Masterclass IMCO 04 feb2014 - Importance of international partnerships between port clusters


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The Master Class series Shipping and Transport has been organized by STC-Group's Netherlands Maritime University in Rotterdam to provide a platform for knowledge exchange between young professionals in the maritime and port industrial cluster. IMCO and STC-NMU jointly organized a Master Class in Sohar at International Maritime College Oman (IMCO) on Tuesday 4th of February 2014. The Master Class explored the value of the strategic partnership between Port of Rotterdam and Port of Sohar

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Masterclass IMCO 04 feb2014 - Importance of international partnerships between port clusters

  1. 1. Master Class Importance of international partnerships between port clusters The value of the strategic partnership between Port of Rotterdam and Port of Sohar Moderator: Dr. Hilal Al Hadhrami, Dean IMCO Speakers: André Toet, CEO Sohar Industrial Port Company Jamal Aziz, CEO Sohar Port and Freezone Maurice Jansen, senior researcher STC-NMU Venue: International Maritime College Oman / Falaj Al Qabail, Sohar (next to Sohar Industrial Port, February 4, 2014 17:00 – 19:00 Free entrance, but registration is required. To register, please send you contact details to
  2. 2. STC-Group / IMCO Importance of international partnerships between port clusters International Maritime College Oman 4 February 2014
  3. 3. Introduction by Dr. Hilal Al Hadhrami Dr. Hilal Al Hadhrami introduces the 1st Master Class at International Maritime College Oman
  4. 4. Mr Jan S. Bakker Department Director STC-NMU Jan Bakker explains why students from STC-NMU are in Oman: learning from successfactors of port of Sohar
  5. 5. STC-Group at a glance “We educate from door to door” The shipping and transport world of the STC-Group: a global approach, one-stop-shop for the transport chain
  6. 6. STC-Group education programs in NL Education model of STC-Group: Full mission training centres and work experience Students/ Graduates in 2012-2013 Full mission simulators Restricted function simulators and training centres Interactive software packages and assignments Lectures trough various didactical methods Master Shipping and Transport Master 46 / 24 Maritime Officer, Shipbuilding, Logistics, Chemical technology Bachelor’s 814 / 78* Ports | Aviation | Transportation | Rail | Logistics | Ship & yachtbuilding| Maritime shipping | Offshore & dredging | Fishery | Inland shipping | Process industry Vocational 4, 242 / 1,559 Port and Logistics, Transport and Logistics, Inland Shipping, Ship building Prevocational 487 / 135
  7. 7. Master Class knowledge platform for young port professionals Platform for knowledge exchange between education, business community and association of young port professionals
  8. 8. Mr Maurice Jansen, Senior Researcher STC-NMU Maurice Jansen approaches port development in Sohar from theoretical perspective
  9. 9. Topic of my presentation Strategic value of port cooperation Case of Sohar – Rotterdam A theoretical approach
  10. 10. Topic of my presentation 1 Taking stakes in Global Value Chains 2 3 4 Drivers for competition Emergence of port networks Invest in people for long lasting value
  11. 11. Strategic value creation Why are we here? What brings us together? To create value that can only created in this country under the given conditions Source: World Economic Forum, European Centre for Development Policy Management, Human Capital Report, 2013
  12. 12. Taking stakes in Global Value Chains • Today’s global economy is characterized by global value chains (GVCs), in which intermediate goods and services are traded in fragmented and internationally dispersed production processes. • GVCs are typically coordinated by TNCs • TNC-coordinated GVCs account for some 80 per cent of global trade • GVCs have a direct economic impact on value added, jobs and income. • Policy matters to make GVCs work for development. How to position as a country in the global value chain? Source: UNCTAD, World Investment Report, 2013,
  13. 13. Where is value created? Supply the world with raw materials is not sustainable for long term prosperity
