Global Supply Chain April 2014

AL MAJDOUIE’S GROWTH

R A K F T Z E X PA N D S Roadmap to progress RTA paves Dubai’s future

Rerouting the supply chain Dubai’s plan to be #1

The container revolution ENHANCING THE BUSINESS OF LOGISTICS

Innovatively reusing containers

45 38 16

GCC RAIL OVERVIEW

April 2014 Issue 03

- -

SOHAR

PORT the future beckons

Almajdouie Logistics Logistics Almajdouie of of record for worldrecord is awarded transportation theirtransportation fortheir a aworld is awarded freight" "the heaviest item moved by freight" road heaviest item moved byroad "the Almajdouie Logistics is a proud contributor to Saudi's national growth by hitting a new world record is forainstalling the world’s heaviest evaporator produces Almajdouie Logistics proud contributor to Saudi's nationalwhich growth by hitting a enough water to nourish over 300,000 people per day. new world record for installing the world’s heaviest evaporator which produces enough water to nourish over 300,000 people per day.

This endeavour involved months of preparation, planning and engineering: including trailer computation; site surveying and route simulations - swiftly and This endeavour involved months of preparation, planning and engineering: successfully executing a massive delivery equalling the weight of 5000 cars!

including trailer computation; site surveying and route simulations - swiftly and successfully a massive weight of 5000 cars!

Pleaseexecuting visit our website to finddelivery out moreequalling about our the "Power to deliver" Please visit our website to find out more about our "Power to deliver"

Our Partners:

Our Partners:

P.O. Box 31411, Kingdom of Saudi ArabiaArabia Tel +966 8198251 +966 3Fax 8115566 : logisticsworld@almajdouie.com P.O. Box336, 336,Dammam Dammam 31411, Kingdom of Saudi Tel3+966 13 Fax 8198111 +966 Email 13 8114249 Email : logistics-sales@almajdouie.com

Transport, infrastructure and connectivity Compiling this issue has been exciting. Talking about the region which is seeing a major growth period is such good news. Everyone is extremely busy streamlining their businesses, new businesses want to be ready for the opportunities around the corner and older ones are embracing change and planning ahead, tying up with future government initiatives in order to be a part of the next generation.

The highlight has to be the Dubai World Central story (Rerouting the supply chain Pg 38-43). Speaking to Mohsen Ahmad was definitely an eye opener.

During our conversation, he said we can get the freshest, choicest, North Atlantic salmon on our plates in Dubai within a few hours of it being fished somewhere near Greenland or Iceland.

Well, Dubai can get all the freshest, newest, choicest anything because it is so widely connected, because it has worked so hard on the backend with its airline, roads, ports, routes, tourism, you name it. All of it is not an easy feat to achieve. Dubai just makes it look easy.

A few weeks ago when I was visiting Dubai Airports’ new training and study centre, I read a quote by UAE Vice President, Prime Minister and Ruler of Dubai His Highness Sheikh Mohammed bin Rashid Al Maktoum. It went like this,“Most people talk, we do things. They plan, we achieve. They hesitate, we move ahead. We are living proof that when human beings have the courage and commitment to transform a dream into reality, nothing can stop them. Dubai is a living example of that.” How energising are these words! Spoken by a true leader.

Just brings me back to the theme of the issue infrastructure and intermodal connectivity - if we prepare ourselves with the infrastructure (the longest and toughest part), success is bound to happen.

Hope you enjoy the issue.

Munawar Shariff Managing Editor munawar@signaturemediame.com

2 APRIL 2014

SIGNATURE MEDIA FZ LLE P. O. Box 49784, Dubai, UAE Tel: 04 3978847/3795678 Email: info@signaturemediame.com Exclusive Sales Agent Signature Media LLC P.O. Box 49784, Dubai, UAE Publisher: Jason Verhoven jason@signaturemediame.com Director: Deepak Chandiramani Deepak@signaturemediame.com Managing Editor: Munawar Shariff munawar@signaturemediame.com Art Director: Raveendran Production Manager: Roy Varghese Roy@signaturemediame.com

Printed by United Printing Press (UPP) – Abu Dhabi Distributed by Tawseel Distribution & Logistics – Dubai

Contributor’s opinions do not necessarily reflect those of the publisher or editor and while every precaution has been taken to ensure that the information contained in this handbook is accurate and timely, no liability is accepted by them for errors or omissions, however caused.

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April 2014 Issue 03

ENHANCING THE BUSINESS OF LOGISTICS

22 04 News

34 Strong market leader Al Majdouie has a very focussed growth plan

10 Oman – Towards

economic diversification

Oman sets its focus on manufacturing

16 Roadmap to progress

RTA is mapping Dubai’s roads to match its ever expanding population

22 Sohar Port – ready

38 Rerouting the supply chain

DWC with its intermodal connection is rerouting the traditional supply chain

45 The container revolution

34

Reusing the discarded shipping container

to take the lead

48 Oman the central hub

The port and freezone gear up to attract more business

Analysing Oman’s potential

28 A connected region

A new era is unfolding for the GCC soon to be connected by rail

16

56 Ready for more trade

How Ras Al Khaimah freezone is attracting more customers

58 Megatrends to watch for

Coverage of Frost and Sullivan’s event – Growth Innovation and Leadership

48

60 Hardwork = success

Dubai Trade’s CEO, Eng Mahmood Al Bastaki’s, leadership rules APRIL 2014 3

Emirates - first airline to launch giant A380 double-decker service from Gatwick

Emirates, launched its A380 service to Gatwick on March 30th representing a 15 per cent capacity boost for the UK’s South East.

Emirates was the first carrier to operate an all-A380 service out of Heathrow and is now the first to lead the service out of Gatwick – the same airport from which Emirates flew its inaugural UK flight 26 years ago.

Speaking about the launch, Hubert Frach, Emirates Divisional Senior Vice President Commercial Operations West said, “Six years after launch, the Emirates A380 is still a customer magnet.

Airports the world over are eager to have the Emirates A380 on their roster and today’s launch to London Gatwick is representative of that demand.”

In order to become A380 compliant, London Gatwick has invested £6.4m (US$ 10.6 million) in new facilities, including

the widening of three runway rapid exit taxiways and modifications to taxiways between the runway and the stand.

Guy Stephenson, Chief Commercial Officer of London Gatwick, said, “The A380 is one of the modern marvels of aviation engineering and as such we have dedicated part of Gatwick’s £1 billion (almost US$ 1.7 billion) investment in transforming its infrastructure, creating a stand designed specifically with the world’s largest aircraft in mind. We are pleased to welcome a scheduled A380 service with Emirates, an airline that Gatwick has a long history with.”

“Emirates and Gatwick have once again been working closely together in the shared goal of providing the best possible passenger experience,” added Frach.

“It is fitting that Gatwick’s renewed

airBaltic and Eithad expand codeshare Latvian flag carrier airBaltic has expanded its codeshare agreement with UAE national airline Etihad Airways to include routes from Amsterdam, Brussels, Frankfurt, Munich and Zurich (commencing from

4 APRIL 2014

June 1, 2014) to Abu Dhabi and Riga.

Subject to government approvals, the newly added codeshare routes will see airBaltic and Etihad Airways offer 37 connecting return flights per week between Riga and Abu Dhabi.

spirit of ambition, as symbolised in their modernisation programme of recent years, will now be joined by Emirates’ own symbol of ambition and connectivity, the world’s largest passenger jet. Now, more people in the South East of England will be able to connect to more destinations and that is great news for holidaymakers and business travellers alike.”

Emirates is a strategic investor in the UK employing over 700 staff and contributing £260m (US$ 432.6 million) into the economies of the six hubs that it operates to. The launch of this A380 has not only allowed Gatwick to invest, but also supports suppliers such as Alpha LSG, who are now tasked with producing over 1,000 additional meals each week.

The airline’s commitment to the A380 will also guarantee jobs at companies like AIM Aviation, a British company based in the South East that supplies furniture for the A380 upper deck, including the iconic on-board lounge for First Class and Business Class passengers. Airbus itself employs around 10,000 people in the UK, and Emirates’ announcement last year of a further 50 new A380s guarantees those jobs for many years to come.

The daily A380 service will replace the existing afternoon Boeing 777-300ER flight EK 009, providing customers with an additional 9700 seats per month in both directions.

DP World provides Borouge with world class distribution platform

DP World, UAE region and Borouge, a provider of innovative, value creating plastics solutions, signed a contract through which DP World will support the distribution of Borouge’s products as one of Borouge’s several gateways to export its products to its customers in the UAE and around the world.

The contract was signed by Abdulaziz Alhajri, CEO of Abu Dhabi Polymers Company (Borouge), and Mohammed Al Muallem, Senior Vice President and Managing Director, DP World, UAE region. The signing ceremony took place at Borouge’s headquarters in Abu Dhabi in the presence of senior officials from both companies.

Under the terms of the signed contract, DP World will provide Borouge with value added logistic services at its flagship Jebel Ali Port including the technologydriven handling operations of containers and the wide connectivity the port provides regionally and internationally.

Borouge in turn will benefit from the availability of the port’s storage facilities, staffing and seamless shipping to its customers globally.

“We are pleased to collaborate with such a strong international port services provider like DP World to distribute our products shipped from our plants in Ruwais to our customers around the world,” said Abdulaziz Alhajri, CEO of

Abu Dhabi Polymers Company (Borouge).

“The signing of this contract with DP World embodies our commitment to ensure fast and safe shipments of our products looking forward to the high quality services DP World will be providing us.”

Mohammed Al Muallem, Senior Vice President and Managing Director, DP World, UAE Region, said, “DP World is proud to provide Borouge with valueadding, efficient general cargo handling services and unparalleled sea connectivity through Jebel Ali Port, with 98 weekly services to over 115 direct ports of call.

We provide a cost-effective distribution platform that allows Borouge to quickly deliver to its customers the quality Abu Dhabi-made products they expect from this global leader of innovative plastics solutions.”

“The contract will enable Borouge to benefit from Jebel Ali’s modern technology, which supports the supply chain with gate automation systems and paperless processing of cargo documentation through a single electronic window.”

Borouge will also benefit from the semiautomated new capacity coming on line this year, which will take capacity at Jebel Ali Port to 19 million TEU (twenty foot equivalent container units) and enable Jebel Ali to handle as many as 10 of the new generation ultra large container ships (ULCS) at the same time.

Al Futtaim in expansion mode The region’s logistics sector is poised to grow exponentially and Al-Futtaim Logistics is gearing up to meet the future requirements by investing in new infrastructure, expanding geographic reach and service innovation.

“Over the past year, more focus was placed to expand beyond our core offerings extending Al-Futtaim Logistics’ capabilities to provide comprehensive logistics and supply chain solutions. We are now

gearing up for 2020 and beyond with considerable investment in infrastructure, value added services such as home delivery and assembly services and our maiden foray into fashion logistics,” said Raman Kumar, Acting Managing Director of Al-Futtaim Logistics.

Al-Futtaim Logistics recently opened its 50,000 sq metre warehouse, distribution and office facility in JAFZA South Zone and Dubai Industrial City to accommodate

growing regional needs for costeffective storage solutions for its clients.

Also the newly opened air hub in Dubai World Central and Sharjah International Air Cargo Terminal is ideally positioned to engage and execute charter freight operations as the company explores new markets and improves services.

The company has invested in a dedicated home delivery fleet to service the needs of its clients.

The investment called for a 30,000 sq metre distribution centre, fleet and technology that is dedicated to offering a centralised and automated home delivery platform in real time live trading environment.

Further diversifying its services portfolio, the contract logistics division of Al-Futtaim Logistics recently made its first venture in to fashion logistics with the opening of a 15,000 sq metre facility based in Jebel Ali Free Zone, to handle over 220,000 units of designer children, men’s and women’s wear.

APRIL 2014 5

Welcome to Salalah Hub Ready to serve local, regional and global business Connect your business to Europe and Asia with the fastest transit times from the region. Utilize Oman’s free trade agreements and tax-free export benefits with the USA and Singapore. Salalah Free Zone offers 100% foreign ownership with competitive rates in a stable and business-friendly environment.

