SCLG YEARBOOK 2013/2014 by Jason Verhoven

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 1

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 2

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 3

FOREWORD This is my pleasure to present to you the SCLG Yearbook 2013 - a detailed look at the regional industry today. We can see a surge in infrastructure projects GCCwide, governments are continuously prepping for the future despite the recent global financial crises as well as unrest in some of the countries in the wider MENA area. There is an expectation for the GCC countries’ GDP to reach growth levels of five per cent per year until 2020 and subsequent population increases of approximately 50 per cent. So not only are national infrastructure needs being forecasted and met, but on a regional level preparations are going ahead for an integrated rail connection for freight and passengers. This is being actively planned and coordinated by all governments. We have compiled a comprehensive look at the status of all the modes of transport in the GCC with strong article updates on each level. The yearbook is published under the banner of the SCLG - The Supply Chain and Logistics Group by Signature Media. Signature Media is a strong new player in the market with a dedicated team of professionals catering to all media, events and consultation services in the region. The purpose of this yearbook is to bring together in one place an overview of the major branches of the industry, to be able to provide an insight for all our members as to what the status has been and where the industry is headed. There’s never too much of the right information to steer you businesses in the right direction. Hence the 6th SCLG Summit and Yearbook is being held and launched at the right time when the industry is turning around for growth and innovation and leaving behind the period of global financial confusion. I would wish to take this as an opportunity to extend thanks to all individuals and corporates who supported in developing and delivering the book well on time. A special mention to our colleagues at AT Kearney who have diligently supported us each time with their comprehensive and concise country reports. I would also like to extend my sincere thanks and appreciation to Dubai Chambers for providing direction, support and encouragement in advancing the supply chain and logistics industry in the UAE, the region and around the globe. It is my pleasure to add that since the Supply Chain and Logistics Group is based in Dubai - the inspiring and vibrant city of innovation, knowledge, economy and global trade connectivity - we shall continue our efforts in bringing excellence to the supply and logistics industry globally.

SHASHI SHEKHAR Chairman Supply Chain and Logistics Group, SCLG

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 4

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 5

CONTENTS 08 What the future holds Experts from SCLG’s distinguished members panel look at the industry’s present and future

COUNTRY REPORTS 13

Logistics in the GCC

The emergence of a transcontinental hub

16 Bahrain Resilient progress

Kuwait

New opportunities up ahead

Oman

An expansionary ﬁscal policy

Qatar

A continuing balance-of-payments surplus

Saudi Arabia

Tempered growth

UAE

Core assets - trade, tourism, infrastructure - prove resilient

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 6

BY ROAD 60 GCC rail connection Realising GCC unity

BY AIR 82 World air cargo forecast A round-up of the year

94 On a high Emirates sky cargo

96 Taking control with SAP SAP transforms Panalpina

BY SEA 102 Full steam ahead DP World remains conﬁdent about their long term vision

105 Jebel Ali expansion on target DP World talks about new developments

106 Khalifa port Abu Dhabi container operations move to Khalifa port

107 Khorfakkan exceeds expectations Sharjah’s Khorfakkan port experienced most growth in the Middle East

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 7

CONTENTS MANAGEMENT 110 GCC’s logistics infrastructure Asset rich and cargo poor?

116 Rock steady SSI Schaefer has a solid future strategy

121 Logistics drives regional economic growth The region’s supply chain and logistics industry is in the driving seat

126 Winning supply chains integrate today’s capabilities with tomorrow’s goals A bullet proof supply chain is the way forward

132 Logistics outsourcing trends - a strategic insight Challenges of outsourcing a part of the supply chain Published for the Supply Chain and Logistics Group Editor Director Munawar Shariff Email: munawar@signaturemediame.com Kanchan R. Vora Exclusive Sales Agent Signature Media LLC P.O. Box 49784. Dubai, UAE

Design and Layout by Design Bucket Email: merw@designbucket.me

Deepak Chandiramani Email: Deepak@signaturemediame.com

Printed by United Printing Press (UPP) – Abu Dhabi

Jason Verhoven Email: jason@signaturemediame.com 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. Articles and information contained in this publication are the copyright of SCLG and Signature Media LLC and cannot be reproduced in any form without written permission.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 8

WHAT THE FUTURE HOLDS Four of SCLG’s exper ts share their vision about what’s in store for the supply chain and logistics industr y regionally and internationally. Munawar Shariff spoke to Bob Collier, Owner and CEO of Lydon Consultancy; Mar k Millar, Managing Par tner at M Power Associates, Dr Donald Tham, Professor at Ryerson University, Canada and Mishal Kanoo, Deputy Chairman of the Kanoo Group. reduction in customs revenue for the respective countries.

Bob Collier, Owner and CEO of Lydon Consultancy

Although this is marginally off-set by increased volume

How mature and steady is the region's supply chain industry?

What do you see as the major challenges going forward?

The industry in the region is long established and is very steady.

I do not see any major challenges going forward as the region’s

Although

throughput.

volumes

fluctuate with seasonal demands

there

members have the experience and capability to plan ahead for positive growth.

and client focus helping

From here where do you see the market going and how does it compare internationally?

the region maintain its

We are in a vibrant, growing region with a growing purchasing

importance

power, which places it ahead of most International regions to

history of continuity

the

supply chain.

attract major investment.

How have the equations changed coming into the present?

Which is the most promising country in terms of growth in the MENA region?

With

competitor to further develop as a regional transhipment hub to

the

constant

demand for lower priced goods

and

Because of international sea lanes and the proximity to the Red Sea route to Europe, then Oman must be considered as a major serve both the Middle East and African markets.

services,

have switched their sources of supply. This has been a gradual

Where is your area of concentration today and in the future?

switch from USA and European suppliers to South East Asian and

My main focus today is establishing a niche market for discerning

Far East sources. This affects the supply chain transit times and

customers where service and commitment are more important

documentary requirements and with lower prices this means a

than a low price.

buyers in the region

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 9

SGLG MEMBER INSIGHT Mark Millar, Managing Partner at M Power Associates

are also seeing an expanding proportion of intra regional trade and the development of substantial E2E (emerging to emerging) business.

Mar k Millar provides value for clients with independent, external and informed perspectives However, what would be your cautionary advice? on their supply In this exciting environment, there are many challenges within the chain strategies in supply chain ecosystems, with the major ones typically relating to Asia – including Infrastructure development, regulatory environment and China and ASEAN. availability of human capital. His presentations, seminar s and Different economies are at differing stages of investing in the corporate briefings transportation infrastructure that is needed to empower and enable help companies to efficient logistics networks. Multi-modal hinterland connectivity is improve business essential to effective supply chain ecosystems, but often gets operations, plan neglected in the early stages of infrastructure expansion. more effectively Regulatory environments vary across the different economies, and increase the with some markets having cumbersome administrative efficiency of their procedures, restrictive licensing frameworks and inefficient supply chain customs processes that cause costly delays that inhibit successful ecosystems. Mar k supply chain execution. ser ves as Asia Pacific Regional Skills shortages across the white collar sectors of logistics and Advisor for SCLG. His contact is supply chain often manifest themselves in environments of rapidly developing economies, where the demand for mar k@mar kmillar.com. experienced

logistics

personnel

easily

outstrips

the

available demand, further compounded by the industry

How do the two regions - the Asia Pacific and MENA - compare in terms of supply chain efficiency and maturity in the logistics industry?

talent pools frequently not expanding rapidly enough at the

There are many similarities between the Asia Pacific and MENA

chain management. Both regions comprise multiple different

How much are the emerging markets (India and China) contributing towards propelling trade through the GCC? How have those figures changed in the last few years?

emerging and developing markets, all at various stages of

The ‘Chindia’ trade will continue to expand apace, with south-

development and maturity – and therefore cannot be serviced by

south trade flows projected to grow faster than most. GCC will

a one-size-fits-all approach.

continue to play an essential pivotal role in many of these

regions – both are complex and dynamic with plentiful opportunities and challenges in the context of logistics and supply

intake level.

expanding trade routes and will also increasingly act as the

What excites you most considering the present scenario of markets improving and businesses experiencing more success than previous years?

fulcrum for sea-air supply chain options between Asia and

There are many exciting opportunities – particularly with the rapidly emerging consumerism across the regions which is driving

Where do you see the industry headed over the next couple of years?

exponential growth in FMCG, retail and electronics sectors. We

We will see further rapid growth of economic prosperity across

Europe.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 10

emerging and developing markets, as the centre of global

chains have become challenging tasks. It is this context or

economic gravity continues to shift eastwards.E2E and intra-

framework that should drive the changes in supply chain and

regional trade flows will expand.

logistics academics over the years. Educational courses should strive to provide the balanced content towards exposing students

Within the 3PL sector we will see further consolidation through

to appropriate theories, best practices, researched findings and

merger and acquisition activity, whilst customers also reduce the

technologies so that graduates of such courses may be able to

number of service providers that they deal with. Persistent

operate successfully within this reality framework.

proliferation of mobile internet and e-commerce business will fulfilment experiencing some interesting innovations during the

What in your opinion is the industry specific course or specialisation of the moment?

years ahead.

In my opinion, it is very difficult, if not impossible for me to

challenge traditional logistics networks leading to last mile

identify the industry specific course or specialisation of the

From your vast experience, what would be your word of advice to logistics companies in the GCC?

moment. However, based upon my academic and industry experiences over three decades,

Focus on adding value for your customers and always adopt a ﬂexible and responsive approach to the market. Ensure you are

I feel confident that a well rounded post-secondary undergraduate

regularly accessing the independent informed insights that will

programme in Industrial Engineering tends to produce highly

empower your business to continuing proﬁtable growth in the

successful and productive employees for corporations and

rapidly changing environment.

governments operating in the reality context or framework I put forth for your previous question.

Dr Donald Tham, Professor at Ryerson University, Canada

How have the industry requirements led to and enhanced course contents? By virtue of the global or extended supply chains we live with or have to live with, the traversing of physical borders of countries over land, sea and air is given. This exposes the industry players to encounter various types of terrains, waters, skies, supporting infrastructures, governmental and ﬁnancial laws, cultures, business practices, technologies, environmental laws, human behaviour,

How have supply chain and logistics academics changed over the years?

industrial relations, languages, foods and eating habits.

The

and pollution issues.

reality

corporations

that

Consequently, industry requirements have led to course contents that have been enhanced through case studies whereby students are being exposed, for example, to various governmental, environmental and ﬁnance related laws, coupled with sustainability

and

governments from all

More so, course contents complemented with case studies and

over the world, more so

collaborative inputs from students of various countries are being

from North America and the Euro Zone, have organically become

delivered and discussed by various "visiting professors" thereby

associated with "long or extended supply chains" in their quest to

bringing a global experience to the classrooms made seamlessly

search for low cost geographies for materials and labour inputs

possible today through varying communication and information

into the products and services they provide. The physical logistical

technologies. Further, exchange students may take course

entities and associated control procedures needed to maintain the

electives outside his/her country with supplemental work

integrity, sustainability and legality of these extended supply

internships in the visiting country, as all part of earning a course

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 11

SGLG MEMBER INSIGHT credit. In short, the "internationalisation" aspect of course

low cost geographies for materials and labour are shifting from

curriculums driven by industry requirements have enhanced the

China and India to the African Continent. This demands

"course contents".

directional and operational changes to various extended supply chains. The crushing economic declines within the Euro countries

What can you identify as areas yet to be explored in supply chain and logistics knowledge?

such as Greece, Portugal, Spain and Cyprus, leading to the austerity measures imposed on those countries by the ECB and the IMF. Now with the formation of the BRICS Bank, there will

The aspects of ensuring accountability, responsibility, traceability,

be a shift in the trading zones thereby calling for a demand in the

sustainability, integrity, quality and the right performance metrics

expertise of the supply chain and logistics domain too. Hence,

in real time throughout the supply chains are some areas yet to be

there is optimism in my outlook for the industry.

explored in the supply chain and logistics knowledge domain. Case in point - the mystery of horse meat on some supermarket shelves! I rest my case.

Mishal Kanoo, Deputy Chairman of the Kanoo Group

There's just so much to learn and adapt to in everyday business, how quickly do you see new techniques being implemented today? The agility towards the implementation of new techniques being implemented will always depend on various factors:- one, the

Therefore, just keep the status quo. Two, the prospect of the general

What is the current logistics scene in the region?

economy impacting the company's market share. Though, it may be

It is blooming. This is

said that many of my company clients are driven towards

still the most important

implementing new techniques quickly notwithstanding the generally

hub on the east/west

poor economy with the conviction that they can leverage from the

crossroads. Some cities

new technique/technologies to beat the competition and improve

will do fine while others

proďŹ tability. Three, the abilities and skills of the company's workforce.

will do great.

outlook perspective of senior management coupled with risk acceptance and the complacency factor - do not upset the apple-cart!

In this respect, there are senior management players that promote and subsidise costs to better train and educate their workforce.

Where is it headed? We are about to exit a financial crisis. It might not feel like it, but

In many ways, this is an enabler towards the agile implementation

we are. As the global economy grows, so will the industry.

of new techniques. Four, the competition factor to the companyâ&#x20AC;&#x2122;s and faces little or no competition, the company may tend to

What challenges are you facing in your freight and shipping businesses presently?

postpone the implementation. Though one must be cautioned that

The main problem that we are facing is getting the right talent at

such a situation may make the company overly complacent. This

the right price.

products and services. If the company is in a niche market vertical

may sometimes prove to be detrimental to the company.

What's the future looking like for the industry from your wide academic vision?

In your opinion, is the logistics industry lacking in any way in the GCC? How does it (the local logistics industry) compare with global supply chains?

The supply chain and logistics knowledge domain will continue

This is a growing market but not a mature one. It is covering

to gain in prominence, visibility and significance for enterprises

the commodities freight but not the niche markets â&#x20AC;Ś at least not

by the dynamic factors evolving around the world. For example,

yet.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 12

COUNTRY REPORTS

Sources: A.T. Kearney Analyses, Business Monitor International, CIA Factbook, Containerization International, Economist Intelligence Unit, Factiva, Frost & Sullivan, International Monetary Fund, MEED, National Governments, National Ministries of Transportation, National Port Authorities, World Bank, Zawya Disclaimer: This document is presented exclusively for information and/or evaluation purposes and A.T. Kearney Limited accordingly makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability or suitability of the information for any particular purpose and conďŹ rms that it will, under no circumstances, be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from-, out of-, or in connection with, the use of the information.

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 13

OVERVIEW

LOGISTICS IN THE GCC –THE EMERGENCE OF A TRANSCONTINENTAL HUB Logistics and transportation infrastructure developments enable the

Ocean is likely to bring further prosperity to the GCC providing

region to boost its local economies as it progresses towards

access to some of the world’s fastest-growing markets in CHIMEA

diversiﬁcation. With an estimated growth of the gross domestic

(China, India, Middle East and Africa).

product (GDP) around ﬁve percent per year until 2020 in the GCC, and a forecasted population growth of up to 50 percent by 2040, GCC governments are expected to continue to invest in their existing logistics infrastructure and build new facilities to cater to

Trends and Challenges for Logistics in the GCC Region

growing population needs. The GCC is undertaking these signiﬁcant investments both at an integrated regional level, e.g. with

Overall, the GCC experienced substantial economic growth in the

the GCC rail network development, as well as at a national level,

aftermath of the global recession. GCC’s 2012 GDP growth was

e.g. with projects in airports, seaports and roads.