  14. 14. Pros and cons to GVC participation Rewards Pitfalls • Employment gains • Transfer of business practices • Build productive capacity, incl. through technology dissemination and skill building • Degree of dependence • Narrow technology base • Limited value added activities in GVCs Best development outcome results from increased GVC participation as well as from increased domestic value added creation Source: UNCTAD, World Investment Report, 2013,
  15. 15. How the GVC works EXAMPLE Production is dispersed and fragmented over the world. Manufacturing is only a small fraction of total value added
  16. 16. GVC of Textiles and Apparel Value chain EXAMPLE This article was first published by the Asian International Economists Network, Website provides full infographic
  17. 17. Topic of my presentation 1 Taking stakes in Global Value Chains 2 3 4 Drivers for competition Emergence of port networks Invest in people for long lasting value
  18. 18. Competitiveness defined (2) How to position a country in global value chains? Competitiveness is the set of institutions, policies, and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be earned by an economy. Source: World Economic Forum, European Centre for Development Policy Management, Human Capital Report, 2013
  19. 19. Where does competitiveness come from? Source:World Economic Forum, The Global Competitiveness Report 2013-2014 Base period 2013-2014 GCI edition
  20. 20. Drivers for efficiency and innovation Factor driven e.g. Quality of port Infrastructure vs GCI Efficiency driven Innovation driven e.g. Extent of staff training vs GCI e.g. Capacity of innovation vs GCI Physical and human capital infrastructure are preconditions to an efficient and innovative port cluster Source:World Economic Forum, The Global Competitiveness Report 2013-2014 Base period 2013-2014 GCI edition
  21. 21. Port infrastructure at Oman 1 WEF Ranking Port Infrastructure and Global Competitiveness Index 6 11 16 21 Ranking 26 31 36 41 46 Quality of port infrastructure Quality of infrastructure overall Global Competitiveness Index 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 32 33 27 24 23 22 21 20 20 17 41 34 32 32 33 Oman has been successful in outperforming other countries in development of port infrastructure
  22. 22. Understanding competitiveness of nations Government Context for firm strategy, structure & rivalry Demand conditions Related & supporting industries Factor conditions International innovationdriven competitive advantage Chance Diamond model provides a framework for understanding the conditions for growth and competitiveness Source: Porter, Competitiveness advantage of nations1990
  23. 23. Porter’s Diamond model applied to Oman Entire GCC region strategically located on junction of world trade flows (both sea and air) Demand conditions • Leading firms established (e.g. Vale, ORPIC, OOTO, OICT, Air Liquide, C. Steinweg Oman LLC, Safe Alloy, Sohar Aluminium, etc) • Diversified industry base (metals, containerised, liquid bulk, refinery, energy) • Clustering and co-siting among clients Factor conditions • Strategically located on East-West Trades • Favourably located within region • Access to and stable supply of cheap energy • Well-developed infrastructure • Education infrastructure in place from early beginnings
  24. 24. Porter’s Diamond model applied Government • Country vision to diversify economy • Industry policy supporting port investments • Favourable business conditions (e.g. ‘tax holiday’ • Promotion of foreign investment Industry rivalry • Diversification strategy applied to port range (e.g. cruise port Muscat) • Masterplans for all major Omani ports • Intermodal infrastructure in planning of development
  25. 25. Topic of my presentation 1 Taking stakes in Global Value Chains 2 3 4 Drivers for competition Emergence of port networks Invest in people for long lasting value