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www.portofsalalah.com

Will Qatar 2022 provide the region with more jobs?

Legacy events often initially provide employment in construction, tourism and infrastructure but can fall short in their provision of longer term opportunities. Once the audiences have left, efforts to maintain the drive and enthusiasm to continue the legacy commitments can often stagnate.

With the recent London Olympics, Sochi Winter Olympics and the forthcoming Brasil World Cup. People are looking to events like the Qatar World Cup to make the employment opportunities more sustainable and have longer term impact.

Qatar is investing billions of dollars over the next five years to transform Qatar into a commercial and sporting hub. The Qatar National Vision 2030 hopes to “prepare Qatar’s students to take on the world’s challenges and become tomorrow’s innovators and entrepreneurs … and to equip Qatari youth with the skills and motivation to contribute to society”.

Common Purpose, the global leadership development organisation, is bringing together 45 leaders from across Middle East and North Africa, and Europe to solve the challenge -”For every 10 million Euros invested in legacy events, how can we ensure that 100 direct jobs are generated by and for young people in business and social enterprise?”

This cross-sector group of leaders will be taking part in Itijah, a four-day Venture run by Common Purpose, in partnership with Shell and Silatech. “Youth unemployment is an increasing issue for both regions and as cities invest heavily in large scale events, there is a potential for them to generate employment and help to address youth unemployment in particular” says Sir Graham Boyce, Senior Adviser, Bank of America Merrill Lynch and Chair of Itijah Advisory Group.

“Itijah brings together bright new leaders from a wide range of disciplines and nationalities. I believe they will be able to give political leaders fresh ideas on how to meet this challenge.”

Participants on the Venture are from Alexandria, Amman, Amsterdam, Doha, Frankfurt, Istanbul, London, and Tripoli, and are representing organisations as diverse as Alexandria Business Association, Jordan River Foundation, Mastercard, Ozyegin University, Biedermann Consulting, Arab Youth for Climate Movement and the British Council.

Itijah, meaning ‘direction’ in Arabic, is part of a series of Ventures run by Common Purpose that will expand, enrich and energise relations between two or more locations. It will take place at the Qatar Shell Research and Technology Centre in Doha from 31 March to 3 April 2014

Northrop Grumman highlights global defence and security capabilities At the recently held Doha International Maritime Defence Exhibition and Conference (DIMDEX), Northrop Grumman Corporation highlighted a range of its global defence and security solutions, including airborne early warning and control systems, aerial surveillance and mine countermeasures.

Northrop Grumman has had a presence in the Middle East for more than a decade. The recent appointments of Walid Abukhaled and Doug Raaberg as chief executives in the Kingdom of Saudi Arabia and United Arab Emirates respectively, enhances the company’s presence and further positions Northrop Grumman for success in the Middle East region as the company continues to broaden its global market focus.

“Northrop Grumman’s strong relationship with the Gulf Cooperation Council countries goes back many decades and is built on a legacy of trust and performance,” said Abukhaled. “Our objective is to continue to work closely with our customers to build on this partnership and to provide the most advanced long-term capabilities to help meet the needs for enhanced defence and national security across the region.”

The world-leading airborne early warning capabilities of its E-2D Advanced Hawkeye will be highlighted in Northrop Grumman’s exhibit demonstrating the E-2D’s capabilities for military and civil applications.

The E-2D Advanced Hawkeye couples a newly designed electronically scanned radar with a matching suite of sensors, avionics, processors, software and displays to provide the most technologically advanced command and control capability available worldwide. The new AN/APY-9 radar is the backbone of the E-2D Advanced Hawkeye and provides greater flexibility and significantly improved detection and tracking over all terrains.

Northrop Grumman has delivered 12 E-2D Advanced Hawkeye aircraft to the U.S. Navy and initial operational capability with the Navy fleet is on track for 2015. The programme entered full-rate production in early 2013 after being declared operationally suitable and effective following a robust 10 month initial operational test and evaluation by the Navy.

APRIL 2014 7

GrowthGatebacked Able Logistics Group completes leveraged recapitalisation GrowthGate Capital, the GCC specialist investment firm, today announced that its portfolio company Able Logistics Group (“Able”) has completed a leveraged recapitalisation. GrowthGate Capital had acquired a strategic stake in Able, a Dubaibased logistics and transport service provider, in Q4 of 2007, and over time amassed a controlling stake therein. With this latest recapitalisation, and from antecedent dividend repayments, GrowthGate Capital has realised circa 158 per cent return on its original investment, whilst still controlling 70 per cent of Able’s equity.

GrowthGate Capital intends to set Able on course for an IPO in 2014 in the UAE and is actively engaged in the process of selecting investment bankers for such deal. In light of the immense infrastructure developments (ports, airports, trains and roads) and in anticipation of major events, including but not limited to Expo 2020 in the UAE, an IPO for a logistics and transport company would constitute a landmark deal for the local stock market.

The recapitalisation was led by Bank of Sharjah, which acted as sole adviser and principal lender on the deal. Proceeds from the recapitalisation were used, along with cash on hand, to repay existing debt and pay a cash dividend to shareholders. Haythem M. Macki, a founding partner in charge of managing GrowthGate Capital’s portfolio, said, “We are very pleased with our investment in Able, which has performed exceedingly well since becoming part of our portfolio.

Through this successful recapitalisation, our investors received a significant cash dividend while retaining a controlling ownership of this growing company.”

8 APRIL 2014

Dubai’s foreign trade hits AED 1.329 trillion in 2013 With a new peak for non-oil foreign trade in 2013, Dubai’s rising growth in foreign trade culminates with a volume of AED 1.329 trillion, achieving an AED 94 billion increase from the 2012 value which totalled AED 1.235 trillion.

Foreign trade has successfully managed to keep up with Dubai’s new economic surge; based on a wider diversity of growth, where various economic sectors contribute with convergent rates. In response to this massive leap in economic performance, foreign trade hits a growth rate that exceeds twice WTO’s forecasted 2.5 per cent global trade growth.

This soaring economic performance surely solidifies Dubai’s position at the forefront of the global economic scene.

Being awarded the right to host Expo 2020 is a clear testament by the international community to Dubai’s economic ability, and with the arrangements for such an event - considered the world’s greatest and most highly-celebrated international trade exhibition - the emirate enters a new stage of continuous rise to new peaks of performance and achievement. This would ultimately make Dubai a regional leader and an international competitor according to all global indicators, most notably those of competitiveness, confidence and happiness.

“We are driven by the comprehensive and insightful vision of H.H. Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice-President and Prime Minster and Ruler of Dubai, about the nature of the new stage of Dubai’s economic course,” said Ahmed Butti, Executive Chairman of Ports, Customs and Free Zone Corporation and Director General of Dubai Customs. “We are set to develop and implement a creative work strategy that is able to keep pace with a stage where Dubai embarks on a more prominent role in the global economy, by means of developing the emirate’s ability to efficiently link with regional

and international markets. Building on its advanced infrastructure and increasing competitive advantages, the emirate will serve as gateway to markets that virtually extend across the world.”

Mr Butti continued, “In line with Dubai’s pivotal role in global trade, we work to develop Dubai Customs’ array of services so as to respond efficiently to the global market expansion. Dubai foreign trade growth of eight per cent reflects the emirate’s capability to enhance its trade dealings at all levels. The emirate’s imports saw an increase of AED 74 billion to reach AED 811 billion in 2013, compared to AED 737 billion in 2012. On the other hand, exports and re-exports increased by AED 20 billion with a total value of AED 518 billion, compared to AED 498 billion registered last year.”

Furthermore, Dubai’s direct trade with the outer world rose to AED 846 billion, up from AED 808 billion. Dubai free zones trade volume recorded AED 467 billion, compared to AED 417 billion. Customs warehouse trade went up from AED 10 billion to AED 16 billion.

During 2013, Dubai maintained a relative diversity in its external markets.

India tops Dubai’s major trade partners with a total trade volume of AED 137 billion representing a 10% share. China comes second with a value of AED 135 billion which accounts for around 10%.

The USA is third with AED 86 billion, that is a 6% share. Saudi Arabia rises to the fourth position with a total share of four per cent amounting to AED 56 billion, then the UK with a total share of approximately four per cent accounting for AED 54 billion.

As far as Dubai’s imports are concerned, China leads the list of trading partners followed by the USA then India. As for reexports, Saudi Arabia comes first, followed

by India then Iraq. India, Turkey and Switzerland are respectively the leading partners of Dubai in terms of exports.

DP World’s new terminal at Jawaharlal Nehru Port

A major milestone in the development of the new DP World terminal at India’s premier gateway port, Jawaharlal Nehru Port, was achieved recently with the ceremonial laying of the foundation stone by the Honourable Minister of Shipping Shri GK Vasan.

The ceremony at the Nhava Sheva (India) Gateway Terminal site was held in the presence of the Honourable Minister of State for Shipping, Shri Milind Deora, the Chairman DP World, HE Sultan Ahmed Bin Sulayem, and HE Shri NN Kumar, Chairman of Jawaharlal Nehru Port, along with dignitaries from the Government of India, senior members of Jawaharlal Nehru Port Trust and DP World, and the Indian trade community.

HE Sultan Ahmed Bin Sulayem, Chairman, DP World, said, “Today is an important milestone for us and we thank the Honourable Minister Shri GK

Vasan for laying the foundation stone for the Nhava Sheva (India) Gateway Terminal. The new development would not have been possible without the dedication and commitment of the Government of India to India’s trade community. As the busiest gateway and hub in India, Nhava Sheva has been constrained in the past by lack of facilities, which has impacted trade.

We at DP World are proud to bring new capacity to this vibrant city and the fast growing economy of India.

“The new terminal will serve India for generations to come and help speed goods to market, stimulating trade, contributing to economic growth, which in turn contributes to the development of communities and individuals.”

Anil Singh, Senior Vice President and Managing Director, DP World Subcontinent said, “For the last five years, India’s premier port has been in critical need of capacity with container trade rising. The building of greater capacity is part of the port’s long term vision. Nhava Sheva (India) Gateway Terminal will provide the immediate relief that the trade community urgently requires and we at DP World are fast tracking the project to commence operations as early in 2015 as possible and we have already placed the order for the cranes that will be installed.”

Once constructed, the new terminal will add 800,000 TEUs (twenty foot equivalent container units) of container capacity to the port, and help ease congestion, as the port is currently operating beyond capacity.

DP World is investing US$200 million to build the terminal.

With one of the strongest emerging economies in the world, and a burgeoning middle class population, India offers immense potential for growth. With Nhava Sheva (India) Gateway Terminal, DP World will contribute even more to India’s growth, offering customers the ability to grow and expand their business in India more efficiently.

