By Jean-Paul Rodrigue
In last two decades, Dubai emerged as a world class logistical platform, a role which is in part attributed to its geographical location at the crossroads of major trade routes between Asia, Europe, South Asia and East Africa. This role began to take shape in the 1960s when the growing availability of capital derived from oil exports in neighboring countries led to initial infrastructure investments, such as the first modern port facilities (Port Rashid) completed in 1971. These facilities were further expanded with the completion of the mega port of Jebel Ali in 1979, which supported the growth of related maritime activities such as transshipment, bunkering and repairs. By 2014, Dubai handled 15.2 million TEUs, ranking as the world’s 8th largest container port.
The 1980s and 1990s saw an acceleration of the logistics role of Dubai, with the Asia/ Europe trade booming and its growing role as a logistical platform. Dubai used the sovereign wealth fund approach to finance state sponsored enterprises to fulfill its strategic objectives. Emirates Airlines was established in 1985 and the Dubai International Airport was gradually expanded and upgraded with new runways and terminals. Dubai started to emerge as a passenger and air cargo hub for the Middle East. By 2014 it handled 70.5 million passengers and 2.2 million tons of cargo, making it the 3rd busiest in the world for passenger traffic and the 6th busiest for cargo. The opening of the Jebel Ali Free Zone in 1985, a zone of 5,700 hectares located adjacent to the Jebel Ali container terminals, conferred the role of Dubai as a free port with incentives concerning foreign ownership and taxation regime. Dubai Internet City, inaugurated in 1999, represented another free zone initiative specializing in the information technology sector. These initiatives were followed by a number of free zones specializing in specific sectors such as Dubai Media City, Dubai Studio City, Dubai Health Care City and Dubai Industrial City. The logistics and manufacturing functions became increasingly complex and blurred.
The setting of the global terminal operator Dubai Ports World (DPW) in 2005 marked a renewed internationalization of Dubai with a growth of its maritime connectivity and transshipment volumes. DPW is the outcome of a merger of Dubai Port Authority that was established in 1991 and of Dubai Ports International, a company founded in 1999 to develop and manage port terminals at the international level. As of 2014, DPW managed a portfolio of 65 terminals handling 59.9 million TEUs, making it the fourth largest in the world. The main terminal of DPW is Jebel Ali, which handled the quasi totality of Dubai’s 15.2 million TEUs in 2014. In 2010, a second international airport (Al Maktoum international) with its associated free zone, Dubai Logistical City, was opened. The airport was designed with a capacity of 160 million passengers, but so far has not yet been extensively used for that purpose. Air cargo handled by the airport has been growing rapidly, underlining a possible specialization of the airport for air cargo operations.
To further expand the freight distribution and added value opportunities of the port and airport terminals as well as the free zones, a “virtual freight and logistics corridor” linking these facilities was created. This corridor enables simplified customs procedures for the bounded cargo, reducing transactions costs and improving the velocity of freight. In 2015 the Abu Dhabi airport opened a customs pre-clearance facility for the US Department of Homeland Security, the only one in the Middle East. This enables passengers bound for the United States to clear customs in Abu Dhabi and avoid doing so at congested American gateways. It is expected that a similar facility will be opened at the Dubai International Airport.
The convergence of maritime and air cargo connectivity, coupled with a free zone status, has anchored Dubai as a regional logistics and manufacturing hub providing added value. For instance, as an intermediate location, Dubai is able to perform assembly, labeling and packaging for goods manufactured in South, Southeast and East Asia and dominantly bound for European and North American markets. While relative proximity (intermediacy) to Europe underlines the importance of this market, the North American reach of Dubai is illustrated by the growing volumes handled through the Suez Canal and bound to the North American East Coast, which accounted for 15% of its traffic in 2014. Such developments have however placed several socioeconomic pressures on Dubai to develop infrastructures and capabilities. In addition to cycles of booms and busts in the provision of infrastructure and real estate, Dubai heavily depends on foreign workers which over the year has transformed the city into a cosmopolitan world city.
