The licence granted by the Saudi Government to the Saudi Trade & Export Development Company (Tusdeer) to build, develop and operate a container terminal at Jeddah Islamic Port (JIP) has revitalised the Saudi ports sector at a time when the kingdom is going through an amazing transformation that will see greater diversification of the national economy.

Tusdeer is one of four companies within the umbrella of the Saudi Industrial Services Company (Sisco), an outfit established to undertake large-scale capital investment in desalination plants, free zones, industrial estate development, information technology and other key projects within Saudi Arabia.  The other companies set up by Sisco are Kindasa Water Services, the support services organisation Isnad and the International Water Distribution Company (Tawzea).
For Tusdeer, the entry into the container terminal sector marks a diversification from its presence in JIP as the operator of a free trade zone. While it remains to be seen how successful Tusdeer will be in its new area of involvement, Tusdeer and Sisco are currently busy with issues related to getting the terminal up and going.
Engineer Saleh Hefni, board member of Sisco, discusses with Gulf Industry magazine aspects of the new terminal project, the experience gained in operating the free zone and the plans Tusdeer has for the enclave:  

Sisco has assumed a prominent role in Saudi industry. According to you what are the significant achievements of Tusdeer and Sisco?
Saleh Hefni: So far, over the last seven to eight years, the company has been implementing a major infrastructure project, mainly for the free trade zone. It has invested nearly SR250 million into land reclamation and building up the zonal infrastructure in terms of telecommunications and what have you. That was one major investment we had in the past.
Also, we went into the production of water in Jeddah. We started building the first water desalination plant in 1999 and it was operational in 2000 and produced 12,000 tonnes a day. We increased the capacity during 2004-2006 and currently we are producing about 40,000 tonnes per day which contributes to about five to six per cent of Jeddah’s production.

Any projections for 2007 and beyond?
Saleh Hefni: It’s a bit complicated looking at Sisco. It is a holding company. You would see that some projects have still to be launched and some are growing.
If you look, for example, at the free trade zone and the water industry, you will see that a major development will occur in 2007  - in terms of increasing production capacity and in terms of bidding from the government for a build, own and operate project.
If you look at existing projects we have the free trade zone and we are into building central warehouses and going into logistical services.
If you look at new projects…those to be realised this year…they include building a new container terminal. That’s what we’re doing right now. This is a project that has been awarded to the company by the Government and we signed a deal with PTP Malaysia. The total investment into this project is SR1.6 billion.
We have already started the groundwork. We have already assigned an engineer to design the engineering aspects. Construction should start by the end of 2007.

What is the role of PTP Malaysia?
Saleh Hefni: PTP Malaysia is an equity investor. At the end of the day, they invest about 20 per cent with us. They will become also the operator of the terminal…what we will do is that we will have a subsidiary, a sub-company again between us and PTP, and it will handle the operation of the terminal.

When will the tenders for the project be issued?
Saleh Hefni: I would anticipate by September of this year, if not before.

What steps has Tusdeer undertaken to prepare for the construction of the terminal?
Saleh Hefni: They have already done the pre-feasibility study…pre-technical study in terms of the actual depth of the area, the land reclamation required. The topographical survey has been done. So, a lot of groundwork has been done.

What is the size of the free zone in terms of tenants?
Saleh Hefni: Unfortunately, the free trade zone has run into a lot of problems in terms of rules and regulations of the port. You know, in order to operate a hassle-free zone, you would require more or less proper regulations…government regulations. So far, for the past few years, we have been having trouble with a lot of government regulations.  In order that we overcome those obstacles and start attracting customers, we were awarded the contract.

What are some of the obstacles you face?
Saleh Hefni: The main problem was that when the contract was awarded to us, it did not look at the relationship between us and other container terminals within the port. Would our presence take some business out of them? Would their presence take more business out of us?  That relationship was not really covered in our contractual agreement with the government.

Are there any plans for setting up manufacturing units within the zone?
Saleh Hefni: We looked at that in the past. And we realised that the amount of land available within the region is close to 12,000 sq km and we have a limited size, which is one million sq m.
After evaluating all of that, we realised that the zone should be really a hub, and it should not be a manufacturing zone. It should be a hub in terms of packaging and labelling…in terms of third-party logistics, but not in terms of manufacturing.
When we looked at the strategy we identified those businesses as part of it.

What makes this zone different from the other zones in the Gulf?
Saleh Hefni: When you look at the zones, zones are zones. We see our zone having a competitive advantage over other zones in terms of location…Consider for example, cargo coming from Europe or Asia to the UAE versus cargo coming to Jeddah… You save about seven to eight days in terms of shipping time…and that by itself is money.  Time is money at the end of the day. And there is a large Saudi market…with 22 million people. It is always attractive.

What plans or strategy does Tusdeer have for the next five years?
Saleh Hefni: I have identified three areas of opportunity at the free zone: One is the container terminal and container stacking area.
The second is the central part of the zone, where we will build an open yard and small warehouses and car storage facilities. I’m opening up the small warehouses and car storage facilities for more or less local customers.
The third portion we are looking at is more or less a commercial area whereby we can provide commercial buildings that can really attract a lot of companies. For example, they can have the shipping line and the customs clearing houses. The major trading houses in Saudi can have their offices within the port and linked with the computer system and the portal they have within the port.
These are the three main sectors that we are considering right now and let’s not forget the railroad that is being looked at right now and which will link the eastern and western regions.
The port is a major player in that and we see our zone as having more coming from the railway. It will have huge potential with the completion of the land bridge.

What is the significance for companies using the free zone?
Saleh Hefni: To go back to certain statistics that I heard when I was in Jebel Ali…for example that it takes seven to eight years to set up…we see the potential…The minute we finish building the container terminal and people start realising the hassle-free operations between the container and the free trade zone, there will be synergy and you can really attract business.

When will the container terminal be inaugurated?
Saleh Hefni:  Expect another two and a half years from the date of really starting the operation…but we’re trying to fast track the bidding process and all that.