APRIL 2014 9

OMAN towards economic diversification

10 APRIL 2014

COUNTRY REPORT

Trends and Challenges for Logistics in Oman GDP and Federal Finances GDP recorded an estimated growth of 5% in 2012, driven by oil production increase. It is estimated that the economy will continue to grow by 5.1% in 2013 Oman has the second most diversified economy after Bahrain in the GCC region, with the oil and gas sector contributing less than 50 per cent of GDP (41% in 2009), and is expected to drop to 9% by 2020 The country will continue to invest in economic diversification, following its Economic Vision 2020 plan which aims to reduce the contribution of oil and gas to roughly 20 per cent of GDP, while raising the manufacturing sector to 15 per cent of GDP Following the diversification drive, the government’s 8thFive Year Plan (2011-15) allocated more than ~$3.9 billion towards development of non-oil exports including the construction of basic infrastructure such as ports, airports and tourism development projects Nevertheless the government continues to invest in oil and gas. It has plans to increase Oman’s crude oil production in the 8thFive Year Plan (2011-15), setting aside ~$1 billion for that purpose FDI Confidence and Competitiveness Oman based its 2013 budget on a price estimate of $85/barrel, significantly below the Bloomberg forecast of $111/bbl (for Brent Blend), therefore providing a buffer in case of a fall in oil prices FDI inflows in Oman aggregated to $788 million in 2011, experiencing a decline from previous years on account of socio-economic instability in the region, affecting investor confidence Development Outlook The government plans to invest ~$78billion between 2011-15 in the development of oil industries, hospitals, education and roads. This value represents a 113% increase over the last five year plan. Major tourism investments are also planned Oman’smerchandise trade surplus is rose to ~$24billion in 2012 Exports are expected to grow by 6.5% in 2013, driven bystable oil prices and sea port developments Imports are also expected to grow strongly by 10%, boosted by an increased domestic demand for consumer goods Endeavors to increase the role of the private sector in large-scale projects are expected to continue The transport sector is expected to continueoutpacing the economy, driven bynew and continued infrastructure projects in airports and roads Improved business environment will most likely attract more private investments for infrastructure projects However regional political instability has the potential to adversely impact foreign investments, development potential and waterway access

Infrastructure Investment Outlook The Oman government’s 8thFive Year Plan (2011-15) plans to invest~$31.2 billion ininfrastructure development. From that sum the planned spending for projects in airports is~$6 billion, for roads~$3.2billion, and for seaports ~$1.4 billion Airports and roads form the bulk of the spending between 2011-15

APRIL 2014 11

Logistics Projects and Outlook SEA Overview $1.4 billion has been allocated to develop the seaports of Oman as part of the 8th Five Year Plan (2011-15) The Muscat port is being turned into a tourism and maritime heritage facility and the transfer of traffic is due to be completed by the end of this year Oman’s ports are playing a central role in supporting the country’s growing industrial base and providing more employment opportunities Salalah Port In 2012, Salalah port handled 3.6 million TEUs of container shipping, as well as 7 million tonnes of bulk cargo, compared with 3.2 million TEUs in 2011. Volumesare forecasted to continue growing The first phase has been initiated with the expansion of the General Cargo Terminal (GCT) which has 1.2-kilometre of multipurpose berths with drafts up to 18m Salalah Port Services Company, a joint venture between the Oman Government, AP Moller Maersk and other Omani investors, is aiming to complete an expansion of its cargo terminal by Q1 2014 The expansion scheme will increase Salalah’s cargo handling capacity to 20 million tonnes a year (t/y) of dry bulk commodities and more than 6 million t/y of liquid products, up from a total cargo handling capacity of 6.5 million t/y during 2011 The construction award for the expansion of the general cargo terminal is valued at ~$143 million The expansion of the general cargo terminal is part of the $645 million expansion of Salalah Port that will be carried out over 20 years There will also be several contracts floated during 2013 related to the rehabilitation of Salalah’s old port. There are also plans to look at building new container terminal berths in 12-18 months’ time, which once completed could add 3.5 million TEUs of capacity

Sohar Port Sohar port plans to announce further expansions to its capacity as it is assuming an increased regional market share Expansion work on the Port of Sohar is in progress, with two main project developments: a $250million major deep-water jetty and a dry bulk and aggregates terminal The jetty and the dry bulk terminal are scheduled to be completed in 2013 and in mid-2014, respectively In January 2013, Hong Kong – Hutchinson Whampoa won a $130 million contract to build and operate a new terminal at Sohar Port. The terminal will double the port’s capacity to 1.5 million TEU from existing 800,000 TEU Duqm Duqm port is part of a special economic zone authority, which includes an industrial zone, a fishing harbour, and tourist and logistic areas. The port is due to be completed by 2015 The Duqm port was scheduled to have a soft opening in 2013, as a part of the gradual roll-out to be carried out until the commercial quay is fully operational in 2015.

The roll-out began in 2012 with the opening of the dry dock The estimated value of the contract is~$75-$200 million A new development is planned to be added for a major liquid terminal at the port. The terminal is set to be completed by 2017 It will have a capacity of 230,000 barrels a day. The port will comprise a multi-purpose terminal with a capacity of 0.8 million tonnes, a container terminal with a capacity of 3.5 million tonnes and a dry bulk terminal with a capacity of 5 million tonnes Port at Al Halaniyat Islands There is a plan to construct a fishing port at shuwimiah on Al-Halaniat Islands for around $16 million in 2013 Hasik Port The new construction at the Hasik port is expected to cost around $100 million including development of quays enabling express ferries calling the port

AIR Overview ~$6 billion has been allocated to develop Oman’s airports. It is one of the topbudget area in the 8th Five Year Plan (2011-15) Muscat International Airport The on-going expansion of Muscat International Airport is planned to increase annual passenger handling capacity to 12 million by 2014 while the overall master plan is to accommodate 48 million passengers (more than 8 times its current capacity) by 2050 Salalah International Airport The Salalah airport development plan will have capacity for 1 million passenger and 100,000 tonnes of cargo annually by 2014

12 APRIL 2014

The expansion will enable the airport to host modern and large aircrafts such as the A380 Adam Airport in Dahiliyah region The airport will have a capacity to handle 250,000 passengers per year with a runway of 4km The commercial operations is planned for 2014 with project costs of around $150 million Sohar Airport The construction of an airport terminal at Soharis planned to accommodate 500,000 passengers and 50,000 tonnesair cargo per year The project will include a runway, a fire station, fuel tanks, lighting and drainage system at total expected costs of around $150 million

COUNTRY REPORT

RAIL Overview The country has plans to establish a comprehensive national rail network of more than 1,000-kilometres, including both freight and passenger rail. This rail network will connect with rail in neighboring countries

by the third quarter of 2014 with expected completion in 2018 The project will be implemented with the funding support pledged by the members of the GCC bloc, and bids have been invited for network design in February 2013

Oman Rail Lines Oman is planning a ~$15 billion and more than 1,000-kilometrescomprehensive national rail network, including both freight and passenger rail, which will link major cities and rail projects in neighboring countries The rail network is set to play an important role in connecting the industrial zone of Sohar, Duqm and Salalah The project is divided into five sections initially (260-kilometresbetween Sohar and Muscat, 526- kilometresbetween Muscat and Duqm, 140-kilometresbetween Sohar and Buraimi, 58-kilometresbetween Sohar and KhatmatMelaha, and 646-kilometres between Duqm and Salalah) The rail network design stage is expected to be completed early next year and the construction of the first stage is due to begin

GCC Rail Network Oman will be in charge of the Batinah railway, which will run parallel to the Batinah highway, and eventually will connect to Kuwait through the GCC rail network The link will run 260-kilometresfrom Muscat to the border with the United Arab Emirates, and earlier reports cite the possibility of linking the railway to Al Duqm in the future The first phase of the project involves the construction of 1,000-kilometre of track, linking Muscat with Sohar and then extending to the UAE. This phase is expected to take four years to construct and will begin operations around 2017 The second phase of the project may connect Muscat with Salalah in the south, and involves the construction of 600-kilometresof track

ROAD Overview Road traffic has been increasing steadily in recent years and therefore requires infrastructure adjustments $3.2 billion has been allocated to develop Oman’s roads. It is the second priority budget area in the 8th Five Year Plan (2011-15) Al-Batinah Coastal Road The contract for the first phase of the construction of a four-lane carriageway from Naseem Garden to KhatmatMalaha in Wilyat Shinas was awarded in March 2012 at a cost of $360 million The second phase of the contract, worth $328 million, was awarded to a Malaysian/ local joint venture in August 2012 but was subsequently cancelled in 2013 Nizwa-Thumrait Road The first phase of the 758-kilometre Nizwa-Thumrait dual carriageway project started in 2010 with an estimated budget of~$650 million A $132 million tender to build a 48km stretch

of the road between Izz and Adam in the Dakhilyah governorate was awarded in 2012 The build and habilitation of the road will allow the link between Muscat and Salalah to be fully dualised along its length of more than 1,000km BidBid-Sur Road The first phase is worth~$325 million for 115kmand the total budget for the dualization of the road is approximately ~$623 million Oman’s transport ministry has decided to add a third lane to the Bidbid-Sur road dualisation project Ibri-Jibrin road project The dualisation of the road is budgeted at~$190 million Other road project The construction of lKhassab-Lima-Dibba road at around $700 million The dualisation of Mahda Al Rawdah road at around $100 million The Rehabilitation of SinawMohootDuqum road at around $200 million Asphalting Wadi Al Mayh road at around $62 million

APRIL 2014 13

COUNTRY REPORT

International airport City

Airport Name

Annual Cargo (kilo-tons per year)/ % change vs. prior year

Annual Passengers (thousands)/ % change vs. prior year

Year

Throughput

% change

Year

Throughput

% change

Muscat

Muscat International Airport

2012

113

15

2012

7,547

16

Salalah

Salalah International Airport

2012

1

-2

2012

629

23

Other airport Buiabui, Buraimi, Dibba, Fahud, Ghaba, Haima, Ibra, Ibri, Jarf North, Lekhwair, Marmul, Mukhaizna, Nizwa, Rustaq, Saiq, Sohar, Sur, Yibar

Major seaports City

Port Name

Major Terminal Operators

Annual Containers (thousand TEU)/ % change vs. prior year Year

Throughput

% change

Muscat

Port Sultan Qaboos

Oman Port Services Company

2011

335

9.3

Salalah

Port of Salalah

Salalah Port Services Company

2011

3,167

-9.1

Sohar

Port of Sohar

Sohar Port Services Company

2011

120

15.4

Kuwait – Key Economic Drivers Foreign Trade Balance JO CJMMJPO

Energy Trade Balance 0JM JO NJMMJPO CCM EBZ (BT JO CJMMJPO N

Imports

Major Products

Major Trade Partners

JO

Agricultural Products

JO

Fuel and Mining Products

UAE

Other

*NQPSU

Exports

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(BT

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14 APRIL 2014

0JM

Manufacturing

Japan

US India

Agricultural Products

Manufacturing

(BT

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China

South Korea

Japan

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RTA

Roadmap to progress Dubai’s Roads and Transport Authority (RTA) is making immense progress.

Easily a direct indicator of a rapidly expanding population. Munawar Shariff spoke to Nasser Abu Shehab, Director, Strategic Transportation Planning, RTA about the future of the city’s public transportation network and infrastructure

16 APRIL 2014

RTA

I Nasser Abu Shehab

n the last five years, RTA’s statistics say that its mass transit systems comprising the Dubai Metro, public buses, marine transit modes and taxis (Dubai Taxi and franchise company taxis) - have collectively transported 440.672 million passengers in 2013. The figure indicates significant growth as compared with previous year figures which amounted to 367.657 million travellers, and 346.500 million travellers in 2012 and 2011, respectively. In 2013, a daily average of the number of public transport users was 1.3 million as compared to one million in 2012 and 963 thousand in 2011.

Today, Dubai’s public transport system is instrumental in the mobility of people all over the emirate and the RTA is making huge efforts to make these transport modes the mobility of choice for citizens, residents and visitors in their daily commute for work or leisure. Giving people public transportation options have paid great dividends, too, as the number of people using public transportation has steadily increased from six per cent in 2006 to 13 per cent in 2013.

The number is gradually edging closer to the target set by the RTA to have as much as 20 per cent of the population to be using public transport by the year 2020. Integration of public transport is the one of the key areas that the RTA is constantly working towards. With integration comes sustainability, increase in the use of public transport, improvement in health and many other benefits.

Over the years as the country has progressed, the population has increased sharply and with the Dubai Metro available from 2009, peoples attitudes have changed.

People value the many benefits of using public transportation in terms of psychological and physical comfort, financial gains, higher safety, reduced expenses associated with the use of vehicles such as fuel and maintenance.

Infrastructural plans for Expo 2020 Infrastructural preparations for the expo are in the planning stages currently. They include a vivid masterplan of direct and secondary access roads, expansion of current road networks as well as the required number of parking spaces. The current RTA plans include a number of main road projects which directly serve the Expo 2020 site. These include major development of Al Yalayes road and its intersections, widening the last portion of Mohammed Bin Zayed Road,

APRIL 2014 17

RTA

The three km long canal will run development of the Academic from the Business Bay district to City road and development of a Jumeirah Beach. The development number of interchanges at the main is planned to be completed in 2017. roads surrounding and leading to the expo site as well as parking areas and internal roads/walkways Sustainibility initiatives needed to serve the site.