4.8% and is expected to reach 4.1% in 2013 and pick up in the years to come.

Coordinated investments integrating existing and new logistics infrastructure assets across the GCC as well as across multimodal

Oil prices aside, GCC economies are increasingly implementing

logistics and transportation concepts remain crucial to strengthening

measures to become less vulnerable to ﬂuctuations of oil prices while

GCC’s overall economic development and global competitiveness.

improving economic development and competitiveness. For

While mainly focused on meeting growing local demand, improving

example, three of the GCC countries have moved up in the World

operational efﬁciency as well as developing the required service

Economic Forum Global Competitiveness ranking (Qatar, Bahrain

sector to operate these logistics assets are essential for success. In

and United Arab Emirates).

terms of operational efﬁciency, the GCC countries continue to improve customs, tracking and tracing processes as well as

Regional logistical improvements were also revealed in the 2012

timeliness. Based on these investments and process improvements,

World Bank Logistics Performance Index where the United Arab

airports, ports, roads and railroads are becoming key enablers to

Emirates, Saudi Arabia and Qatar improved their logistical

sustain GCC wealth and growth. To fully leverage these

performance scores compared to last year.

investments and efforts, it is important to note that the “intelligent” connections – communications, logistics, scheduling, and IT systems

The United Arab Emirates advanced across all dimensions

– are every bit as signiﬁcant as the physical connections of roads,

especially in customs, logistical competence tracking and tracing and

railways, and pipelines.

timeliness. Saudi Arabia advanced international shipments and Qatar improved customs, international shipments, logistics

Improved integration with ports and markets along the Indian

competence and tracking and tracing.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 14

Sector Analyses

on upgrading handled goods. The United Arab Emirates, Saudi, Qatar and Oman have invested extensive amounts in building and

Airports and aviation

improving their actual infrastructure to become the heart of the Middle East in air cargo handling.

The Middle East has become one of the fastest growing regions in terms of aviation. Passenger trafﬁc levels have been steadily increasing and are expected to continue to increase given the GCC’s strategic location. The number of passengers is expected to grow

Ports and marine transportation

substantially in future years. In the coming years the GCC countries are expected to invest an estimated total amount of $90 billion in

Ports continue to attract the interest of the GCC governments.

airport infrastructure for passenger and cargo trafﬁc. Numerous

Across the region, a number of seaport developments aim to adjust

major airport projects are already underway to create sufﬁcient

container and solid as well as liquid bulk capacities due to increasing

capacity to meet the anticipated demand.

local export and import demands. In addition, the GCC has always been the link between East and West, i.e. a signiﬁcant share of world

Saudi Arabia and the United Arab Emirates account for the majority

container trafﬁc between Europe and Asia pass through the Gulf.

of airport capacity in the region, becoming transcontinental hubs

This growing trade allows GCC ports to embrace the transshipment

linking the East and the West. Together their airport capacity in

business. GCC governments are continuously investing in state-of-

2025 is expected to be 314 million passengers ( Saudi Arabia - 114

the art port infrastructure with some specialization taking place.

million passengers and UAE - 200 million). Qatar is also very active

In this perspective, Bahrain has designed its ports with an ability to

and is seeking to position itself as a transit zone, but also as both a

expand but most importantly focused Khalifa Bin Salman port on

business destination and a “the tourism hub” especially for the

transshipment and specialized Mina Salman Port on the export and

“2022 World Cup. Qatar airport capacity is expected to reach 60

import of building material. Kuwait sets its goal toward

million passengers in 2025. Oman, Bahrain and Kuwait are

transshipment and focuses on serving its northern neighbors by

reinforcing themselves and upgrading their airport infrastructure in

expanding its main port to handle up to 2.5 million TEU by 2016.

order to strive with their GCC partners. Their goal is to promote

Oman’s ports act as the main source of jobs and the backbone of

their standing and anchor a well-deserved position on the aviation

the industrial sector. The Salalah port expansion emphasizes on

map while diversifying their economies away from natural

cargo handling and transshipment capabilities with a cost of around $650

resources. Bahrain intends to hit a capacity of around 14 million

million, while Sohar port targeted deep-water jetty and dry bulk

passengers by mid-decade while Kuwait has forecasted a capacity

terminals at a cost of around $250 million. Duqum port’s upgrade will

of 25 million in 2020. Oman’s master plan has set a target of around

include a liquid terminal to be completed by 2017 as part of a free zone.

12 million by 2014 and a goal of 50 million by 2050.

Qatar has plans to spend $5 billion for a new deep sea port focusing on containers and transshipments, its other ports have also been enhanced

Air Cargo also is expected to continue to grow, especially focused

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

and specialized. Mesaieed is focused on handling bulk and oil and Ras

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 15

OVERVIEW Laffan on handling liquid products (LNG). Last year Saudi Arabian ports

Among the many projects it is worth mentioning the plans to

grew at around 13%, e.g. Jeddah Islamic Port and King Abdulaziz Port

interconnect the GCC states by building an extensive railway

Dammam expanded and upgraded their infrastructure and storages.

network for both passenger and freight trafﬁc. This will further

Jubail and Yanbu are expanding towards positioning themselves as the

regional trade and economic development.

main gateways for petrochemical exports. Ras Al-Khair is focusing on dry bulk, liquid bulk and general cargo while the port of King Abdullah

The combined GCC railway projects being built cover around

Economic City (KAEC) is expected to expand its transshipment

2.200-kilometres covering the coast of the Gulf and extending from

capabilities in a free zone environment. Hence decreasing the custom

Oman to Kuwait, passing through the UAE, Qatar and Saudi

clearance and becoming more efﬁcient. Khalifa Port in the United Arab

Arabia. The network is expected to be completed within this

Emirates became the main container terminal with an expansion allowing

decade. The combined GCC rail and road network connecting

the capacity to hit 15 million TEUs by 2030 while Jebel Ali port is

countries, free zones and ports is expected to enhance cross country

expected to handle around 55 million TEUs by 2030.

cooperation, develop local economies, and balance intra-GCC trade. Overall it will enable the increase in freight volumes to be

To create a long term sustainable network of ports in the region,

covered by the available ports decreasing waiting times and turn

there are three important dimensions to consider; cargo

overs, hence increasing efﬁciency and growth across all GCC

specialization, transshipment hub and free zone developments. By

markets.

acting along these lines, GCC governments will be able to sustainably manage port expansions, decrease potential competition

The various investments in road and rail, especially the rail network

and increase the value creation potential of port investments.

plan in coordination with the port developments will position the GCC as a transcontinental hub. This is important for the overall economic development of the region as well as especially for

Rail and road developments

petrochemical exporters to increase their outputs and volume ﬂows. It will also open doors for potential new business opportunities and new markets that could be reached by rail in the future.

Investments in rail, roads, causeways and bridges are ﬂourishing across the GCC. Bahrain is intending to connect itself to Qatar before the 2022 games in Qatar while Qatar has set aside $30 billion to develop

Outlook

and upgrade the national road network supporting industry, tourism and linking Doha to major industrial, oil and gas developments. Kuwait

In the long term, continued investments in GCC logistics and

plans to invest $14.2 billion in country road work to be completed over

transportation infrastructure as well as related service sector

the next ﬁve years connecting internal ports and towns and Oman

developments are expected to boost regional trade. The integration

allocated around $3.2 billion as the second priority budget area in the

of air, sea and land transportation modes will be vital in establishing

8th Five Year Plan for road building. Saudi Arabia is spending around

the GCC as a global transshipment and export hub allowing

$45 billion on its rail network adding 7,000-kilometres of track. Finally,

sustained and coordinated economic growth leveraging business

the United Arab Emirates is planning numerous road and rail projects

opportunities across the emerging markets of China, India, the

connecting airports and free trade zones.

greater Middle East, and Africa. a world class

About A.T. Kearney: A.T. Kearney (www.atkearney.com) is a global management consulting firm that uses strategic insight, tailored solutions and a collaborative working style to help clients achieve sustainable results. Since 1926, we have been trusted advisors on CEO-agenda issues to the world’s leading corporations across all major industries. A.T. Kearney’s offices are located in major business centers in 39 countries. From our Middle East offices in Abu Dhabi, Bahrain, Dubai and Riyadh, A.T. Kearney supports both private and public sector clients as well as nations to excel and prosper by combining our regional expertise and global business insights to achieve results. For more information, visit www.middle-east.atkearney.com.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 16

GCC LOGISTICS PROFILES 2013

BAHRAIN

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 17

BAHRAIN Trends and Challenges for Logistics in Bahrain GDP and Federal Finances • Real GDP recorded at around 2.0% in 2012 • The petroleum and minerals sector is expected to constitute 86% of total treasury income in 2013 and 2014 while it has accounted for around 76% of budgetary sources in 2009 and 2010 • Bahrain is projecting a budget deﬁcit of $1.76 billion for 2013 • In 2011, the GCC decided to give $10 billion of ﬁnancial aid to Bahrain and Oman each over a span of 10 years to help them overcome socio-economic and socio-political issues

FDI Conﬁdence and Competitiveness • FDI inﬂows in Bahrain have rebounded in 2011 from relatively low values in 2010, rising to a level of $781 million with an increase of around 400% • Bahrain is ranked 35thin the World Economic Forum’s 2012-2013 Global Competitiveness Index

Development Outlook • Bahrain’s GDP is expected to stabilizearound 3.7%between 2013-15 and then to increase to around 4.7% in 2016-17 • However, port and other infrastructure capacity continue to make Bahrain an attractive logistics hub given its drive to diversify its economy and the likeliness of Khalifa bin Salman Port becoming a transshipment hub in the near future • Bahrain has emerged from the crisis experienced in 2011, and the same has been reﬂected in improved ratings, yet the same is constrained by ﬁscal dependency on sustained high oil prices and international donor support • Oil price volatility remains a source of risk as exports and services are vulnerable to changes in demand • Regional political instability has the potential to adversely impact foreign investments, development

Infrastructure Investment Outlook • “Vision 2030” is an action plan to fast track development projects in the infrastructure sectorthroughout the country • Around ~$600 million has been allocated for infrastructure facilities in the 2013budget and the same was dedicated for 2014 • Bahrain is seeking to reduce government ﬁnancing in infrastructure projects through Public Private Partnership (PPP)

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 18

GCC LOGISTICS PROFILES 2013 Logistics Projects and Outlook

SEA

Overview • Forecasts predict that the country’s shipping sector will experience steady growth in the medium term due to Khalifa bin Salman Port, which may become a major transshipment hub

Khalifa bin Salman Port • APM Terminals Bahrainis slated to operate both Mina Salman and Khalifa bin Salman Port for 25 years • Khalifa bin Salman Port’s initial capacity is 1.1 million TEU per year with a possible expansion of up to 2.5 million TEU • The port wasopened in 2009, and has been designed to allow for future expansion

Mina Salman Port • In response to the growing demand for building materials in Bahrain, the former main container and general cargo terminal, Mina Salman Port has been converted to a dedicated import and export building materials terminal. It has been re-commissioned and is in operation since January 2012 • In addition, the US Navy is also expanding the port.A $580 million project is scheduled to be completed in 2015, and will include utilities infrastructure, a consolidated port operations and harbor patrol facility, personnel barracks, administrative buildings, dining facility and a ﬂyover bridge connecting Naval Support Activity (NSA) Bahrain to the new port facilities

AIR

Overview • The GCC is set to invest around $90 billion in the next few years in order to meet the growing need and Bahrain is likely to receive some of these funds

Bahrain International Airport • The expansion of Bahrain International Airport is expected tohit a passenger capacity of around 13.5 million per year with an expected budget of ~$4.7 billion • The original timeline for the expansion project suggested completion of Terminal 1A by 2013, and demolition of the existing terminal to commence construction of Terminal 1B in 2014. Formal launch of the Bahrain international Airport expansion project was made in June 2011 • The project also features nearly ﬁve additional contact gates, nine remote gates, 40 additional check-in counters, and a large transfer facility and other capacity enhancements and value added facilities

Bahrain’s Sakhir Air Base • A ~$15.4million project to upgrade the infrastructure at Bahrain’s Sakhir Air Base was completed on schedule in early 2010

RAIL

Overview • The GCC region is united in a push towards developing rail transportation in the region, Bahrain stands to gain from GCC interconnectedness

Bahrain Rail Network • Bahrain envisions the construction of a ~110-kilometre network in three phases by 2030; and is awaiting approvals to begin initial studies for the $8 billion rail plan • 90 km rail will link Bahrain and Saudi Arabia, which is estimated to cost $4.5billion

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 19

BAHRAIN Bahrain monorail • The project calls for the construction of the Bahrain Monorail that will link the various regions of Bahrain to ease trafﬁc (it is part of a whole public transport network project including Light Rail Transport (LRT), a monorail, trams and a Bus Rapid Transport (BRT)) • The ﬁrst phase i.e. the Green Line is a 23-kilometre long section which will extend from Juffair through Manama to Seef district • The entire project, measuring around103-kilometres, is planned to be completed by 2030 • Phase 1 budget is ~$1 billion, complete project budget is ~$8 billion

Saudi Arabia-Bahrain Rail Link • Discussions are taking place to develop a rail link between Bahrain and Saudi Arabia, linking Al-Khobar with Manama • The project will cost around $4.2 billion. The proposed construction will take place in parallel to the King Fahd Causeway • The feasibility report is expected to be available by the end of 2014 with the aim of the project being operational in 2017

ROAD

Overview • Bahrain is well situated, only 40-kilometres from Saudi Arabia. In case theBahrain-Qatar Causeway is constructed, Bahrain could further strengthen its regional economic and logistics position

Bahrain-Qatar Causeway • The recently redesigned causeway is expected to connect the western costal region of Qatar with eastern Bahrain (the so-called 40-kilometre ‘Friend-ship Bridge’) • It will carry four vehicle lanes and two railway tracks between the two countries • It is planned to be finished before the World Cup in 2022 with an expected budget of ~$2.9 billion King Fahad Causeway • The 25km-long King Fahd causeway links the Kingdom of Bahrain with the Eastern region of the Kingdom of Saudi Arabia • Expansion work on the King Fahad Causeway, connecting Bahrain with Saudi Arabia will be developed over a period of 20 years and is supposed to cost around $5 million • Workshall include construction of additional lanes for incoming and outgoing traffic and a waiting yard on each side of the causeway.King Fahd Causeway Authority received bids from firms for the Project Management contract for the first part of the expansion project in Feb 2013

