Safe harbor

By Karen Thomas ADEN
Bustling, cosmopolitan and beautiful, there is something about Aden that is indefinably reminiscent of Lebanon's coastal cities - the hills that rise sharply above the sea, the heaving souks filled with chattering shoppers, the ubiquitous military roadblocks - all faintly reminiscent of early 1990's Beirut.
Aden was once the most prosperous trading post in Arabia, a hub for trade routes spanning the Far East, the Red Sea and southern Africa. Depending on whom you ask, the city was the original site of the Garden of Eden, the burial place of Cain and Abel, and the launch-port for Noah's legendary ark.

Shipping out. It is true that Aden is one of the oldest ports and trading posts in the world. The port city lay at the heart of trade routes between India and Europe, until Vasco da Gama discovered the sea route around Africa in 1497. Under British control until 1967, Aden was one of the world's largest ports in the 1960s - a must-see for cruise and passenger travelers en route between northern Europe and Asia.

Today, however, Aden is notorious for its troubles - a major casualty in the brief 1994 civil war and now a target for sporadic Islamist insurgency, such as last October's bombing of the USS Cole and a New Year mortar attack on one of the city's last remaining churches.

Before the 1991 unification of North and South Yemen, Aden was the capital of the southern republic. By the mid-1990s, it seemed that the city was the commercial capital of united Yemen only in name - run down and desperately in need of new infrastructure and investment. Now, there are moves to revive the city's fortunes, reprising its former role as an international trading hub and upgrading Aden's transport and industrial infrastructure - the question is whether these moves offer too little, too late.

Like the smaller Yemeni ports of Hodeidah and Mukalla, the Port of Aden had fallen into steady decline. Yemen has failed to keep pace with global trends in port investment and development. During the 1990s, the government-owned Port of Aden became notorious for its inefficiency, its lack of equipment and factors such as silting.

The international shipping community wrote Aden off as a shadow of its former glories that had lost ground to newer rivals, players such as Dubai Ports Authority (DPA) presiding over upstart Jebel Ali, now Arabia's leading transshipment hub.
Central to the bid to revive Aden's fortunes is Aden Container Terminal (ACT), the fledgling container port developed by Yeminvest. Yeminvest is a partnership between Singapore's PSA Corp., which holds a 60 percent equity stake, and Yemen Holdings Ltd., owned by the mighty Saudi Bin Mahfouz conglomerate. Launched in September 1999, ACT handled around 250,000 twenty-foot equivalent units (teu) during 2000 - a lightweight performance compared with DPA's 2.8 million teu, but an impressive start.

Yemen's prime minister, Abdul Karim al-Iryani, is robustly confident in ACT. "We expect Aden Container Terminal to expand to up to 12 berths," al-Iryani says. To say that Yemen has pinned its hopes on the terminal is an understatement. Aden is under intense pressure to match the successes of Oman's Port of Salalah, Arabia's other new container port. Salalah handled 1.3 million teu during 2000 - though, in fairness, the Omani port has a captive market. Maersk-Sealand, the world's biggest shipping line, is a shareholder, and Salalah has yet to win any third-party traffic.

Late last year, the New World Alliance - one of the most powerful international shipping consortia, whose members include the Japanese carrier MOL and Korea's Hyundai Shipping - chose ACT over Jeddah as its regional hub for the key China Express Service between northern Europe and the Far East. Jeddah Islamic Port's southern terminal is operated by Dubai Ports Authority and ACT welcomed the decision with quiet glee. The new business will boost the terminal's ambitions to handle up to 400,000 teu this year.

"It is a very positive sign to have this main line haul service calling at Aden and that MOL has been quoted saying that it has chosen Aden over Jeddah," says ACT general manager Tan Kee Chai. "Our location is just one aspect - it also shows that our efficient service standards and costs are acceptable as well."
High prices. Yemen has paid a high price for its 1990 refusal to endorse the allied offensive against Iraq. Losing $3 billion worth of migrant workers' remittances and the influx of surplus labor from neighboring Gulf states was devastating, but even more devastating is the all-too-evident lack of investor confidence in Yemen - either at home or overseas.