  26. 26. Emergence of port networks Port city Port area Port region Shipping lines Terminals • Containers: top 3 about 45% market share. New development: P3 and G6 • Other commodities: quite/somewhat concentrated markets (Cars, liquid bulk, dry bulk, LNG). • Containers, ‘big four’ have > 50% marketshare • Tank storage: highly concentrated. • Other commodities: often increasing concentration, often direct involvement of globally operating end users (ThyssenKrupp, Shell, Vale) Port network Port industries • Energy, refining, chemical industry: increasingly globally operating • Logistics: increasing globalisation, forwarders as well as logistics real estate investors Port have no other choice then to strengthen their connectivity with ports in hinterland and overseas Source: Peter De Langen, presentation Masterclass (2013), Van Klink, A. (2003)
  27. 27. Connectivity between ports increasingly important Projects (examples): • Inlandlinks • Keyrail • Common Barge Terminal • Extended Gate concept Connectivity with hinterland ports in NL and Europe Govern ment Context for firm strategy, structure & rivalry Connectivity comes from: • • • • Demand conditions Related & supporting industries Factor conditions International innovationdriven competitive advantage Chance Connectivity with international ports and hubs abroad Source: Van den Bosch, Baaij, Volberda, RSM, 2011 • • • • Trade Capital People Information Add value to customers at home abroad Connecting with growth markets Build a portfolio of ports Petrochemical, energy, transport, logistics
  28. 28. Government: Oman’s port policy framework Sohar Duqm Salalah • 50/50 JV • Port of Rotterdam • Throughput from 6 mn to 44 mn in 7 years • Diversification: metals, containers, break bulk, petrochemical complex • 50/50 JV • Consortium Port of Antwerp • Oil refinery, ship repair, liquid bulk • Easy access to oil and gas fields, various minerals • 30/70 partnership APMT • Transhipment • 3.5 mn TEU • Single commodity Strategic partnerships with foreign ports and terminal operators secure inflow of world class capabilities Coordination within domestic port region to balance rivalry among ports NOTE: In addition projects for PSQ, Khasab and Shinas have been executed or are under development:
  29. 29. Topic of my presentation 1 Taking stakes in Global Value Chains 2 3 4 Drivers for competition Emergence of port networks Invest in people for long lasting value
  30. 30. Leveraging on an educated workforce Human Capital Index, 2013 Return on investment: what is the leverage of the investment to the economy? Life long learning: How much is invested in capacity of people? “People are the most valuable resource a available to any economy” Talent development Productivity Education Health Source:World Economic Forum, Human Capital Report, 2013
  31. 31. Maritime education and training infrastructure Highly specialised and experienced staff Main supplier of skilled labour force to port, industrial and maritime cluster Focussed on the business with vertical education model Largest maritime simulator park in Europe / GCC Maritime knowledge infrastructure
  32. 32. Port development in HRD perspective • Infrastructure development usually focuses on engineering physical infrastructure; • Human resource infrastructure development is often sequential to physical infrastructure development • As a result HRD is not capitalised in port development business case. Port development: Port development in human resource perspective Port analysis Industry policy Training needs assessment Feasibility Feasibility Business case Business case JV Set up Training centre set up Operati onal JV Human resource development Execution IMCO has been established in parallel and at an early stage in the port development process
  33. 33. Summary Today’s globalised economy is dominated by global value chains Strategic value can only be created under the right conditions Supply the world with raw materials is not sustainable for long term prosperity Diamond model provides a framework for understanding the conditions for growth and competitiveness Oman has outperformed other countries in port development Ports around the world have no other choice then to strengthen their connectivity with ports in hinterland and overseas Strategic partnerships with foreign ports and terminal operators secure inflow of world class capabilities, both parties win from knowledge spillovers Port development requires a long term view, investing in people brings lifelong value
  34. 34. Mr André Toet, CEO SIPC André Toet explains Sohar’s new corporate identify and how to position Oman and Sohar : “It all starts here!”