North Manama causeway • The project includes building: - Anupgrade of the two junctions and the improvement of the at-grade movements of Al Fateh / King Faisal Highway, and Al Fateh / Shaikh Hamad Causeway - The construction of a new signalized trafﬁc junction for entry / exit into the Manama Lagoon area halfway - The construction of new 2.42 km of roads along Al Fateh Highway and the eastern and northern sides of the Bahrain Bay - The construction of a new 238 m long curved left turn ﬂyover to provide a two-lane single carriageway access to the Bahrain Bay - The construction of a new 51.4 m long single span bridge to provide three-lane dual carriageway across an architectural canal along the northern side of the Bahrain Bay • This~$265million contract is nearing completion, with major portions now open to the public (as of February 2013)

Mina Salman Interchange • Ongoing tunnel project worth~$123 million and expected to be completed in November 2013

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 20

GCC LOGISTICS PROFILES 2013

Bahrain – Key Economic Drivers

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 21

BAHRAIN

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 22

GCC LOGISTICS PROFILES 2013

KUWAIT

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 23

KUWAIT Trends and Challenges for Logistics in Kuwait GDP and Federal Finances • Real GDP recorded an estimated increase of 5% in 2012and is expected to grow by ~4.6% in 2013 with the non-oil sectors contributing around 5% • Kuwait’s economy is reliant on the petroleum sector which accounts for more than 90% of all exports • The Government reported an inﬂation slow-down from 4.8% in 2011 to 4.3% in 2012.Kuwait passed 2012-13 budget with a deﬁcit of around $26 billion mainly through calculating oil income at a conservative price • The budgeted revenue was posted at around $48 billion, an increase of 3.7% on last year’s estimated income

FDI Conﬁdence and Competitiveness • According to the World Investment Report, Kuwait has attracted an FDI inﬂow of $399million during 2011 • Kuwait is ranked 37thin the World Economic Forum’s 2012-2013Global Competitiveness Index

Development Outlook • Kuwait's fiscal system remains the most dependent on oil income. The petroleum sector at large, including sales of gas, will account foraround 95% of government revenues (Kuwait non-oil revenue increased by 6.8% in the first 10 months of fiscal year 2012-13) • Diversifying the economy away from oil is the long-term development strategy of the country • Regional political instability has the potential to adversely impact foreign investments, development potential and waterway access

Infrastructure Investment Outlook • Kuwait budgeted $111 billion to the development of new infrastructure projects as part of the Kuwait development plan • The Kuwait government announced plans to invest ~$12.6 billion in 320 projects covering roads, bridges and government buildings to ease trafﬁc congestion, provide improved access for more isolated regions and upgrade existing infrastructure • In line with GCC rail plans Kuwait is dedicated to pursuing a rail development initiative

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 24

GCC LOGISTICS PROFILES 2013 Logistics Projects and Outlook

SEA

Overview • Kuwait is committed to diversifying its economy and becoming a regional hub with its northern neighbors. Investment in ports is part of realizing that goal

Existing Kuwait Ports • Mina Al-Ahmad handles most of Kuwait’s oil exports • Kuwait’s existing ports face capacity constraints: ‒ Shuwaikh (next to Kuwait City, surrounded by a free-trade zone): ~800,000 TEU capacity ‒ Shuaiba Seaport

Shuaiba Sea Port • ~200,000 TEU capacity • A new trailer driver, sailor building and a monitoring tower are to be added. The bid is expected be closed in mid-2013

Mubarak Al Kabeer (Bubiyan) Port • Kuwait plans to establish a new seaport at Bubiyan Island to serve as a trade hub with its northern neighbors. The new port is expected to handle up to 2.5 million TEU, with the ability to receive 2 million TEUs by 2016 • The port is scheduled to be completed in 4 phases, the construction of new roads and the railway scheme; the dredging of the planned harbour site; the creation of nine new docks, followed by an additional seven; and the addition of 33 new docks (bringing the total to 60) by 2033 • The commissioning date of the port’s ﬁrst phase is 2016 while construction is scheduled for completion in 2014 with an expected budgetof~$2 billion

Silk City Mega Container • It is part of the Silk City project, which aims to revive the ancient Silk Road trade route by becoming a major free trade zone linking central Asia with Europe • Progress on the $77 billion Silk City project stalled after Kuwait called for a review of its master plan

AIR

Overview • The Middle East airfreight has had a very strong growth. Kuwait’s International Airport is likely to experience year-on-year growth in trafﬁc in the medium term

Farwaniya Kuwait International Airport • Airport capacity will be increased in Phase 1 to 13 million passengers per year by 2016 and in Phase 2 up to 25 million passengers per year by 2020 • The expansion includes the construction of runways, airplane hangars, roads, docking stations, substations and related facilities • This includes a new terminal building, extensions to the two existing runways plus a new third runway, with an expected budget of $3.3 billion • A third phase has been discussed, which would see the facility expanded to a capacity of 50 million passengers per year

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 25

KUWAIT RAIL

Overview • Kuwait plans to invest heavily in its rail sector in the short and medium term

Kuwait Metro • Kuwait plans to build a 171-kilometre four line metro system for up to ~70 million passengers annually. 60kilometres will be underground and will span across 60 stations • Expected budget: $7billion • The metro will be built in five phases until 2035 • Up to 50% of the project was expected to be financed through an initial public offering (IPO) • Preparations of expressions of interest for the first package of the project were being undertaken, when the same was put on hold in late-2012, after the Government ordered a review of the plans while it considers bringing them back under government ownership • The first package covering the rolling stock is planned to be tendered in 2013

Kuwait Rail Network • Plans are in place for the construction of a 550-kilometres railway in Kuwait, which will stretch from the east to the west of the country and will link into the railway networks of neighboring Saudi Arabia and Iraq; with an expected budget ofaround $10 billion, and expected completion by 2017 • Feasibility studies for the project were being conducted when the same was put on hold in late-2012, after the Government ordered a review of the plans while it considers bringing them back under government ownership

Silk City Rail • A rail network between major Middle East cities and China –the route will travel through Kuwait, Damascus and Baghdad, and will eventually link the Middle East with China • This is part of the Silk City project expected to be completed by 2030 • Progress on the $77 billion Silk City project stalled after Kuwait called for a review of its master plan

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 26

GCC LOGISTICS PROFILES 2013 ROAD

Overview • Kuwait has one of the best road systems in the GCC with considerable coverage of the entire country. Plans are in place to further improve the country’s roads • $14.2bn worth of road work to be completed over the next ﬁve years

Subiya Causeway • Kuwait plans to construct an eight-lane bridge of 37.5-kilometrelength across the Bay of Kuwait connecting Shuwaikh Port with Subiya New Town Development • The $2.6 billion contract for the designing and building of the causeway shall also include two man-made islands of 30 hectares, one on each side of the bridge, for housing of maintenance and trafﬁc emergency buildings, fuelling stations and boat docks • The project is expected to be completed by Q1 2018

Al Jahra Road Upgrade • The project involves upgrading Jahra Road to increase its capacity and improve road facilities and services • It includes a 7.2-kilometre long viaduct and construction of a 21-kilometre motorway, a 1-kilometre tunnel, an elevated 7-kilometre motorway on the viaducts, which consists of approximately 8,500 precast segments to cover a total area of 38,000 cubic meters • The Jahra Road Development project was formally launched in February 2011

Sheikh Jaber al-Ahmed al-Sabah Bridge (Doha Link Bridge) • A16 km long bridge will connect Shuwaikh to the port villageof Doha in the Jahra region,it will connect to Subiya Causeway project • The bridge will contain three trafﬁc lanes and an emergency lane in each direction. • The project is expected to cost ~$1 billion

Kuwait – Key Economic Drivers

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 27

KUWAIT

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 28

GCC LOGISTICS PROFILES 2013

OMAN

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 29

OMAN 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

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 30

GCC LOGISTICS PROFILES 2013 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 1.2kilometre 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

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 31

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 32

GCC LOGISTICS PROFILES 2013 Logistics Projects and Outlook 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 • 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 atSoharis 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

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

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, 526kilometresbetween 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 by the third quarter of 2014 with expected completion in 2018

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 33

OMAN • 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

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

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 34

GCC LOGISTICS PROFILES 2013

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 35

OMAN

Oman– Key Economic Drivers

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 36

GCC LOGISTICS PROFILES 2013

QATAR

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 37

QATAR Trends and Challenges for Logistics in Qatar GDP and Federal Finances • GDP growth in 2012 was highreaching5.8%. Government authorities expect 2013 growth to be ~4.8% • Qatar’s economy grew in 2012 thanks to a 9.3% rise in the non-oil and gas economy over the full year, as well as elevated LNG prices • Total budgeted fiscal expenditure was ~$49 billion for 2012.The actual expenditure for H1 2012 was ~$19.3 billion • Despite the difficult global economic scenario, financing of infrastructure projects continued. The government sovereign wealth fund, the Qatar Investment Authority, assisted with funding whenevercredit unavailability threatened the projects’ timely progress • Facilities are also being developed with a perspective of hosting the 2022 FIFA World Cup, the country is preparing itself for an around $60 billion construction boom • Traditionally Qatar has used loans and bonds to finance economic development projects

FDI Conﬁdence and Competitiveness • Qatar demonstrates solid growth, with plans to spend around $80 billion on construction of buildings and around $60 billion on energy related projects • $60 billion-plus are to be invested for the 2022 World Cup and around $18 billion to develop petrochemical and industrial projects and schemes • Qatar is ranked 11thin the World Economic Forum’s 2012-2013 Global Competitiveness Index, up from 14thin 2011-2012

Development Outlook • Expectations for annual GDP growth are around 6% in the coming years, putting Qatar within the top Middle East economic growth performers.The operating environment remainedpositive for infrastructure developments with projects being executed across the country. The transport sector registered a growth of 15% in 2012 • The government continues to invest in the country’s transport infrastructure and in diversifying the economy mainly through the development of natural gas resources and gas-based industries • The inter-modal balance has gradually adjusted to reﬂect the country’s development while strong investments in the transport infrastructure will persist. In addition, the government will continue to favor state and private sector partnerships in the freight transport business • Qatar is working to develop infrastructure to absorb the huge inﬂux of visitors for the 2022 FIFA World Cup event • Nearby regional political instability has the potential to adversely impact foreign investments, development potential and waterway access

Infrastructure Investment Outlook • Qatar plans to make large investments in improved infrastructure in order to host the FIFA world cup in 2022 • Along major investments in ports, airport, rail and roads, the government allocated fundsfor the tourism development which will include new stadiums and increased hotel capacity

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 38

GCC LOGISTICS PROFILES 2013 Logistics Projects and Outlook

SEA

Overview • There are around $5billionplanned spending on a new deep sea port development • Qatar has three portswith different purposes. The new port at RasLaffan has LNG berths, liquid-product berths, container and solid cargo berths which serve the gas industry, the Massaieed port handles the bulk of industrial goods and oil, and the Doha deep-water port serves as a container and transshipment point

RasLaffan Port • This project provides the expansion of berths and infrastructure to handle growth in liqueﬁed natural gas exports, dredging, land reclamation and new breakwaters • The port needs to follow the expected expansion of the RasLaffan Industrial City, which should nearly double in size by 2015 • The beginning of the expansion phase includedthe largest dredging operation in history, where 20 million cubic metres of sand was reclaimed and 21 kilometers of breakwater was built • The expansion included alsobuilding ﬁve new LNG berths, four small tanker berths, navy/coastguard and tug berths, container exports berths and onshore infrastructure, including electrical power distribution • Expected overall budget: ~$3.5 to $3.8 billion

Umm Said / Mesaieed Port(New Doha Port) • Located at Masaieed, south of Doha, 5-kilometreeast of Doha International Airport, this new port is intended to replace the Doha Port downtown while supporting the local industrial development • The port development is based on different phases. The ﬁrst phase of the New Doha port will accommodate 2 million TEUs. It is also designed to accommodate larger ships • The project is set to completion in 2016, phases two and three will take place after 2022, to expand the port in line with demand for capacity • The Gabbro terminal will also be expanded and a new jetty for export of liqueﬁed petroleum gas will be developed • The cost of the new port is expected to be $7bn covering 26.5 square kilometres and including the construction of a naval base and an economic zone • The existing port in Doha’s city centre is capable of handling up to 300,000 containers a year and this new port is intended to replace Doha Port

AIR

Overview • Qatar plans to spend about ~$17.5 billion on a new airport and ~$1 billion on a crossing between the airport and northern Doha • The aviation sector is already thinking beyond 2022. The construction of New Doha International airport is as much about supporting Qatar Airways’ expansion plans as it is about transporting World Cup-related trafﬁc • Passenger trafﬁc at the current Doha airport is increasing at roughly 14% a year, driven by Qatar Airways’ rapid growth

Doha International Airport • The ﬁrst phase of the Doha International Airport is expected to open by mid-2013 • The project’s ﬁrst phase will bring capacity to 24 million passengers a year and will create 42 contact gates, 6 of which will be dedicated to the Airbus A380

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 39

QATAR • The New Doha International airport will be able to assist to a certain extent in importing cargo into Qatar • When complete, the airport is expected to handle 50 million passengers a year, along with 2 million tonnes of cargo and 320,000 aircraft landings and take-offs

RAIL

Overview • Up to~$40 billion is expected to be spent on developing the country’s rail lines per Qatar rail and Qatar Development Bank. In case the Bahrain-Qatar Causeway is constructed, Qatar could further strengthen its regional economic and logistics position

Qatar Integrated Rail Project • The ~$35 billion nationwide rail and metro network is expected to conclude in 2026, although the sections necessary to host the world cup in 2022 should be ready by 2020 • It will have 643-kilometres, 318-kilometres of metro lines within the greater Doha area and 325-kilometres of ground rail network • The project will contain passenger and freight railway linking RasLaffan and Mesaieed via Doha, a high speed link between the New Doha Airport, Doha City Center and Bahrain, the Doha Metro, and a light rail people mover in Lusail, Education City and Westbay • The high speed link is expected to complete in 2017 and the ﬁrst of the four lines of the metro network is due to be operational in 2019 • Initially, Qatar Railway Development Company (QRDC) was the authority in charge. In 2011, the responsibilities of QRDC were transferred to a new entity, QRail • Following the restructuring, QRail reordered the planned construction phases of the integrated rail plan, deciding to prioritize the 300km Doha metro project • Doha metro green, red and golden line are expected to be awarded for tunneling in 2013 as well as the Msheireb station's and the 30km Lusail light rail network's construction

ROAD

Overview • Qatar has a paved network of 1,160-kilometres, linking Doha to major industrial, gas and oil developments • $30 billion is to be set aside to develop and upgrade the national road network to support industry and tourism

Bus Rapid Transit (BRT) System • The project includes special lanes for buses parallel to the Salwa Road and the Industrial Area

Local Roads and Drainage Program (LRDP) • Qatar’s Public Works Authority will be overseeing the development of 136 kilometer of new roads by 2014, and upgrading others • The complete program is valued at $14.6 billion, with the construction of roads expected to complete by 2014

