Grand Prix. “This is not final, but basically the numbers that we have indicate that we need a metro network in Abu Dhabi,” says Abdelgader Elshabani of the Abu Dhabi Department of Transport. “In the future, it will be important to link Abu Dhabi to Dubai. We need to have this connection to Dubai through a regional rail system and as a matter of fact we have begun reserving space for that.”

Abu Dhabi’s network of tram lines is scheduled to open in 2015, while the metro is planned for 2020 and regional rail may be completed between 2020 and 2030. So while the Emirate is still a while away from completion of such projects, at least officials have acknowledged the need for such transport and are actively seeking solutions. Time will tell.

With the abundance of heavy trucks on the GCC roads today, one rarely takes the time to consider the qualifications of these load hauling drivers. Before truckers receive the necessary category four license, they must partake in a rigorous seven week course in which they receive classroom instruction, testing, vehicle simulation and controlled and open-road driving lessons.

To date, the Emirates Driving Institute remains the largest and most successful driving institute in the Middle East. Based in Dubai, the 50,000 sq metre headquarters is bustling with aspiring couriers of cargo, both young and old. With an unquenching demand for certified heavy haulers in the region, the institute remains packed with applicants who are fully aware of recent trucker pay increases and job availability. Offering courses in heavy motor vehicles, heavy bus, light motor vehicle, motorcycles and forklifts, it seems as though anyone interested in attaining these abundant employment opportunities must come through EDI.

Additionally, the ISO certified institution retains close ties with The Motor Industry in the United Kingdom, The Institute of Advanced Motorists of the UK and the German Cultural Institute for Driver Education, and takes great pride in its reputation abroad.

I was fortunate enough to take a day course offered by EDI in heavy vehicle trucks and learned just what makes this course so renowned. My instructor, Khalid, was a well-built man in his late 30s and was as professional as he was instructive. By the
end of the day, I was required to have memorised the 19 elements for passing a driving test. This was no easy feat, however the elements’ usefulness remains unquestioned.

After our session in the classroom we were on to the driving simulators. I was amazed at the level of technology used as all monitors used were state of the art with up to the minute graphics translating to successful recreations of real life road conditions. The simulators were a favourite of the other students as well.

Finally, the time came where I could drive the big rig, with my instructor of course. Taking a drive around the enclosed track, the sheer mass of the vehicle quickly reminds me of the caution I must use. That, and Khalid sitting next to me with a keen eye on my driving (as well as any innocent bystanders).

After our session, I had a chance to ask Khalid a few questions about the trucking industry here. He was quick to attribute EDI’s rise in applicants to the UAE’s booming market and companies looking for qualified personnel. The labour shortage extends to certified heavy truckers as well and subsequently EDI’s applicants have indeed been steadily growing. Some companies have established contracts where their drivers’ education is paid for. However, more often than not, EDI’s fees are paid by the students themselves. This creates a level of stress on drivers, says Khalid, as they feel they must pass the first time because they cannot afford a second opportunity.

After a long valuable day at EDI, I can say I feel like a more astute driver. Though the chances of me getting on the open road behind the wheel of a 20-tonne hauler remain slim, I do have a new appreciation for those who do. And I still haven’t forgotten about those 19 elements.

Requirements: The minimum age for participation in the heavy vehicle course is currently 20 years old. Those interested in signing up must bring in their original passport with a valid Dubai visa, seven passport size photos, and a no-objection certificate (NOC) from their sponsor.

Those 19 elements: What you need to know to pass a heavy truck driving test:

1.  Vehicle starting
2.  Use of gear
3.  Proper stopping and parking
4.  Obedience to traffic lights, traffic
     signs and pedestrian crossing
5.  Applicant causing a serious
     danger (hazard)
6.  Precautions before starting the
     vehicle (seat belts)
7.  Use of clutch, accelerator, brakes, mirrors and hand brake
8.  Use of indicator, hand signals
    and horn
9.  Left turn, right turn and U-turn
10. Emergency stopping
11. Lane discipline and lane changing
12. Approaching junctions,
     roundabouts and traffic lights
13. Yielding to pedestrian crossing
14. Maintaining speed limit
15. Over taking
16. Maintaining safe distance
17. Ensuring that the road/
     roundabout is clear before entering
18. Control of the vehicle and
     attentiveness
19. Stalling

With a reputation as a global hub for the gold, diamond and property trade, Dubai has historically held a reputation as a haven for illicit money laundering. Each year, with billions of dollars flowing in and out, it remains difficult to trace how and where such funds are ascertained. In trying to clean up its image, the Dubai government has recently introduced stricter measures to clamp down on the shadowy cash trade, but the task has proved formidable.

