DP World in Russian strategic joint venture
DAVOS // DP World, the UAE’s global ports company, has signed a strategic joint venture that could lead to a $2bn investment in ports, transport and logistics in Russia.
Sultan bin Sulayem, DPW chairman, unveiled the deal Thursday at the World Economic Forum in Davos, where he signed an agreement with Kirill Dmitriev, chief executive officer of Russian Direct Investment Fund (RDIF), a government-owned entity designed to attract foreign investment into the Russian economy.
Speaking to The National in Davos, Mr Bin Sulayem revealed that the deal had come about after a meeting with Vladimir Putin, the Russian president, during a visit to the eastern port of Vladivostok last year.
“We heard Mr Putin’s plan for his country’s ports, and became interested in being a partner with the Russians. We were not very familiar with Russia so it was good to have government blessing of the deal to help us navigate the business system there,” Mr Bin Sulayem said.
The joint venture - DP World Russia - will be 80 per cent owned by DPW, with the balance held by RDIF, and will target investments in marine, dry ports, and logistics infrastructure in Russia.
The DPW chairman said that specific investment locations had not been decided yet. “We are evaluating a few potential sites, but are not in a position to announce them yet. They are likely to be in the Black Sea, the Baltic and perhaps Vladivostok in the east,” Mr Bin Sulayem said.
The final DPW investment in any individual project might vary from the 80/20 per cent ownership model, he said.
A statement from DPW said: “DP World Russia’ is expected to potentially invest over time a total of $2bn in upgrading Russian port facilities, while introducing international best practices in operations to improve trade connectivity for the benefit of Russian businesses, consumers and community.”
Mr Bin Sulayem said he was not concerned about the current Russian economic situation, with falling oil prices affecting the value of the rouble and causing a contraction in GDP. “Russia is a rich country with lots of mineral and commodity wealth. I don’t think this stage of the cycle would stop us doing this deal,” he said.
“We are never short term in our thinking, it’s never about five years from now. We like to negotiate 50-year concessions with our partners when we can. There is so much potential in the Russian transport business, where a lot of logistics is based on bulk transport, rather than containers. We can help them develop the container business to its full potential,” he added.
DPW is also determined to push ahead with expansion in east Asia. “We are doing big business in China and it’s a very big market for us. Of course, it has slowed down recently, but double-digit growth cannot be sustained forever. They will grow by 6.9 per cent, they say, and that is still very big by any standard.”
DPW is pushing ahead with other projects in Central Asia, notably the land-port on the Kazakh-China border at Khorgos and the Caspian Sea maritime port in Aktau in Kazakhstan, Mr Bin Sulayem said.
He was confident that, despite the economic slowdown in the Arabian Gulf region on falling oil prices, business at DPW’s flagship port in Jebel Ali, Dubai, was still good in 2015. “Financial figures will be released soon, but they will be good, after a challenging start to the year. We managed that well,” he said.
Global shipping activity has fallen off recently, but Mr Bin Sulayem said Dubai would still be doing good business through Jebel Ali, its main profit centre. “People in the UAE will still have to eat and to consume. We have enough experience of getting through crisis in 2008-9.
“The situation now is not comparable to then, but in any case Dubai handled it very well. We were told by the experts to do it one way, but we did it our own way, in an ordered and disciplined restructuring,” he said.
Mr Bin Sulayem was chairman of Dubai World, which owns 80 per cent of DPW, at the beginning of the last crisis, when the conglomerate sought a standstill on $25bn of debts.
“I’m very pleased with the way Dubai handled it. We never sold any more of DPW, and the government is happy with 80 per cent. I don’t think it will sell any more.”
He added that he believed Dubai would be able to meet the investment required to finance Expo 2020.