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 40

GCC LOGISTICS PROFILES 2013

Qatar – Key Economic Drivers

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 41

QATAR

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 42

GCC LOGISTICS PROFILES 2013

SAUDI ARABIA

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 43

SAUDI ARABIA Trends and Challenges for Logistics in Saudi Arabia GDP and Federal Finances • As oil production stabilizes in Saudi Arabia, the real GDP growth is expected to be 4.1% in 2013 • With the global economic environment still recovering, the public sector and state credit institutions become additionally important to ﬁnance investment activities • Private investment is being encouraged in partnership with state owned companies (PPP) or in projects contracted out by the public sector • The government continues to monitor its economic intereststhrough substantial stakes in state owned companies which are partially privatized by IPOs

FDI Confidence and Competitiveness • Saudi Arabia continues to reform with the goal oflanding on the top tenof the World Bank’s annual doing business rankings • Saudi Arabia is ranked 18thin the World Economic Forum’s 2012-2013 Global Competitiveness Index • Tariffs for power and water have risen but the government is unlikely tolevy additional direct taxes unless revenues from oil underperform • The corporation tax (capped at 20%) is likely to continue to apply to non-Saudi firms

Development Outlook • 2015 logistics sector revenues are forecasted to hit around $20.6 billion • Extensive growth opportunity exists for the freight forwarding market due to the high growth in exports of ~$381 billion in 2012 and imports ofaround $137 billion and a rise in domestic uptake of major manufacturing and consumer oriented industries such as retail, fast-moving consumer goods, engineering, chemicals, food and electronics • The government plans to invest on multimodal logistics networks that integrate air, sea and rail, thus saving costs, increasing performance, connectivity and supporting economic development • Saudi Arabia’s logistics sector is attractive for Logistics Service Providers (LSPs) due to the large regional economy size, which accounts for nearly two-third of the GCC’s economy • Saudi Arabia continues to grow its infrastructure in line with growing logistical demands, increasingthe quality of service and resolving capacity issues in the current road network in Saudi Arabia along international borders with the United Arab Emirates, Yemen, and Oman, which resulted in signiﬁcant delays for load carriers in the past • Nearby regional political instability has the potential to adversely impact foreign investments, development potential and waterway access

Infrastructure Investment Outlook • The 9th Development Plan for the Kingdom of Saudi Arabia signaled its intention to continue with its infrastructure investment and diversiﬁcation drive. Saudi Arabia plans to invest ~$385billionuntil 2014 in social and economic infrastructure • In 2012, the Kingdom of Saudi Arabia had awarded construction contracts worth ~$16 billion • The government has also enhanced its transportation and communication projects budget to~$17billion for 2013 • In addition, Saudi Arabia has major plans to improve its rail and metro network, investing an estimated ~$45 billion and adding 7,000-kilometre of track through many major railway projects • Plans to invest more than ~$50 billion in port projects over the coming 10 to 15 yearsalso exist

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 44

GCC LOGISTICS PROFILES 2013 Logistics Projects and Outlook

SEA

Overview • In 2012 Saudi Ports handled over 185 million tons, growing 13.8% compared to 2011 • This growth was driven by both imports and exports, which grew respectivelyby 18% and 10.4% vs. 2011 • General cargo handling and RORO vehicle handling grew respectively by 30.5% and 36.7% while container handling grew by 17.6% from the previous year

Jeddah Islamic Port • In 2012 till March 2013, around 20 maintenance and internal projects were undertaken at JIP at a cost ofaround $186million including the modernization of the electricity network, garages, sanitation channels, rehabilitation of roads, the construction of administrative buildings, renewal of port docks, construction of new workshops etc. • Expansion of the northern container station by adding three piers, back yards, and by adding gantry cranes and rubber-tired gantry (RTG) cranes, in addition to supporting equipment. The operational and handling capacity of the terminal stands now at more than 2.5 standard containers per year • Construction of a new container station on the north western side of the port. The terminal is made up of four piers, and is equipped with 10 gantry cranes and 30 RTG cranes. The operational and handling capacity of the terminal stands now at more than 2 million standard containers per year with plans to upgrade the southern container terminal to increase the operational and handling capacity to more than 2.5 million standard containers per year • JIP administration is currently conducting a study for the upgrade of JIP's operational and handling capacity, through the construction of a new container terminal in the southwestern part of the port. JIP is also studying the possibility of expanding the three container terminals currently available at the port

Dammam King Abdul Aziz Port • The construction of the second container terminal at King Abdul Aziz in Dammam will raise the capacity of the port to about 4million TEUs annually. The construction started in August 2012 and is set to end in 2014 • The investments in the 2nd container terminal project is estimated at$533million with a capacity of up to 2 million TEUs after the completion of construction stages • Several large projects to connect Red Sea ports with Arab Gulf ports are being executed. In addition, the planned railway network will link Ras Al-Khair Port to other ports at the Arab Gulf (e.g. King Abdul Aziz Port in Dammam and Jubail ports)

Jubail Commercial Port • The handling capacity has reached 9 million tons and 300,000 containers • Logistics projects backed by major petrochemicals exporters is intended to make JCP the main exporting gateway for petrochemical products (mainly polymers) in the Kingdom • In addition, the port currently supervises the Jubail ﬁshing harbor with prospects to develop a stronger ﬁshing sector

Ras Al-Khair Port • The Kingdom is building a three-berth port to handle dry bulk, liquid bulk and general cargoto boost the dry bulk export capacity in the Eastern Province,worth $600million • Ras Al-Khair port handled its ﬁrst vessel in February 2011. The port is suitable for tonnage up to 70,000 dead weight tonnes and can handle a range of industrial commodities including aluminum, bauxite, construction materials and chemicals

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 45

SAUDI ARABIA King Abdullah Economic City Sea Port • KAEC Sea Port’s capacity is expected to commence operations in2013 with a gradual expansion to around 4million TEUs by 2016.The construction will cover a 14 million square-metre seaport at a cost of $6billion • The maximum potential capacity of the port is expected to be 20m TEUs • The port is expected to become the only port in the Kingdom to be located within a free zone hence decreasing custom clearance efforts and becoming more efﬁcient • KAEC Sea Port has the long-term potential to provide alternative/ additional capacity to Jeddah Islamic Port for shipments between Saudi Arabia and Europe or Asia • The construction contract is stipulated to complete in 2019

AIR

Overview • There is a need to adjust airport infrastructure to accommodate the increasing passenger demands while GACA plans to invest up to$53billion in the air transport industry over the next ﬁve years.GACA plans to spend around $10.66bn on building new airports until 2030. GACA is planning additional new airports at Al-Qasim and Abha

King Khalid International Airport (Riyadh) • Saudi Arabia’s General Authority for Civil Aviation (GACA) has selected the joint venture of Turkey’s TAV and the localAl-Arrab ContractingCompany for the estimated $400million contract to build the new Terminal 5 building at King Khalid International airport in Riyadh • Terminal 5 is part of GACA’s signiﬁcant expansion program for King Khalid International Airport, which will increase the airport’s annual capacity to about 24 million passengers from the current 14 million

King Abdulaziz International Airport expansion (Jeddah) • This $8billion development of a new passenger terminal will increase the handling capacity in Jeddah in three phases, taking capacity to 30 million, 45 million and 80 million in stages 1, 2 and 3 respectively. The project is expected to complete at the end of 2025 • About 40 percent of work on King Abdulaziz International Airport expansion project has been completed with the new Jeddah airport is expected to be operational in 2014 • The new Jeddah airport is designed to become one of the largest hubs in the world, covering an area of 670,000 square meters. It will consist of 82 domestic, international and VIP lounges in addition to 96 air bridges

Muhammad Bin Abdulaziz Airport (Medina) • GACA is expanding the Prince Mohammed bin Abdulaziz airport in Medina while adding a second runway with a new 256,000 square metres passenger lounge and commercial areas.Also the current runway is being upgraded as is the existing passenger terminal • The airport will have a planned capacity of 8 million passengers a year after the completion of the expansion project • The $1.5billion contract is expected to be completed by the end of 2014 covering passenger terminal, runways, apron and taxiway, new passenger lounge (670,000 sq m), air control tower (136 meter long), commercial areas and associated facilities

Jizan Airport • The airport will be located at a distance of 30 kilometres fromJizan Economic City(JEC) and will have an estimated value in excess of $500 million

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 46

GCC LOGISTICS PROFILES 2013

• The airport will have the capacity to handle up to 2.4 million passengers a year. The project will involve building a three-storey passenger terminal, a control tower, air cargo zones and other facilities. The terminal will have 10 gates and a VIP lounge

Hail Airport • The international airport is planned to be completed by 2025 and will focus on cargo linking in with the development of the Hail economic city which will focus on logistics

RAIL

Overview • Saudi Arabia is spending ~$45 billion on its rail network adding 7,000-kilometres of track through many projects • The ﬁrst of which is the Saudi Landbridge project, a 950-kilometre railway which will connect Jeddah and Dammam. Secondly the 450-kilometre Haramain high-speed which will connect Mecca and Medina via Jeddah and ﬁnally the North South Railway which joins the northern mineral belt with Riyadh and the industrial city of Jubail

Saudi Landbridge • East-West connection between Riyadh and Jeddah (950 km), will upgrade the existing Riyadh-Dammam line and then be extended from Dammam to Jubail (115 km) • The Landbridge will offer freight opportunities for the transport of containers between the country's main container ports, Jeddah and Dammam, passing though the Kingdom's capital of Riyadh. It will connect the red sea to the Arabian gulf • The Land bridge Project is one of the largest projects in the GCC for“Build, Operate and Transfer” (BOT) work. It allows freight of cargo imported from East Asia via the port of Dammam, and from the western countries via Jeddah Islamic Port • It is forecasted that in 2015 the number of container handled will be more than 700,000 while over 8 million tons of freight cargo will be distributed in the Kingdom and neighboring countries • For passenger transport, it is expected that the (Riyadh-Jeddah-Makkah), and the (Jeddah-Riyadh), and the (Jeddah-Dammam) lines will serve several million passengers per year • The railway project linking Riyadh to Jeddah will alone cost around $7billion constructed over 7 years • The project is pivotal for the petrochemicals industry of the country and for interconnection with the GCC

Haramain High-Speed Railway (Mecca to Medina) • The ~$13billion and 450-kilometre rail project will connect Mecca, Medina, Jeddah, and KAEC by high-speed passenger rail (360 km/h). This project is intended to alleviate congestion on roads between Mecca and Medina mainly during the annual Hajj period • The project has been divided into 2 phases: - Phase 1 covered 2 packages, the ﬁrst package focused on the civil work construction with an implementation plan that would cover 36 months. Package 1 was extended until end of 2014 at a cost of around $3billion. Package 2 covers the development of the stations. Its completion is planned for 2015 at a cost of around $2.5billion. The main stations at Mecca and Medina will include concourses, 5 platforms, mosques, civil defense stations, helipads, 10 terminals, parkings, lounges shops and cafes - Phase 2, includes the construction of the tracks, the installation of signaling and telecommunication, electriﬁcation, operational control center, buying 35 trains and the operation and maintenance over 12 years. The contract value for this phase totaled around $8billion

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 47

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 48

GCC LOGISTICS PROFILES 2013 RAIL

North-South Railway • It is a 2,400-kilometre passenger and freight rail line originating in the capital city Riyadh, in the north-west of the country, to Al Haditha near the border with Jordan • The line is expected to transport four million tons of commodities (phosphate from Hazm Al-Jalamid and Bauxite from Al-Zubayrah) and two million passengers every year

GCC Rail Network • Saudi Arabia is expected to provide a critical contribution to the proposed pan-GCC Rail Network, with direct connections to Kuwait, Qatar, and UAE • The overall project will cover around 2117km with 663km within Saudi Arabia • The Saudi-Bahrain connection is estimated to exceed $5billion covering around 90km

Yanbu-Jeddah Line • This project will be pivotal for the petrochemicals industry of the country

TaifKhamisMushayt – Abha Line • The length of this line is about 706km that will link Al-Taif with the land bridge on one side and Abha and KhamisMushayt, on the other side

Jeddah and Jizan Line • This line with 660km connects Jizan region with the city of Jeddah due to the rising economic growth promoting the importance of this line for Jizan region

The Mecca Mass Rail Transit (MMRT) • The project will include the construction of 4 rails, 88 stations and more than 180km of track to be completed by 2017

ROAD

Overview • Saudi Arabia continues to enhance its road network and border crossings to support economic developments

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 49

SAUDI ARABIA

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 50

GCC LOGISTICS PROFILES 2013

Saudi Arabia – Key Economic Drivers

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 51

A D V E R T O R I A L

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 52

GCC LOGISTICS PROFILES 2013

UAE

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 53

UAE Trends and Challenges for Logistics in United Arab Emirates GDP and Federal Finances • Real GDP of the United Arab Emirates (UAE) grew by 3.4% in 2012 (est.) and is expected to grow by 3.7% in 2013 due to higher oil prices and production • Expenditure in the approved 2013 federal budget is projected to increase by around 7% compared to 2012’s budget

FDI Conﬁdence and Competitiveness • UAE ranked 24th in the Global Competitiveness Report 2012-2013 published by the World Economic Forum (WEF) • A.T. Kearney’s 2012 Foreign Direct Investment Conﬁdence Index ranked the UAE 15th

Development Outlook • 51% of the budget is allocated to the “social development”, with 22% allocated to education sector • The UAE is making a concerted effort to diversify its economy away from hydrocarbons. The government is spearheading numerous infrastructure projects, including housing, schools, roads and other infrastructure • There are many infrastructure projects in the pipeline with an emphasis on rail and air logistics given the continued growth in air transport and the regional potential for rail • Nearby regional political instability has the potential to adversely impact foreign investments, development potential and waterway access

Infrastructure Investment Outlook • The UAE allocated~$1.4 billion, or approximately 12% of its 2013 budget, to infrastructure projects • Future rail projects include a high-speed link, the purple line, which will connect Dubai International Airport and the new Al-Maktoum Airport at Dubai World Central in the Jebel Ali area • Dubai's transport department declared that it will spend ~$1.7 billion in 2013 on transportation infrastructure projects • Dubai’s ~$1.1 billion Al Sufouh tram line will link to the metro system and is expected to be completed by 2014 • An estimated 340-kilometres of two-way tram tracks will service the Central Business District and the Capital District, parts of Khalifa City A, Yas Island and the airport in Abu Dhabi

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 54

GCC LOGISTICS PROFILES 2013 Logistics Projects and Outlook

SEA

Overview • The UAE is focused on diversifying its economy, the government’sdesire is to accommodate all ship sizes, including additional dry bulk shipping capabilities to accommodate heavy industry

Khalifa Port (Abu Dhabi) • Khalifa Port is planned to grow to a capacity of 15 million TEUs and 35 million tons of general cargo through phased development through 2030 • Phase 1 infrastructure was completed inSeptember 2012 with initial capacity of2.5 million TEUs container trafﬁc. The port’s infrastructure has the potential to provide 5 million TEUs of capacity • Khalifa Port has replacedthe container terminal of Mina Zayedport allowing inland port trafﬁc to bypass the capacity constrained downtown Abu Dhabi city area

