Port of Call

The reopening of the Iraqi border is a significant development for many industries in Jordan. But it is of special importance to the Aqaba Container Terminal, which hopes to revive its well-earned reputation as a major gateway for goods destined for the huge Iraqi market.

By Dina al-Wakeel

APM Terminals are quite proud of their modern, highly automated containers terminal in Aqaba. A joint venture between the government of Jordan represented by the Aqaba Development Corporation and APM Terminals, which is part of the mammoth Maersk group, the Aqaba Container Terminal (ACT) has a capacity of about 1.2 million TEUs and 1,050 employees.

As the current operations reach 800,000 TEUs annually, the ACT is ready to increase its container handling by up to 30 percent once trade with Iraq resumes fully.

Venture spoke to both the ACT’s newly appointed CEO Steven Yoogalingam and its Chief Commercial Officer Vincent Flamant who explained how the company spent the past two years preparing and easing procedures—including inspection and clearing time—for the reopening of the border and to improve operational efficiency in general.

How is the ACT faring today and are you satisfied with the way things are going?

Vincent Flamant, ACT’s Chief Commercial Officer

Flamant: We handle about 800,000 TEUs today so we have spare capacity to take a lot more business without further investment and that’s an opportunity for the country. But of course, when we build and operate a terminal we always plan ahead for the necessary future investments to increase our capacity in line with the market. In terms of operational performance, we seek continuous improvement but must admit that the relocation of the cargo inspections outside of ACT removed a substantial bottleneck in our processes and released much needed yard space. From our side, containers are available for pick-up just a few hours after our vessel discharge. The average number of days that a container stays in a terminal is called the dwell time. The higher is the average dwell time of the containers, the more space the containers take in the terminal. Considering yard space is limited in Aqaba, we have been pushing hard with all parties to get the dwell time down. The cargo cannot be released by the terminal before the customs authorities agree to it and they cannot agree to it unless they have received the declaration submitted by the importer. So there’s a whole process involving many different parties that actually impacts the number of days that a container stays at the Terminal. In most countries in the world, containers are collected from the Terminal in less than three days. Here it takes eight to nine days. But it used to be 10 to 14 days so there has been a significant improvement in the clearance process of containerized cargo in Jordan.

Is the government cooperating when it comes to minimizing the constraints?

Flamant: You cannot develop a strong industry without having a strong logistics chain. The authorities are taking the necessary steps to improve the logistics chain in the country. There has been some good progress recently and the good collaboration with ASEZA, ADC and the Customs authorities should bring further improvement in the months to come, and that’s a positive development to attract investors in Jordan.

What distinguishes the Aqaba port from any other in the region?

Flamant: Aqaba port is a deep-sea port, which allows us to receive the larger ships deployed directly from some ports in Asia, Europe or the United States to the Red-Sea. The largest vessels we have received so far were about 14,700 TEUs. Our ability to receive such large ships gives us—potentially—a competitive advantage compared to other ports. We talk a lot about Iraq now. No container terminals in Iraq has a 1 km-long quay, as we have in Aqaba, and they have a limited draft that limits their ability to receive large vessels. As a consequence, most of the services calling Iraq are feeder services, loading their cargo from transshipment ports like Dubai or other ports. The transshipment operations add costs and time in the transportation system.

Steven Yoogalingam, ACT CEO

Yoogalingam: The biggest shipping lines in the world are all calling in Aqaba. This gives our customers a wider choice of service options and carriers to ship with.

I reckon the international reputation of ACT is also a factor that distinguishes Aqaba from other terminals in the region. The track record of ACT and the many international nominations and awards it has received over the past four years or so allows Aqaba to stand out.

How important is the reopening of the Iraqi market to the ACT?

Yoogalingam: The ACT today is in a very good position. We support the Jordanian economy and the local market is our key market. The opening of the Iraqi border represents an opportunity for us to grow. We used to handle the Iraqi transit cargo in the past and have worked hard to ensure that we would be able to capitalize on the reopening of the border. I think it is actually an opportunity for Jordan as a whole. Whether it is trucking companies, forwarding companies, logistics companies, insurance or clearing agents.

Of all shipments arriving at Aqaba, how many would be headed to Iraq?

Yoogalingam: So today for the Jordanian market we handle 800,000 TEU. Based on what we handled in the past and based on the stronger value proposition that we have today, we hope to capture some 100,000 to 200,000 TEU of transit cargo. I think there are a lot of variables at play which make any prediction quite complicated, but ACT has been working with all the relevant agencies to make sure that—on this side of the border—everything will run as smoothly as possible. The traders say the cost is important but what they want is a competitive service. They want the transporters to use the corridor without risking their lives. And they want their cargo to arrive as quickly as possible and in good condition.

