Khalifa Industrial Zone Abu Dhabi (Kizad) Q&A
The Khalifa Industrial Zone Abu Dhabi (Kizad) has been earmarked by the Abu Dhabi government to play an important role in the long-term growth of the UAE capital’s economy. With the launch of Khalifa Port last year, and the projected completion of the zone’s pre-built warehouses later this year, Kizad is poised to become a force in the region. So, Logistics Middle East spoke to Charles Acworth, Kizad’s head of project development, to find out more.
What role does Kizad play in Abu Dhabi’s 2030 plan?
The 2030 plan is an economic development plan and one of the key tenants is the move away from 60-40 relationship favouring oil and gas. So the growth of the GDP and Abu Dhabi, and the 2030 plan has annual 6% compound growth. Further plans are to move from the 60-40% reliance on oil and gas to one of a non-reliance on oil and gas. Where Kizad comes in is to create a world class industrial zone, and in numbers terms: Kizad is responsible for delivering 15% of the non-oil GDP, which is a huge target for us and therefore we take it very seriously.
What is kizad’s plan for the next 10 years?
The Kizad goal is to create a world class industrial zone, so what we are trying is to create a GDP and employment generating economic zone. It is very different from Jafza. We want to generate manufacturing opportunities. What we are trying to do with Kizad is to make sure the framework is there, the framework in which companies can fit, rather than the all-too-common model of : “We’ll get the company along and then worry about the infrastructure.”
It takes quite a long time for an industrial project to move from delivery to opening. Very often these things take 18 months to 2 years just to build. Some of our projects are over a billion dollars in investments, and over a million square metres of land – a project like that can take two years to get ready to go on site, and another two years to build.
So it is interesting that you have asked about a ten year plan because in ten years this will be radically different from now, with companies running and producing. If you come today you will see a lot of ground and preparation for work that will be in place this time next year.
What are some of the benefits in joining Kizad?
Kizad is an industrial zone. As an industrial zone, it is part of Abu Dhabi. So in Kizad, you can set up like a normal Abu Dhabi company with a 51% local ownership; the other 49% can be local or foreign. But as an investment zone, it allows a company with some foreign shareholders to take a land interest through a 50 year-Musataha deal.
By virtue of its being an investment zone, a company with ownership of 49% can take a land interest in Kizad. Secondly, it also allows a company to bring in raw material duty free and of course they can export duty free. So that is already a significant advantage. Parts of Kizad are designated as a free zone. Where this has an advantage is that the company that comes in can be 100% owned, and where we become the agent to get work permits, visas - and the process is generally quicker. But for example the security checks are the same for both.
What is also important, as it is in an investment zone, is that it is an Abu Dhabi company, so when they export to GCC countries those exports go in duty-free, because it is the same thing as manufacturing in the UAE.
What is the difference between Kizad and Jafza?
With Kizad, yes, we will welcome both marketing and logistics firms, but if you look at Jafza with its 40 odd square kilometres of land, the vast majority is logistics warehousing. A container may come into Jebel Ali, and could then be transhipped without even coming into Jafza. Containers coming in to Jafza may be opened up, and stripped, and then certain goods might go to the GCC. The vast majority of Jafza and Jebel Ali’s traffic is that.
The vast majority of Kizad’s traffic is raw materials coming in, whether they are raw materials produced in the UAE or globally. They come into the manufacturing zone and they change that - EMAL is a good example. EMAL bring in alumina and they convert that into aluminium and then they export that aluminium. So it creates thousands of jobs and creates a significant income in GDP for the UAE.
Yes, – there are those who will ask: should we go to Jafza or Kizad for the free zone bit? And there will be a debate and Jafza will sometimes win and Kizad will sometimes win , but I don’t see that as being a big thing, because logistics, as it stands, is a relatively small part of Kizad.
Within Kizad, Area A is 50km2 and logistics is only 2.7 km: just a small fraction. There are companies that will migrate from bringing in goods through Jebel Ali port and move to Khalifa port: we are already seeing that, because these are products that are going to Abu Dhabi. However they needed it to come through a modern advanced port, which Jebel Ali is, and Mina Zayed isn’t. Now we have Khalifa Port, so there will be Abu Dhabi-bound goods that will come in there.
Kizad’s pre-built warehouses are expected to be completed later this year; can you give us an update on that?*
We need to produce warehousing in Kizad, principally because if you’re going to use the port, and will be bringing a lot of containers into the port, you will need a warehouse. Historically, people have always brought things into Mina Zayed, so there are warehouses there.
From a port point of view, Mina Zayed warehouses are very convenient, but from an Abu Dhabi point of view, they are on the end of the peninsula, so anything that comes out of it, has to come down the road to Mina Zayed.
So Khalifa Port is a better location for that sort of thing. We launched our warehousing last year for leasing, because we’re not going to build 100,000m2 of warehousing and then just sit back and hope that people will come. That sort of business model was fine in 2006, through to 2008, but in this market, it is not. So we launched a pre-leasing commitment - we have pre-leased enough now to go on site and start building. Our contractor, who is called System Construct, is on site building the warehouses, and the date for the delivery is now December of this year. The first 41 warehouses will be delivered in December. We may be able to bring that forward. What we have done is designed warehouses that actually match what tenants want. Going back five or six years, it didn’t matter what you built as far as a warehouse, or office went, the demand was such that you could let them go very quickly. This market is a soft market and you need basically to deliver a product that customers want. So we have designed them according to what our customers want.
We’re putting in high-grade specifications and the market reaction has been very good. We’ve pre-leased much more than I thought we would pre-lease at this stage, so I’m pretty confident that by the time we deliver in December, if it is not fully leased, then it will certainly be up to 85-90%. And then we will move on to phase 2, and if the market demands it, phase 3.
Have you managed to attract the industries that you planned for to Kizad?
I think in the majority of cases it was pre-planned. We set certain industries as being target industries for us, for example, aluminium products, because we have EMAL on the doorstep, and because EMAL can deliver molten aluminium to the front door of certain plots in Kizad. From an energy point of view, a consumer of aluminium saves a huge amount of energy, if they don’t have to melt the aluminium once it is delivered.
Obviously, it also saves costs, and we mustn’t forget its environmental impact as well.
We go right from the primary manufacturing companies to the other end of the spectrum: we have got logistics companies that have taken up plots.
The only industry that we looked at, but didn’t target hard, was food. And the food sector is proving to be big news for Kizad. Companies are setting up regional food processing plants where they will bring in chickens, set up a food-processing plant and chop , package and get them ready for redistribution in the GCC.
* Interview conducted for July edition of Logistics Middle East.