Jebel Ali Port (Dubai) • Jebel Ali faces increased trans-shipment competition from Salalah port in Oman • The current capacity at Jebel Ali port is 15 million TEUs a year while the expansion of Terminal 2 will increase the capacity by about 1 million TEUs and is due to be completed in 2013 • A joint venture of Japan’s TOA and France’s SoletancheBachy has formally signed an agreement to build Terminal 3 at Jebel Ali port, which is expected to expand capacity at Jebel Ali by 4 million TEUs and will open in 2014. The total handling capacity will then be of 19 million TEUs • Bids have been invited for the design and build of Terminal 4 at Dubai’s Jebel Ali port. Terminal 4 has the potential to add a further 10 million TEUs to the overall long-term port capacity • These expansions are part of a larger program covering 15 different phases to be completed by 2030 and make it the largest port in the world with a handling capacity of 55 million TEU • The estimated cost of the expansion of Terminal 2 is $1.5billion, while the construction of Terminal 3 is estimated to cost $850million • The two expansion projects are expected to create more than 1,000 jobs

KhorFakkan (Sharjah) • The need to expand is becoming imminent as the levels of throughput are rising. The throughput got to 3.3 million TEU in 2012, marking an increase of 28% on 2011 • An evaluation study for the port expansion is expected to be released in 2013

Mina Saqr Port Expansion (Ras Al Khaimah) • The capacity of the port is expected to increaseto 3 million TEUs by 2020

AIR

Overview • Air freight is expected to continue growing steadily in the medium term indicating the potential for additional airport expansion projects • The Middle East aviation market is one of the key success stories for logisticsdevelopment especially due to hubs in Dubai, Doha and Abu Dhabi that enjoy both a well-positioned location and the ability to handletransit trafﬁc while regional airlines are strongly backed by their respective local governments

Al Maktoum International / Dubai World Central International Airport • Phase 1 of the Dubai World Central Al Maktoum International Airport is completed and is fully operational.The

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:55 AM Page 55

UAE international airport currently has the capacity to handle 600,000 tonnes per annum and5 million passengers per annum (expandable to 7 mppa) • Phase 2 of the airport, which includes the construction of an additional two automated and one non-automated cargo terminals, is currently under way. This is expected to increase the total cargo capacity at Al Maktoum International Airport to 1.4 million tonnes per annum • Once completed (2020s), the airport will be able to ﬁt up to 120 million passengers a year

Dubai International Airport • The number of passengers at the Dubai International Airport is expected to increase with the Emirates-Qantas agreement • The airport opened concourse A at the beginning of January, the ﬁrst concourse in the world to cater exclusively to large A380 aircraft • Dubai is set to start refurbishing Terminal 1 in 2013

Abu Dhabi Airport • Abu Dhabi International hit around 13.4 million passengers in 2012, an increase of 12 per cent on 2011. To meet demand, the airport is investing in its mid-ﬁeld terminal, due to be completed in 2016 and due to open in 2017. It will handle up to 20 million passengers annually • The $2.9billion contract covers the construction of a 700,000-square-metre terminal.A second parallel runway is also planned

RAIL

Overview • Rail is an important transportation method for the UAE. The country is looking to utilize rail as a cheaper, faster alternative means of transporting freight and offering convenient transportation for residents and tourists

Dubai Metro and Al Sufouh Tram • Three new Metro lines — Blue, Gold and Purple — and a Jumeirah tram route are planned to be operational by 2030, covering 421km with 197 stations • The land has been procured for widening the existing network and new rail routes and infrastructure are expected to be completed in three phases • Dubai is constructing the Al Sufouh Tram worth ~$1.1 billion with a 14.5-kilometre trackfrom Dubai Marina to Burj Al Arab expected to be completed by the end of 2014

Abu Dhabi Metro and Tram • The original masterplan for the metro involved the construction of 131 kilometres of line, supported by tram and bus feeder services. Earlier this year, plans were revised with the size of the network reduced to ~70 km • As part of the Abu Dhabi Surface Master Plan the entire transport system will include a network of underground metro lines, trams and high-speed rail • The system could be operational by 2017

National Rail Network • An~$11 billion UAE national Rail Network is planned and isexpected to complete the construction of its ﬁrst route in 2014/15. Plans are to extend it up to 1,200-kilometreby 2018 • It will stretch from Ghweifat on the Saudi border, pass by the coast of Abu Dhabi then Dubai and extend up to Ras Al-Khaimah and Fujairah. One more line will stretch to Al-Ain and Oman. Finally, it will connect with the GCC-wide railway network

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 56

GCC LOGISTICS PROFILES 2013 • The first phase is the270-kilometre Shah HabshanRuwais section • In February 2013 the financingof around $1.3 billion was secured for the 166 km first stage of its railway project, comprising the route from Shah and Habshan to Ruwais

ROAD

Overview • Numerous road projects are underway connecting airports and free trade zones

Construction • In the medium-term, ongoing construction of road and transportation infrastructure results in a constantly changing road network and detours that must be factored into route planning for local shipments

New Projects • There are plans for future road and transport projects in Dubai’s central business district, from the Sharjah border in the north, to Port Rashid in the south and inland as far as Ras Al-Khor • Road contracts in the Northern Emirates worth an estimated total value of $118.4 million were approved, involving construction of the new Ras Al-Khaimah ring road and the ﬁrst phase of the Khorfakkan western ring road

United Arab Emirates – Key Economic Drivers

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 57

UAE

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 58

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 59

BY LAND

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 60

GULF RAIL CONNECTION: Realising GCC unity GPCA (Gulf Petrochemical and Chemicals Association) and AT Kearney present a detailed study on the benefits of linking the GCC by rail for the regional logistics and transpor tation industr y. GCC continues to grow

expected to grow at a stable ďŹ ve per cent per year until 2020, with population increases of 50 per cent until 2040, driven mainly by

Initially driven by expanding oil and gas and petrochemical

Saudi Arabian and UAE populations (Fig. 1).

industries, GCC countries maintained robust growth through new investments, supported by strong governmental economic

Until now, GCC economic growth was primarily enabled by

development agendas, low energy and chemical feedstock costs.

infrastructure investments in ports, as the majority of growth was

The growth agenda continues to advance toward developing

driven by export of oil and petrochemicals to European and Asian

downstream industries, which leverages the broader range of

markets. As local populations and economies continue to grow, the

molecules available to enhance the manufacturing and service

need for advanced national and regional infrastructure becomes

offering in the region.

increasingly important to support economic growth.

As a result, the overall GCC Gross Domestic Product (GDP) is

Road-based infrastructure played the primary role in this support,

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 61

yet with aggressive development targets, rail infrastructure will

networks and public mass transport services in GCC member

become a critical enabler and driver of sustainable growth for the

states.

GCC. Rail is well positioned to absorb expected demand increases by

Transportation and intra-GCC trade

passenger transport, while air and road segments are expected to increase signiﬁcantly over the next ﬁve years, and beyond. Cross-

Continued economic and population growth in GCC member

border intra-GCC trade has traditionally demonstrated lesser

states will generate the need for new and expanded land, sea

importance for GCC economies; the trade volume oscillates

and air transport infrastructure and services for both freight and

around three per cent of the overall GCC GDP, with the outlook

passenger transport. Meeting this demand with the present

ratio stable over time (see ﬁgure 2).

means of transport will require significant ongoing investment in; roads, ports and airports, and further expansion of railway

This creates various opportunities as a result of the GCC rail

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 62

connection. Firstly, at a minimum, freight volume addressed by

products and supporting the development of advanced

rail will grow at the same rate of real GDP growth, leading to at

downstream industries in the region. The planned petrochemical

least a ﬁve per cent per annum growth rate, until 2020. Secondly,

product capacity is increasing along with this agenda (see ﬁgure 3).

an integrated GCC railway infrastructure can become an important

Growth is focused on specialised products, adding capacities for

catalyst in driving increased economic cooperation between GCC

products never before produced in the GCC, presenting local

countries, fostering the economic, regional and national

manufacturing (downstream) companies with a competitive

development agenda, supporting growth and strengthening

advantage.

national capacity integration within the GCC. Thirdly, rail can raise the proﬁle of the importance of intra-GCC trade in the overall

The current estimated intra-GCC trade volume of petrochemical

balance.

products, pertaining to production by GPCA companies (encompassing plastics, chemicals and fertilisers), is above 2.5

Role of the petrochemical industry as a GCC growth engine and volume driver

million metric tonnes per annum (see ﬁgure 4). The majority of products are transported by truck supported by marine logistics if required and these volumes are expected to grow along with local trade, GDP and petrochemical capacity additions.

GCC petrochemicals are leading the current wave of economic growth in the region, aggressively diversifying from commodity

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

Linking GCC national networks and key economic centres in the

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 63

Gulf, will immediately position the GCC integrated rail network

Railway characteristics: The GCC Railway will service

strongly to take over a signiﬁcant portion of these trade volumes.

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

Enabling future GCC growth

in the mountainous regions of UAE and Oman will feature clearances to allow double stack containers. Air conditioned

The integrated GCC Railway will provide the required

passenger trains operating at speeds of up to 200 kph, will operate

infrastructure to enable rail to absorb increasing freight volumes,

mainly during the day and are planned to run in each direction

efﬁciently and economically. The planned GCC railway will link

every two hours. Freight trains (including container and bulk

Kuwait City, traversing along the Gulf, to Muscat in the Sultanate

freight) operating at 80-120 kph, will operate mainly at night.

of Oman, serving the Kingdom of Saudi Arabia, the Kingdom of Bahrain, the State of Qatar and

Stations and facilities: Passenger stations will total seven

the United Arab Emirates. The total length of the GCC Railway

large stations each located at Kuwait City, SRO (Saudi Railways

main line is approximately 2,177 km, including about 180 km of

Organisation) Interchange (near Dammam), Doha, Manama, Abu

connecting lines to key trafﬁc generators such as ports and

Dhabi, Dubai and Muscat, supported by three small stations at

industrial zones (see side bar 1: The GCC Railway at a Glance).

Salwa, Fujairah and Sohar and an SRO station at Jubail. As proposed in each of the GCC member states’ national transport

Railway length: Totalling approximately 2,177 km, the GCC

master plans, metro and light rail links will facilitate connections

Railway includes about 180 km of connecting lines to trafﬁc node

to downtown centres.

generating centres and transport facilities such as ports, airports and industrial cities. These are broken down into geographical

Train control system: In line with key objectives for a safe

segments including Kuwait (145 km), Saudi Arabia (695 km),

and efﬁcient operation, critical signal systems will determine the

Bahrain (64 km), Qatar (283 km), UAE (684 km) and Oman (306

rail network’s maximum speed and capacity. A Level 2 European

km).

Train Control System (ETCS), with no trackside signals, will underpin control 1. It will achieve this because it is safe and already

Corridor alignment: From Kuwait to the Kingdom of Saudi

in commercial use, it facilitates a competitive bidding process and

Arabia via Dammam to the Kingdom of Bahrain via a proposed

avoids a monopoly, allows conventional lines and the train density

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. Crossborder intra-GCC trade has traditionally demonstrated lesser importance for GCC economies causeway, in parallel to the King Fahd Causeway to Bahrain, the

nodes to be increased—especially in mixed trafﬁc with fast and slow

corridor connects key GCC city transport nodes. Extending to

trains and is reliable during operation.

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

Environmental assessment: An environmental baseline

Dhabi, Dubai and Al-Ain, and then on to Oman via Sohar to

assessment describes the existing environmental conditions and the

Muscat, the network will reach all member state key cities.

potential construction and operation impact to GCC member states, prepared according to the applicable rules and regulations

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 64

in each member state. As in any construction project, there are

infrastructure, which is common practice for capital intensive

some adverse environmental effects, but in general, they are not

transport projects aiming to provide public transport services.

major. By aligning the project to the relevant mitigation measures and environmental management plans, environmental impact will be minimised.

Benefits of rail

Capital investment: The estimated capital investment (based

Tracking safety, efﬁciency and environmental beneﬁts: Providing

on 2009 ﬁgures) for the initial construction of the railway

a safe, efﬁcient and sustainable transport alternative is at the core

infrastructure collectively represents over US$100 billion (AED

of the GCC railway’s mission. It will change the face of transport

367 billion). This includes formation, track, sidings and yards,

and logistics, beneﬁting the entire region.

signaling and telecommunications, stations, workshops and other buildings. This is based on using diesel trains and train speeds of

An alternative, safe import and export trade route: Railways are

up to 200 km/hr for passenger transport, as well as the construction

widely recognised for decreasing the volume of road trafﬁc, which

of the proposed causeway between Saudi Arabia and the Kingdom

protects infrastructures impacted by excessive use of roads with

of Bahrain.

overweight loads and contributes to minimising road related accidents.* (Piracy & Hormuz Strait closure threats should be

Allocations of project’s costs: The proposed cost of the

addressed in a more strategically focused way).

railway is expected to be distributed among GCC member states based on the planned route length in each member state. The cost

An environmentally friendly transport alternative: The integrated

of procurement of the rolling stock, and hence the operation and

GCC railway is also expected to positively impact the environment

maintenance, is expected to be borne by the private sector.

with its Reinforce Responsible Care and Sustainability concepts

Another approach for consideration is the allocation of costs in

through less CO2 emissions and rationalised usages of fuel. Put

relation to the expected beneﬁts of each GCC member state, an

simply, diverting trafﬁc from roads to a more environmentally

approach that requires further study and analysis during the

friendly mode of transport lowers air emissions, particularly

detailed engineering design and onward phases of project’s

greenhouse gases. This will also enable higher energy efﬁciency

implementation.

(easy and fast access) and reduce noise pollution levels (resulting from road trafﬁc).

Project implementation: GCC governments are expected to pay the capital investment cost for the construction of the GCC

Decreasing congestion at border gates: The addition of on-board

Railway.

inspectors, supported by pre-clearance immigration procedures based at the point of journey origin will make railway transport

Benchmarking: The GCC railway compares with the use of

more efﬁcient and competitive; decreasing current delays

best practices relevant to regional and international railway

experienced at borders for both freight and passengers.

standards. This includes axel loads, signalling, communication systems and transport technologies, ensuring efﬁcient and effective

Less dependency on foreign labourers: The usage of rail will

integration of the GCC railway within the GCC National

substantially rationalise the need for foreign drivers and the

Railways. This is key to achieving maximum compatibility and

associated challenges that result from heavy dependence on them

utilisation between GCC member states. It is expected the GCC

especially during abnormal situations.

Railway will set a number of new standards for the railway industry.