  36. 36. LANDLORD MODEL Private Business SOHAR Port and Freezone
  37. 37. THE DIFFERENT MODELS FOR PORT PARTICIPATION (Building Blocks) Landlord + Development of special economic zones Landlord Maritime services Note: • Participation is based on project financing • Participations should be complementary to existing activities (and never threatening) Low Port knowledge Port marketing allocation of clusters allocation of clusters Regulation / Port authority Consultancy Port marketing Regulation / Port authority Master Planning Maritime services Port knowledge Port knowledge Level of participation High
  38. 38. GATEWAY SOHAR Sohar Port 22 km2 Sohar Airport 20 km2 Train Freight Terminal Sohar Freezone 45 km2 Sohar Industrial Estate 20 km2
  40. 40. Gulf SAUDI ARABIA Dubai Doha Abu Dhabi Sohar Barka Muscat Riyadh UAE ROAD CONNECTION BETWEEN SOHAR & OTHER MAIN REGIONAL DESTINATIONS Sea of Oman Sur OMAN Main City Express Way Under Construction Main Connection Road Coastal Road Under Construction
  41. 41. RAIL CONNECTIONS Amman JORDAN • Connect to Muscat and Sohar to the GCC (future KUWAIT connections to Duqm and Salalah) • Freight terminal adjacent to Port and Freezone Sohar • Sohar will be at the doorstep of the GCC markets BAHRAIN QATAR Medina Dubai Abu Dhabi Muscat Riyadh UAE Jeddah Mecca Etihad Rail GCC Network Existing Lines North-South Line Saudi Land bridge Mecca-Medina Sohar SAUDI ARABIA OMAN YEMEN
  42. 42. AIR CONNECTIONS • Sohar Airport cargo terminal (2014/2015) capacity of 50,000 tons per annum. Amsterdam Frankfurt London Paris Zurich Munich Milan • Muscat International Airport; 100,000 tons of freight per annum; after expansion 260,000 tons per annum. Istanbul Peshawar Chah Bahar Beirut Islamabad Sialkot Amman Lahore Cairo New Delhi Shiraz Turbat Kathmandu Damam Gwadar Jaipur Dubai Manama Karachi Madinah Lucknow Sharjah Doha Hyderabad Dhaka Riyadh Abu Muscat Ahmedabad Jeddah Chittagong Kuwait Dhabi Mumbai Khasab Salalah Mangalore Bangalore Kozhikode Chennai Bangkok Trivandrum Addis Ababa Colombo Maldives Kuala Lumpur Nairobi Zanzibar Dar es Salam AIR CONNECTIVITY FROM MUSCAT INTERNATIONAL AIRPORT
  43. 43. Umm Qassar REGIONAL SEA CONNECTIONS Kuwait Jubail Gulf Bahrain Bandar Abbas Khor Fakkan Fujairah Doha Sohar Jebal Ali Karachi Abu Dhabi SAUDI ARABIA Muscat Port Sultan Qaboos Mundra Hazira Nhava Sheva Duqm Salalah Indian Ocean
  44. 44. SOHAR Port Clusters Maritime & Industrial Education Logistics 3 km Energy & Water Metals & Minerals Petrochemicals 7.7 km
  45. 45. Oiltanking Odfjell C. Steinweg 4.5 km berths 16-19 meters deep Khimji – Tata Hutchinson Wampoa
  46. 46. NEW PROJECTS Dry Bulk Terminals: Iron ore, iron pellets, aggregate, other minerals
  47. 47. NEW PROJECTS Grain Terminal
  48. 48. CARGO THROUGHPUT (FRT tons)
  49. 49. FREEZONE Phase 1 Area SOHAR Freezone Master Plan 5 million square meters New direct road access with cargo terminals 25 million OMR investment in infrastructure 25 million OMR expected industrial investments this year Logistics 200 ha Manufacturing 50 ha Downstream industries 250 ha
  50. 50. WAREHOUSING AND LAND DEVELOPMENT • Pre-build warehousing available as per Q3 2013 • Minimum size 660m2 with possibility to connect units • Direct contract with warehouse operator • One Stop Shop Services for lessees of the warehouses • Other developers more than welcome to set up operations • According to own standards
  51. 51. FREE TRADE GCC CUSTOMS UNION • • • Free trade within the GCC by early 2015 SOHAR will be in a position to become game changer in GCCs logistics. SOHAR’s transport connections in particular train, can highly contribute to make it the most efficient point for moving goods in the region. UNITED STATES • • Oman is one of the 2 countries with an FTA with USA Duty free imports and exports between the countries
  52. 52. FREEZONE SOHAR SPECIAL INCENTIVES 100% ownership possible 10-25 years corporate tax holiday Only 15% Omanisation requirement z No import duties Local sales possible on 5% import duties No capital requirements No personal tax Training infrastructure One Stop Shop customer service
