Dubai logistics: growth and challenges

issa_balushDubai has undergone tremendous growth over the years. Today, it enjoys its favorable place as a significant player in international trading and transport logistics. This growth is a result of the Dubai government’s strategy in developing sectors that have been the key contributors to economic growth, including transport and logistics, as detailed in the Dubai Strategic Plan (DSP) 2015.


DSP 2015 leverages on the UAE’s foremost advantage, its inherent strategic location on the globe.  The UAE is right in the middle of the Far East and Europe and sits at the crossroad of international trade and commerce between the Eastern and Western worlds. Due to its location, the UAE is considered to be the gateway to the world’s most progressive markets, including Africa, India, and China.

The Growth
This position on the globe has cemented Dubai and the UAE’s place as a leading sea-air multimodal transport hub in the world – a cost-effective transport mode that provides considerable savings in transit time and freight cost, compared to pure sea freight or air freight mode. Sea-air allows transit time of only 15 to 17 days from origin port to a destination airport, and savings on cost of as much as 50% compared to pure airfreight.


Indeed, UAE’s position as an international logistics hub proved to be significant during the recession. It was one of the strengths that the government focused on in order to weather the effects of the crisis. While other economies were flagging, the country proved to be resilient as its merit as a logistics hub continued to attract investors from abroad.


In 2009, the UAE accounted for about 0.4 percent of the world’s total foreign direct investment (FDI), 1.5 percent of that of developing countries, and over 10 percent of FDI into the Arab countries.  Exports, particularly non-oil, also remained robust. In 2009, the UAE’s exports and re-exports increased despite the global financial crisis to reach $209.6 billion. Exports and re-exports of non-oil products also increased to $139.7 billion.


In addition, the government’s support of businesses and efficient customs facilitation add to Dubai’s appeal as a prime transit and re-export hub, handling an average of 70 percent of air cargo in the Middle East per year. This dominance is expected to continue, as the International Air Transport Association (IATA) forecasts that the UAE will be the sixth largest in the world in terms of international freight, with a projected 2.75 million tonnes handled by 2014.

 
With projects such as DWC-Al Maktoum International Airport, Dubai Logistics City, Dubai Logistics Corridor, the Khalifa Port which is being constructed in Abu Dhabi, and the planned GCC-wide railway, the UAE is expected to remain a logistics hub well into the future.

The Challenge
The growth of Dubai and the UAE as a logistics hub also poses challenges, foremost of which is the issue on cargo security. This is a pressing concern, especially as the country positions itself to be an international multi-modal logistics platform.
As screening of cargo become more stringent, the challenge for officiating bodies in the country is to strike a balance between addressing the need for cargo security while permitting international trade and commerce to thrive.

 
One idea that comes to mind is a formation of a think tank, composed of industry specialists from all economic sectors, who will each provide smart solutions that will contribute to the creation of resolutions that will ensure the country’s progress moving forward.
We are at a crossroads – it is important for us to look back at the country’s successes and not lose track of the concepts that made Dubai and the UAE an international hub.
Conclusion


The good news is industry analysts believe we’re on the right track.
In 2010, the FTSE Group, an index profiler jointly owned by the Financial Times and the London Stock Exchange, declared the UAE an emerging market. An emerging market is an economy that is currently in the process of rapid growth, such that a wealth of opportunities is offered for investment.
Now, recently Morgan Stanley Capital International (MSCI), another index profiler, which currently categorizes the UAE as a frontier market (a category lower than emerging markets), announced that it will evaluate the UAE for possible promotion to an emerging market and will give its final decision in December.


In all, I believe the UAE is still a fantastic growth opportunity even as profilers have varying opinions on to which economic category the country belongs. It will always have the distinct advantage of being equidistant from the Far East and Europe, and a great hub for the GCC countries.
Strategic geographic location is a significant aspect in the UAE’s success. Many goods flowing between Africa and Asia and between Europe and Asia pass through the Middle East. Despite the tough times, businesses here have the advantage of being in close proximity with emerging markets.
Therefore, the UAE is definitely an exciting place to be at – perhaps, all the more now, as we anticipate the country’s emergence as the future and next bright star in the international arena of major economic players.

Issa Baluch is the president of the Dubai-based National Association of Freight and Logistics (NAFL); and serves on the Board of Directors of the International Federation of Freight Forwarders Associations (FIATA president, 2003-2005); and The International Air Cargo Association (TIACA). He is credited with pioneering the thriving sea-air combined transport freight business in the UAE and authored two books on logistics, namely, Transport Logistics: Past, Present and Predictions, which is available in four languages; and the recently launched, Transport Logistics: The Wheel of Commerce. For more information, visit www.transportlogistics.com and www.issabaluch.com.