Driving economic development for GCC member states: The integrated railway is a powerful symbol of unity, to which all GCC

Railway feasibility: GCC Railway is economically and

members are committed. Apart from creating a transportation

ﬁnancially feasible and on the condition that Governments of the

backbone connecting and integrating major urban centres, the

GCC member states pay the capital cost for the construction of the

railway will add diversiﬁed transport infrastructure development

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 65

and service provisions across the region. Collectively this improves

ﬁgure 5). Syria and Turkey are also target destinations representing

competitiveness and the investment environment, which in turn

an important step toward a European connection.

supports the development of export trading. On a regional level, this is critical to reaching key target GCC economic development

In the long term, this will include exploring the possibility of

goals of sustaining growth at national and regional levels, and

extending a link via Central Asia and China, as well as other

supporting GCC national industries in neighboring economies.

dynamic Asian economies. Similarly, linking with Turkey’s rail

*An overweight load is a load that exceeds the standard or ordinary

through Jordan will give GCC member states access to the

legal size or weight limits for a speciﬁed portion of road, highway

European rail grid. The goal is to become an important strand of

or other transport infrastructure.

a reconstituted ‘Silk Road’ to position GCC member states and the wider MENA region as signiﬁcant players on the transportation

Linking GCC member states and national railways through an integrated

and

efficient

transport

network,

and logistics world map.

strengthens

institutional capacity, generates employment for GCC nationals

To capture opportunities available from the GCC integrated

and promotes the growth of specialised skills required for the

railway, demand drivers and key success factors need to be

development of sustainable railways. In addition, this will

prioritised to maximise the beneﬁts to the community and the

enhance regional trade.

economy.

Looking forward, the railway plans to integrate and connect

This includes safety measures for people on passengers, assessment

beyond the GCC, region linking into other countries in the Middle

of passenger demand to improve mobility and productivity, and

East. Following a detailed feasibility study, this includes speciﬁc

optimisation of the environmental footprint of construction and

plans for connecting to the Yemeni border. Other planned

operations. Growth in commercial and business activities as well

connections include reaching Jordan via the North-South Railway

as economic development and diversiﬁcation depends on several

in the Kingdom of Saudi Arabia and Iraq via State of Kuwait (see

other enablers. For example layout and coverage of the rail

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 66

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 67

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 68

network, intermodal connectivity with hubs to stimulate regions

Rail connection will provide member states with alternative export

and industries, design capacity of railway tracks and rolling stock,

and import options. Rail will enable connections from and to ports

investment attraction and promotion as well as rail industry

south of the Strait of Hormuz, as well as other ports on the Arabian

establishment and services support.

Sea. The Land Bridge in Saudi Arabia will give member states access to the Red Sea ports of Jeddah, Yanbu and Rabegh.

An alternative, safe import and export trade route

Equally important from a strategic point of view is the fact that rail will provide an important alternative to sea trading routes, currently under threat by piracy. Piracy impacts supply chains of

With repeated threats of closure of the Strait of Hormuz, the GCC

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

the Arabian Gulf through additional cost, risks and deceased

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 69

customer conﬁdence. Apart from the obvious negative impact on

by half. When completed, it will represent a quantum leap in the

any one vessel, there is also an economic domino effect throughout

Kingdom’s transport sector and usher in a new era of highspeed

the entire vertical value chain within the maritime sector. With only

trains for passenger transport (see ﬁgure 6).

limited possibilities to bypass the dangerous waters zone, piracy is currently a direct threat to any industry using the Arabian Gulf as

UAE: The UAE rail network will link all of the country’s major

a transport route for imports and exports. Providing an alternative,

population hubs and connect to Saudi Arabia via Ghweifat in the

safe transport route, interconnected with export points throughout

west and Oman via Al Ain in the east. The railway network will

the South of the Arabian Gulf, the Arabian Sea and the Red Sea,

be built in phases linking principal population centres to industry

is a potent weapon against potential future instability at strategic

hubs in the UAE and will form a vital part of the planned

supply chain maritime transport routes, affected by the threat of

integrated GCC Railway. The network will extend up to 1,200 km

piracy.

and will initially operate on diesel, but will be designed and constructed to accommodate electriﬁcation in the future (see ﬁgure 7). It will accommodate passenger and heavy freight such as rocks,

GCC rail progress full steam ahead

aluminum, cement, iron, steel and will cater for all other trade commodities, as well as hydrocarbons.

Each of the GCC Governments has launched various rail projects, currently worth over US$100 billion. Saudi Arabia and the UAE have taken the furthest strides to date.

Rail challenges and Greenfield rail projects

Saudi Arabia: Well under way is the North-South Railway (NSR) project in Saudi Arabia, the world’s largest railway

Building an integrated GCC rail network clearly offers many

The UAE rail network will link all of the country’s major population hubs and connect to Saudi Arabia via Ghweifat in the west and Oman via Al Ain in the east. The railway network will be built in phases linking principal population centres to industry hubs in the UAE and will form a vital part of the planned integrated GCC Railway. construction and the longest route to adopt the European train

beneﬁts, but it will also present many challenges. To leverage

control system (ETCS) to date. Trial operation began on the 2,400

maximum beneﬁt, and create sustainable value for regional

km passenger and freight line, which runs from Riyadh to Al

industry stakeholders, these need to be taken into consideration

Haditha near the border with Jordan, in May 2011. Today the line

within the implementation programme.

transports phosphates from Jalamid to Ras-Al-Khair. The East West Land Bridge Project will be interoperable with the North-South railway linking the Kingdom coast to coast; facilitating

Geographic characteristics and technical standards

oil, agricultural and industrial product transportation. This will present a coast-to-coast journey time of around 18 hours, compared

Challenging geographic conditions and geographic sizes of nations

to a ﬁve to seven day journey by sea. Although the main trafﬁc is

and distances: Building rail infrastructure over long distances in

expected to be freight, the line will also provide passenger train

desert terrain demands consideration of very speciﬁc climatic

services cutting the current Riyadh - Jeddah journey time almost

conditions. These include shifting sand dunes and volatile ground

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 70

surfaces. Many of the GCC countries, with the exception of Saudi

Arabia and Oman, are small in terms of geographic size. Due to its

mode competition and overall passenger travel experience

nature, rail will create the highest value for all parties when all

requirements (for example seamless interconnectivity of overall

GCC countries as well as neighboring countries, are connected.

‘door-to-door’ experience)

Compatible technical standards: Linking individual railways across

shippers’ decision levers and mode competition

Overestimated passenger ridership forecasts without considering

Pure academic freight forecasts without fully considering Unrealistically short ﬁnancial planning horizons and disparity

countries to form a coherent GCC network will require close

collaboration and continuous alignment by various stakeholders.

between expansive service offerings and viable low fares

In order to overcome this challenge, common speciﬁcations and standards should be agreed to in advance. This includes project

Rail

scheduling; line, network and stations layout, access and

infrastructure equipment and material as well as on-going

implementation

requires

signiﬁcant

investment

connections design, rolling stock selection and, signaling system

operations and maintenance. In order to ensure long-term value

and type, number and frequency of trains, as well as environmental

generation the business model for the rail project should include

impact. The European Union is still struggling to overcome the

demand analyses (captured and induced), scenarios for intended

challenges faced by independently developed national rail

operating and management models as well as an economic model

Lessons learned from implementing greenfield rail networks globally show that commercial common sense needs to prevail in early stages of any rail project to ensure successful project completion. Rail implementation requires significant investment in infrastructure equipment and material as well as on-going operations and maintenance. standards across Europe. For example, most of Europe is using the

to assess the overall economic impact. A ﬁnancing plan (including

standard gauge. However, Spain and former member states of the

sources and schedule) is as critical as project funding and ﬁnancing

Soviet Union have widespread gauge tracks. In addition,

in meeting on time delivery of large-scale infrastructure

electriﬁcation systems of lines vary from country to country

investments.

(adding another barrier to true interoperability) demonstrating multiple incompatible signaling systems.

Commercial aspects, funding and business case

Rail management and operating model, legal requirements and communication In addition to technical and commercial aspects, success or failure

Lessons learned from implementing greenﬁeld rail networks

relies heavily on rail management, the operating model and the

globally show that commercial common sense needs to prevail in

impact on regional economic development

early stages of any rail project to ensure successful project

and diversiﬁcation. The chosen management and operating model

completion. This extends to engineering and “political excitement”.

will impact all major stages of the rail value chain including

Common reasons for project failure include:

infrastructure ownership and maintenance, rolling stock ownership, and operations and sales. Along this rail value chain, global best

Scope creep due to overemphasis of technical and engineering

management practices and operating models vary from fully

requirements and de-emphasis of business model requirements and

integrated to highly fragmented examples. For example, United

impact

States’ freight railroads are fully integrated along the complete

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 71

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 72

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 73

value chain and are privately owned. Examples of private

load to truck loads varies and depends on cargo and corresponding

companies include Union Paciﬁc, Burlington Northern Sante Fe

packaging types and requirements. Additionally, due to the typical

Railway and Canadian National Railway. The UK rail industry

high volume of cargo, rail transport might require relatively higher

has a public owned rail network (infrastructure ownership) with

loading and unloading times Subsidised diesel and gasoline prices in some member states is

private operators for the rest of the value chain. France and

Germany focus entirely on public ownership and operations along

creating a competitive challenge for rail to compete with trucks for

the entire rail value chain.

freight and to compete with cars and buses for passengers

New high-speed rail systems in Spain and Portugal as well as in

Rail projections must reﬂect shippers’ needs and offer price

Belgium and the Netherlands are partly based on public private

attractiveness. This means the sizing of the “rail eligible” market

partnerships (PPP) with public and private infrastructure

should be based on potential markets given distances, types of

ownership and maintenance, as well as concessions for operations

commodities and shipments sizes. Not all cargo ﬂows can be

including leasing of rolling stock. All options have speciﬁc

considered for rail. In addition, cost of alternatives need to be

advantages and disadvantages that need to be considered and

assessed on competitive service levels for the shippers, for example

carefully evaluated in deﬁning the best overall management and

cost of haulage by road, rail or ship should be compared to the

operating model for the GCC Railway. Furthermore, legal aspects

required transit time and delivery reliability on a door-to-door

including land restrictions, utilisation protection and acquisitions,

basis. Potential future changes, such as growing or changing trade

bid design and launch, as well as management model related

and cargo ﬂows, additional infrastructure developments or other

contracts, need to be considered when implementing new rail

outlooks impacting shippers’ competitiveness, should also be

developments. All these activities should be supported by an

considered when developing and quantifying realistic price

effective communication and stakeholder engagement plan to build

volumes scenarios.

the required image and brand for long-term success. Competition with other transportation modes and reﬂection of

Untapped opportunities for GCC petrochemical companies

shippers’ needs There are additional opportunities, yet to be tapped, beyond the Successful rail developments should consider positioning versus

expected beneﬁts surrounding freight rail discussed so far. These

other transportation modes and shippers’ needs. Usually, rail

include multiple beneﬁts for passenger networks, for example

competes with road and marine transportation on multiple

increased mobility and reduced costs for passengers. While rail

dimensions. These include:

offers higher speed together with increased reliability, based on

Differential line haul costs which can be relatively ﬁxed and low

for rail for long haul transportation and largely versatile and high

statistics on accidents and casualties, it is also widely considered up to nine times safer than road.

for road transportation Road transfer at either or both ends leading to additional

Speciﬁcally for freight transportation, rail can become the

handling and haulage costs. In addition, favourable fuel and labour

transportation mode of choice due to its ﬂexibility in terms of types

costs for truck drivers can increase the competitiveness of truck

of goods. Rail is capable of carrying almost any packaging type,

versus rail for short haul transportation

including break bulk, solid dry bulk, liquid bulk as well as

There is usually only limited backhaul cargo for bulk transports.

containers and even over-sized cargo. Speciﬁcally for long haul

However, container based intermodal transportation usually offers

transportation rail can open access to markets and materials across

backhaul opportunities, even if it only constitutes empty container

the Middle East and beyond, at competitive costs. Depending on

repositioning. Availability of backhaul cargo depends on overall

the load and distance, rail based cargo transportation can be

trade ﬂows and segment speciﬁcs

considerably more cost effective than road transportation as

Railcar wagon versus truck loading availability, weight

restrictions and loading times: The conversion of one railcar wagon

average freight trains can carry up to 1,000 tonnes of cargo replacing around 50 truck movements.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 74

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 75

General freight companies as well as petrochemicals companies can

caused by rail crossings. Furthermore, rail transportation is safer

beneﬁt from using rail transportation when integrating rail into

than road transportation in terms of potential spills of hazardous

their existing supply chains. As already experienced in Europe or

materials. In the United States reports of spills and hazardous

the USA, using rail transportation can add value to shippers by

materials are tracked in a standardised way. The number of

supporting existing transportation networks and creating new

fatalities and total damage compared to the modal split are

intermodal transportation opportunities. The beneﬁts include

signiﬁcantly higher for road transportation than for rail

increased choice and delivery ﬂexibility, broader competition in the

transportation.

transport sector, and optimisation of head haul and back haul by partnering with additional players. Rail also positively impacts the

Given the future economic development of the GCC petrochemical

ability of petrochemical companies to manage their supply chain

sector, additional beneﬁts can be gained from rail when considering

more effectively. This means meeting customer requirements and

the possibility of container transport. The GCC petrochemical

becoming more competitive - using rail can increase supply chain

sector has already taken signiﬁcant steps towards moving

reliability, reduce supply chain volatility and risk, as well as shorten

downstream, expanding manufacturing capabilities of commodity

lead and delivery times. Rail transport is also reasonably resilient

materials. Expanding these local manufacturing capacities to meet

to disruptions due to changes in seasons or climatic conditions.

both local and international demand (for example for automotive components, paints and coatings as well as healthcare products)

In addition, rail can support the growing sustainability efforts of

will lead to a demand for more volumes to be transported with

Gulf petrochemical companies. Rail compares positively to truck

smaller lot sizes and different packaging types (for example liquid

From a strategic perspective, a fully connected GCC rail network could become invaluable to GCC petrochemicals companies in the long term; it could enable unrestricted access to alternative ports for global marine exports outside the Arabian Gulf. Gulf petrochemicals companies can position themselves strongly today to capture the future value of these untapped opportunities transportation in all categories concerned with minimising the

ISO containers). These additional volumes can also be transported

environmental footprint of surface freight transportation-fuel

via rail.

efﬁciency, greenhouse gas emissions, accident and casualty rates as well as potential spills of hazardous material. Rail transportation is

From a strategic perspective, a fully connected GCC rail network

more fuel-efﬁcient than road transportation. On an average, trucks

could become invaluable to GCC petrochemicals companies in the

use more than double the energy per ton km than trains - the higher

long term; it could enable unrestricted access to alternative ports

the volume (mass) and the longer the distance, the bigger the

for global marine exports outside the Arabian Gulf. Gulf

difference (due to the high-energy consumption of the locomotive

petrochemicals companies can position themselves strongly today

during the acceleration phase).

to capture the future value of these untapped opportunities beneﬁting their customers, industry stakeholders, and the broader

Rail transportation with diesel engines leads to about half the

community at large.

greenhouse gas emissions compared to road transportation with trucks. Statistically, rail transportation is signiﬁcantly safer than road transportation. Rail cargo accidents are second only to marine

Getting ready to capture the future value of the GCC railway

transportation in terms of the ratio of fatalities to injuries per accident. About half of the accidents associated with trains are

In light of the GCC rail network development, GCC

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 76

petrochemicals companies should determine the best overall transportation, logistics and supply chain concept, taking into account

existing

operations

and

new

Assess operational cost and determine modal split

opportunities.