  53. 53. OICT TERMINALS BY Q2 2014 Terminal B Will be handed over to SIPC by Q2 2014 Sohar Aluminum Jindal Steel Terminal C Operational by Q2 2014 970 m / 68 ha 520m 1,780m / 89 ha Terminal D (available for T/O + liner combined development) by 2017 / 18
  54. 54. THANK YOU
  55. 55. Mr Jamal T. Aziz, CEO Sohar Freezone Jamal Aziz elaborates on the impressive foreign direct investments in the Sohar Freezone
  56. 56. 2004 Port operations 1999 Port construction 2010 Port & Freezone Ph.1 2014 Port & Freezone Ph.2 2020 Economic zone
  57. 57. SOHAR was subject to a planning exercise by the (then) Ministry of National Economy in the Year 2000. SOHAR encompasses an area of approximately 350 square kilometers with the following estates contained within it: • Sohar industrial Port 22 km2 • Sohar Free Zone: 45 km2 • Sohar Industrial Estate: 22 km2 • Sohar Airport: 20 km2 • Corridors: 20 km2 • Intermodal Rail Port: 10 km2 SOHAR also contains private residential and agricultural properties. Besides the coastal villages , of Harmool and Majis the total number of residential private properties amounts to nearly 1500 belonging to approximately 11000 inhabitants. In September 2011, a Royal Order was issued to relocate those inhabitants outside SOHAR in order to protect them from the ever-expanding industrial activities within SOHAR.
  58. 58. 7.7km Petrochemicals • oil refinery 5.4mtpa • • • • • • Polypropylene 340ktpa Aromatics 1mtpa Methanol 1mtpa Urea 1.2mtpa Formaldehyde 53ktpa Industrial gases 52mcm Nitrogen • Sohar Refinery Expansion Project (under formation) Metals & Minerals • Aluminum smelter 350ktpa • Iron ore pelletizing 10mtpa • DRI steel 1.5mtpa • Steel melt shop 350ktpa • Modular fabrication • Heavy metal manufacturing 3km After 10 years of development, Sohar Industrial Port has evolved from a green-field project to a diversified complex of major upstream and some first tier downstream industries in the following clusters: Logistics • Container Terminal • General Cargo Terminal • Liquid Terminal • Dry Bulk Terminal • Agro Terminal (under formation) • Heavy Lifts Support • Energy o Oil and gas o Power stations o Water stations • Education o Maritime college • HSSE o Air monitors o SEU o Emergency response
  59. 59. In December 2010 Sohar Free Zone was established as per RD 123/2010. The FZ is intended to attract local and foreign investments in the following main clusters : Metals & Minerals Logistics • Ferro-alloys • Warehousing • Steel & aluminum industries • Cold storage • Copper, marble, ceramics • Automotive distribution Food Industries Petrochemicals • Downstream petrochems • Sugar & Molasses downstream • Flour and pasta industries • Fish processing • Packaging • Oil waste re-use • Pharmaceuticals
  60. 60. Downstream Petrochemicals Food Cluster Logistics hub Downstream Metal & Minerals Downstream & Key Clusters Sohar Industrial Port Sohar Free Zone Road Rail Air Sea Sohar Industrial Estate Airport Cargo Village Intermodal Rail Logistics Center Express way Intermodal Sohar Airport Port of Sohar
  61. 61. High Impact on Non-oil GDP SOHAR as a cargo hub and a platform of sizeable industrial development are engines for creation of jobs and SMEs in the Batinah region, thus impacting the lives of at least half of Oman’s population. However, to maintain sustainable development, health, education and social reforms are critical factors.
  62. 62. Location & Connectivity SOHAR’S connectivity by rail and road with the rest of the GCC, outside the Strait of Hormuz gives it a distinct advantage. Direct sea services allows Sohar to compete with other ports in the GCC. Markets: GCC, India, Iran, Africa, Korea, China, Brazil
  63. 63. • Apply and enforce on all industries international industrial standards: IPPC/ BAT • DCMR initiated and presented the Bubble Concept covering the whole SOHAR Area. Discussions to expand the role of SEU to cover SOHAR are not concluded Applying and practicing international standards is vital for SOHAR’s sustainability. This strength could easily become a weakness if not managed properly.