Though as is often the case, the issue of global currency transactions and their respective legality is by no means black and white. While some move currency to legalise their clients’ unaccounted money, others use the money for trading, letters of credit and money laundering. Millions of dollars are known to be transferred electronically among operators in Singapore, Dubai and Hong Kong for these purposes, lawfully and unlawfully.

As a means of making money appear legal, embezzlers, fraudsters, drug traders and tax dodgers are fully aware of the logistical, as well as financial advantages that Dubai has to offer. Tales abound of Russian and Chinese ships coming into port, unloading shrinkwrapped pallets of greenbacks, with few questions being asked.

“‘Money launderers are no longer the criminals they used to be,” says Norman Inskter, the former president of Interpol. “Today they are astute business people and use the banking system as a way of moving money. When you look out at this sea of construction, you would like to know who owns it all.”

According to Eckart Woertz, a UAE based economist, the initial thirst for development gave local authorities little time to verify all the inflow of capital, which subsequently encouraged money laundering. “But, after achieving remarkable success in a short period of time, they are now realising the need to adopt corrective steps.”

One measure expected to have an impact is the UAE Central Bank recently ordering financial institutions to register details of anyone transferring as little as AED 2,000. At minimum, this will establish a paper trail for authorities to reference when looking into someone’s transaction history.

Last month, the Dubai Islamic Bank announced it purchased integrated antimoney laundering software from Norkom Technologies, with plans to introduce it across the bank’s operations in UAE and Pakistan. The DIB claims the software will “monitor customer transactions and identify suspicious behaviour”.

“The initiative demonstrates DIB’s commitment to improve its defences against money laundering and terrorist financing,” says Waheed Rathore, Head of Group Compliance at Dubai Islamic Bank. “Sustainable growth can only be achieved by maintaining high standards of regulatory compliance.”

In addition to the banks proactive solutions, the Dubai Multi Commodities Centre (DMCC) has pledged to fight against money laundering by ensuring transparent business in gems and other precious commodities.

Undoubtedly, one of the appeals for launderers in choosing Dubai remains its liberal free zone concept. With enticing tax exemptions and 100 per cent freehold ownerships, the areas are perceived by some as safe havens for illicit funds. However, Raymond Termini of Patton Boggs LLP, disagrees and feels established laws are coming on par with the US and Great Britain. Termini offers some advice about the current policies in place, “Within the UAE, there are four federal laws relating to money laundering and counter-terrorism, dating back to 1987,” says Termini. “Both the Ministry of Economy and Commerce and the Central Bank issue circulars on the subject, and the Central Bank issues Directives.”

“Within the DIFC, the Dubai Financial Services Authority (DFSA) has produced its own anti-money laundering rules. The DFSA is the independent regulator that governs the DIFC’s financial services companies, and also ancillary service providers such as law firms,” says Termini.

“Companies must appoint a Money Laundering Reporting Officer (MLRO) and a deputy to act in their absence. The regulations require that companies carry out due diligence checks on potential customers or beneficial owners of funds. They are required to complete a comprehensive customer profile, verify their integrity and locate the source of any funds to be deposited. This duty falls on both company employees and the MLRO.”

“For financial service companies, evidence obtained under the identification procedure must be kept for at least six years after the customers’ account is closed. Other authorised firms, such as law firms, must keep their identification evidence for at least six years after the consummation of any transaction they advised on,” says Termini.

Interestingly, says Termini, if someone is investigated for fraudulent activity, he or she is not allowed to know about it. “No firm or any of its employees may inform a suspected individual that their transactions are being scrutinised for money laundering. Failure to adhere to this policy may result in a fine or imprisonment.”

However, not all smuggled money whether laundered or squandered, has to pass through the mainstream western banking system. Organised crime in the Middle East and South Asia, have long since relied on informal money transfer networks, often between trusted third parties. This process, known as hawala dates back centuries and is considered by the some the basis of the modern day 3PL model.

The extensive use of trusted connections such as family relationships or regional affiliates, are the distinguishing components of the hawala system. Often referred to as ‘underground banking the system makes minimal use of any sort of negotiable instrument or record keeping. Transfers of money take place based on communications between members of a network of hawaladars and hawala dealers. Thus, money is transferred internationally, without actually moving it from one place to another.