Developing rail strategies requires a multi-phased approach.

Knowing the operational costs of the current supply chain, as well

This includes significant effort and time to determine rail

as estimates for the potential future supply chain including rail, is

requirements as well as driving corresponding design and

crucial to derive the ideal modal split by product and route and to

implementation of required changes to integrate rail into

determine potential ﬁnancial support requirements to activate new

existing supply chain operations.

rail infrastructure and operations. The assessment of cost structure and operational mode characteristics should include key cost

Shippers activating greenfield rail operations or connecting to

positions (for example handling, shunting, labour, depreciation of

existing rail networks usually plan the following phases in

rolling stock, inspection and maintenance, fuel and energy costs,

developing rail strategies, assessing the general feasibility of

potential rail network access fees and rail track utilisation fees). It

rail and determining specific rail requirements.

should also include operational assumptions (for example loading times and cycles, transportation times, maintenance frequency). Furthermore, the role of multiple stakeholders such as investors,

Understand existing and forecasted future cargo flows

operators and maintenance service providers also needs to be considered. In order to determine the best future transportation model mix, such as how much road, rail and sea transportation to

The ﬁrst step for any petrochemicals company considering rail as a

be used, shippers need to evaluate different transportation concepts

future mode of transportation is to analyse the status quo including

(for example feeder, hub, ring road) as well as trafﬁc types (for

relevant

product

example wagon load freight, block train, combined trafﬁc).

requirements. This includes understanding the relevant rail master

Different combinations and scenarios of these concepts should be

plan for the overall GCC, as well as planned connections to its local

assessed in terms of operational feasibility, overall economics,

production facilities such as planned developments and schedules,

safety, and emissions.

business

units,

production

plants

and

status of railway projects, proposed rail connections and sidings, as well as connections to inland hubs and seaports for marine exports. An understanding of target markets, customer demands,

Define infrastructure and investment requirements

destinations and requirements, as well as existing supply chain networks, current logistics operations and transportation modes,

To integrate rail as a new transportation mode into existing supply

are just as important to determine current ﬂows and simulate future

chain operations, petrochemical companies need to recognise the

volume ﬂows. In addition, potential new business opportunities (for

infrastructure and investment requirements for rail integration at

example potential new markets that could be reached by rail in the

production plants, loading facilities, rolling stock, inland hubs, and

future) should also be considered.

customer unloading stations. This requires reviewing current logistics and product handling infrastructure (for example

Petrochemicals companies should also verify their estimates of

determining product handling requirements including; safety,

future developments (such as cargo ﬂows) based on sensitivity

operations, quality, costs, legal and customs requirements, and

analyses. Potential drivers and metrics include GDP forecasts,

identifying available space for rail sidings and loading facilities).

demand and trade projections, and plans to develop new industries (for example downstream manufacturing).

Based on the understanding of current facilities and available space, requirements for new infrastructure (for logistics and product

The intelligence gathered based on these analyses is critical to

handling, road capacities, railway sidings and port connections) can

developing a sound understanding of approximate future freight

be identiﬁed. The operational feasibility of the new integrated

ﬂows (by business unit, products, packaging types and

transportation concept, such as addressing how road and rail

destinations).

crossings will be used in parallel to nearby rail shunting facilities,

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 77

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 78

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 79

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 80

needs to be assessed. In addition, rolling stock requirements (for

mechanical completion and commissioning, the new infrastructure

example number and size of locomotives, railcars, and wagons)

should be activated and ramped-up, based on a phased approach.

need to be determined. Based on these requirements, the necessary

During operations, intermodal logistics facilities and operations can

investments for typical rail infrastructure can be estimated.

be improved and optimised on a continuous basis to maximise overall supply chain performance and customer satisfaction.

Petrochemicals companies are advised to share their service and operation requirements with national and GCC rail authorities as

The beneﬁts and opportunities from integrated railway networks

early as possible to ensure operational feasibility and alignment to

are manifold and extensive. Community contributions extend to

the rail network across the GCC. Petrochemicals companies and

safety, by contributing to reducing the number of road accidents,

rail authorities will need to work hand in hand.

reduced air and noise pollution and improved quality of life. Rail brings with it direct and indirect beneﬁts to GCC economies

Developing a business case and prioritising rail integration projects

through increased investments in rail infrastructure and new industries, facilitating domestic and international trade and reducing the cost of business operation. Furthermore, it enables

Based on the investment requirements, business case assessments

economic development and diversiﬁcation along and beyond the

including net present value calculations can be developed to

rail value chain while promoting the build-up of local specialised

prioritise key rail integration projects. When recommending viable

talent, creating more jobs for the region. Rail will connect the GCC

The benefits and opportunities from integrated railway networks are manifold and extensive. Community contributions extend to safety, by contributing to reducing the number of road accidents, reduced air and noise pollution and improved quality of life. Rail brings with it direct and indirect benefits to GCC economies implementation options, short- and long-term perspectives should

region and when it is completed will position the GCC favorably

be considered to evaluate the expected feasibility and value

for the development of a strategic long-term railway hub between

generation potential. Rail implementation projects are usually

Europe and Asia. Once fully operational it will be one of the best

phased over time.

mitigations against any abnormality due to piracy or closure of the Strait of Hormuz. GPCA members are in the unique position to leverage the beneﬁts of these developments as they control

Conduct EPC and ramp-up new operations

signiﬁcant volumes traded between the countries and are already evaluating the feasibility of the GCC Railway for selected freight movements.

In order to implement prioritised rail projects, infrastructure and operational upgrades at chemical production plants need to be

The potential beneﬁts are mutually attractive to both chemical

designed and executed.

producers and rail operators, as GPCA companies can provide the critical mass required to initiate successful rail operations.

This includes the development of detailed duty speciﬁcations as well as the management of FEED and EPC phases to ensure the successful integration of rail into existing supply chains. After

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

Produced jointly by The Gulf Petrochemicals and Chemicals Association (GPCA) and A.T. Kearney.

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 81

BY AIR

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 82

WORLD AIR CARGO Forecast 2012-2013 The Boeing Company issues the biennial World Air Cargo Forecast (WACF) to provide a comprehensive, up-to-date over view of the air cargo industr y. The forecast summarises the world's major air trade markets, identifies major trends, and presents forecasts for the future performance and development of markets, as well as for the world freighter airplane fleet. Here we re-produce a par t of the summar y relevant to the region.

An overview

reflects a normal recovery from the precipitous drop in cargo traffic during 2008 and 2009, when traffic fell 3.2 per cent and 9.6 per

Air cargo traffic contracted slightly in 2011 and 2012

cent, respectively — the first time that air cargo traffic contracted in two consecutive years. World air cargo traffic has expanded only 3.7 per cent per year on average since 2001. Of greater concern,

After rebounding sharply in 2010 from the depressed levels of

traffic has grown only 2.0 per cent per year since 2004 — much

2009, demand for air cargo transport began to weaken in early

slower than the 6.7 per cent historical growth trend maintained

2011, sliding into contraction by May of that year. The slide

for the 23 years between 1981 and 2004. The slowing of world

continued into the ﬁrst eight months of 2012, with year-to-date

air cargo traffic since 2004 can largely be attributed to the

trafﬁc down two per cent. Despite the near-term slowdown, world

global economic downturn of 2008 – 2009 and the rising price

air cargo trafﬁc will more than double over the next 20 years,

of fuel.

compared to 2011 levels, with an average 5.2 per cent annual growth rate. The number of airplanes in the freighter ﬂeet will

The global economic downturn of 2008 and 2009, the worst

increase by more than 80 per cent over the next two decades.

economic contraction since the Great Depression, dragged down all modes of transport. Statistics for world seaports show that

In 2011, world air cargo trafﬁc declined about one per cent, after

container handling fell 9.7 per cent in 2009, prompting

expanding 18.5 per cent in 2010. This exaggerated expansion

containership lines to cut services, reduce frequencies, and idle

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 83

ships on a global scale for the ﬁrst time on record. Air cargo trafﬁc

was aggravated by the civil unrest of the Arab Spring uprisings,

fell 12.5 per cent between mid-2008 and year-end 2009, the worst

the Japan (“Tohoku”) earthquake, and ﬂooding in Thailand. The

decline since the beginning of the jet transport age. By mid-2009,

latter two exogenous shocks disrupted manufacture of automobile

however, worldwide industrial production began to perk up,

components and information technology (IT) goods, both of which

nudging air cargo trafﬁc toward recovery. Air cargo surged in 2010

are key commodity groups for air cargo.

as world industry moved to restock depleted inventories. Rising fuel prices have been a factor in air cargo trafﬁc slowdowns Growth continued during the ﬁrst quarter of 2011, expanding an

since late 2004, diverting air cargo to road transport and maritime

estimated 4.5 per cent compared to ﬁrst quarter 2010, after peaking

modes, which are less sensitive to fuel costs. The price of jet fuel

at a level not seen since 2007. But starting in June 2010, jet fuel

has tripled over the past eight years, and prices are likely to remain

prices were on the rise, climbing 42 per cent by December 2011.

volatile as the threat of supply disruptions persists. In the near term,

This contributed signiﬁcantly to an air cargo trafﬁc slowdown that

high unemployment in developed economies, tight ﬁscal policy in

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 84

On a positive note, however, oil and jet fuel prices are forecast to remain around mid-2012 levels or, in some scenarios, even decline over the next three to five years. Economic activity, as measured by world GDP, remains the primary driver of air cargo traffic growth Europe and the United States, and overall restrained consumer

fuel surcharges imposed in response to the fuel crisis helped push

spending will also dampen air cargo growth.

yields up 15.4 per cent compared to 2007. Although the global economic downturn drove freight yields down 22.1 per cent in

On a positive note, however, oil and jet fuel prices are forecast to

2009, yields rose steeply by 11.9 per cent when cargo trafﬁc

remain around mid-2012 levels or, in some scenarios, even decline

rebounded in 2010. In 2011, total cargo capacity increased while

over the next three to ﬁve years. Economic activity, as measured

demand stayed nearly ﬂat, holding yield growth to slightly more

by world GDP, remains the primary driver of air cargo trafﬁc

than one per cent.

growth. World economic growth averaging 3.2 per cent over the next 20 years, coupled with the forecasted stable fuel prices, will

The higher cost of shipping by air held world air cargo trafﬁc

help air cargo trafﬁc grow.

growth to only 3.7 per cent averaged over the past 10 years — well below the historical trend. Industry-wide freight yields are expected to return to the historical downward trend as more efﬁcient

Yield trends

airplanes enter the market, helping to stimulate market growth.

Freight yields have declined at an average rate of 4.2 per cent per year over the past 20 years. Continuing proﬁt challenges at

World air cargo traffic growth detail

passenger airlines have focused airline attention on opportunities to earn lower-hold cargo revenue. On average, cargo revenue represents approximately 15 per cent of total air transport revenue, with some airlines earning nearly 40 per cent of their revenue from

International air freight will drive overall world air cargo growth through 2031.

cargo. Declines in yield for cargo and passenger services reﬂect productivity gains, technical improvements, and intense

Over the next 20 years, world air cargo trafﬁc will grow 5.2 per

competition. While declining yield creates pricing pressure on all

cent per year. Air freight, including express trafﬁc, will average 5.3

industry segments, it also helps stimulate growth for the industry

per cent annual growth, measured in revenue tonne kilometres

by enabling lower shipping costs for the consumer.

(RTKs). Air mail trafﬁc will grow much more slowly, averaging only 0.9 per cent annual growth through 2031. Overall, world air

Averaged over the past two decades, freight yield has declined 4.2

cargo trafﬁc will increase from 202.4 billion RTKs in 2011 (down

per cent per year. The most recent decade saw a slight yield

from its 2010 record of 204.2 billion RTKs) to more than 558.3

increase of 0.9 per cent per year, compared to the 9 per cent

billion RTKs in 2031.

average annual decline recorded in the preceding decade. Asia will continue to lead the world air cargo industry in average Freight yield diverged from the 20-year downward trend between

annual growth rates, with domestic China and intra-Asia markets

2002 and 2008, increasing approximately 4.1 per cent per year

expanding eight per cent and 6.9 per cent per year, respectively.

during that six-year period. Much of the increase is due to fuel and security surcharges that began to rise in 2003. In 2008, signiﬁcant

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

Latin America markets with North America and with Europe will

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 85

grow at approximately the world average growth rate, as will

About two-thirds of ﬂeet additions for airplane replacement and

Middle East markets with Europe. The more mature North

ﬂeet growth will come from modiﬁed passenger and combi

America and Europe markets reﬂect slower and thus lower-than-

airplanes. Yet, production freighters will continue to play an

average trafﬁc growth rates.

important role because their superior reliability, operating cost, and capability can outweigh the signiﬁcant on-ramp acquisition cost advantages enjoyed by conversions.

Freighter fleet About 1,300 of the 2,754 projected freighter deliveries will replace The number of airplanes in the worldwide freighter ﬂeet will

retiring airplanes, with the remainder expanding the ﬂeet to meet

increase by more than 80 per cent during the next 20 years, as

the requirements of projected traffic growth. Two-thirds of

demand for air cargo services more than doubles.

deliveries will be freighter conversions, 60 per cent of which will be from standard-body passenger airplanes. Of the projected 935

Freighter airplanes are crucial to the overall health of the air cargo

new production airplane deliveries (valued at $250 billion 2011

industry. Dedicated freighters provide reliable capacity to shippers

US dollars), about three-fourths will be in the large freighter

of general cargo, mail and express packages, and cargo that cannot

category.

be accommodated in passenger airplane lower holds. Since 2001, freighter airplanes have carried on average just over 60 per cent of

Continuing a trend of many years in the Asia Paciﬁc region, all-

the world’s total air cargo trafﬁc each year.

cargo and combination carriers will take the greatest number of large freighters, which are uniquely suited to long-haul,

The role of large freighters will increase as the large freighter share

intercontinental markets.

of the fleet rises to 36 per cent by 2031, compared to 31 per cent today and 22 per cent a decade ago. The significant efficiency and

Express carrier networks will take the majority of medium

capability advantages of large freighters will enable carriers to

widebody freighters, ideally sized to support high-yield, time-critical

manage projected trafﬁc growth without increasing the number of

operations. Standard-body freighters will serve emerging regional

airplanes proportionately.

and niche markets, as well as express markets.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 86

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 87

Despite near-term challenges, the world economy will return to its longterm historic growth trend

corresponding downturn and the vigour of the resurgence in world air cargo trafﬁc. Global manufacturing slowed over the course of 2011 and remained muted in 2012. Growth is expected to moderately strengthen in 2013, then expand further in 2014 to a

World economic activity, as measured by gross domestic product

rate of more than four per cent, which will be sustained through

(GDP), is forecast to grow an average 3.2 per cent per year through

2017, supporting the positive outlook for continued long-term

2031. GDP growth is a major driver of international trade and air

world air cargo trafﬁc growth.

cargo trafﬁc. The current deceleration in world trade dating back to 2011 is expected to end sometime this year as the pace of global growth strengthens. GDP growth is forecast to expand at a rate of

World air cargo components

nearly four per cent by 2018, before reverting to a rate closer to the long-term trend for the remainder of the forecast period.

