Dr Daniel Tarka
The Chief Executive Officer of Aerotropolis, Dr Daniel Tarka, told Chinedu Eze that both foreign and local investors have made $400 million investment commitments in the Aerotropolis project. Excerpts:
Is the Aerotropolis project still on?
Yes. Aerotropolis is the baby of the aviation industry. It is still on. It is a platform where the aviation sector contributes to the economy in so many dimensions. Airports have been traditionally viewed as a place where passengers and cargo transit but this view has changed over a period of time now and commercial entities, shopping centres, office complexes are now built within the airport where revenues can be enhanced. This is the whole concept and I think that this is the right time for us to develop this in this sector.
When you say that the Aerotropolis project will be private sector driven, what do you mean?
Aerotropolis will be 100 per cent private sector driven. This means that it is away from the bureaucracy of government, if its initiative and focus are private sector driven, it means that funds don’t need to be approved by government; government is not funding any part of the Aerotropolis. It is organised private sector; investors from overseas and local are putting funds together to help to drive this initiative without the bottlenecks of government.
This is to ensure that the best practices all over the world can be applied to this business models that it will have a smooth sail.
In the aviation master plan where is the Aerotropolis located; what is the symmetry between the Aerotropolis, the fresh cargo terminal projects and the establishment of other facilities?
The Aviation Master Plan calls for massive infrastructural changes in the aviation sector. But in order to do this, every sector must be engaged properly because the aviation sector is highly technical, highly skilled driven and a highly competitive sector.
If you look at China today, the country is building 400 new airports in the next 10 years; 30 of those airports will be Aerotropolis. India is building 300 new airports and half of that number will be Aerotropolis. This is because airports are now the market focus for global economy. You realise that 40 per cent of passengers and cargo arrive their destinations largely through air transportation.
So airports are very important and the economies and the synergies around the airport or non-aeronautical income generation are very important. The Aviation Master Plan understood this and in the last two years what the Ministry of Aviation did was to try to understand this synergy between the public sector and the private sector, where the private sector can come in so that we allow the interplay of both sectors in order to grow the industry and the economy, as it is in other parts of the world.
There are fears that as government transits this policy the whole Aviation Master Plan will be affected. Do you nurse that fear or do you see inherent in the arrangement a continuity?
When the National Civil Aviation Policy was being drafted, it was a combination of all aviation policies in the last 10, 15 years. Policies are dynamic in themselves. They have to change with the industry. Technology is changing the way we move people; the way we move cargo.
The industry changes, policies are not static, but I believe that those fears are legitimate. Of course, the most difficult thing for people to understand is change. This change is change in a positive direction and I believe that the new Supervising Minister and the new team in the Ministry of Aviation understand that the changes that have taken place in the aviation sector in the last two years must continue for the benefit of not only the aviation sector but the general economy.
When this Aerotropolis project is realised in future what are the things Nigerians should expect?
For the Abuja Aerotropolis we are expecting to have half a million square meters of retail, exhibition, business offices, hotel and entertainment complexes near the airport, including residential complexes where aviation and non-aviation related businesses will synergise for convergence of commercial enterprises.
If you look at the Aerotropolis in Kuala Lumpur, Amsterdam, Paris we see this synergy between the airport, the environment, some are 10 to 15 miles from the airport but linked and you see that synergy of commercial enterprises, retail enterprises, taking advantage of the airport locations and the fact that goods and services and the passengers can be moved at the shortest time and distance from the airport to these business centres.
We are expecting that in the next two to five years you will see Abuja, Lagos, Port Harcourt, Kano and Enugu Aerotropolis. And they will be in the same rank with what is obtained in Kuala Lumpur, Dubai World Trade Centre, Hong Kong, Amsterdam and Frankfurt.
Let us look at the Nigerian market and the possibilities. Many people believe that the number of people that travel by air in Nigeria is small compared to the country’s population. This has to do with the general economic situation. How can you realise this project in an environment where there is no drive and incentives to travel by air and how do you believe the project will stimulate economic development around the airport?
If you look at the geographical location and the fact that we have the population you will realise that we will meet our target. Let me take you to South Africa, for instance. The South African President three months ago declared that the South African tourist industry made $304 million only from Nigerian tourists.
This is only from Nigerians visiting South Africa. This tells you that income multiples that can be generated from Nigerian customers and passengers is high. Also Nigeria is a natural hub for the West African sub region. Lagos is a hub and market for those going to Ghana, Ivory Coast and the whole West Coast. Kano could also be a hub for Central to North Africa including Chad, Niger and others.
So the population is there. Economics have proven to us that this can work because of our geographical position and of course our population.
So if we had 12 million passengers passing through Nigerian airport in 2010; that number is growing and the projection is by 2020 it could reach 30 to 40 million passengers.
That is a lot. And don’t forget that for every one dollar spent in the aviation sector, six jobs are created. So economically it is beneficial to everyone, it is beneficial to the country and it is beneficial to our GDP. It is also good for employment for our teeming youths. The economic support of the Aerotropolis project is tremendous.
Where does fresh cargo come in? Is it part of the Aerotropolis project?
Yes and no. Yes in the sense that some of the airports for Aerotropolis are also designated perishable cargo airports. There are 14 perishable cargo airports. Lagos is part of it. Lagos also has Aerotropolis. Abuja is also perishable cargo airport and it has Aerotropolis.
It is the same thing with Port Harcourt, Kano and Enugu. Yes some of the airports have perishable cargo terminals and also have Aerotropolis concept attached to them.