In line with Dubai’s Strategic Plan The Authority also plans on 2015, RTA developed its own developing and operating its strategic corporate plan for 2009-2013 Integrated Travel system (ITS) as well which defines various goals. These as efficiently managing road and act as the main pillars for all plans public transportation systems serving and projects and work practices in the expo. RTA has already initiated RTA. Integration at all levels in the the work on the main underlying base of Enterprise Command the plan.

Control Centre (ECCC) Clear attention to project which aims to the environment and Taxis develop an integrated sustainability is given transportation control importance through three centre and a central out of eight main goals to transportation media enhance the environment Buses and risk management and to achieve transport centre. In addition RTA sustainability. As a part will provide systems of the goal to integrate needed to manage Dubai, RTA focuses Water taxis parking and taxi areas on integrating its at the expo site. The transportation system main elements of the to Dubai’s urban plan ITS include: as well as integrating different transportations modes Extension of Dubai Metro’s into this system. In its safety and Red Line as well as providing a environmental sustainability station. RTA has already evaluated goal, RTA has given all necessary different options which will serve environmental considerations in all of the expo site and other surrounding its activities at all levels of planning, developments in a sustainable way.

Provision of environmentally friendly design, construction, operation and maintenance of transport buses to transport visitors from infrastructure and services, including different parts of Dubai to the expo. roads, railways and public transport Provision of a taxi fleet and taxi systems on both land and sea. parking areas.

RTA’s initiative to minimise the Work in close coordination with adverse environmental impact of all strategic partners and relevant roads and public transport has a entities in Dubai to manage preset KPI to reduce megatons transportation access, circulation of CO2 emissions produced by and safety requirements of the expo private and public transport in the in an integral and efficient way. emirate. In line with this, RTA has (RTA has successfully managed established a policy and system for transportation requirements of health, safety and environment and major events in close coordination adopted and applied it across the with its partners and stakeholders.) board. As a result, in October 2010, RTA’s teams are also working the RTA achieved the International on making substantial progress on Certification on Environmental and Dubai Canal project. It is an AED Occupational Health and Safety 2 billion project, which will span more than 8,000 sq metres and have management system based on ISO 14001:2004 and OHSAS 18001:2007 more than 450 new restaurants, several bridges and four new hotels. standards, respectively.

In numbers

8,480 1,569 5

18 APRIL 2014

RTA’s green initiatives: Rail - Metro Services The Dubai Metro was founded on a planning (i.e.

Environmental Impact Assessment) study that was conscious of sustainability requirements from day one Metro operates on clean fuel (electric) with advanced features such as regenerative braking, which regenerates electricity when slowing down to fuel other trains in the fleet The construction of Metro had due regard for all environmental considerations – i.e. dust control, ventilation, noise control, by use of modern equipment and material Our stations are very energy efficient with state-of-the-art insulation features The concept of energy conservation in Dubai metro is based on choosing the best power techniques and energy efficient equipment distribution Public Transport – Buses Services RTA’s bus fleet is extremely fuel efficient and maintains highest eco-friendly standards The latest fleet of buses operates on special diesel that contains only 50ppm (parts per million) sulphur i.e 10 times less than the normal diesel which contains 500ppm sulphur The new bus fleet is manufactured with Euro IV standard engines which are the most eco-friendly version as these engines minimise emissions by use of Selective Catalytic Reduction technique as well as Exhaust Gas Recirculation – EG fitted on the exhaust system Public Transport – Water Services RTA recently launched Rowing Abra that uses a small electric engine instead of a diesel engine, which considerably reduces the environmental impact The waterbus, has been designed as a low-wash catamaran which reduces wake waves and hence reduces impact on the shores and the neighbouring vessels. In terms of the engine, the water bus uses the lowest diesel-emission fuel type Taxis RTA has conducted a full length test for three years for 20 hybrid taxis. Currently it is considering compressed natural gas (CNG) as an alternative fuel in full coordination with fuel suppliers in the emirate Traffic and roads services RTA promotes non-motorised transport modes such as cycling and walking in the city. Such modes are known to have zero emissions RTA has also developed a climate controlled pedestrian walkway – ‘pedway’ strategy to extend the walking and cycling catchment areas for public transport stations RTA is studying to test the recycled asphalt and subbase material for construction of roads, commonly known as ‘crushed aggregates’ which are locally produced from construction and demolition waste

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PORT OF SOHAR

SOHAR PORT

READY TO TAKE THE LEAD

22 APRIL 2014

Oman’s Sohar Port is undergoing major upgrades to ensure it is one of the major players in the region. Bolstering capacities and investing in infrastructural developments is the way forward. Munawar Shariff spoke to Andre Toet, CEO, Sohar Port and Jamal T Aziz, CEO, Sohar Freezone about actual plans What are current figures in terms of handling capacities at the port of Sohar?

In 2013, Sohar Port and Freezone handled over 45 million tonnes of cargo, comprising 26 million tonnes of dry bulk, 16.8 million tonnes of liquid bulk, 800,000 tonnes of project cargo and breakbulk, and 205,000 TEU of containers.

Unprecedented growth at Sohar port and freezone has been commonplace since Sohar’s inception 11 years ago.

Looking ahead, there are ample opportunities to replicate these success stories and continue the trend of double digit over the forthcoming years.

There are a number of important developments that will drive this growth but key among these will be the relocation and expansion of the HPH-led Oman International Terminal (OICT) which will see container capacity ramped up to 1.5 million TEU’s when the upgraded facility opens later this year.

C Steinweg Oman recently signed a landmark agreement with Sohar Port for the further expansion of its multipurpose terminal. The additional capacities boost Stienweg’s quay wall length to a total of around 950 metres, and its yard space to over 500,000 sq metres.

Where does the Sohar port stand in terms of port handling facilities in the GCC? How much is capacity being utilised, is the entire infrastructure in place? What are expansion plans?

November 2013 saw one of the first steps towards major expansion plans with the delivery of three ship to shore post panamax container cranes. Representing a further multi-million dollar investment by OICT, the huge new cranes have an outreach of 52 m to service very large container ships, and are equipped to pick-up two 20-foot containers simultaneously, further increasing productivity in Sohar. The three new post-Panamax cranes can service the largest ocean carriers and simultaneously carry two containers. The cranes are part of

24 APRIL 2014

the new high-tech Terminal-C development, which, once completed, will give Sohar another significant boost in terms of its competitiveness in the Gulf region.

Unique to the region is the deep water availability alongside OICT’s Terminal C enables the port to increase the size of container vessels to 9,000 TEU. The investments in this expansion are estimated to reach around OMR 50 million (almost US$ 130 million) and will be operational in the second quarter of 2014.

Terminal C puts Sohar in a very competitive position for shipping lines to bring their cargoes with direct lines to Oman and to consider Oman as a gateway hub for their transshipment cargo in the region.

This expansion plan is the first step

Terminal C puts Sohar in a very competitive position for shipping lines to bring their cargoes with direct lines to Oman and to consider Oman as a gateway hub for their transshipment cargo in the region.

PORT OF SOHAR

towards setting the landmark for long term growth by adding in 2018 an additional dedicated post-panamax terminal with a capacity of 2,5 million TEU creating the largest container handling capacity on the Sea of Oman.

With the creation of Terminal D container, capacity will increase to 4.5 million TEU, with operations expected to start in 2018.

In terms of investment figures, how much is spending planned for enhancing the infrastructure at the port?

When is this going to be implemented?

Since 2002 there has been US$ 15 billion of investment. Ongoing improvement and development, investment, personalised service, and modern infrastructure will

Andre Toet

Jamal T Aziz

all significantly help to improve the infrastructure within Sohar, chief amongst these will be the Terminal C development with an investment of US$ 130 million.

Additional investment will take place in the Expanded Petrochemicals Cluster. Oman Oil Refineries and Petroleum Industries (Orpic) the nation’s oil refining and petrochemicals flagship, as well as parent company, Oman Oil Company SAOC, will result in major upsizing of the Petrochemicals Cluster at Sohar. In all, three major refinery and petrochemicals based schemes are envisaged with a combined capital investment of around US$ 6.5 billion over the next five years.

Connecting the port and freezone with the GCC and national rail networks is a top priority given the obvious benefits associated with rail based freight transportation.

Without doubt rail connectivity will change the logistics landscape due to the Sohar’s advantageous geopolitical location.

A rail line that starts from Sohar and goes all the way into the Gulf will give Oman the opportunity to become the main logistics player in the region, much like how Jebel Ali in Dubai positioned itself for growth at the outset of its development.

We have created a dedicated team in our technical department to chart an effective and optimum plan for rail linkages that will

help cargo flows in and out of the port and freezone primarily from the standpoint of Sohar’s gateway concept.

The estimated cost of the initial phase of the line development, between Al Buraimi and Sohar, is US$ 2.6 billion.

How much of the government’s spending is targeted at bolstering the facilities at the port in order for it to be best in class?

Bolstering the facilities of Sohar port and freezone is at the very core of activity for all concerned. It is managed by Sohar Industrial Port Company (SIPC), a joint venture between the Port of Rotterdam and the Sultanate of Oman.

The goal is to make it attractive for shippers and shipping lines to channel their North Oman specific boxes through Sohar rather than Jebel Ali or other neighbouring ports. Sohar Port is ready to receive all business and not just meet the needs, created by the significant growth in the volume of cargo and marine activity, but exceed them.

As per current capacity, Sohar port and freezone is ready to receive all business from Port Sultan Qaboos (PSQ).

The port was launched in 2002 as a joint venture between the Port of Rotterdam and the Government of Oman and the associated freezone was added in 2009.

APRIL 2014 25

PORT OF SOHAR

from 28 to 68 hectares and will boast seven post-panamax quay cranes on berthside and 14 rubber-tyred gantry cranes, boosting the facility’s annual handling capacity to 1.5 million TEU per year.

What is the direct economic impact of the port to the country’s GDP? t Air consignments – 50,000 tons of air cargo will be available each year t Easy land, air and sea access for people. 3.5 billion people t Number of ships and quantity of container shipments – currently over 2,000 vessels a year t Rate in the increase of container shipments.

Thousand per cent cargo growth t Number of investment projects – 100 sq km of investment opportunity t Direct and indirect job opportunities availed in Sohar port and freezone – 85,000 direct, 250,000 indirectly t The railway network – Hundreds of kms of rail and road infrastructure to be constructed With the new container terminal being readied, how will business improve?

Although only a few hundred metres from its current location, a new equipment upgrade will produce both a qualitative and quantitative impact and create a surge in OICT’s container handing capabilities – thus creating robust growth over the coming years.

The port authority is taking steps develop

26 APRIL 2014

the required synergies to enhance Sohar’s appeal as a hub for containerised cargo. In the course of 2014 the upgraded Container Terminal of OICT will be geared to cater for growth in container traffic through a number of factors including accommodating volumes attracted from Dubai. With container traffic from Muscat set to be channeled through Sohar, it creates the necessary inducement for shipping lines to call directly at Sohar rather than route Oman-bound cargoes through Dubai. Besides, Sohar becomes far more attractive to shipping lines as a hub from where they can consider feeding cargoes to other destinations in the Gulf or even the Indian sub-continent.

Give us details in terms of how many cranes are currently in use at the port, how many containers can be handled, how many TEUs is current capacity, how are these numbers going to change in the next five years?

As part of the OICT’s multibillion dollar investment the new Terminal C development will represent a gigantic leap over OICT’s existing facility at Terminal B. The quay length alone will nearly double to around a kilometre, from the present 520 m.Yard space will increase

What are your sustainability initiatives?

Of course investment and growth are crucial to the ongoing success of the port and freezone, but so is sustainability and economic diversification. Our vision and ambition is to see Sohar become a byword for sustainability and a catalyst for economic diversification. We are committed to working with the various port stakeholders to build a sustainable future for the Omani people.

The goal is to continue working with the local community to enhance socioeconomic conditions in our neighbourhood, as well as leverage Sohar’s economic strength to fuel national growth and prosperity.

Employment generation, vocational training and skills development, stimulating trade and inward investment, promoting inward investment, promoting entrepreneurship, fostering the growth of small and medium scale enterprises, boosting productivity, and competitiveness and encouraging technological innovation and research among other goals. These goals are all aimed at ensuring future generations will continue to enjoy the benefits of a healthy vibrant centring on trade, industry and logistics.

