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Home > Business/Finance > Diversified Services > Shipping & Logistics
United Arab Emirates Freight Transportation Report Q2 2008
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In November 2007, UAE-based DP World, the fourth largest container-handling company in the world, raised almost US$5bn in an IPO which valued the company at US$21.58bn. The sale of shares wasreportedly 15 or more times oversubscribed, leading analysts to claim investors had offered between US$80bn and US$100bn for the shares. The shares were floated on the Dubai International Financial Exchange (DIFX), which was launched in 2005. DP World which bought British ports operator P&O in2006 for US$6.8bn, sold 3.818bn shares, or 23% of the company, at US$1.30 each, towards the top endof the expected range. The shares were allocated with individual investors getting 10%, bondholders 25%, and institutional investors the remaining 65%. DP World chairman Sultan bin Sulayem said there hadbeen strong demand for the shares among institutions, which were looking for them to ‘grow value overtime’. DP World’s net profit was expected to rise 55% to US$564mn in 2008 and US$630mn in 2009, thecompany said. The company in many ways represents the wider health of the UAE transport sector. Infact, in our latest UAE Freight Transport Report, BMI concludes that freight carried growth across allmodes, measured in million tonne-km (mntkm), will average 5.5% per annum in the 2008-2012 forecastperiod..
Various factors support this prediction. Although the current oil price boom is easing, we still expect the UAE economy to grow by an average of 4.8% per annum over the next five years, providing an importantlevel of support for the freight business. Infrastructure investment will also remain high, with the emiratescontinuing to focus on a variety of ambitious transport projects in aviation and shipping. Overall, BMIbelieves the UAE freight sector will expand rapidly in the short term but will slow as global conditionseventually deteriorate. The UAE economy is relatively dynamic and is now more diversified and showsevidence of robustness to withstand external shocks. Strong investment in transport infrastructure and theglobal ambitions of companies like Emirates Airlines and DP World will be strong positive factors.By transport modes, we expect the fastest-growing sector in the 2008-2012 forecast period to be air, withan annual average of 9.6% growth in freight carried, followed by sea freight with 5.9% and pipelinethroughput (5.4%) and road haulage (5.2%), just ahead of GDP. With a score of 72.7 out of 100 the UAE’s freight rating is one of the best in the Middle East and Africa (MEA) region. It scores particularlywell in terms of its political, economic and infrastructure environments. The UAE has one of the mostliberal business environments in the region and foreign investment is actively encouraged in manysectors.
For the 2008-2012 forecast period, we expect the transport and communications sector to continueoutpacing the economy as a whole in value terms. It will achieve average annual growth of 5.1%, versus4.8% for overall GDP. The total value of transport and communications GDP will rise to US$21.1bn innominal terms by 2012, representing 6.8% of the UAE’s GDP.
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