Getting the UAE to number 1 in the shipping industry

English

By Rania Tadros, Managing Partner

      Anna Fomina, Lawyer

      Ince & Co Middle East LLP

The maritime industry in the UAE is constantly evolving and the UAE is now ready to voice its ambitions to become the leading international shipping hub. In this article we tackle what makes the country number 1 in the shipping industry and comment on what the UAE is doing to improve its position as the world maritime centre and to get ahead of its competitors.

The 2017 Menon Economics report on The Leading Maritime Capitals of the World ranked the cities on the basis of the following five factors: shipping, finance and law, maritime technology, ports and logistics, attractiveness and competitiveness. Singapore is currently holding the pride of the first place in the ranking.

In this rating, Dubai was ranked a respectable number ten. The experts predict that it will rank number six globally by 2022. However, the UAE as a country has a lot more to offer with other major shipping hubs in particular in Abu Dhabi, Sharjah and Fujairah; each having its own unique offering. We look below at the factors perceived to contribute to a city’s position in the shipping rankings, which can be applied to the country as a whole.

Shipping, attractiveness and competitiveness

The Menon report has highlighted an interesting fact about Dubai. Only 5% of experts named Dubai as the leading shipping center of today. Contrast that with one third of the surveyed shipping companies that named Dubai as the place where they would like to relocate to. Does this mean that the future is bright? Ultimately, to qualify as a leading shipping center, a country needs to host a significant number of ship owners, including major players, as well as operators and other commercial shipping companies. The estimated value of the UAE's shipping fleet is $9.9 billion according to ship valuation company Vessels Value, whilst Greece's fleet is currently ranked number 1 in value at about $95 billion so there is a long way to go but in the current economic environment the UAE is making good inroads to bridge that gap.

The country’s ability to attract the major ship owners requires careful consideration of the key aspects that these players are looking for in a host country, which is a combination of ease of doing business, favorable and predictable policy framework, availability of maritime technology and levels of openness and information sharing. The UAE needs to continue to capitalize on its attractiveness as a largely tax free destination for the shipping companies.

Finance and law

The availability of the local capital in the UAE sets it apart from many other jurisdictions, but perceived competency of the banks in the maritime finance sector remains low. Only a few local banks have active shipping desks, along with the expertise and knowledge required to structure a maritime finance deal. That is a definite area for improvement that goes beyond the task of the government and requires a concerted effort from the shipping and the financial industries. Presumably with a view to improve its position in this regard, there are reports that the government is considering establishing an investment fund exclusively to help shipping companies to grow their fleet.

On the legal side, the government is making progress with the new draft maritime law. It is hoped that the law will address many of the grey areas including application of some of the maritime conventions, to which the UAE is a signatory. The recent establishment of the Emirates Maritime Arbitration Centre (EMAC), the first specialised maritime arbitration centre in the Middle East, is another step forward to establishing an attractive legal environment.

The country should also avoid adopting legislation which may cause uncertainty with respect to legal processes, for example there is concern surrounding the recent amendment to article 257 of the UAE Penal Code that has criminalised the arbitrator’s liability for breach of duty of fairness and impartiality.

Ports, logistics and maritime technology

The emirate of Dubai is already doing well in these criteria and is ranked sixth in the world.

As a country the UAE is already taking advantage of its strategic geographical position to become aviation and maritime logistics hub. Dubai in particular is set for success as a transit hub between Europe and Asia and its Industrial Strategy 2030 aims to capitalise on DP World’s status as one of the largest port operators in the world.

Conclusion

It is worth noting, that there was no one city that ranked first in each category in the Menon report. Singapore itself is the leader in three out of five categories (shipping, ports and logistics and attractiveness and competitiveness). Whilst the UAE always aspires for greatness in all respects, it may be advisable to focus on particular aspects of the maritime sector and ensure excellence in those areas.

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