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DP World will not renew its operating contract for PT Terminal Petikemas Surabaya (TPS) in Indonesia at the end of the agreement in 2019, the company has announced.
DP World is a 49% shareholder in TPS, which represents a gross capacity of 2.1 million TEUs (twenty-foot containers) out of 85 million TEUs for the Group.
There will be no material financial impact on the Group as a consequence of this action, DP World said in a statement.
DP World in July signed a technical assistance contract with the Indonesian government in which it would provide the government and port officials with knowledge and experience in increasing efficiencies, training and development for employees and developing multi-modal transport hubs at the the Kuala Tanjung greenfield Port and logistics zone and the Port of Belawan in North Sumatra.
It is unclear whether this latest disagreement also includes the cancellation of those activities.
The global port operator, based in Dubai where it runs Jebel Ali Port, issued a rare rebuke on the Indonesian government in its announcement.
“We are disappointed that the operating contract renewal terms offered by the Indonesian authorities did not meet our threshold for continued investment,” said Sultan Ahmed Bin Sulayem, DP World group chairman and CEO.
“Adhering to strict financial discipline has been crucial to the growth of DP World and on that basis we are not able to renew the agreement beyond 2019,” he added.
The announcement brings to an end two decades of port operations in Indonesia for DP World. Sulayem added that “DP World, alongside other global terminal operators, has built world class port infrastructure in Indonesia that serves the needs of shipping lines, manufacturers, traders and consumers in the region.
“Over the last 20 years, Surabaya has benefitted from DP World’s state-of-the-art, productivity-enhancing systems, training and development programmes, as well as the company’s security, safety and environmental best practices, and we are proud of our success there.”
“We have invested significantly in the terminal infrastructure, which has created jobs and contributed to the growth of both the port and the region,” Sulayem added. “It is unfortunate that the significant positive contributions made by global terminal operators in Indonesia have not been fully recognised, despite our successful track record.”
The transfer of operations will be in accordance to the terms and conditions of the contract, DP World said in its statement.
“When investing in trade infrastructure and services, our goal is to serve our global customers while making a positive economic impact in the countries in which we work and delivering returns to our shareholders,” said Sulayem. “We remain committed to investing in Asia and all geographies that have an appetite for foreign direct investment.”