The UAE’s strategy of economic diversification over the past decade has paid rich dividends for its maritime business Image Credit: Courtesy Dubai Maritime City Authority

It’s been plain sailing for the UAE’s maritime industry in recent years even as the international industry navigates choppy waters. As we cruise into 2019, the sector has expanded, port facilities have grown, new yacht marinas have been announced and the nation has positioned itself as an international centre for nautical arbitration. “The UAE’s maritime industry continues to grow and maintain its strength,” says Riju George, Show Director of Dubai International Boat Show, which takes place from February 26 to March 2. “With around $65 billion (Dh239 billion) invested in 2018 in ports across the country, the future of the UAE — and Dubai in particular — as a maritime hub both regionally and globally is looking immensely promising.” Late last year, the UAE was ranked 14th globally in the first global survey of leading maritime nations by Menon Economics and DNV-GL. Although China and the United States took the top places, the UAE’s international climate and strong port infrastructure were particularly commended and the country was placed fourth overall in terms of ports and logistics.

“The UAE’s strategy of economic diversification over the past decade has paid rich dividends for its maritime business, the flagship for the region’s industry,” says Nabil Ben Soussia, Managing Director, IEC Telecom Middle East, a leading provider of managed network services for maritime and other sectors. Overall, the sector totals 5 per cent of the domestic economy, according to official data, with the UAE’s stated aim to become one of the world’s top shipping nations within the next ten years.

Much of the growth has and will continue to be centred around Dubai. The emirate is now the fifth-most important of 43 global shipping centres thanks to its quality, breadth and business services, according to the International Shipping Centre Development Index.“The broad outlook for the UAE maritime sector is positive, following the launch of the Dubai Industrial Strategy 2030 (DIS) and growing consumer demands in emerging markets serviced by Dubai,” Ben Soussia says.

The broad outlook for the UAE maritime sector is positive, following the launch of the Dubai Industrial Strategy 2030 (DIS) and growing consumer demands in emerging markets serviced by Dubai.

- Nabil Ben Soussia, Managing Director, IEC Telecom Middle East

At the heart of the action is Dubai Maritime City Authority (DMCA), the government authority responsible for regulating, coordinating and supervising the emirate’s maritime sector.

Tasked with establishing Dubai as a leading global maritime hub, DMCA laid out the Dubai Maritime Vision 2030 in 2014.

“We are working hard to create a vibrant maritime environment to attract industry leaders and promote Dubai’s status as a global shipping centre supported by a series of leading quality initiatives, including the Dubai Maritime Virtual Cluster (DMVC), Dubai Maritime Cluster Office (DMCO), and Maritime Dubai,” Amer Ali, Executive Director of DMCA, said in a statement.

Several infrastructure developments are expected to boost the UAE’s maritime sector, which accounts for 30-35 per cent of the total regional maritime sector investment at $65 billion. Some of these include the $1.6-billion expansion of Jebel Ali Port’s Terminal 4, which will increase the port’s capacity by 3.1-million 20-foot equivalent units (TEU) by 2018-19, the development of the Nasr oilfield in Abu Dhabi, Phase 3 of the Dubai Canal Extension Project, Meraas Holding’s 20-million-square-foot Dubai Harbour, which is set to become the nation’s new cruise terminal, and Dubai Creek Harbour, home to the world’s next tallest tower and a shopping centre bigger than Dubai Mall.

International waters

Even as the nation pushes the boat out, the global industry however is bracing to weather several challenging business developments after a trying year. Digitalisation, particularly in terms of blockchain, IoT and communications, and a cap on the sulphur content in marine fuel will force a change in the way the industry operates. “The shipping and commodity markets suffered huge losses in 2018, and all hopes are now pinned on 2019 being a better year,” Capt. Gürkan Büyüktelli, Marine Superintendent, Mercan Group — Chemical Tanker Operator, tells GN Focus. “The market is slightly picking up after the festive season. The IMO 2020 global sulphur cap is expected be a highly disruptive factor…although to what extent this will actually affect the market is unclear. ”

The IMO 2020 global sulphur cap is expected be a highly disruptive factor…although to what extent this will actually affect the market is unclear.

- Capt. Gürkan Büyüktelli, Marine Superintendent, Mercan Group

On the flip side, new technologies offer bold new opportunities, transforming the way people and goods are being moved around, Ben Soussi says. “Today one of the biggest concerns in this sector is the importance of connectivity in order to be able to retain crew and drive overall business productivity. Fortunately, the availability of many new technologies are removing technological and financial barriers to providing decent connectivity at sea.”

A fillip to the economy

Three new laws could see the maritime sector provide the UAE with a dynamic economic boost.

The first draft of the UAE’s new maritime law is expected to be ready soon, and stakeholders will be invited to offer feedback before it returns to the federal government for approval.

“The new law is a key step in addressing some of the critical problems faced by the industry and has been fashioned in consideration of the UAE’s long-standing legacy to augment and expand the country’s port infrastructure, allowing the country to surface as a preferred destination for shipping,” Sunil Thacker — Senior Partner, STA Law Firm, told GN Focus via email. “It will address the issue of diversification, which forms one of the critical problems faced by the industry at present.”

The new law is a key step in addressing some of the critical problems faced by the industry and has been fashioned in consideration of the UAE’s long-standing legacy to augment and expand the country’s port infrastructure, allowing the country to surface as a preferred destination for shipping.

- Sunil Thacker — Senior Partner, STA Law Firm

Besides ships and utilities, the new law is expected to also focus on issues such as pollution and civil or criminal remedies for the negligence of maritime safety.

Along with other notable UAE legislative developments, including the new Federal Companies Law and the new Federal Arbitrations Law, it could quickly improve the performance of the UAE maritime sector. Last year’s arbitrations law and the establishment of the Emirates Maritime Arbitration Centre (EMAC) have helped strengthen the nation’s position as a centre for excellence.

The authorities within the UAE had recognised the necessity to upgrade the previous provisions in the law pertaining to arbitration by adopting UNCITRAL arbitration rules that enhance the arbitral process as well as clarify the enforcement of arbitration agreements and awards in this new arbitration law.

- Majid Obaid Bin Bashir, Vice Chairman and Secretary General at EMAC

As a result, even parties with no connection to the UAE seek to conduct their disputes here, says Majid Obaid Bin Bashir, Vice Chairman and Secretary General at EMAC. “The authorities within the UAE had recognised the necessity to upgrade the previous provisions in the law pertaining to arbitration by adopting UNCITRAL arbitration rules that enhance the arbitral process as well as clarify the enforcement of arbitration agreements and awards in this new arbitration law,” he adds. “This is without a doubt, a fantastic move towards confirming the UAE as a friendly, reliable seat for arbitration.”

— K.J.F.