CASE STUDY

ON
TRANSPORTATION &LOGISTICS
DUBAI PORTS WORLD.

Sub Name - International Environment and Management.

Course code- (MGN514A).

Done by
Rithwik-11603049
Sai Teja-11605880
Karthik-11602353
Introduction-:

What is DP World (Dubai Ports world)

DP World is a global port operator formed in 2005 by the merging of Dubai Ports Authority
and Dubai Ports International that operates around 150 locations across 40 countries with
50,000 people from 130 various countries working in it, with 79 marine and inland ports.

This DP world CEO, Sultan Ahmed Bin Sulayem. This earns a total profit of 3.2 billion
dollars per annum.

History-:
They began life as a local port operator. They began their first project developing the Dubai’s
port named RASHID in 1972. Seven years later they built the largest man made harbour
named as Jabel-Ali port which is world’s 9th busiest port in the Middle East. This Jabel-Ali
port ranked alongside Great Wall of China and the Hover dam as one of only three man-made
objects that could be seen from space.

Formation of DP world-:
In 1999, Dubai Ports international (DP) was founded and started its first project at
Jeddah(Saudi) collaborating with local partner on management and operations. DPI then went
on to develop operations at the port of DJIBOUTI in 2000, Vizag in 2002, Constanta in 2003.
IN 2005, DPI acquired CSX world terminals, a leading global container terminal operator and
in September in the same year, it merged with Dubai ports authority to form DP World, to
become one of the largest global port operators.

Acquisitions-:
In 2006, it acquired THE PENINSULAR AND ORIENTAL STEAM NAVIGATION
COMAPNAY(P&O) increasing its global network and market positions in Asia, India,
Australia, Europe, America and Africa.

Acquired brazils Embraport, Prince Rupert container terminal in Canada and also LONDON
GATEWAY LOGISTICS PARK and named it as DP World Yarimca.

In 2019, DP World acquires 76% stake in KRIBCHO Infrastructure Ltd (KRIL). Its joint
venture with the National Investment and Infrastructure Fund (NIIF) HIPL has acquired 76
stake in KRIBCHO Infrastructure Ltd (KRIL).

KRIL is an integrated multi-modal logistics operator. With acquisition of KRIL, DP World

will emerge as one of the leading integrated rail terminal and container train operators in
India with an enhanced network to provide door-to-door connectivity to cargo owners.
TRANSPORTATION AND LOGISTICS INDUSTRY-:
The global transportation and logistics industry is one of the most important factors that
contributes to the expansion of trade and logistics. And it is important to know how the
business is being operated in this industry.

Most countries to increase trade has reduced tariffs, import restrictions and exchange rate
which has resulted in an increased demand for transporting raw materials finished and
unfinished goods. This has increased the demand for global transportation and logistics
service.

Ports plays a major role in this industry with quality in service advance technologies and
skilled labour to increase productivity. The world bank has developed a logistics performance
indicator(LPI) for around 150 countries which measures different dimensions of supply chai
performance in different countries such as custom clearance, trade related infrastructure,
quality of transport services, delivery timelines and ability to track and trace consignments.

Countries that attempt to develop policies to improve trade activities scored higher on LPI
and vice versa.

CHALLENGES FACED BY DP WORLD -:

The main objective of DP World is to help improve trades across different nations. They
provide them huge profits but there are lot of challenges associated with it.

Government are constantly aspiring to open their ports to logistics companies to facilitate
economic growth and to increase employment opportunities. In some countries like Africa
when Dubai ports world started their business they have found that the supply chain is
expensive and time consuming process.

Transportation costs comprises up to 75% of retail price in markets such as Malawi, Rwanda
and Uganda.

Another challenge is that they are unable to find skilled labour when they operated foreign
countries. This is usually because of low supply of qualified candidates with low wages, low
industry profiles and poor working conditions. Around 25% of the costs of logistics
comprises labour costs.

The presence of logistic companies may increase air pollution and this may increase air-
pollution and also lead to health hazard. There is always a trade-off between economic
benefits and hazards of their effect on environment and health of surrounding community in
logistics.
Other challenges include natural disasters geo political risks such as terror threats, economic
risk such as currency fluctuations, technological risks such as outage in IT and Tele
Communication system.

