Wednesday, Jun 26, 2019
Transport | Middle East | Jordan

Jordan

Aqaba Container Terminal: facilitating regional development


3 weeks ago

Steven Yoogalingam, CEO of Aqaba Container Terminal
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Steven Yoogalingam

CEO of Aqaba Container Terminal

The Aqaba Container Terminal (ACT) Pvt. Co. has grown into one of the leading container terminals in the Red-Sea and plays a crucial role in the Jordanian economy, enabling growth and development regionally. It serves as a gateway for the Jordanian market, as well as for transit cargo moving to and from other countries in the region. CEO of Aqaba Container Terminal Steven Yoogalingam talks to Worldfolio.

 

What are the main goods imported or exported through ACT?

Jordan is predominantly an importing country. Most of its imports are consumer goods and food products as well as raw materials and semi-finished products for the Jordanian industries. On the export side, besides empty containers that need to be repositioned to the countries which have a deficit of empty equipment, the main containerized export cargo is traditionally minerals (potash and phosphates) and textiles.

 

What is the ownership structure of the terminal?

ACT is a Public-Private Partnership between APM Terminals and the government of Jordan. PPP models usually allow the country to retain the ownership of the strategic facility while benefiting from the operational expertise and the financial strength of a strong private partner like APM Terminals. Having one of the leading global port and terminal operator in the world as private partner allows ACT to access one of the largest pool of best practices, systems and processes in the world. Not only does the terminal deliver high productivity and second-to-none customer experience, but it also contributes to the national budget through substantial taxes, royalties and dividends. ACT was actually deemed a model PPP by the Government of Jordan in 2015, following an in-depth evaluation of all PPP ventures in the country.

 

How critical is a container terminal in the competitiveness of country?

Container terminals play the role of cargo gateway into a country or wider region.

ACT invested about 300MUSD in the construction and upgrading of the Terminal. It also brought state-of-art equipment, processes and IT solutions which are fundamental to the delivering of the highest productivity. High levels of efficiency and productivity are required to attract and retain the largest shipping lines to call Aqaba, using among the largest ships in the world; which in turn give the consumer and the industries of Jordan the widest choice of lines to access their markets overseas at the most competitive rates.

The way the terminal was designed and is operated is based on the way we operate terminals around the world, with the same standards for safety, security and performance that applies everywhere.

 

What are the main improvements that you would highlight from before when the terminal was fully public and now?

The terminal of Aqaba was the country’s biggest hindrance to trade in mid-2003 when the Terminal collapsed under the growing volumes (which were only about a third of the volumes we handle today). It could take 15 days for a vessel to have a berth and 45 days for a container to be released for delivery to the cargo owner. There was no IT systems. According to a report from the World Bank, the cost to the Jordanian economy from such congestion was an estimated $120 million a year. 

In 2004, APMT won the first international tender for a 2-year management contract and immediately introduced new IT systems and processes. By 2005,  the congestion was history and the Lines declared the terminal “congestion free”. Heavy investments followed after ACT was created in 2006 under a 25-year BOT agreement. We have doubled the quay length to reach a full kilometer long, allowing to berth the largest ships in the world (and more than one at a time), we have brought new cranes, expanded the yard, and kept upgrading our IT systems to the latest and most advance releases. The capacity of the Terminal today at about 1.2MTEU which is four times what is was in 2004. What you see now is a modern state-of-the-art Terminal which reputation goes well beyond the national borders.

 

I also wanted to ask about Aqaba in general because ASEZA wanted to attract 6 billion dollars and they managed to attract 8. However, it was mainly concentrated in real estate and tourism, that’s the problem. What is your outlook on other investments like this one?

We do not see the large investment in real estate and tourism as a problem. To the contrary. These investments demonstrate the attractiveness of Aqaba to investors from many different sectors. But there has also been a lot investment in the transport sector, besides ACT. A brand new Port for non-containerized cargo has been developed and opened last year, a cargo inspection yard was opened 2 years ago, and you have logistics facilities like Aqaba Logistics Village which complement the overall value proposition of Aqaba as a modern transport. When it comes to industries there have been some investments in Aqaba, like the industrial park of PBI where various industries are developing, including labour intensive textile factories. So, as you can see, Aqaba is a quite vibrant place where a lot is happening.

 

You mentioned interesting investments in the transportation sector. Is there any plan for the development of a cargo rail system in Jordan? Would such a project be beneficial to the country while economically viable?

We have heard of several studies. The most recent and probably most pertinent one is a bankability study that indicated that the construction of an integrated cargo rail system connecting Aqaba to Amman could be economically sustainable for a strong operator.

I think it is important that the government invests on transport and logistics as it is the backbone of the economy of trading nation. We have seen various countries developing very efficient logistics cluster, around which industrial clusters started to form, sparking what Professor Sheffi of the MIT calls a virtuous feedback loop. Jordan is ideally located to develop such logistics cluster, potentially becoming a true logistics hub for the region which Prof. Sheffi and Wolfgang Lehmacher (World Economic Forum) both noted during their presentation in Aqaba at the Trans Middle East Conference of last October.

 

And what are main challenges you have found working in Aqaba, or in Jordan in general, compared with other countries in your experience?

The geo-political context is a challenge because it makes the business prospect reading more complicated than in more stable regions. Jordan is an example of stability though in this part of the world and that is how Jordan manages to turn the challenge into an opportunity for business. It’s amazing what they’ve managed to do when you look at the highly complex situation they suffer from the conflicts at their borders. I think this is the biggest challenge we have because what we built here is a gateway not only for Jordan but also for the Levant and that requires the cargo to be able to cross borders within least possible friciion along the chain.

 

So finally I wanted to ask you as CEO of ACT, what would you like to have achieved by the time you leave? What are your ambitions?

I think -as the management team here- our ambition is just to take the business to the next level. You can see the shipping industry moving quickly now to embrace new digital technologies, including IOT and blockchain, all integrated into smart digital platforms.

These platforms give customers a much improved experience, greater transparency on the position of their cargo at any time, easier, faster and more secure transfer of shipping documents, efficiency in clearing the cargo and booking your truck for delivery to your door. For instance, using one of APM Terminals digital solutions already adopted in many other countries, trucks in Jordan could visit the Terminal on the basis of an appointment, without having to wait. Cargo could be cleared before arrival to a much larger scale than it is today.

At the end, it is the industries and the consumers in Jordan who will benefit directly for these improvements. It is actually heartening to see that, in Jordan, the government is working hard on adopting digital solutions which facilitate legitimate trade. This country has one of the largest number of engineers per capita in the world so Jordan is in good position to lead this digital revolution in the region.

 

 


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