We do not expect the volumes to all come back in one day. We do not know how quickly the cross-border traffic will resume but what is really important is to be prepared. We have here a good example of the excellent collaboration we have with the authorities as we have been working with them for the past two years to improve the competitiveness of the Aqaba gateway. At a meeting last week at ASEZA (Aqaba Special Economic Zone Authority) with ADC, Customs and the Security agencies, all parties confirmed their commitment to get the Iraq In-transit cargo to the border within 36 hours from discharge of the vessel. There will be no physical inspection of the Iraq cargo anymore, only scanning. That will make Aqaba extremely competitive, possibly even more competitive than the national port of Iraq. We’re really fighting hard to get the transit cargo back though Jordan.

Are you offering incentives as well?

Flamant: What best incentive can we give to any traders than 36 hours for the cargo to be at the border after vessel discharge? The main concerns for importers are how quickly they can get their cargo to its destination and what’s the total cost of the transportation system from origin to destination using one corridor versus another.

The port costs are actually only a fraction of the total cost of transportation and probably the smallest element. These port costs have at the end little or no influence on the routing of the cargo.

Also, there’s talk of opening the Syrian border as well. How was the volume of work regarding Syria before the closure of Nasib?

Flamant: Historically, there have only been limited container volumes moving between Syria and Jordan. The Syrian border was a major gateway though for Jordanian exports, moving by road to Syria, Turkey and beyond. When the Syrian border closed, the exporter could not use the landside gateway so they redirected all their exports through ACT. In support for the Jordanian industry, ACT managed—without notice—to to handle a massive 46 percent increase in export volumes.

While we experienced a surge in export volumes of full containers, the export industry in Jordan suffered from the closure of the border and ACT still lost volume as the import trade is the dominant trade. It is indeed a lot better for ACT when the export industry does well because that means higher imports of material and equipment. It also means higher levels of employment, higher levels of consumption and again, higher import volumes through the Terminal.

The industries did receive a blow in the last few years due to the closure of both borders. What was the decline in the container volume like? 

Yoogalingam: We experienced a decline in container volumes of about 10 percent in 2015 and about 4 percent in 2016. We believe volumes have now reached the bottom of the curve and will grow again form here. We have used the bad years to actively prepare for the better ones. The reopening of the borders and the return of the cross-border container traffic will be good signs of the recovery to come.

How can the government help more in facilitating procedures?

Flamant: As a country, we must continue to work on improving the logistics system and reducing the time-to-market of the goods. We must continue to work towards reducing the amount of stamps and paper trails required to clear and move cargo. We must also continue to embrace new technologies to speed-up processes and further tighten security. One initiative which will have an immediate positive effect on the logistics chain is to reduce the free-time from seven days today to five days, as a first step to adopt the International standards of three to four days.

What’s the real potential for Aqaba’s container terminal?

Yoogalingam: Our primary focus here is to serve the Jordanian economy, which is what we do and we do it very well. But we are also convinced that Jordan can develop into a logistics cluster where Aqaba will serve as the gateway to the Levant. ACT has the capacity and the ambition to make it happen. But turning Aqaba and Jordan into a very efficient regional logistics cluster takes a lot more than a container terminal. The country needs dry-ports, rail connection, and electronic documentation processing to allow the containers to reach the industrial areas and the consumers a lot faster and a lot more efficiently than today.

You also suggested a dry port a couple of years ago. What’s happening with that investment?

Flamant: Over the past 10 years, APM Terminals have proven to be an exemplary partner for Jordan. In 2014, a government report deemed ACT as a model Private-Public-Partnership in the country. APM Terminals have indicated all along that they were prepared to support Jordan with other critical infrastructure development projects should they be tendered and make business sense for the Group.

How much have you invested so far and what are your future plans for ACT?

Yoogalingam: The total investment stands at $300 million. ACT employs a little more than 1,000 people, 99.5 percent of whom are Jordanians. The great majority of the cash generated since 2006 has remained in Jordan. The investment we have made in Jordan therefore goes well beyond the capital injected into the company. We will also continue to give back to the community through our fairly comprehensive CSR strategy and its key pillars which are education, environment and well-being.

As to the terminal capacity, we have clear investment plans to develop the terminal capacity ahead of—but also in line with—the market and future demand to become and remain the most sustainable gateway to the Levant.