Largely used by people working abroad for sending money home to relatives who may not have a bank account, hawala is often misused by those who seek to evade taxes, engage in money-laundering or hide the details regarding the source of funds or their owners. As the process leaves no paper trail (because there are no accounts, cheques, signatures or ATMs involved), hawala is essential to launderers who wish to remain anonymous. However, as hawala works faster and cheaper than conventional systems and reaches places where even post offices do not exist, many low-income workers in the Gulf continue to use it to make their remittances.

The UAE Central bank remains fully aware of the futility of attempting to ban the hawala system, however it says measures are underway to increase transparency. “The system can be used by those who have legitimate reasons for doing so and those who seek to abuse the system for illegal transactions will be identified and stopped by the authorities,” the bank said.

Woertz agrees, and says the efforts to crack down on hawala operators alone will not help. “Today’s banking system has enough loopholes for manipulators to channel unaccounted money and indulge in money-laundering activities,” he added, implying that the “practice will never be rooted out completely”.

These days, in such fiscally turbulent times, the topic on everyone’s mind seems to be money. With the recent US$700 billion government bailout in the United States, many in the GCC have turned their attention towards the region’s monetary policies.

As the UAE dirham remains pegged to the dollar, many are concerned the repercussions of such American actions will inevitably reach the shores of Abu Dhabi and the UAE Central Bank. Though the UAE maintains sovereignty over its own monetary system, the Central Bank has had to answer many questions as of late. Most notably, what are we doing to reinforce stability in the money markets?

Consider that inflation has been hitting record or near-record peaks across the world’s biggest oil-exporting region, where most states peg their currencies to the ailing US dollar, driving up import costs. Dollar pegs have forced Gulf states to track US interest rate cuts even though their economies are booming on a more than six fold increase in oil prices in as many years.

Consequently, money supply in the UAE has maintained “rapid growth” over the past 24 months, despite Central Bank measures to curb its increase by borrowing from local banks and investing the funds abroad. Bankers attribute such rapid growth to a sharp rise in private capital inflow, a fiscal boom in the country and higher public spending on development and other projects. The surge in money supply, which is normally associated with inflation, occurred despite the Central Bank’s measures to stem liquidity growth by sharply boosting the issue of certificates of deposits (CDs), as well as investing the borrowed funds in banks abroad.

According to published reports, the Central Bank borrowed more than AED170 billion (almost US$46.3 billion) from the country’s 24 national banks and 28 foreign lenders in 2007. The borrowing, mostly through CDs, has boosted the combined deposits of those banks with the Central Bank to a record AED231 billion (almost US$63 billion) at the end of 2007 from AED58.4 billion (almost US$16 billion) at the end of 2006. Such a drastic influx of capital has been accompanied by only further escalations in deposits throughout 2008.

As a result, the surge in UAE banks’ combined assets to a record AED1.42 trillion (almost US$387 trillion) at the end of June 2008, has catapulted the UAE to the position of the largest Arab banking sector by overtaking Saudi Arabia. The UAE also ranked first in terms of capital and deposits. The inflow of such investments boosted the Central Bank’s net profits by 42 per cent to AED3.778 billion (more than US$1 billion) in 2007 from nearly AED2.654 billion (more than US$722 million) in 2006. However, those measures have had no impact on domestic liquidity, as curbing money supply growth remains the only fiscal tool available to the Central Bank to tackle inflation.

Confronting the record-high inflation, Central Bank governors from the six-member GCC have been laying out a road map to establish a common monetary institution before 2010. GCC central bankers have agreed to create the nucleus of a joint central bank next year in a major step forward for monetary union but signalled that a new common currency would not be in circulation by the 2010 date.

This September, finance ministers of the GCC met in Jeddah and approved the proposals to establish a monetary council and a draft charter for a monetary union, bringing the six member group, including Saudi Arabia, Qatar, Bahrain, Oman, Kuwait and the UAE, a step closer to launching their single currency.

“The endorsement of the proposals constitutes a major step toward adopting a long-sought single currency,” said Abdul Rahman Al-Attiyah, GCC Secretary-General.

Youssef Kamal, Qatari Finance Minister, who chaired the meeting, confirmed the agreement, “We have asked the central bank governors to complete the requirements for the single currency in future meetings,” he said.

The Qatari minister also downplayed the effect of the region’s currency pegs to the US dollar in increasing inflation in the member countries. He hoped that the improvement in dollar’s exchange rate and fall in shipping costs would bring down inflation.

