The UAE Shipping Association (UAESA) was founded 12 years ago. But Tahir Lakhani, UAESA Vice-Chairman, indicates that in that time the UAE has been much more conducive to foreign companies than domestic ones, owing to a lack of options for ship finance.
“We are trying to promote the UAE as a shipping hub, but there are not many shipowners here,” says Lakhani. “There is a lack of funding, and people do not understand ship finance in this part of the world. This is one of the reasons we’re facing a problem attracting new shipowners, who can do their business in a way where funding is available.”
Lakhani points out that this is a bewildering state of affairs when some two thirds of all ship cargo passes through the Middle East on its way from Asia to Europe. But the local banking establishment is risk-averse, he says, and not as willing to take a chance on shipping as in other countries. “When people say ‘I want to buy a ship’ the bank will turn around and say: ‘why not buy a property instead?’ Lakhani indicates. “Shipowning would help the economy here, but in the UAE it’s mainly related to property and small trading. We tell the banks that it’s a lot easier to arrest a ship than a property.
“There are many investors and banks in Norway and other European countries, and we would like to invite them here, where they can do business, and help them set up their offices.
“Almost $60bn circulates throughout the shipping industry, by only $0.5bn ever stays here in this country, because we don’t have shipping banks, shipping firms,” Lakhani adds. “This is why the most important thing we can do is raise awareness of what we do here, in the international arena.
“There are still some challenges with the UAE flag. The biggest problem is that I can’t have a vessel working here for more than 21 days with a foreign flag. You have to apply for a navigation license, which takes three months. We are always having discussions with the Federal Transport Authority, trying to persuade them to be more flexible. There are only a few government owned vessels, tankers, flagged here.”
But there are many opportunities to bring business to the UAE, Lakhani says, with a number of new oil and gas projects underway. Notable is the expansion of the Al Ghaf island and accompanying construction of 10 new artificial islands off Abu Dhabi, an unusual project amounting to $1.36bn of investment, using reclaimed land instead of oil rigs to drill for oil, and one which is expected to add 20% greater production capacity for Abu Dhabi National Oil Company (ADNOC).
“We work with a lot of hedge funds, Swedish investors, Norwegian investors. Their knowledge of this market is much greater than those in this part of the world. It would be great for them to come over and take advantage, open offices.
“I gather there are lots of OSVs and PSVs standing in Norway, that they have financed for the Brazilians. But if the awareness is there, Norwegian companies can join operations here, business can be done, and those boats can be deployed.
“There will be a lot of government contracts and opportunities coming up. Big oil and gas projects coming up. It will explode. Many expansions in the oil and gas business will take place in the coming months, particularly in Abu Dhabi, Kuwait. It would be a great investment opportunity.”
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