Which means that ACT is more than just another industrial project - the joint venture is now a benchmark for Yemen's ability to reverse the woes of the past decade and to attract the private sector investment that it so desperately needs. The port is also a cornerstone for other projects that aim to upgrade Aden's industrial base and transport infrastructure. Aden Distripark is a new industrial development zone, a vast site near ACT aiming to give the city a genuine industrial base that is scheduled to open by the end of this year.

Meanwhile, national airline Yemenia has won the tender to build a new air cargo village at Aden International Airport - to be developed as a joint venture with the government-owned Port of Aden. The venture aims to improve air cargo handling in southern Yemen, boosting Aden's credibility as a potential sea/air cargo hub. "This will be similar to Dubai Cargo Village with the advantage that sea/air traffic transshipped at Aden will save up to two days' sailing time onboard ship," says Yemenia acting commercial director Amin Ahmed al-Haimi. "Our geographical advantages will give the project a push."

Yemenia is Saudi-Yemeni owned, with the Yemeni government holding a 51 percent stake. The airline operates 14 aircraft, A310-300s, B727s and B737s, as well as several smaller aircraft deployed on domestic routes, and serves 28 international destinations. Forecasting airfreight growth of 15 percent this year, Yemenia launched an all-cargo division early in 2000, responding to a steady increase in demand, particularly in oil industry-related cargo. It charters in additional aircraft - relying mainly on former Soviet cargo carriers based in Dubai - whenever it needs extra capacity.

"This is being driven by a combination of freight and passenger demand," al-Haimi says. "We have seen such amazing growth in demand for freight that we have already had to convert one of our older B737 planes into an all-freight aircraft. Yemenia has seen an increase both in passenger and freight volumes, particularly in consumer goods. Everyone talks about our stagnant, deteriorating market, yet we have seen an increase in the volume of goods being transported to Yemen, putting pressure on our regular flights and creating a backlog at every station we serve, especially in Europe. Demand is being driven by growth in every sector. As a country, Yemen needs to develop and we have seen increases in building projects as well as growth in consumption."

Aden's third - and most contentious - project is the planned Aden Free Zone, a venture first mooted when the government created the Yemen Free Zone Public Authority in 1991. Business sources in Yemen agree that Aden Free Zone is a long-term project, but also fear that the development will launch too late to achieve its potential.

Dubai Ports Authority has signed a contract to manage a port and free zone at east Africa's Port of Djibouti. The Port of Djibouti lies opposite Aden at the foot of the Red Sea. The feisty Yemeni Times has accused Dubai Ports Authority of laying "economic and commercial siege to the Port of Aden," while blaming the Yemeni government for dragging its feet over the free zone.

Richard Cheong, the Aden-based chief operating officer of Yeminvest, remains optimistic about Aden's prospects. "Competition between ports?" he asked rhetorically. "It's all around us, all the time. Price is one aspect of competition - but there are other factors, such as the provision of efficient services and turnaround times for ships. The success of our terminal speaks for itself. Djibouti is not an immediate threat to us, though we have to be mindful of it. We will compete through service as well."

Others are less optimistic. A senior international financier based in Sana'a says that Aden cannot capitalize on its strategic port, cheap and skilled manpower and undeniable industrial potential, unless the Yemeni government creates the favorable climate for investors that Aden Free Zone needs to succeed.

"The question is whether or not Yemen can provide this," he says. "Aden faces competition from Salalah in Oman and from DPA's venture in Djibouti and, crucially, Djibouti Free Zone is completely sponsored and managed by the private sector. The government paid only for the land. This competition may be healthy - it will wake the authorities up. There is more than enough business for everyone, but Yemen must not miss this opportunity."

In the meantime, anxious to demonstrate the seriousness of its intentions, the Yemeni government is doing its utmost to upgrade the country's infrastructure, investing around $100,000 on improved road links into Oman and Saudi Arabia. "Aden's location is unbeatable," Prime Minister al-Iryani says. "It has the indigenous population and skills that are lacking in both Dubai and Salalah, which depend on external labor and expertise.

"In 2001, we will pilot the industrial development site, constructing and operating it. Then, once that 35 hectare site has started to operate, we will develop another 100 hectare site [as Aden Free Zone]. PSA Corp. will have no problems leasing the first 35 hectares within less than a year. When this is finished, we will start promoting the second, third and fourth expansion phases."