Perhaps most importantly, GCC central bank governors said last month they saw little systematic risk from the US financial crisis as their exposure to troubled US banks and subprime assets was limited.

“As far as the Gulf region is concerned and especially GCC countries, they are very far from these turbulences that are affecting global markets. Because they don’t have any connection with what has happened,” Kamal said, adding that the GCC economies remain strong despite the recent global developments.

But Dominique Strauss-Kahn, IMF Director General, who attended the Jeddah meeting, said the brunt of the financial crisis may still lie ahead and could weigh on the world economy. However, the financial crisis remains as just one of many obstacles that must be dealt with during the progressive steps to a uniform currency.

“Overcoming the current inflationary pressures, developing a clear vision of the powers of the future common central bank, choosing an exchange regime of the common currency and harmonising financial regulation will be critical to this process,” says the IMF chief.

The ministers are scheduled to meet again on October 26 in Muscat to continue negotiations as well as discuss the location of the monetary council. “Achieving a monetary union will be a major challenge as much remains to be done to enable the creation of a common currency,” says Strauss-Kahn.

Matthew Patton (Left), Chairman of Triton Lines, Alexander Hamalton (Right), a broker for Barry Rogliano Salles (BR S) Middle East

Sit down with any shipbroker and he’ll be quick to tell you, the market is changing. No longer are brokers perceived merely as middlemen facilitating ship acquisition for their clients. Rather, with daily variables such as rising fuel costs, hourly market fluctuations, futures contracts and other speculation- driven interests, their roles have become industry specific and far more real time data-driven.

“In the old days, shipbrokers were just like middlemen, ‘Get me a ship at the cheapest price,’” says Alexander Hamalton, a broker for Barry Rogliano Salles (BRS) Middle East in Dubai. “Now it’s getting a bit more like banking where there is a lot of market research. People are interested in your views on forward freight, historical freight, how the market is going to move, etc. So you have more of an analyst role.”

Hamalton says he spends most of his time interpreting market conditions and relaying information to clients as well as shipowners. With a specific focus on oil tanker acquisition, Hamalton feels that specialising in a respective industry allows brokers to stay abreast with their ever-changing markets.

“In shipping, anything can go wrong,” says Hamalton, “hurricanes, break downs and other instabilities affect the entire market. Brokers today must always cover their clients’ interests in that respect.”

“At BRS we have a designated person only watching ships’ activity. That has become an important part of the job,” he continues. “We’re trying to prevent problems before they occur.”

From a shipowner’s perspective, the rapid flow of information has proved invaluable. According to Matthew Patton, Chairman of Triton Lines, the advent of the Internet has directly impacted the global shipping market.

“The Internet has had a significant effect on the industry since it’s made the world much more ‘flat’ as they say. Cargo owners and shippers are able to quickly advertise, communicate and book cargos because the information can be sent to hundreds if not thousands of potential clients in an instant.

This type of communication was impossible beforehand and it allows market prices to correct themselves much more quickly as cargos are fixed at a much faster rate,” says Patton.

As the Middle East region continues to escape the slump that has plagued the global ship charter market since the beginning of the year, BRS and other industry analysts do not see a change in this trend anytime soon. One contributing factor is the flexible nature of the market in the region, compared to a more structured and defined European model.

“The Middle East is more of a traders market, whereas in Europe it would be considered a systems market,” says Hamalton, comparing regional differences within brokering. “For instance, in Europe a company has a refinery which produces ‘x’ amount each month, and most of the time the product is sold in a yearly or bi-yearly contract. You just have to get the stuff moving. Here, it is far more speculative trading. A refinery pumps out a product that doesn’t necessarily have a designated destination at production, but inevitably they will still have to move the product.”

Indeed, trade lanes such as Intra-Asia and Middle East as well as Asia to South America and southern Africa routes are continuing to soak up capacity for almost all tonnage sizes.

Most brokers and industry experts agree that within the GCC there is still huge capacity and demand for commodities is growing. This has helped to keep the region’s container market afloat despite the global slump. Globally, hire rates for all ship sizes are retreating with carriers able to negotiate sizeable discounts as owners opt for lower rates rather than having their vessels unemployed.

“The one thing I think all ship-owners and brokers agree about is that the Middle East has changed drastically in the last five years, and no one expects the demand for raw materials to slow down anytime soon,” says Patton.

Carriers also are deferring charters until the last possible moment because they expect rates to fall even further during the current seasonal slack ahead of the pre-Christmas peak shipping season that gets under way towards the end of summer. However, rates of shipping containers within and out of the Middle East region have increased by an average of 60 per cent since last year due to increasing capacity and fuel prices.