What are diversification plans? What about international presence how much is revenue a part of that plan?

International players in the port which include Hutchison from Hong Kong, Vale from Brazil, Jindal from India, Steinweg from Holland, Oiltanking/Odfjell from Germany/ Norway are already doing brisk business.

Sohar already has marketing offices in the United Arab Emirates and China and very soon open an office in India, alongside this, in collaboration with our partner Port of Rotterdam, we have representation in Europe, Brazil and China all of which strengthens our global reach further.

Our partnership and work with Rotterdam port provides us with a great opportunity to be recognised on a global scale and attract companies from around the world.

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GCC RAIL GCCRAIL

28 APRIL 2014

With the GCC set to be connected by rail for passenger and cargo in the next few years, trade and logistics are about to face new benefits and challenges

GCC continues to grow Initially driven by expanding oil and gas and petrochemical industries, GCC countries maintained robust growth through new investments, supported by strong governmental economic development agendas and low energy and chemical feedstock costs.

The growth agenda continues to advance toward developing downstream industries, which leverages the broader range of molecules available to enhance manufacturing and service offering in the region. As a result, the overall GCC Gross Domestic Product (GDP) is expected to grow at a stable five per cent per year until 2020, with population increases of 50 per cent until 2040, driven mainly by Saudi Arabian and UAE populations.

Until now, GCC economic growth was primarily enabled by infrastructure investments in ports, as the majority of growth

was driven by export of oil and petrochemicals to European and Asian markets. As local populations and economies continue to grow, the need for advanced national and regional infrastructure becomes increasingly important to support economic growth.

Road-based infrastructure played the primary role in this support, yet with aggressive development targets, rail infrastructure will become a critical enabler and driver of sustainable growth for the GCC.

Transportation and intra-GCC trade Continued economic and population growth in GCC member states will generate the need for new and expanded land, sea and air transport infrastructure and services for both freight and passenger transport. Meeting this demand with the present means of transport will require significant ongoing investment in; roads,

APRIL 2014 29

GCC RAIL

ports and airports, and further expansion of railway networks and public mass transport services in

GCC member states Rail is well positioned to absorb expected demand increases by passenger transport, while air and road segments are expected to increase significantly over the next five years, and beyond. Cross-border intraGCC trade has traditionally demonstrated lesser importance for GCC economies; the trade volume oscillates around three per cent of the overall GCC GDP, with the outlook ratio stable over time.

This creates various opportunities as a result of the GCC rail connection. Firstly, at a minimum, freight volume addressed by rail will grow at the same rate of real GDP growth, leading to at least a five per cent p.a. growth rate, until 2020. Secondly, an integrated GCC railway infrastructure can become an important catalyst in driving increased economic cooperation between GCC countries, fostering the economic regional and national development agenda, supporting growth and strengthening national capacity integration within the GCC. Thirdly, rail can raise the profile of the importance of intra-GCC trade in the overall balance.

Enabling future GCC growth The integrated GCC Railway will provide the required infrastructure to enable rail to absorb increasing freight volumes, efficiently and economically. The planned GCC railway will link Kuwait City, traversing along the Gulf, to Muscat in the Sultanate of Oman, serving the Kingdom of Saudi Arabia, the Kingdom of Bahrain, the State of Qatar and the United Arab Emirates. The total length of the GCC Railway main line is approximately 2,177 kilometres, including about 180 km of connecting lines to key traffic generators such as ports and industrial zones.

Railway length: Totalling approximately 2,177 km, the GCC Railway includes about 180 km of connecting lines to traffic node generating centres and transport facilities such as ports, airports and industrial cities.

These are broken down into geographical segments including Kuwait (145 km),

30 APRIL 2014

GCC RAIL

APRIL 2014 31

Saudi Arabia (695 km), Bahrain (64 km), Qatar (283 km), UAE (684 km) and Oman (306 km).

Corridor alignment: From Kuwait to the Kingdom of Saudi Arabia via Dammam to the Kingdom of Bahrain via a proposed causeway, in parallel to the King Fahd Causeway to Bahrain, the corridor connects key GCC city transport nodes. Extending to Qatar via the Qatar-Bahrain bridge, from Dammam to Qatar via Salwa and on to the United Arab Emirates via Al-Bat’ha to Abu Dhabi, Dubai and Al-Ain, and then on to Oman via Sohar to Muscat, the network will reach all member state key cities.

Railway characteristics: The GCC Railway

32 APRIL 2014

will service mixed passenger and freight operation, based mainly on single line tracks to standard gauge (1,435 mm), with double tracks in certain areas, dependent on demand, with diesel traction. Tunnels required in the mountainous regions of UAE and Oman will feature clearances to allow double stack containers. Air conditioned passenger trains operating at speeds of up to 200 kph, will operate mainly during the day and are planned to run in each direction every two hours. Freight trains (including container and bulk freight) operating at 80120 kph, will operate mainly at night.

Stations and facilities: Passenger stations will total seven large stations each located

at Kuwait City, SRO Interchange (near Dammam), Doha, Manama, Abu Dhabi, Dubai and Muscat, supported by three small stations at Salwa, Fujairah and Sohar and an SRO station at Jubail. As proposed in each of the GCC member states’ national transport master plans, metro and light rail links will facilitate connections to downtown centres.

Train control system: In line with key objectives for a safe and efficient operation, critical signal systems will determine the rail network’s maximum speed and capacity.

An European Train Control System (ETCS) Level 2 system, with no trackside signals, will underpin control.1 It will achieve this because it; is safe and already in commercial use,

GCC RAIL

facilitates a competitive bidding process and avoids a monopoly, allows conventional lines and the train density nodes to be increased especially in mixed traffic with fast and slow trains and is reliable during operation.

Environmental assessment: An environmental baseline assessment describes the existing environmental conditions and the potential construction and operation impact to GCC member states, prepared according to the applicable rules and regulations in each member state. As in any construction project, there are some adverse environmental effects, but in general, they are not major. By aligning the project to the relevant mitigation measures

and environmental management plans, environmental impact will be minimised.

Capital investment: The estimated capital investment (based on 2009 figures) for the initial construction of the railway infrastructure collectively represents over US$100 billion.

This includes formation, track, sidings and yards, signaling and telecommunications, stations, workshops and other buildings. This is based on using diesel trains and train speeds of up to 200 km/hr for passenger transport, as well as the construction of the proposed causeway between Saudi Arabia and the Kingdom of Bahrain.

Allocations of project’s costs: The proposed cost of the railway is expected to be distributed among GCC member states based on the planned route length in each member state. The cost of procurement of the rolling stock, and hence the operation and maintenance, is expected to be borne by the private sector. Another approach for consideration is the allocation of costs in relation to the expected benefits of each GCC member state, an approach that requires further study and analysis during the detailed engineering design and onward phases of project’s implementation.

Benchmarking: The GCC railway compares with the use of best practices relevant to regional and international railway standards. This includes axel loads, signaling, communication systems and transport technologies, ensuring efficient and effective integration of the GCC railway within the GCC National Railways. This is key to achieving maximum compatibility and utilisation between GCC member states. It is expected the GCC Railway will set a number of new standards for the railway industry.

Railway feasibility: GCC Railway is economically and financially feasible and on the condition that Governments of the GCC member states pay the capital cost for the construction of the infrastructure, which is common practice for capital intensive transport projects aiming to provide public transport services.

Benefits of rail Tracking safety, efficiency and environmental benefits: Providing a safe, efficient and sustainable transport alternative is at the core of the GCC railway’s mission. It will change

the face of transport and logistics, benefiting the entire region.

An alternative, safe import and export trade route: Railways are widely recognized for decreasing the volume of road traffic, which protects infrastructures impacted by excessive use of roads with overweight loads and contributes to minimizing road related accidents. (Piracy & Hormuz Strait closure threats should be addressed in a more strategically focused way).

An environmentally friendly transport alternative: The integrated GCC railway is also expected to positively impact the environment with its Reinforce Responsible Care and Sustainability concepts through less CO2 emissions and rationalized usages of fuel. Put simply, diverting traffic from roads to a more environmentally friendly mode of transport lowers air emissions, particularly greenhouse gases. This will also enable higher energy efficiency (easy and fast access) and reduce noise pollution levels (resulting from road traffic).

Decreasing congestion at border gates: The addition of on-board inspectors, supported by re-clearance immigration procedures based at the point of journey origin will make railway Transport more efficient and competitive; decreasing current delays experienced at borders for both freight and passengers.

Less dependency on foreign labourers: The usage of rail will substantially rationalize the need for foreign drivers and the associated challenges that result from heavy dependence on them especially during abnormal situations.

Driving economic development for GCC member states: The integrated railway is a powerful symbol of unity, to which all GCC members are committed. Apart from creating a transportation backbone connecting and integrating major urban centers, the railway will add diversified transport infrastructure development and service provisions across the region. Collectively this improves competitiveness and the investment environment, which in turn supports the development of export trading. On a regional level, this is critical to reaching key target GCC economic development goals of sustaining growth at national and regional levels, and supporting GCC national industries in neighboring economies.

-Gulf Petrochemicals and Chemicals Association

APRIL 2014 33

PROFILE

Strong market

leader

Al Majdouie Logistics is a major solutions provider in the region. Being a one-stop shop, Al Majdouie has the advantage of expertise, fleet, technology and wise leadership. Munawar Shariff spoke to S I Mustafa, CEO Al Majdouie about challenges and future plans

34 APRIL 2014

W

ith a single truck operations began in 1965, today with a fleet of almost 2,000 trucks and more than 5,000 employees just in its logistics division, Al Majdouie is a giant corporation. S I Mustafa joined Al Majdouie in 1976. He was the only one in his office then.

PROFILE

And he built the company from there along with the owner to what it is today.

When we spoke of current challenges affecting the transportation trade in the GCC region, he reminisces about the old days before the GCC union. “People said that with the GCC formation things would improve, but in reality they were simpler

before the union. Our truck drivers would get visas on arrival before the union, but afterwards there were regulations such as getting the visa stamped in the embassy with the name of the driver on the particular consignment documents meaning the driver had to be sent on that particular job.”

Challenges Today things have improved but getting drivers remains Mustafa’s major hurdle.

“As per government regulations a certain percentage of our drivers need to be Saudi nationals,” Mustafa says, “however very few Saudis actually want to be in that profession, we have mostly

APRIL 2014 35

PROFILE

foreign drivers and this is a challenge we are trying very hard to overcome. We’ve even initiated our own programme wherein we identify not very educated Saudis who show an interest to be trained as drivers, we then educate them and train them. Till two days ago we had 156 trucks without drivers.

I don’t think this problem is going to go away very soon.”

We move on to customs’ procedures and regulations in inter GCC trade. “Generally everyone thinks that Saudi customs are a huge hassle. They are more than the other GCC nations, but I feel that it’s not too difficult if you have all your documents in place and are prepared in advance. There is no comparison to Dubai where almost everything is now online, however we are slowly and steadily getting to that level.”

He mentions the new King Abdulla Port which has state-of-the-art facilities making cargo clearance a smooth ride. “The last time we had a clearance from there everything was systematic and online, inspection time was also reduced, making the entire process very streamlined and unlike the other ports in Saudi.”

Moving across the GCC borders has become fairly smooth over the years says Mustafa. “But we have a lot to learn from our European neighbours. You do not even realise you are in another country when travelling by road in Europe. The check points are far away from the roads and require hardly any documentation processes,” he says.

“A few years ago there was a 38 km line at the Saudi border on the Abu Dhabi side and the government had to provide the drivers with food … the problem was again on the Saudi side. That is a very important factor the government has to focus on.”

GCC road infrastructure Infrastructure is another very important aspect of road trade.“All the GCC countries have an excellent road network. The Saudi government has invested approximately SAR 180 billion (US$ 48 billion) in its road infrastructure in the last 40 years. When I started in 1976, there was a single track road going to Riyadh. It was a five day journey.