To reduce the risk, DP World is using advanced information technology tools in its
operations. They are using mobile technology to reduce time and money usage. These risks
can be controlled by research and analysing before starting the business and also through
synchronizing backup plans in different markets.

The future of Dubai Ports World looks promising. It continues to sustain its growth by
penetrating new markets while offering a unique customer experience. Its people remain the
key stakeholder responsible for delivering the best service. Dubai Ports World is a global
leader in logistics and transportation.

DP World and USA CONTROVERSY-:

Peninsular and oriental steam navigation company (P&O) was one of the world’s largest port
operator that operated along US Atlantic and gulf coasts before it was acquired by DP World.
The acquisition had previously received approval from US government committee on foreign
investment in the United States on Jan 17, 2006. P&O operated major US port facilities in
New York, New Jersey, Philadelphia, Baltimore, New Orleans and Miami. Attention was not
drawn into deal until Singapore based PSA dropped its bid to acquire P&O on Feb 10th, 2016.
Since then the debate over DP Worlds acquisition has engulfed Washington DC. Both the
political parties in USA had expressed their anger that they are not informed about the deal
after the approval of CFIDS. On Feb 26, 2006, DP world had agreed to a 45days
investigation of its controversial purchase of P&O.

This controversy has acquired because of lack of understanding both in public and in
Washington about the working of the maritime industry and authorities of port security.
William George Bush then the president of US also supported the deal.

An US based company currently involved in a joint venture with P&O as the port of Miami,
launched an aggressive lobbying campaign to sink the deal because it doesn’t want to sell its
stake.

The main reason behind this is the control of key national infrastructure such as ports by
UAE state owned business which would threaten US national security, with much more the
force focusing on Dubai and UAE’s questionable role in the war on terror and spread of
weapons of mass destruction.

This is not surprising since within the international maritime shipping industry, DP world is
widely respected as an efficient, trustworthy firm. While DP word is a commercial enterprise
of the UAE, the government is not involved in the daily operations of the corporation.

At last The United States House Of Representation held a vote of 16 March 2006 on
legislation that would have blocked the DP world deal, with 348 members voting for
blocking the deal, and 71 voting against.
DP World sold P&O’s American operations to American International Group’s asset
management division, Global Investment Group for an undisclosed sum.

ISSUES WITH DJIBOUTI-:

In the year 2006, DP World signed a 30yr concession agreement with Djibouti to develop and
manage Doraleh container terminal. In the last February, Djibouti breached the rights of
Dubai port operator DP world to manage the Doraleh container terminal.

To become one of the biggest trading ports in Africa Djibouti breached the agreement. Since
2006 when the operations to exclusively design, build and manage started, the officials in that
tiny African state started campaigning to renegotiate the deal. In 2012, Djibouti accused DP
world of paying bribes to secure the deal.

In 2013 Djibouti sold 23.5% of its 66.66% stake in DCT to China Merchants Port
Holdings(CMP), the Hong Kong based subsidiary of the state owned conglomerate china
merchants group. This was the move that didn’t fit well with DP world which still owned
33.34% of terminal.

Djibouti claims the concession agreement contravenes states sovereignty and national
interests and make DP World the key authority in a geo-strategic corridor even though
Djibouti held the majority of equity on the port.

Dubai, they also argued, was conducting a game plan that protected its own Jebel Ali port and
was preventing Djibouti from developing into a fully-fledged and versatile shipping hub. Its
involvement in leddah in Saudi Arabia, also meant it was developing competitions to the
Doraleh terminal. The concession also gave Dp wolrd the right to develop new ports, which
is why China’s construction of the Doraleh Multipurpose Port that opened in mid-2017
escalated the situation further.

A London court has delivered the attest verdict in the battle to manage one of Africa’s most
strategic ports. The court of International Arbitration, which helps to resolve international
commercial disputes, ordered Djibouti to pay $385 million plus interest for breaking the deal,
$148 million is unpaid royalties and legal costs.

The fight over the Doraleh terminal highlights the challenges posed by China’s deepening
reach in Africa. Djibouti is home to several military bases, key among them the United States
lone permanent outpost in Africa and China’s first overseas military base, opened in 2017.

After all an article on 28 Feb 2018 claimed that china has influenced Djibouti to break
agreement and tried to acquire the DCT to become a strong ports holder int eh horns of
Africa and China’s firms is holding 77% of Djibouti’s debts.