“What most people want to talk about is how shipping rates have changed in the last few years,” adds Patton. “Overall, rates have definitely surged in the past five years or so years. Most of this rate increase has been attributed to what some call the Chindia effect. This is really just China and India’s demands for raw materials as those developing countries continue to grow. China has definitely had a greater impact than any other nation in the last five years, but that doesn’t mean the other developing countries aren’t contributing to this growth.

With rates already starting to correct themselves, we’ll probably see some ship yard orders cancelled and scrapping will increase.”

Indeed, reports of cancelled charters and shipyard orders have been depressing market sentiment in recent weeks. Germany’s NSB, the world’s largest container ship charter owner with a fleet of 87 ships totaling 360,000 TEUs, this month cancelled a US$620 million contract for eight 4,250 TEU vessels reportedly because it could not persuade banks to finance ships that didn’t have charter contracts. Earlier, Evergreen Line pulled out of a long term charter for eight 12,400 TEU ships from Greek owner Niki Shipping.

“When rates go up the way they have, it’s typical to see a large number of new ships ordered by shipping companies worldwide,” says Patton. “I think the past five years have been no exception. In theory the rates should correct themselves as new vessels come online to meet this increased demand, however what typically
happens is an overcorrection of the market – thus begins the cycle. If an overcorrection occurs then we’ll see rates drop significantly forcing shipowners to lay up vessels and others to send their older ships to scrap. This of course will take vessels out of the market and allow the prices to stabilise.

Then eventually there will not be enough ships to meet demand and the cycle will start all over again. The game has always been the same, we just need to learn how to play it right,” he says.

With a flood of large ships of up to 12,000 TEUs about to be delivered from Asian shipyards over the next three years, charter owners globally are bracing for rates to sink even lower. However, brokers rule out a repeat of the 2001 bear market when charter owners considered a coordinated lay-up of idled ships, largely because cargo demand and ship supply are more closely aligned now, than seven years ago.

“We have a bullish outlook on the market,” says Patton. “Since many of the vessels which are currently on order are for the most part delayed in their delivery, the market hasn’t been flooded with as many ships as expected. In actuality it will take some time before many of these ships reach the market and as a result it should dampen the effect it has on rates by some degree. Another element to the stability of the market is the fact that many other nations are developing at a rapid rate and this will require further resources. Locally we’ve seen the UAE completely transform in the last five to 10 years. We’ve seen China and India grow by leaps and bounds but we believe there are other nations that are nowhere near their full potential.”

Clarkson, the London shipbroker, has forecasted world container trade to grow by 8.7 per cent this year, down from an earlier estimate of 9.7 per cent, while ship capacity should grow by 13.2 per cent. That gap will be narrowed substantially by several factors including port congestion and slow steaming. Clarkson expects trade will grow 9.6 per cent in 2009 while the world fleet will expand by 12.9 per cent. While the cargo growth on the major trade routes is slowing, Asia to Europe shipments are expected to increase 10 per cent this year compared with 20 per cent in 2007.

So the question remains, with current market conditions are long-term structured contracts more appealing or short-term flexible deals? “I believe it’s a simple commercial decision at this moment,” says Patton. “The only reason you would sign a short term contract is because you felt rates may increase and you want to be able to capitalise on that increase. If, however, you can still make a good profit at today’s rates, then we believe it’s better to sign the vessels to long term contracts of 12 months or more. Trust me when I say this, if you sign a short term contract because you think rates will go up and you turn out to be wrong – you’ll be kicking yourself for the losses you’ve incurred. When it comes to greed I’ve always believed that it’s better to be a pig instead of a hog. Pigs get fed every day, but hogs end up going to the slaughter house.”

THE RISE AND FALL

Today, the average daily charter rate for a 3,500 TEU gearless Panamax ship has fallen to US$27,000 from US$31,000 in May and US$33,000 in March, according to Clarkson, the London shipbroker.

A 2,750 TEU vessel is earning US$22,000 a day, down US$8,000 since March, and the benchmark 1,700 TEU geared ship is pocketing US$16,000 a day compared with US$18,500 six months ago. Current rates have retreated to their 2006 average and are well below earlier years – a 3,500 TEU vessel for example, earned an average of nearly US$38,500 in 2005.