Yes, on both perspectives they will work. Perishable cargo refers to the terminal, the processing, the timing, the warehouses and the fact that we can reserve and preserve perishable goods in those airports and export them within a reasonable time to super markets overseas.
It will also allow passengers to transit and travel to other places. So it is yes and no. some airports don’t have Aerotropolis, they won’t be part of it, but some airports have both perishable terminal and Aerotropolis as well.
What is your optimism that every year government will be voting money to support this project?
Aerotropolis as I earlier said is 100 per cent private sector driven business. Government is not funding any part of the project. What the Ministry of Aviation is doing and by that, the government is to provide the policy and regulatory environment so that there will be level playing field for Aerotropolis to thrive.
Government is not providing any finding, whether seed or second phase or third capital Aerotropolis.
How hopeful are you about attracting investors both local and foreign to invest in the Aerotropolis project?
As I am speaking to you today we have commitments from foreign investors to over $400 million of private investment in the Aerotropolis Nigeria project. We also have five Nigerian banks that have indicated interest to participate in the infrastructural development of the Aerotropolis project.
It is going well; we have over $400 million commitment from overseas partners who are prepared to build trade centres, hotels, get into power, get into the telecom sector within the Aerotropolis project. So we are satisfied with that.
But what we are trying to do is to create a balance between local and foreign investors so that we have the opportunity for our Nigerian operators to participate in this wonderful project and also to employ Nigerians who will participate from the infrastructure development and other things.
What is your projection of the employment figures that would be needed for the five Aerotropolis projects in the five international airports in the country?
In the first three years of Abuja airport Aerotropolis we expect to recruit 55,000 people. This is because we are going to start with infrastructure development; with the provision of water, roads, power and then we go into the physical structure of the hotels, the trade centres, the Nollywood amphitheatre, shopping districts and residential districts. This should be phase by phase, but in the first phase we are expected to recruit 55,000 Nigerians on the project.
Do you think the rebasing of Nigeria’s economy may have attracted the foreign investors who are now committing to the Aerotropolis project?
The rebasing of Nigeria’s economy has given the country positive outlook and credit, and endorsement to every sector of Nigeria’s economy. It has boosted investors’ confidence in the Nigerian projects and Aerotropolis is going to benefit from that.
It has really helped us to attract more foreign investment. We have investors from Singapore, from Malaysia, from China, from Dubai, from South Africa and the total commitments as I said earlier is over $400 million.
Don’t you think insecurity fears may impede the project?
When 9/11 happened in the US the American business did not stop and development was going on in all the 50 states in America. I think this issue about security is overhyped as far as I am concerned. I think that every country has its unique situation, has its security challenges but business must continue.
For every business plan, for every company, they know that it is part of what they must contain and it is factored into their business plan, into their projections, so we have that factored into our plan.
What will you say to the sceptics of the project?
Well, every laudable idea has had problems from the beginning all over the world. I can name so many instances, but once there is a vision, there is a projection and it is followed through; government all over the world are not getting involved in businesses. Governments are privatising; it has been going on for the last 20, 30 years.
Private sector is what drives the economy and the Nigerian government is not immune to it. The private sector must drive Nigeria’s economy. Yes there will be scepticisms, there will be doubts but we have our projections and we have investors who have indicated interest. I believe that if we can achieve 80 per cent within the next two years I think we will have success.
How far have non-aeronautical revenues in the aviation sector grown?
The Air Transport Action Group (ATAG) in 2010 estimated that non-aeronautical revenue rose to 46% in 1995 to 57% in 2000 and to record 54% in 2006.
For some large airports, non-aeronautical revenue now exceeds 60% of total revenues. This figures show significant contribution that Aerotropolis could have on the Aviation sector and the economy in general.
Government policies are sometimes difficult to enforce, and it appears as if there could be changes in them.
Policies are dynamic. The new NCAP 2013 is a combination of several reviews including the Aviation Reforms of 1995, the Aviation Policy of 1989 and the National Civil Aviation Policy, NCAP 2001.
The main aim is to develop a broader strategic plan to achieve intensive study on safety, security and comfort of passengers. The emphasis is thus designed to make the aviation industry pivotal to the economic growth of Nigeria.
The NCAP 2013 is of course guided by the International Civil Aviation Organisation (ICAO) Standards and Recommended Practices (SARPs) for the regulation of the aviation industry which contracting States are obliged to implement.
In addition to the SARPs, there are other international Air Law Instruments including Conventions, Treaties and Protocols adopted in the field of Civil Aviation that require ratification, domestication and must be complied with by all ICAO Contracting States.
What are the benefits of Aerotropolis in terms of tourism and travel?
The resources deployed by the aviation sector as are measured by the Gross Value Added (GVA). Airlines operating in Nigeria carried about 12 million passengers (2010) and 119000 tons of freight a year to, from and within Nigeria.
These figures have grown approximately about seven per cent consistently in that two years and through the supply chain employ about 33,000 people. Overall, the airlines contribute over N58 billion to the economy and support over 100,000 jobs directly in Nigeria.
Thus the GVA per employee in the aviation sector is estimated to be N3.5million; this is nearly 7 times higher than the average production for the economy as a whole (estimated at N527, 000).
Tourism, both for business and leisure purposes makes a large contribution to the Nigerian economy with foreign visitors spending just over N110billion in Nigerian Economy each year. Over 60 per cent of these institutions came by air such that foreign visitors travelling by air spend approximately N67billion.
Oxford Economics /ATAG estimate that in 2010 the travel and tourism sector indirectly employed 814,000 people and supported the industry through its supply chain a further 529,000 people.
Tarka: Aerotropolis Has Attracted $400m Foreign Investment Commitments