36 APRIL 2014

S I Mustafa

When a truck left our warehouse, we would just have to trust that the driver would come back. There was no vehicle tracking system, no mobile phones. In fact most of our clients also did not have phones, we had two telephones in the office”

Fleet Mustafa says thay have almost 2,000 vehicles that are all connected through a vehicle tracking system (VTS), all drivers are connected through their mobile phones and everything is traceable if the need arises. “We give our drivers well-thought out journey times. We do not give them very tight time-lines for any journey as we want to consider safety and speed.”

Their vehicle maintenance facility is fully equipped to handle and manage

the vehicles in every way from engine overhauling, injection pumps to what have you. “Incidentally, the very first truck we began our operations with is still running but there’s nothing original in that truck everything has been replaced,” he laughs.

All their trucks (of which most are Mercedes and the rest are Volvos) have a seven-year operational age, after which most of them are auctioned off and are replaced with newer ones.

Revenue One would expect with a larger geographical reach in term of road trade, there would be greater revenue coming in from inter and intra regional clients.

Mustafa has a different opinion, “We prefer to stay within Saudi where we have better

PROFILE

control. We have our own subcontractors as we have not only our own fleet but we are also managing fleets for other clients.

In 2013, we paid a third-party SAR 170 million (more than US$ 45 million) as we hired them on a monthly basis and we utilise their trucks for jobs outside Saudi Arabia and our own fleet we use for within Saudi Arabia. We work with two different business models, one is on-call basis and one is dedicated. When it is on-call we have a lot of business from the petrochemicals industry (it is the second largest product in Saudi Arabia after oil).

So because we’re handling more than eight million tonnes of cargo between the GCC, we have major fleet engaged in this.

“For the dedicated business model, we study the client requirements and

customise the solution based on their business needs. We analyse their flow and then decide on how many trucks are needed which are then dedicated to his business. We manage the deliveries, the warehouse, the inventory and charge them a lump sum amount monthly. If there is a fluctuation in the orders up to five per cent more is covered in the monthly cost, but if orders are increasing to more than five per cent of our quotation, then we revise the charges. In this type of business model most of our clients are FMCG.

Is rail the future?

“There is talk of the entire GCC region being connected by rail by 2018. I don’t believe that will happen. There will be some kind of infrastructure in place, though.

“In Saudi they are working on a land bridge connecting the north to the east. Rail will have an impact on transportation but not as much as it will kill the road transport business. Rail cannot move into every corner and deliver to every warehouse. I am a big supporter of rail because of the great safety, because of the environmental impact, because of speed. Etihad Rail will do cargo rail travel at 150 kilometres per hour and passenger at 220 kilometres. This will be a huge transformation, it will reduce about 8,000 trucks from the road, companies will save on fuel cost, get their cargoes transported quicker with very reduced impact on the environment. But from the rail station to the final destination a truck will still be used.

We are in talks to manage one or two freight stations, we’re not sure how it will all work out in the end but we are in discussions.

APRIL 2014 37

PROFILE

Rerouting the

supply chain

T

raditional supply chains have big conglomerates with distribution centres in the main hub of a region to serve the rest of the region. The Middle East falls under Europe, Middle East and Africa (EMEA) so usually companies serve the region out of Europe. With Dubai’s new port, air, sea, road connectivity means cargo could be on its way within a few hours of reaching Dubai translating to enormous benefits for international supply chains. Dubai is where the region needs to be served from.“Many companies are moving their distribution centres into DWC. Hino has done that last year. Many others are doing it too,”says

38 APRIL 2014

The Dubai World Central is not just a new airport beside a port and a freezone with a single customs window. The big picture of this facilitated logistics platform is in its being the biggest catalyst in changing the traditional international supply chain route. Munawar Shariff spoke to Mohsen Ahmed, VP Logistics District, DWC about the masterplan

Mohsen Ahmad, VP Logistics District, DWC. However this achievement was a part of the masterplan.“The plan of having an airport next to Jebel Ali freezone was there from Sheikh Rashid’s time. The area was set aside for it from then,”says Ahmad.“It’s just recently it was fine tuned and designed to have a connected airport and seaport. But now, it’s more than that because we now want to connect this infrastructure with the rail in the future.”

“Today it looks simple but when we started off in 2010, we had few flights a day, the corridor helped with getting us started off. Jebel Ali is one of the most recognised ports globally because of the fact that you

PROFILE

get your cargo on the ship get it offloaded get it delivered to a cargo terminal where it is then loaded onto an aircraft without going through the hassles of guarantees and customs formalities.�

From paper to reality What Dubai is offering businesses is an extremely facilitated mode of operation, whether it is the logistics corridor with sea, air, road connectivity or a single customs procedure or even paperless business. Dubai makes it look easy, but Ahmad says aligning the soft infrastructure to match the hard infrastructure was by far the most uphill task. “Anyone can build bridges, and even make

Anyone can build bridges, and even make airports beside their se ports, but having all the entities and organisations aligned in order t o give the customer minimum fuss and be in and out in hours is what makes our business what it is.

airports beside their sea ports, but having all the entities and organisations aligned in order to give the customer minimum fuss and be in and out in hours is what makes our business what it is. It is our main selling point. And Dubai can achieve it.�

There are a number of organisations involved in the entire operation, such as Dubai Customs, Jebel Ali Freezone which has its own rules and regulations and ways of working, the port operator DP World, Dubai Logistics City which is another freezone and Al Maktoum International Airport. The fact that the customs managed to align all of these entities to become a single window for the customers is extremely commendable. We

APRIL 2014 39

PROFILE

wouldn’t be able to offer what we are offering without this alignment. I mean if you think about it, Dubai is a major hub connecting the East and the West, the customs authority have a huge job to protect the nation and its security, absolutely nothing can be compromised.”

The joke doing the rounds here is the bridges and roads took less time to build than the complete alignment of the soft infrastructure to hard infrastructure.“The saying goes,” continues Ahmad,“the devil is in the details, and this is our story. There were many things, legal implications, when we got involved with opening up a bridge and it many routes … the areas where things need to be approved, IT details the framework, the customs, we had to ensure everything was working smooth before beginning, we had to be sure the the person on the counter facing the customer had all the knowledge.”

Having said all of the above, what Dubai has today is this huge economic cluster of two major free zones surrounded by two major airports and a seaport on the other side.

“We have something which is next to none globally. We have created a holistic solution for the whole region, if not the world.”

What makes it work for Dubai or what makes this synergised operation work is the fact that all the government department were seeing the business perspective.“I have personally worked and seen international government organisations work and the difference I can see with them and in Dubai is, the customs, the police, the rest of the government, they are ready to listen, they want to work with you, they want to work with the private sector, and not as a regulatory body but rather as the regulatory hand with a facilitating arm. This is the secret of Dubai’s success. Of course ultimately there are higher objectives such as being the top tourism destination, training destination, logistics hub. All of that comes into perspective since logistics is one of the key factors.

Ahmad does admit to having shortcomings,“Of course like any other system there are some minor issues happening time and again. For example when we have one-to-one meetings with our many multi-cultural customers, they have a wish list where-in they want facilites that

40 APRIL 2014

other countries may be providing to them.

We want to convey to them that what might work in Country A might not necessarily work in the UAE and vice versa. While we are providing them with this multi-modal solution there is an immense amount of work that has gone on in the back end to make this solution work. That cannot be underestimated.”

The customs authority has had to wear two hats one where they want to facilitate business and the other where they do their primary duty which is protecting the country from smuggling, counterfeits and illegal things being brought in.“Yes, there are challenges when it comes to customs, but those have been well studied and so far they are doing an excellent job.”

PROFILE

The big shift

The Emirates Road (E-611) will be the main corridor which the trucks will use to move cargo between DWC and Dubai International. The trucks will be able to move both general cargo and temperature sensitive cargo. There will initially be a fleet of 45 trucks, which will increase relative to our future growth.

From May all freighter operations are going to move from Dubai International Airport to the DWC. Ahmad says it will be a big impact on business. Dave Gould, Emirates Senior Vice President, Cargo Operations Worldwide tells us more about the move

How much is the time frame for the cargo to move from DWC to Dubai International and vice versa?

We are looking at between an hour and fifteen minutes to an hour and forty five minutes, excluding loading.

How are preparations shaping up for the move in May? Preparations for the move of our freighter operations to DWC’s Al Maktoum International Airport are progressing well. The construction of Emirates SkyCargo’s terminal is being carried out in phases. Phase1 was completed at the end of March, after that the cross docks and perishables area will be handed over to Emirates SkyCargo. We will then commence the testing phase of the facilities and truck runs between the two airports, before we start operations on 1 May 2014.

Emirates is going to be providing an air, road, sea / air, road, air inter modal service once operations move to DWC, kindly elaborate.

Emirates SkyCargo is not providing the service, it is a competitive advantage of DWC being located close to the Jebel Ali sea port, where it is treated as a single free zone and goods can be transported freely between the two. Customers can take advantage of it. We will provide road feeder services from DWC to all other UAE airports such as Abu Dhabi (AUH) and Sharjah (SHJ).

What kind of a transportation network is in place for this to happen?

We recently appointed Allied Transport, a well-known company in the UAE and the Gulf Cooperation Council, on a five-year contract to provide trucking services for Emirates SkyCargo to move goods between DWC and Dubai International.

What routes are going to be used between the two airports, what trucks, how many trucks in the initial stage and eventually once all the phases are up and running how many trucks will be in the fleet?

Dave Gould

What freight capacities are we looking at in the initial stage and eventually?

The cargo terminal at DWC will have an initial capacity to manage 700 000 tonnes of cargo per annum, which can be further extended based upon our future growth requirements.

Between May to October this year, we expect to manage up to 660 tonnes of cargo per day, which will increase to just over 1250 tonnes a day (452 400 tonnes per annum) post October. In phase two, the facility will be expanded and able to handle up to one million tonnes per annum.

How will this move to DWC make lives easier? How will this new inter modal integration pave the way for future growth?

The move of our freighter operations to DWC provide us with the opportunity to have a dedicated facility for our freighters, with the required infrastructure, space and opportunity to further expand capacity. Our freighter operations currently account for 35 per cent of our total cargo revenue, and the new terminal and facilities is a core part of our growth plans. The new infrastructure will also have a positive multiplier impact on Dubai as it will create a cargo corridor that connects the Jebel Ali Port, DWC and Dubai International. Our DWC operation will create a seamless ability between the two airports that will allow us to grow our business through better connectivity between Jebel Ali Port, DWC and Dubai International.

APRIL 2014 41

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Y A D O T E IB

R C S SUB

GCC RAIL OVERVIEW

AL MAJDOUIE’S GROWTH

R A K F T Z E X PA N D S Roadmap to progress

45 38 16

UNWIND

RTA paves Dubai’s future

Rerouting the supply chain Dubai’s plan to be #1

The container revolution ENHANCING THE BUSINESS OF LOGISTICS

Innovatively reusing containers

April 2014 Issue 03

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1/4/14 20:40:36

CONTAINER CONVERSIONS

THE CONTAINER

REVOLUTION Medical unit

Containers, there are so many of them stacked on ports around the world, that an alternate use was bound to be found. It’s not a new concept but is definitely one that is adding immense value to quick, economic and even sustainable spaces.

Munawar Shariff spoke to Nick Trott, General Manager, Modern Freight Company about container conversions

I

f you visited the Market Outside the Box (OTB) at this year’s Dubai Shopping Festival, the stalls were refurbished and converted shipping containers. A couple years ago Starbucks opened a drive through using a few containers in Tukwila, Washington.

In the UK, containers are being used as low-cost accommodation for the homeless. There are endless uses in practice all around the world. And as Nick Trott,

General Manger of Modern Freight Company (MFC) says,“There are hospitals, ablution areas, offices, mobile hospitals, kitchens, laundry rooms and even hotel pods being made out of containers in the region.”

Clearly this business model is an area of immense value. But Trott says,“It is very difficult to assess the monetary value of the regional market as new gas/oil wells are being found/tapped plus there’s an increase

APRIL 2014 45

CONTAINER CONVERSIONS

in power generation construction projects across the region. Having said that, a very rough estimate would be US$ 500 million.