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Pick up any major newspaper and chances are Iran is headlined, in not so pleasant terms, on the front page. With so much negative press about the Islamic republic’s ‘ambitions’ it is often difficult to decipher
any substantive, unbiased information on the country. Yet as one of the world’s oldest civilisations, most experts agree that Iran remains largely untapped potential. So what gives? Well, self imposed regulatory hurdles and crippling western sanctions aren’t doing its economy any favours, while the looming threat of war assuredly wards off any potential investors.

And while possessing 10 per cent of the world’s proven oil reserves, and 15 per cent of natural gas reserves, Iran’s economy remains predominantly government administered, though a more liberalised approach remains the topic of much debate.

Iran’s main port is Bandar-Abbas on the Strait of Hormuz. Other major ports include Bandar Anzali and Bandar e-Torkeman on the Caspian Sea and Korramshahr and Bandar e-Khomeyni on the the Persian Gulf

Consider that today, with a population of 70 million, more than two-thirds of Iranians are under the age of 30, and boast an 80 per cent literacy rate. But with the average salary just US$2,700 a year, many young Iranians are leaving for greater opportunities abroad. The subsequent ‘brain drain’ is not going unnoticed by the government. According to Manouchehir Kabiri, the Director General of Iran’s Management and Planning Organisation’s Commerce Department, Iran’s current Five-Year Economic Development Plan (2005-2010) hopes to create more opportunities for its youth, while opening up Iran to outside investment.

“The focus will be on expanding trade interaction with the global community and pursuing an active presence in international markets,” says Kabiri. “To achieve this would require raising exports substantially.”

Iran’s major trade partners include China, Germany, South Korea, Japan, France, Russia and Italy. From 1950 until 1978, the US was Iran’s foremost economic and military partner; thus participating greatly in the modernisation of its infrastructure and industry. After the Iranian Revolution in 1979, however, the US ended its economic and diplomatic ties, banned Iranian oil imports and froze US$12 billion of Iranian assets. In 1996, the US government passed the Iran and Libya Sanctions Act (ILSA) which prohibited US companies from investing and trading with Iran, with the exception of pharmaceuticals, medical equipment, caviar and persian rugs.

So just what is Iran producing for export these days? Petroleum and petroleum chemicals, automobiles, agricultural, utilities, pharmaceuticals, textiles, construction materials, metallurgy, armaments and electronics are recognised as the largest industries.

In 2007, Iran’s GDP was estimated at US$206.7 billion. In 2008, about 55 per cent of the government’s budget is expected to come from oil and natural gas revenues, and 31 per cent from taxes and fees. The service sector contributes the largest percentage of the GDP, followed by industry (mining and manufacturing) and agriculture.

“Pistachio and saffron are traditionally the main agricultural products sold overseas,” says Kabiri. “Also in recent years, Iran has secured a foothold in fruits, vegetables and flower markets.”

Determined to increase exports, Iran is seeking to better utilise its free trade zones. Approved by Iranian Parliament in September 1993, Kish Island, Qeshm Island and the Port of Chabahar are the only designated free trade zones, though many liberalised economic zones currently exist as well.

“So far, free trade zones have acted as import channels,” says Kabiri. “The Economic Plan tries to change that status and make their activities export-based and to aim for global industrial production.”

Pistachios and saffron are Iran’s main agricultural exports

With the abundance of free trade zones springing up throughout the Middle East, Kabiri acknowledges that competition for investment will be stiff.

“One has to admit that Iran’s free zones are not able to rival those in the nearby states,” he says.

“Performance of Iran’s free trade zones has an impact on social, political and economic parametres, which is not the case on the other side of the border. What the government has tried to do within the Economic Plan is to continue eliminating import incentives and push for trade liberalisation policies.”

On the domestic front, Kabiri says the priority is on improving the overall situation; i.e. regulating the domestic market on the one hand, and maintaining a well functioning supply of basic commodities on the other. The latter would need improving the subsidy distribution system to relieve the government of the huge financial burden on subsidy payments. Another obligation the plan places on the government is to provide economic justification for the pricing of basic commodities and public services.

“By offering modern trade services, the government hopes to win the confidence of foreign investors and open the way for foreign banks and insurance companies to set up branches in the free trade zones,” says Kabiri.

One central issue when debating Iran’s trade sector these days is joining the World Trade Organisation (WTO). Since 2005, Iran has faced resistance from the United States, consistently blocking any Iranian attempt to join the WTO, citing among other things, copyright infringements.

“Discussions about joining the World Trade Organisation are high on the agenda,” says Kabiri. “Officials and experts continue to advise against protectionist production policies which they say contradicts principles and guidelines of the World Trade Organisation.”