  64. 64. Infrastructure SOHAR’S industrial cluster is supported by a multi-modal transport system and an excellent energy infrastructure • Port: • Dry bulk:12-25m deep • Liquid: 16m • Container: 18m • General: 16m • Airport: • Cargo • Passenger • Expressways • Oil and gas • Power: captive and grid 2400MW • Water • Cooling • Process • Potable • Wastewater treatment • Intermodal Rail Terminal
  65. 65. Additional Infrastructure Million OMR 1 Future Roads & corridors 25 2 Rail 300 3 Utilities (grid, gas, water) 500 4 Marine (Container Terminal D) 200 5 Buffer Zone & Green Belt 20 6 Flood protection 50 7 Emergency, security, customs 50 8 Nature Compensation 5 Subtotal 9 8 Resettlement 1150 150 Total (say) 1500 • Very rough estimates • Does not include current infrastructure programmes • Does not include infrastructure to be borne by SIPC, SFZ, PEIE 4 5 9 2 7 1 6 3
  66. 66. World Class Sohar Sohar is served by reputable international organizations, that are known to be global leaders in industry. This has elevated Sohar to be known as a “destination of choice”. Its HSSE policies follow good international practices.
  67. 67. • Labour issues • Labour issues Raising productivity levels Raising awareness for employment in port cluster (Education Information Centre) • Customs Regulations GCC Customs Law could limit business • development at port and freezone. It may require updating. • Small local market Customs Regulations Improve seamless customs communication and administration • Small local market Oman needs to devise a clear strategy that continues to promote and achieve higher volumes of exports, re-exports and FDI. Oman’s location advantage alone is a primary driver for Oman to supersede business volumes in countries inside the Gulf. • Stakeholder management • Stakeholder management Lack of structured communication with local communities as well as different messages to markets. Coordinate and communicate single message with local communities
  68. 68. Synergies to create an integrated economic zone: There are synergies between SIP, SIE, SFZ and Sohar Airport: • Markets • Customs • Vehicular traffic • Emergency response • Infrastructure & utilities • Feedstock • HSSE standards • HR needs & HR development Integration would reduce capital outlay and yield higher economic returns
  69. 69. Jobs There is approximately 120 square kilometers of industrial space. This has the potential to yield on average 500 direct jobs for each square kilometer and approximately 1500 indirect jobs for each square kilometer. A total of 240,000 jobs could potentially result from the full development of SOHAR. 120 km2
  70. 70. Small & Medium Enterprise There are numerous opportunities for establishing SME’s as a result of the industrial development in Sohar. • • • • • • • • • • • • • • • • Ship chandelling Maintenance and repair Catering Insurance/ reinsurance Freight services Trucking Storage Hospitality Construction Consulting Retail Real estate Landscaping Training Clinics Car hire
  71. 71. SOHAR is equipped to play a “gateway” role in the GCC and the other densely populated regional markets. However, it is faced with tough competition from other economic zones in neighboring countries.
  72. 72. KIZAD could become the main hub for collection and distribution of cargo into the UAE and the GCC by RAIL. SOHAR could face loss of cargo ships to Abu Dhabi if there are border hindrances or a price war.
  73. 73. There are inclinations of possible misalignment between Sohar and other Omani Ports & Terminals as well as Industrial Estates (PEIE): • • • • • • Rail tariffs & incentives Energy Marketing communication Container market KPI’s These require further analysis and agreement amongst stakeholders Gateway Tourism Heavy Industry Container Hub
  74. 74. Questions and Answers
  75. 75. Q&A and panel discussion After presentations, speakers answer and debate on questions from students and participants
  76. 76. Thank you! Putting people first!
  77. 77. Contact details Netherlands Maritime University @STCGroupNL More information: Maurice Jansen MSc Senior Project Manager Innovation, Research & Development / / T.+31 10 4486087