Emirates goes for growth under Dubai World umbrella

PUBLISHED : Friday, 14 July, 2006, 12:00am
UPDATED : Friday, 14 July, 2006, 12:00am
 

Two separate commercial developments in the Gulf and northern China this month largely flew below the radar screens of the media, but industry executives across the commercial spectrum would be wise to sit up and take notice.


Earlier this month, state business interests in the United Arab Emirates created a new holding company, Dubai World, in a development that largely went unnoticed outside the Gulf.


Into that vehicle they injected DP World - the company that bought P&O Ports and CSX World Terminals in the past two years - the Jebel Ali Free Zone, the UAE's dry docks and shipyards, the commercial financier Istithmar and the developer Nakheel, which alone has US$30 billion of projects on the go.


The holding company, led by chairman Sultan Ahmed bin Sulayem, manages about US$270 billion in assets, according to well-placed sources.


By that measure, it is about 8.5 times the size of Hutchison Whampoa.


The board will consist of the six chief executives from the core companies and at least three members from Dubai's wider business community, including Dubai Islamic Bank and Emirates Bank.


According to Mr bin Sulayem, the new corporate structure allows Dubai Inc to better co-ordinate its capital expenditure, have greater leverage for financing and take advantage of more opportunities.


Perhaps more importantly, Mr bin Sulayem and his countrymen have created a company that is so well capitalised and so diversified that it has the potential to dominate the global tender process for the next few years.


Which brings us to Qingdao, a beautiful city in the Bohai Rim area, perhaps most famous for its beer and being the traditional holiday destination for the politburo.


In the first tangible example of the new holding company flexing its commercial muscle, Dubai World signed a memorandum of understanding on July 5 with Qingdao mayor Xia Geng to build a massive commercial complex with a marina and a convention centre at the core.


All the details have yet to be ironed out, but people with knowledge of the project say the capital outlay will be in the US$400 million to US$1 billion range.


The 1.6 million square metre complex will also feature hotels, a shopping centre, condominiums and commercial office space.


In short, Dubai's newest Qingdao venture is destined to be more than 3.5 times the size of Hong Kong's International Finance Centre.


And, according to Mr bin Sulayem, it was in part made possible by the diversity of business skills he now represents under one brand.


'I got tired of managing them all separately, so I put them under one umbrella. Now I have one business card,' he told Below Deck. 'When you are part of a big group, financing becomes easier and the new structure allows us to capitalise on our ideas and opportunities.'


No container terminals are destined for the site, scheduled for the city's central core. DP World acquired an established terminal when it bought P&O and the company has already committed US$500 million to another wholly owned four-berth project at the port's south basin, pending approval from Beijing.


But in Dubai World the emirate's government feels it has created a company that is powerful and skilled enough to sustain the double-digit expansion it is seeing in everything from port throughput to tourism revenue and property development.


One of the keys to sustaining Dubai's home market, according to Mr bin Sulayem, is to identify the countries most responsible for its vigorous economic health.


'The decision of the prime minister was that we have to go and invest in the areas that are responsible for our growth,' he said. 'We want to put money back into those countries because that will sustain it and strengthen our relationships.'


'The holding company was formed to oversee those activities for the group. It will be more organised. The goal is growth.'


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