Yet, if Iran does eventually gain membership status in the WTO, copyright laws will have to be obeyed. This would require a major overhaul of business and trade operations in Iran, a change which many experts believe would be a price too heavy for Iran’s economy to pay at the present time. Still, Iran is hoping to attract billions of dollars worth of foreign investment while creating a more favourable investment climate, such as reduced restrictions and duties on imports and the creation of free trade zones like Qeshm, Chabahar and Kish Island. Time will tell whether Iran gets its wish.

So Iran’s desire for liberalisation and modernisation is apparent, but what about its infrastructure? Currently, it has an extensive paved road system linking most of its towns and all of its cities. In 2007, the country had 178,152 kilometres of roads, of which 66 per cent were paved. There are 55 passenger cars for every 1,000 inhabitants. However, one statistic you won’t hear the Iranian government praising is the rate of road accidents. Iran ranks first worldwide in terms of having the largest number of road accidents claiming 38,000 deaths in 2007. In fact, road accidents account for the majority of deaths in Iran and are perhaps one reason the government is eyeing rail transport as a possible solution.

President Mahmoud Ahmadinejad is acknowledging the need to further develop public transportation systems. As the average journey length currently for both passenger and freight is approximately 600 kilometres, the country remains ideally suited for rail development. To date, passenger tariffs are heavily subsidised and budgetary allocations for rail transport for 2008-2009 are poised to double. According to the Iranian government, the objective is to double its existing 8,300 kilometres of line. At the moment, the rail network is basically single track and there is substantial capacity shortage on several main routes, accentuated by inadequate levels of signalling. Only the Tehran area lines are double track including those going from Tehran to Mashhad and from Tehran to Qom. A programme of track doubling is in hand between Bafq and Bandar Abbas (613 kilometres) and all other routes remain under consideration. The government is financing rapid development of the rail system but rolling stock provision and managerial capacity has not kept pace with the growth inhibiting overall development. Not to be overlooked remains the lack of private investment coming in, compared to the likes of Saudi Arabia or UAE.

The country’s major port of entry is Bandar-Abbas on the Strait of Hormuz. After arriving in Iran, imported goods are distributed throughout the country mostly by trucks and freight trains. The Tehran Bandar-Abbas railroad, opened in 1995, connects Bandar-Abbas to the railroad system of Central Asia via Tehran and Mashhad. Other major ports include Bandar Anzali and Bandar e-Torkeman on the Caspian Sea and Korramshahr and Bandar e-Khomeyni on the Arabian Gulf.

Dozens of cities have airports that serve passenger and cargo planes. Founded in 1962, Iran Air remains the national airline, operating domestic and international flights. All large cities have mass transit systems using buses and several private companies provide bus service between cities. Currently, Tehran, Mashhad, Shiraz, Tabriz, Ahvaz and Esfahan are in the process of constructing underground mass transit rail lines, though the dates for completion are yet to be determined.

For all of Iran’s ambition, the future will be largely determined by external forces. Most notably, war. However, Iran is determined to maintain course, regardless of the potential consequences of her actions or ‘ambitions’. Time will tell whether Iran’s position within the global marketplace will improve, or be left behind.

BY THE NUMBERS

In 2006 Iran had more than seven million vehicles, mostly manufactured or assembled domestically.

Iranian trains operate on 11,106 kilometres of railroad track, though plans call for this to be doubled.

Agriculture contributes to 11 per cent of Iran’s gross national product and employs a third of the labour force.

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UNDER PRESSURE

The United Nations has imposed three rounds of sanctions on Iran over its refusal to halt uranium enrichment, a process the U.S. and others fear it will use to produce nuclear weapons. The sanctions bar financial dealings with 35 companies and impose travel bans and other restrictions on 40 individuals. The sanctions also prohibit shipments of material to Iran that could be used for its nuclear and missile programmes.

U.S. sanctions are stronger. They bar weapons transfers and dealings with a wider range of companies particularly Iran’s top banks although they don’t seek to halt all trade with Iran. In fact, U.S. exports to Iran have increased dramatically during the Bush administration, from US$8.3 million in 2001 to US$146 million last year.

