The Hindu Business Line : ‘Container business in India bullish’

India offers a very good opportunity for container operations as it is the second fastest growing economy in the world. Economic recession will not have much impact on the container business.

MOHAMMED SHARAF, CEO, DP WORLD

V. Sajeev Kumar

The first CEO of DP World, Mr Mohammed Sharaf, prefers to look at the brighter side of things, instead of brooding on the world’s problems. A postgraduate in business administration from University of Arizona, Mr Sharaf started charting the voyage of DP World, an entity formed in 2005, by integrating the domestic and international operations of Dubai Port organisations. Within a short span, Mr Sharaf has altered the profile of DP World, making it the fourth largest terminal operator in the world with a multinational team of 30,000 people and a network spanning five continents.

As a person committed to the vision of sustainable value through global growth, service and excellence, Mr Sharaf is not unduly worried about the dark clouds of economic recession on the horizon.

He was in Kochi to get a first-hand experience of the progress of the International Container Transhipment Terminal at Vallarpadam. He was impressed with the progress so far on the project, a greenfield venture estimated to cost around Rs 2,100 crore. He shared his views at an interaction on the business potential of containerised cargo from the region and the company’s strategy in India.

On completion of the ICTT project in Kochi on time: The economic recession will have no impact on the schedule of completion of the terminal in Kochi. The work is progressing well and we are confident that the first phase will be completed by November next year.

The terminal in Kochi is going to be a catalyst for India’s further economic growth. The Kochi transhipment terminal, strategically located on the global maritime trade route, will help cut import export costs and increase efficiency. The Kochi terminal will attract cargo mainly from the southern Indian states but also from other parts of the country.

On the status of the transhipment business in India: India offers a very good opportunity for container operations as it is the second fastest growing economy in the world.

Globally, industry experts agree that the container business historically grow 3-4 times higher than GDP growth.

Economic recession will not have too much impact on the container business. This was experienced in 1970 and other periods of recession. So, even if India’s GDP growth slips to 5-6 per cent per annum, the container sector will grow by 15-20 per cent.

The port and logistics infrastructure in the country has reached a saturation point and there is tremendous scope for adding capacity. The opening up of the Indian economy has resulted in a rapid growth of the container trade in the country. The container trade moved up to 7.2 million TEUs by 2007 from the levels of 2.47 million TEUs in 2000.

Moreover, the growing demand for natural resources and commodities to sustain the high levels of growth in China and India has led to an increase in Asian-African trade.

The container trade has also increased with improved container rail networks connecting major Indian cities.

Creating regional hubs for transhipments will facilitate foreign trade. There has been a strong growth in container movement globally in the last 50 years. The forecast is that by 2020, the total number of containers handled in ports throughout the world will be one billion TEUs. Given this scenario, the container business in India remains bullish.

On the global recession: The slowdown is happening, and we have to accept it. But it will not affect the traffic flow as we are moving at a fast pace. During all the previous recessions, the container sector always performed better than the general economy.

The container trade maintained a good growth in all previous financial crises. Rather than confining to the terms recession or slowdown, it is better to use this opportunity to achieve more growth.

On the possibility of monopolising the container trade in India: DP World is not seeking a monopoly of container traffic from India. We welcome other players and competitors.

We are operating in an extremely competitive environment in all the ports where we have a large presence. Monopoly is self-destructive and it will create inefficiency.

On labour issues in terminal: Labour issues, especially in Kochi, are a concern for the company. However, there are no issues inside the terminal.

The problem is outside the purview of the terminal where we have no role to intervene.

Trade unions should realise that the container logistics business is similar to the flow of a river. If the flow of a river is disrupted, it will change its course. Similarly, if the transactions are disrupted in container movement, ship operators will be forced to look at other places.

The labour unions should be aware of the changes taking place in other parts. The disruption of work will not solve any problems; it will only create total disorder.

On company’s plans: DP World had handled more than 43.3 million TEUs in 2007 across its portfolio from America to Asia, an increase of 18 per cent on 2006.

It has global capacity of more than 54 million TEUs, which is set to increase in the coming years with a committed pipeline of expansion and development projects in key growth markets, including India, China and the Middle East. The capacity will rise to around 90 million TEUs by 2017.

The company is investing heavily in special economic zones and other port services in the Indian subcontinent region. It plans to expand its logistics and support services in India, and DP World is one of the 14 private players to be awarded a licence to run container trains.

It is also looking to set up ICDs and CFS in Gujarat and north India to provide connectivity to customers in remote locations.

With the completion of the first phase of the Kochi terminal, the company will operate train services linking the terminal with the hinterland in south India and other parts of the country.

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