And this is not including potential markets in Kurdistan, Turkmenistan, Kazakhstan and Africa. Of course, with the types of usages of container conversion units (and modular style units) increasing, this figure could well be much higher.”

Just the estimated value of this market would be a viable business option, but Trott lists more. He says,“Container conversions work on several levels:they’re a cheaper and quicker option as compared to normal concrete structures. They’re extremely flexible in that there are very few areas where containers cannot be converted for use. We see containers being used as offices, control rooms, blast proof facilities and off-shore units to name but a few. Units can be easily extended and they are portable, too. Looking at the environmental angle, as they are made from containers the re-manufacturing of units is part of the recycling process. And since designers are looking at many new uses for containers, we may well see some very new concepts in the future.”

MFC stand at an exhibition designed to look like an office space

Start to finish The entire process from start to finish is quite simple for MFC. As they purchase and sell second hand containers and also provide storage facilities, MFC has units available to them in case a conversion is required by a client. The main suppliers of these containers are shipping lines and leasing companies from whom they purchase. Costs start from approximately AED 5,000 (US$ 1,361.30) and go up to approximately AED 12,000 (US$

MFC completed one such project for the Department for International Development (DFID), UK. The project involved converting three 40-foot ISO containers into a secure, weatherproof site office with all amenities built in.

46 APRIL 2014

Hospital interior after completion

3,267.13). Once they are purchased they are transported by road to MFC’s storage warehouse in the Jebel Ali Industrial Area, 10 km away from the port and freezone.

As per the client’s requirements the containers are re-designed and professionally refurbished at the facility by in-house experts. This procedure takes, on an average, about 15 to 20 days for a 20-foot container. The time frame also depends on the scope of work. Besides offices, MFC has converted a lot of containers into storage rooms, workshops, laundry rooms, kitchens, waste treatment plant, accommodations, high pressure test facilities, offshore DNV diving chambers, changing rooms,

ablution units, offshore chiller freezers and prefabricated buildings like metreing skid sheds and hospital buildings.

Since ISO shipping containers are of excellent basic design, this enables them to be transformed to an almost infinite number of alternative use. They can be joined together to achieve any width or length. Recently, MFC completed one such project for the Department for International Development (DFID), UK. The project involved converting three 40-foot ISO containers into a secure, weatherproof site office with all amenities built in. According to MFC’s scope of work, the container’s walls and ceilings were fitted with medium density fibre (MDF) board along

CONTAINER CONVERSIONS

Nick Trott, General Mananger of MFC

Office space

with insulation of 50 mm thick rockwool which contributes into turning the container into a fire-safe unit with an excellent ability to block sound and heat, thus proving a comfortable indoor climate. The unit was also fitted with aluminum sliding windows with safety bars outside and external steel doors.

This container became a fully functional office space fitted with lighting, plug points, two split air conditioners and office furniture including meeting table, chairs - swivel chairs for counters and fixed chairs for the waiting area.

Where to from here Trott says,“With the business arena continuing to evolve we continue to pursue new activities

in 2014 including turning our focus onto the healthcare and hotel logistics area.”

MFC’s reach is not only regional but global.“We have supplied converted units not just into the GCC but also to Libya, Afghanistan and Papua New Guinea. If we look at MFC container concepts alone, we have seen this business grow 100 per cent in the past five years with much of this growth in new types of conversions (eg. laundry rooms, accommodation units, ablution units, kitchens, changing rooms, office areas etc).

This, coupled with the general increase in the off-shore DNV units, control rooms and blast proof units, it is clear that the interest is growing in this type of equipment. The

previous view of container conversions was basic models for latrines, storage or offshore DNV units. However, we are now seeing enquiries for off-shore chiller units, mobile hospitals and now hotel pods, too. The usages are now almost exponential – so with this in mind the growth is now difficult to predict.

“At present the UAE is our largest market, however we have expanded into Qatar (where we have a conversion facility, and sales for these products are already being seen) and now Saudi Arabia and Iraq, which are probably the two largest potential markets in the region. In saying that, Africa is also a huge investment area and hence we see this as a new target.”

APRIL 2014 47

OMAN

OMAN the central hub

Location is everything, the saying goes. And for Oman being right in the centre of the Middle East offers huge economic benefits. Frost and Sullivan’s Srinath Manda, Programme Manager, Transportation and Logistics Practice, MENA and South Asia analyses Oman’s development abilities

48 APRIL 2014

APRIL 2014 49

OMAN

T

he Sultanate of Oman is geographically the secondlargest country within the GCC. Oman occupies the South East corner of the Arabian Peninsula and is bordered by Yemen (in the South West), the Kingdom of Saudi Arabia (KSA, in the West), and the United Arab Emirates (UAE, in the North West). It is strategically located at the mouth of the Gulf surrounded by the Arabian Sea (in the East) and Persian Gulf (in the North West) that houses the biggest infrastructure of ports in the Middle East. With ports on both the Gulf of Oman and the Arabian Sea, Oman holds immense opportunities as the major

50 APRIL 2014

junction for emerging international trade and commerce between the Eastern and Western hemispheres. Apart from access to the important East-West sea trade route, directly or through the Jebel Ali Port of the UAE, Oman has road links to the UAE and the KSA. Oman is a member of the Organisation of the Petroleum Exporting Countries (OPEC), and is the largest producer of Liquefied Natural Gas (LNG) in the world. The country is now one of the most consistently growing and stable economies in the ME, significantly because of its large oil and gas reserves.

Even though there was a 25 per cent drop in the economy during the 2008-09 global

Oman also has mineral deposits of copper, chromite, marble, gypsum, limestone, manganese ore, and coal.

However, the country’s income is heavily dependent on the oil sector, as oil products constitute around 95 per cent of the overall exports every year.

OMAN

economic crisis, Oman’s GDP has been on an impressive growth track since 2010.

The oil and gas industry accounts for nearly 50 per cent of Oman’s total GDP, while services and other manufacturing industries account for the rest. Oman also has mineral deposits of copper, chromite, marble, gypsum, limestone, manganese ore, and coal. However, the country’s income is heavily dependent on the oil sector, as oil products constitute around 95 per cent of the overall exports every year. In addition, other manufacturing sectors such as minerals and metals, chemicals, engineering equipment, plastics, food, and glass are also actively growing. GDP revenues are

being invested in developing the country’s infrastructure and boosting domestic industries such as tourism and construction.

Oman’s construction and retail sectors have witnessed substantial growth because of improving economic conditions and rising incomes over the last few years. Rapid growth of these industries has resulted in the need for extensive supply chains across the country to enable sourcing and distribution of their production, leading to immense opportunities for logistics services.

The distribution networks of the majority of the industries involve a large number of traders and retailers spread across the country, and it is an extremely difficult task for any

industry participant to solely manage multiple levels of intermediaries serving them. This provides significant opportunity for logistics service providers (LSPs) in Oman.

However, logistics spend varies widely across industries, based on the nature of operations within the country, and complexities of the industries’ supply chains, as demonstrated in Exhibit-1. Industries like building materials, food and construction spend more on their logistics activities due to the necessity of specialised logistics infrastructure and equipment. Other industries like automotive, electronics, and oil and gas spend comparatively less on their logistics activities.

APRIL 2014 51

OMAN

From the perspective of enduser industries, the oil and gas sector accounts for the largest share of the total logistics market, contributing to about 31 per cent. Retail, automotive, metals, and engineering goods are the other leading contributor industry segments.

The sum spent on logistics services by all industries in a country during a year is considered as the total logistics market in the country for that year.

Logistics market size and segmentation The total logistics market in Oman was estimated at about US$ 7.87 billion in 2013. The market comprises four broad segments - transportation, warehousing, freight forwarding and value-added logistics (VAL).

Considering that the oil industry is export-oriented and most other industries are import-dependent, the freight

forwarding function that facilitates these activities accounts for the largest share in the logistics market. Warehousing (storage of goods) represents the second largest share of the total market followed by transportation (domestic movement of goods) at third position.

VAL contributes to a very low share in the market, since most of these functions have integral links with manufacturing activity.

Exhibit 1

Logistics Spend as Percentage of Revenue for Major Manufacturing Industries, Oman, 2013 Logistics Spend as % of Industry Revenues

15%

Building materials

11%

Pharma and Medical products

11%

Industry Segment Name

Food and FMCG

Engineering goods

10%

Materials

10%

Retail

10% 10%

Chemicals Rubber and Plastics

9%

Electrical and Electronics

9%

Textiles, Garments and Leather goods

9% 7%

Automotive Oil and Gas

52 APRIL 2014

5%

Source: Frost & Sullivan analysis

Key growth drivers Oman’s strategic location in the Europe-Asia trade lane Due to its strategic location, Oman serves as a transshipment hub for consignments from Asian countries to the US and Europe. Being located near India and China, the high growth economies, Oman imports its products significantly from these countries, mostly transiting through its capital, Muscat. Thus, Oman has a unique advantage over other Middle Eastern countries and has been able to establish itself as a hub for transcontinental trade.

Focussed development of logistics infrastructure Oman has been focussed on developing world-class infrastructure to fulfil needs of the growing logistics industry and turn the nation into a premier logistics and transshipment hub in the Middle East. Al Mazyounah Free Zone, Sohar Free Zone, Salalah Port, Muscat Knowledge IT City, Port Duqm, among others, are some of the prestigious large-scale infrastructure projects that Oman has launched to establish itself as a logistics hub.

End-user industries The logistics sector is mainly driven by the rising level of outsourcing by key industries such as oil and gas, food, pharmaceuticals, electronics, construction and automotive, as the companies are increasingly focussing on streamlining their core business activities, while looking for cost-effective ways to reach their end markets, efficiently and effectively. The demand for comprehensive logistics services from

these industries is rapidly expanding opportunities for third party logistics (3PL) service providers that bring forth professional handling of logistics functions.

Key challenges Poor logistics infrastructure networks and a lack of multimodal transportation Oman’s logistics infrastructure has not kept pace with the industrial development in the country, as the existing infrastructure is still inadequate with very poor inland road and sea connectivity. This is resulting in increased logistics costs for industries.

Oman’s logistics infrastructure is currently rated as the poorest among all the GCC nations, according to 2012 rankings of the World Bank’s Logistics Performance Index (LPI). In addition, the country’s score in these ratings declined from 3.06 (on a scale of 1 to 5, 5 being highest) in 2010 to 2.84 in 2012, indicating that Oman’s

logistics infrastructure development efforts are significantly lagging compared to its own needs, and in comparison to the efforts of other neighbouring countries.

Low local manufacturing levels limit scope of growth of the logistics market At present, Oman has very limited levels of domestic manufacturing activity as the industry is largely characterised by import and trading activities. The current scenario means industries mostly need Exhibit 2 just freight forwarding activity, leaving very limited scope for integrated LSPs; Logistics Market Break-up by thus restraining the growth potential of Segment, Oman, 2013 VAL Transportation logistics market in the long run.

4.0%

Freight Forwarding 57.7%

21.2%

Revenue forecasts for the Omani logistics market According to Frost & Sullivan, the total logistics market in Oman is likely to grow at a Compound Annual Growth Rate (CAGR) of 10.2 per cent between 2013 and 2020 to reach about US$ 15.50 billion in 2020.

Oman is expected to witness significant growth in exports (driven by oil and gas, and chemicals) and imports (driven by automotive, engineering, and metals), Warehousing which, in turn, is expected to drive the 17.1% freight forwarding market as well as the Source: Frost & Sullivan analysis overall logistics market.

APRIL 2014 53

OMAN

54 APRIL 2014

global supply chain solutions, multimodal transport logistics technology solutions and value-added logistics services.

Improved transportation infrastructure, matching global standards, are all set to boost the logistics sector in the country.

Warehousing and VALS practices are

also expected to improve with improving logistics infrastructure.

The increasing economic integration of the GCC nations, coupled with evolution of supporting logistics infrastructure, is likely to result in progressive fortunes for Oman’s logistics industry.

Exhibit 3

Revenue Forecast for Logistics Market, Oman, 2013-2020 16 Logistics Market Revenues (US$ billion)

The way forward Oman has maintained focussed efforts towards economic development and developing manufacturing bases in the country to attain consistent economic progress. The Omani Government has launched multiple infrastructure development plans related to free trade zones (FTZ), airports, ports and railways.