Source: US Treasury Department

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COLD STORE COMPLEX FOR GULF WAREHOUSING COMPANY IN DOHA

Client:                      Gulf Warehousing Company (GWC)
Consultant:               Gulf Engineering & Industrial Consultancy
Contractor:               Amana Contracting & Steel Buildings
Location:                  Doha Industrial Area
Completion Date:       December 2005
Duration:                  8 months
Built-Up Area:           25,000m2
Total Area:              47,300m2
Scope:                    Design-Build

Situated on 47,300 square meters of land, this 25,000 square meters distribution facility is designed to contain over 43,000 pallet positions. The complex is a high-bay facility with an internal very narrow aisle (VNA) racking system and state-of-the-art material handling equipment with a useable height of up to 13.5 meters. The entire facility was designed and constructed in less than 210 days.

The facility offers a number of storage environments including:

• 4,200 pallets of frozen storage (-30ºC to -20ºC)
• 4,200 pallets of chill storage (0ºC to 12ºC)
• 12,604 pallets of A/C storage (12ºC to 18ºC)
• 22,776 pallets of ambient storage

The complex is also equipped with a positive power air system to significantly reduce dust contamination and humidity levels and a state-of-the-art security system consisting of full CCTV coverage and card-swiped access gates.

Supplied by Amana Contracting

Moving millions of tonnes of goods daily, container cranes remain an integral part of global commerce. These massive structures efficiently and effectively load and unload roughly 90 per cent of the world’s shipped goods, in an almost robotic fashion. Operating 24 hours a day, seven days a week, these colossal cranes offer little in subtlety or wastefulness, moving on average 25 to 30 TEU containers an hour, with very little downtime.

Classified by their lifting capacity and the size of ships they can load or unload, container cranes are generally grouped in three categories: Panamax, Post-Panamax and Super-Post Panamax. Panamax cranes can fully load and unload ships capable of passing through the Panama Canal, normally 13 container rows wide. A Post-Panamax crane often handles ships too large for the Panama Canal, normally 18 container rows wide. Today, the popularity of Super-Post Panamax cranes remains unprecedented, capable of handling vessels 22 container rows wide or more. As larger container ships such as the Emma Maersk continue to set sail, ports must be capable of taking on today’s ever-increasing larger loads. As ships continue to grow, so too must container cranes.

Today, Shanghai Zhenhua Port Machinery (ZPMC) is recognised as the gold standard for container cranes. As the only crane manufacturer in the world that owns vessels for transportation, ZPMC’s cranes sit in 120 terminals around the world. According to World Cargo News, ZPMC has maintained the largest order book for the past eight years, while continuing to increase market share. Their latest quayside container cranes are drawing rave reviews within the port community and remain in high demand. They are renowned for the ability to handle twin 40 foot containers, or four 20 foot containers in one pull. Cranes capable of lifting six 20 foot containers have been designed, but have yet to reach implementation.

As the only crane manufacturer possessing its own bulk cargo ships, ZPMC builds cranes at any of its six Chinese manufacturing bases and delivers them fully assembled and ready for operation. With 18 bulk carriers (60,000 DWT), able to carry up to four quayside container cranes at a time, these loaded ships are truly a sight to behold. The cranes are 103 metres high with the boom up and weigh 1,850 tonnes a piece. Total time from order to delivery takes about two years with ZPMC being able to construct 125 cranes at one time.

Though automation is becoming more and more common, crane operators remain an important asset. Their training is a rigorous one, as mistakes can prove costly, both in terms of damaged goods and time lost. DP World puts its trainees through a thorough four-week simulator course that would rival most airline pilots’ schooling. Sitting inside the simulator, fully equipped with state-of-the-art visuals and lifelike movements and controls, it is easy to see how these crane operators become so efficient and mistake-free.

“Today, Rotterdam Port is fully automatic. They process 20 to 25 containers an hour, requiring wholly automated synchronisation of trucks and cranes,” says Mansour Rashed of DP World.

“However, in Jebel Ali Port, with a greater combination of manpower and automation, we can do 35 an hour. We take this to mean, as of today, a fully automated port is not as efficient,” says Rashed.

Whether this can be attributed to a better-trained labour force, or perhaps just slower automated processes, Rashed agrees the future lies in automation. Though in his opinion, technology still has a long way to go.

POWERLIFTING

Typically, container cranes derive their power from either of two sources: Older cranes are predominantly driven by diesel generators; while more modern cranes are operated by electric power from the dock. Requiring 10,000 to 12,000 volts, these electric container cranes experience fewer breakdowns and, as one DP World official explains, are far more ‘green’. With ambitions of eventually taking on a staggering 80 million TEUs annually, DP World recently purchased three fully-assembled ZPMC quayside container cranes that operate with electricity and it has several more on order.

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