Investment opportunities in the FTZ and other logistics infrastructure are being offered with competitive benefits and special incentives.

Key challenges such as transportation infrastructure until semi-urban and rural areas, and low level of domestic manufacturing activity have to be addressed with focussed efforts on an urgent scale to ensure that the growth momentum of Oman’s economy and logistics sector is not crippled.

Significant growth opportunities exist for the LSPs in areas such as logistics infrastructure development, integrated

14 12 10 8 6 4 2 0

2013

2020 Source: Frost & Sullivan analysis

January 2014 Issue 01

Essential reading for hotel operators, owners, developers and investors

Picture perfect

Hangzhou draws hotels and hi-tech

Expo success

Dubai prepares for hotel boom

Flora and fauna Escape to Sir Bani Yas Island

N O O S G N I M CO +

SKY-HIGH AMBITIONS Emirates leads Gulf carries’ orders charge

Top.indd 1

1/21/14 3:02 PM

CONTAINER CONVERSIONS

READY FOR MORE TRADE Ras Al Khaimah’s free zone authority - the Ras Al Khaimah Free Trade Zone (RAK FTZ) recently announced results of a successful business year and their plans for this year

T Peter J Fort, CEO of RAK FTZ

56 APRIL 2014

he Ras Al Khaimah Free Trade Zone Authority (RAK FTZ) recently announced its new client registrations increased by nearly 30 per cent over the previous year. To accommodate the rising demand, the RAK FTZ plans to build a new office tower in its Business Park that will accommodate more than

700 new clients. It will also construct 100 new warehouses in its Technology Park, for clients doing business in trading and light manufacturing. “The RAK FTZ continues to grow rapidly, attracting top companies from emerging and established markets around the world, and this is why we need to build more

CONTAINER CONVERSIONS

first-class offices and quality warehouses to accommodate them,” said Peter Fort, Chief Executive Officer of the RAK FTZ. “Our substantial increase in client registrations reflects the investors’ confidence in our cost-effective, award winning, businessfriendly company setup services and high quality facilities.”

Two thousand nine hundred new companies registered with the RAK FTZ during 2013, an increase of nearly 30 per cent over the 2012 tally of 2,300.

The new office tower will have retail shops and restaurants on the ground floor; other floors will be outfitted with offices in a range of sizes to satisfy client demand. The tower

will be designed as an environmentally responsible and resource efficient building.

Complementing the five existing business centre office buildings, the new tower will increase the overall footfall and commercial activity in the Business Park, creating a dynamic business hub that will serve the entire emirate of Ras Al Khaimah.

Last year, most of the new investors who took advantage of the RAK FTZ’s businessfriendly benefits, including zero taxes and no restrictions on profits or capital repatriation, were from the Middle East, India, Pakistan, Turkey, the UK, France and the US. The clients benefit from the RAK FTZ’s ideal geographical positioning as a gateway to the sizeable markets of Africa, Europe, the Middle East and South Asia.

The total number of licence renewals at the free zone in 2013 reached 5,100.“The rapid growth lies in the fact that we offer unmatched benefits at lower cost to our clients, including a range of facilities to suit each investor’s needs,”Mr Fort said.“Not only do we offer cost-effective, tax-free and easy to set up business packages, but we also extend ongoing support services to our clients, to help them set up and operate their businesses in a profitable manner. This year, we aim to make the RAK FTZ customer experience even better, with expanded facilities and an enhanced customer relations department that will provide even more services. These improvements, combined with the anticipated economic growth resulting from the Expo 2020, have prompted more enquiries from investors who want to maximise their profits in the RAK FTZ. There are numerous RAK FTZ promotional offices in various, convenient locations across the UAE, providing marketing and sales, client support and administrative services to existing and prospective RAK FTZ clients.

The most recent addition was the opening of the latest RAK FTZ Promotion Centre at the Fairmont Hotel, Dubai. The office is located on the sixth floor (No. 607) of the Fairmont Office Tower on Sheikh Zayed Road in Dubai, and is open Sunday through Thursday from 8am to 5pm.

APRIL 2014 57

EVENT

Megatrends to watch for

Value Chain Leadership Awards recipients with Aroop Zutshi, Global President and Managing Partner and Y.S. Shashidhar, Managing Director, MENA and South Asia

In order to ensure future success, businesses need to have a clear idea of trends that are going to dominate our lives as we head into tomorrow. Frost and Sullivan recently held its fifth edition of GIL 2014: Middle East, The Global Community of Growth, Innovation, and Leadership in Dubai

58 APRIL 2014

F

rost and Sullivan’s fifth annual flagship event GIL 2014: Middle East, The Global Community of Growth, Innovation, and Leadership delved on the theme ‘Disrupt, Collapse, and Transform’ and assisted CEOs and their teams in successful business innovation and strategic growth planning with a strong focus on partner sourcing. The event focused on new trends that are creating widespread disruption, collapsing industries and transforming spaces to give context to the opportunities ahead for growth.

Aroop Zutshi, Global President and Managing Partner, Frost and Sullivan, set the stage for an engaging forum by sharing his insights on how

innovation has become an essential ingredient, how to survive and thrive in the future business environment, both as an individual and as a company.

As disruptive technologies replace current trends, the presentation drew the delegates’ focus to what they could do to cope with the rapidly changing business environment – from newer business models to integrating ‘smart’ with everyday objects. Especially, with the virtual world becoming increasingly commonplace, the world around us is collapsing fast causing the rigid boundaries between industries to fade rapidly. Innovations in technology and materials are responsible for transforming the manner in which the human race

EVENT

interacts with the external environment, associated enablers and internally, within the society.

Highlighting the current business environment in the Middle East, Aroop said, “The region is poised for social change, which, combined with a need to grow globally, is increasing pressures on companies based in the Middle East to innovate in new exciting ways. Faced with increasing complexity, companies are at the vortex of change and hence, innovation through disruption, collapsing and transformation is of paramount importance. Through GIL 2014: Middle East, Frost and Sullivan supports these companies and their management to benchmark and strengthen their growth strategies against proven best practice tools and strategies.”

Brian Denker, Vice President and Global Head Growth, Innovation and Leadership, then presented the 2014 Growth, Innovation, and Leadership (GIL) award to Salma Ali Saif Saeed Bin Hareb. The award recognised demonstration of significant social impact and visionary leadership as showcased by Salma Hareb’s contributions to the Middle East.

Frost and Sullivan also recognised “Bestin-Class” organisations in the healthcare, information and communication technologies (ICT) sectors and individuals who, over the course of their careers, have demonstrated significant excellence in contributing to driving growth, innovation, and leadership through their personal contributions and efforts in the industry.

These awards are based on detailed best practices research conducted across these segments in Middle East, in 2013.

The visionaries, innovators, and leaders recognised at GIL 2014: Middle East: Award 2014 GIL Award

Recipient Salma Ali Saif Bin Hareb

HEALTHCARE AND ICT AWARDS: Lifetime Achievement award GCC In-Vitro Company of the Year Competitive Strategy Leadership Award Sub-Saharan Africa Big Data Solutions

Value chain leadership awards The day-long event concluded with the 2013 Value Chain Leadership Awards (VCLA), Gulf edition. This global programme aims to transform supply chain and manufacturing capability in the region, Frost and Sullivan identified and applauded sustainable organisations with strong business acumen and robust operational performance, aligned to customer satisfaction. The companies recognised have demonstrated excellence in their growth strategies and exhibited exceptional leadership, successful customer acquisition backed by efficient operations and supply chain processes.

Frost and Sullivan’s on-site assessment programme has a legacy of more than a decade in various regions around the globe and has increasingly gained credibility across the business fraternity.

Over the years, manufacturing and process consulting practice has worked closely with management teams of various companies and has been involved in critical decision making with respect to supply chain efficiencies, its leanness and flexibility.

Dr B R Shetty Roche Diagnostics IBM

VCLA evaluation was primarily based on four critical aspects of value chain: customer focus, logistics excellence, operational effectiveness and sustainability.

Frost and Sullivan believes that a firm, which performs well on these four parameters along with strong financial performance, should be a natural “Partner of Choice”.

The developments of the past decade in the Middle East indicate the increasing focus on non-oil sectors as a means to achieve sustained economic development and elevated social status. This marks the advent of manufacturing sector growth in the Middle East, the scope and the enormous opportunities for this sector in the region. Middle East, today, accounts for nearly 40 per cent of the global gas reserves. However, the region contributes to only less than 10 per cent of the global gas production due to the high costs involved in liquefaction process needed for exports. This, in itself, presents a huge opportunity for the manufacturing/ production sector.

Organisations recognised with Value Chain Leadership Awards, Gulf Edition 2013 are: AWARD TITLE

COMPANY

FACILITY-LOCATION

Supply Chain Partner of Choice Award

Weir wEngineering Services Company

Dubai, United Arab Emirates

Supply Chain Partner of Choice Award - Process Sector

National Petrochemical Industrial Company (NATPET)

Yanbu, Kingdom of Saudi Arabia

Supply Chain Partner of Choice Award -Engineering Sector

Midal Cables Limited

Manama, Kingdom of Bahrain

Supply Chain Partner of Choice Award - Service Sector

Gulftainer Company Limited

Khorfakkan Container Terminal, Sharjah, United Arab Emirates APRIL 2014 59

UNWIND

Hard work = success This is the simple formula followed by Eng Mahmood Al Bastaki, Board Member and CEO, Dubai Trade, when it comes to his company’s agenda and handling his team.

Here he shares some of his ideas with Munawar Shariff What school and university did you go to?

I have studied in various government schools in Dubai and graduated from Imam Malik High School. In 1993, I earned my Bachelor of Science in Electronics Engineering Technology from the University of Arkansas in Little Rock, USA. I then completed my Masters in 1998 from Oregon Graduate Institute of Science and Technology in Electrical Engineering specialising in voice analysis and Digital Signal Processing.

What was your first job?

My first job was as Forensic Voice Analyst in Dubai Police Forensic Laboratory. I had an international certification in this specialisation. I was classified an expert in the area of Forensic Voice Recognition in 1995. I stayed six years with Dubai Police till August 1999.

What do they not teach you in business school?

They don’t teach you how to tap your strengths and exploit them in your desired career. Many of us are talented and have never been properly coached on how to harness those powerful skills in the workforce.

Who is your role model? Why? My role model in His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Ruler of Dubai.

His Highness went against all the norms and revolutionised conventional management style

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into a style of his own that is looked upon by the entire world with dignity and fascination. His boldness, unprecedented vision and unmatched perseverance are the attributes of Dubai’s success.

What is your leadership style?

To take initiatives and explore unchartered territories. There are always new ways of looking at things, at evolving. I care about my employees, nurture them, develop them and am close to them. My employees are my biggest asset.

His Highness Sheikh Mohammed Bin Rashid Al Maktoum went against all the norms and revolutionised conventional management style into a style of his own that is looked upon by the entire world with dignity and fascination

What do you think is most important for being an effective manager?

Most important is how you stimulate and motivate your team, how you inspire them for them to be highly productive. You have succeeded when your team voluntarily approaches you to seek your guidance instead of you soliciting them to involve you in business decision making.

How well do you handle stress? What is your fool proof method of getting de-stressed?

I spend quality time with my children. They are my beacon of hope for tomorrow. They teach me all the lessons that work fails to teach me. I also adore going to the beach.

The sound of water soothes my spirit and gives me all the needed tranquillity.

What do you find encouraging?

Seeing a change made in a cumbersome process gives me utmost happiness. It gives me euphoria when I see a smile on a customer’s face and their satisfaction when interacting with us. It energises me to relentlessly continue to work harder and deliver more innovative solutions.

How do you spend your free time?

I spend my free time with my family.

My mother is the most important person in my life and I devote a focused time to be with her. I have a huge number of friends belonging to various nationalities and I tend to spend good times with them.

What is at the top of your agenda right now?

How to take Dubai Trade to the next level ...how to always keep the city of Dubai ahead of the game … what will maintain our position as the trade hub in the region.

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