The US share of air cargo RTKs fell below 25 per cent of the world total for the ﬁrst time in history.

After a strong rebound in 2010, global economic activity began to

World air cargo comprises freight (scheduled, charter, and express)

slow in 2011, due in part to rising oil prices and the disruptive

and mail, with scheduled freight and express being the largest

effects of the Arab Spring uprisings and the Japan (“Tohoku”)

components. For most of the past four decades, world air cargo

earthquake. Global economic growth continued to cool in 2012.

trafﬁc carried by non-US airlines has grown faster than trafﬁc

High debt levels and sluggish growth resulting from decreased

carried by US-domiciled carriers, reﬂecting both faster international

consumer conﬁdence and austerity measures have tempered

air trade growth and slower US domestic growth. Scheduled air

growth in some of Europe’s economies. Some European nations

cargo trafﬁc accounts for 90 per cent to 93 per cent of all world air

have already slipped into recession. High unemployment and

cargo. Most shippers try to use regularly scheduled cargo capacity

restrained business investment curbed growth in North America.

to meet their transport requirements. The remaining seven to 10

China, along with other rapidly expanding emerging market

per cent of world air freight transport is provided either by charters

nations like India and Brazil, showed some signs of slower growth

or through ad hoc requests for cargo capacity, usually to meet

as 2012 progressed.

urgent or special needs. Generally, charter freight share rises during times of strong world air cargo growth and, conversely, falls during

Prospects are encouraging for strengthened economies over the

times of slow or negative trafﬁc growth. But contrary to this general

course of this year and 2014. Measured steps by European

trend, world charter air freight remained nearly ﬂat in 2011 while

policymakers will encourage business investment and consumer

world scheduled air freight declined 1.1 per cent.

conﬁdence, spurring the region’s slowly recovering economy to regain modest growth by 2014. The US economy remains on a modest growth track, with continuing improvement in housing

World air cargo and maritime traffic

indicators and consumer spending. China’s government will continue to invest in infrastructure to stimulate their economy.

Containership trafﬁc had a strong recovery, but is struggling with

Overall global economic expansion is expected to accelerate, fuelled

ﬁnancial losses in the current economic environment.

by deferred demand and renewed industrial investment. World industrial production, a component of world GDP, is a measure of

Air cargo is only one part of the global goods distribution network.

change in manufacturing, mining, and utilities output. It is a key

Shippers demand that shipments arrive at their destination on time,

measure of economic performance and a signiﬁcant indicator of

undamaged, and at a reasonable price, regardless of transportation

long-term air cargo trends. Industrial activity tends to correlate well

mode. Different transport modes — road, rail, maritime, and air —

with air cargo growth because freighter aircraft are often used to

can often move the same commodities. But shippers usually have

move in-progress manufacturing items between production

only two choices for intercontinental freight: air and maritime.

facilities. The strong decline in industrial production in 2009 and

Maritime transport offers the primary beneﬁt of low cost; air

its subsequent rebound in 2010 helps to explain the severity of the

transport offers the beneﬁts of speed and reliability.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 88

Comparison of maritime and air cargo transport in tonnes

frequencies, and taking ships out of service. At the beginning of

The maritime transportation industry is much larger than the air

As the global economy recovered, idled containerships were

cargo industry, measured in tonnes of goods transported. In 2011,

returned to service, and by mid-2010, only two per cent of the

the world maritime industry carried an estimated total of 8.8 billion

world containership ﬂeet remained out of service. Global trade

tonnes compared to 43 million tonnes for the air cargo industry.

increased and containership trafﬁc grew 12.3 per cent in 2010 and

However, this maritime trafﬁc includes the movement of bulk

seven per cent in 2011 in terms of tonne-kilometers. In addition to

commodities such as oil, metal ores, and grains, most of which

returning idled ships to service, available containership capacity

cannot be directly compared to the high-value dry commodities

was further increased by the delivery of new ships that had been

associated with transport by air. A more useful measure is to

ordered before the downturn. When the economic recovery slowed

compare the maritime dry cargo that remains after subtracting the

in 2011, the containership industry had a severe excess of capacity,

5.3 billon tonnes of bulk commodities carried by maritime

as the demand for shipping services failed to keep up with available

transport in 2011.

capacity. As a result, containership yields dropped to very low

2010, 11.6 per cent of the world containership ﬂeet was idle.

levels to maintain loads. Concurrently, rising fuel prices led to Containerised cargo, a segment of maritime dry cargo, is one of

increased operating costs.

the fastest growing forms of freight transport. Since the late 1980s, globalisation and regional specialisation of industry, particularly in

These factors were major contributors to industry losses, estimated

Asia, have driven containership freight ﬂows to grow rapidly.

at US$5 billion in 2011. To minimise continued losses,

Worldwide containership tonnage in 2011 is estimated to be 1.38

containership companies are currently trying to stabilise and

billion tonnes, representing about 40 per cent of the world maritime

increase yields. As the economy improves, it is expected that

dry cargo.

containership rates will rise and return to sustainable levels.

Comparison of maritime and air cargo transport in RTKs

Forecasting methods Several approaches can be used to handle the range and complexity

Containership cargo trafﬁc is estimated at 10.5 trillion RTKs in

of forecasting challenges. Each approach is carefully matched to

2011, while world air cargo trafﬁc is 202 billion RTKs. The largest

the speciﬁc issue and application. Four approaches — econometric

containership markets mirror the largest air cargo markets. In 2011,

modelling, judgmental evaluation, trend analysis, and potential

Europe–Asia was the largest containership market, with 2.8 trillion

analysis — provide useful forecasts. Econometric modelling helps

RTKs, followed by Asia–North America with 1.9 trillion RTKs

determine the overall importance of underlying economic factors

and Europe–North America with 0.3 trillion RTKs. Until the

(e.g., GDP) and provides forecasts that are linked to expectations

global economic downturn of 2009, the containership industry had

of those factors. This method is useful for medium - and long-range

grown steadily every year since its inception. Between 1980 and

forecasts in regional markets.

2011, containership tonnage averaged 8.9 per cent growth per year. The demand for air freight depends on the economic activity in Both air and maritime cargo had major declines during the global

the importing region or country, conditioned by transportation

economic downturn of 2008 and 2009. World air cargo trafﬁc fell

costs, exchange rates, and relative prices. Econometric modelling

by 9.6 per cent and containership freight dropped 7.2 per cent in

may be used to predict demand, assuming that adequate capacity

2009. In response to deteriorating economic conditions and the

will be in place to meet the demand and that factors not included

drop in demand for shipping services, the container shipping

in the model will exert the same inﬂuence as in the past. Judgmental

industry reduced capacity. Measures taken include operational

modiﬁcations often account for expected changes in non-

changes such as “slow steaming,” decreasing ports of call, reducing

econometric growth factors. For example, estimating the effect of

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 89

A D V E R T O R I A L

Dubai Trade posts impressive growth in numbers of users and transactions The UAE trading community responds to Dubai Tradeʼs increased efficiency and innovation by raising the level of its service adoption Demand for the electronic services offered by Dubai Trade, the leading facilitator of trade across borders under Dubai World, has considerably surged in the past 12 months. More than 10,500 new trading and logistics companies joined the Dubai Trade Portal since the end of Q1/2012, raising the total number of companies registered for e-services to around 74,300 by end of Q1/2013. This constitutes an increase of almost 17 per cent – one of the highest year-on-year growth rates Dubai Trade witnessed since it was established to serve the future needs of the supply-chain community and spearhead the next generation of e-services that have contributed to making the UAE a strategic hub for global shipping traffic. Commenting on the annual and quarterly results, Eng. Mahmood Al Bastaki, CEO of Dubai Trade, said: “Performance figures have almost exceeded our expectations. Thanks to strategic growth planning, implementation of best practices and continuous upgrade of customer-focused solutions, we succeeded in winning customersʼ confidence and building an excellent reputation, which is creating a ripple effect in bringing on-board bigger numbers of companies. “The high demand for Dubai Trade services also supports the view that Dubai and the UAE in general are already way ahead in recovering from the pitfalls of the global financial crisis and economic downturn that still grip some of the most developed economies in the world. This buoyant businesses environment, along with enhanced solutions from Dubai Trade, has started to attract bigger numbers of companies of all sizes to our portal, not only big players,” he added. Impressive growth in the number of registered users also affected the number of transactions carried out over the Dubai Trade Portal. Transactions grew by 10 per cent during only the first quarter of 2013 when compared with the same period of last year. Total number of e-transactions increased from 3.51 million in Q1/2012 to 3.86 million in Q1/2013. Total transaction completed throughout 2012 approached 15 million – more than doubling over a three-year period, when they counted 7.3 million in 2009. Al Bastaki gave much credit to his team for the roles it played in various projects undertaken by Dubai Trade in the past 12 months, especially in putting together innovative, user-friendly and scalable, solutions in place, which contributed significantly to overall growth.

The team, along with strategic partners, was honoured last week for successfully completing 10 key projects in 2012, during the annual Employee Appreciation Ceremony 2013, which was attended by senior executives from DP World, Dubai Customs, Jafza, ITC, Dubai World and Dubai Trade, including HE Jamal Majid Bin Thaniah – Chairman, Dubai Trade, who gave the opening speech and awarded high achievers. In his speech, H.E. Al Thaniah, said: “Dedication, resourcefulness, team spirit and taking the initiative are important characteristics we value in our employees. It is their hard work that is behind Dubai Tradeʼs success, completing its projects, ensuring customer satisfaction and meeting the overall goal of keeping the competitiveness of the UAE as a global trade hub and the regionʼs leading business centre.” The completed projects covered several areas. Dubai Tradeʼs IT infrastructure has been entirely revamped and rebuilt from ground up to sustain the overwhelming growth in business and replace the existing platform with cutting edge, reliable, and most scalable technologies. Enhancement of existing services and the introduction of new ones continued to fuel growth in Dubai Trade. These included the 800-JAFZA hotline project, which migrated and integrated two call centres to provide a single, more efficient, end-to-end contact service. The facilitation of trade across borders over the past 12 months through these services and many others, such as real-time online vessel schedule, brought Dubai Trade international recognition from the World Bank and World Economic Forum, for contributing to the UAEʼs global rankings in the Doing Business Report 2013 and the Global Competitiveness Survey, which placed the UAE fifth worldwide in the “trading across borders” Category. Dubai Trade received several other accolades for its achievements in the past 12 months including the “Editorʼs Choice Award” at the Trade and Export Excellence Award Ceremony, and the selection of Dubai Trade CEO Mahmood Al Bastaki as winner of "Accomplished Leaders" at the Feigenbaum Leadership Excellence Award 2013. Al Bastaki was also selected to the high-profile judging panel of the Dubai regional final of the 4th Annual Hult Prize held earlier this year. In turn, Dubai Trade recognised top performers among its clients for their support to Dubai Trade in the 5th E-Services Excellence Award held in January.

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 90

air service agreements, trade quotas, restrictions on night

particularly favourable effects on the express and small-package

operations, and changes in trade patterns could be vital to an

market. Factors beyond the control of airlines include inventory

airline’s strategic plan. Incorporation of anticipated increases in

management techniques, modal competition, environmental

capacity, route restructuring, and market programs can contribute

regulations,

to more reasonable forecasts.

development programmes, and the introduction of new air-eligible

globalisation,

market

liberalisation,

national

commodities. All these factors play signiﬁcant roles in air cargo A simple trend analysis often is used to evaluate changes in

growth. Constraints to economic growth, primarily those

economic factors. This approach is useful in evaluating general

originating outside the airline industry, can hinder air transport

changes in the marketplace that can be attributed to the combined

industry growth dramatically. A variety of air transport industry

effects of a number of factors. Such trends can be extrapolated into

constituencies and policymakers address these interrelated growth

the future. However, extrapolation from a small base with large

issues.

growth can produce unrealistic results. Potential analysis is particularly useful for forecasting markets in their early stages of development. For example, commodities

Air cargo growth has slowed over the past decade

transported by air tend to be valued at more than US$16 per kilogramme. It is therefore possible to project a potential air cargo

World air cargo growth has slowed markedly since 2004. The

market based on the percentage of traded goods (regardless of

global economic downturn and rising fuel prices are key factors in

transport mode) that are valued above US$16 per kilogramme.

the slowing of air cargo growth, but other macro trends may be at work as well.

Market environment

Fuel prices have been a persistent problem for air cargo. As fuel prices roughly tripled between 2004 and 2012, freight forwarders

Although economic activity is the primary inﬂuence on world air

and the greater shipping community diverted a larger portion of

cargo development, other factors must be considered.

general cargo to less expensive modes of transport. As of third quarter 2012, jet fuel prices were near historic highs (even after

The acquisition of aircraft and expansion of services have had

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

removing the effect of inﬂation). One consequence has been the

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 91

contraction of world air cargo trafﬁc by two per cent for the year

projected growth of 4.1 per cent per year between 2011 and 2031.

2012 through July.

China leads the other Asian economies in long term growth with a 6.7 per cent average annual increase. In contrast, Japan’s

Changes in the containership industry have also enticed shippers

economy will grow less than one per cent per year. Asia’s share of

to move their freight away from air cargo. Containership pricing

world GDP is projected to rise from 27 per cent in 2009 to more

is generally 10 times less expensive than air cargo, per unit weight.

than 35 per cent by 2031. The world GDP share held by North

The average containership size has more than doubled since 1990,

America and Europe, which together currently account for more

resulting in lower average unit cost per container transported. At

than half of economic activity, will drop to less than 45 per cent by

the same time, the number of ships in the world containership ﬂeet

2031.

has quadrupled, allowing containership lines to expand their networks to give shippers better geographic coverage and more

World air cargo traffic forecast

service options. The rise in air cargo pricing caused by fuel surcharges only exacerbated the problem.

World air cargo is the sum of freight and mail. World air freight trafﬁc is strongly related to GDP and average yield. The world

Changes in the behavior of shippers have also weighed in favour

airmail component, however, depends less on yield and therefore

of containerships. Improved telecommunication and information

correlates most strongly with GDP.

access have had wide-reaching consequences. For example, e-mail and the electronic transmission of documents have reduced the

Low, baseline, and high annual growth of 4.6 per cent, 5.3 per cent,

need to ship many types of small parcels and documents that are

and 5.8 per cent, respectively, are forecast for world air freight

the life blood of express and courier companies. In addition, “track

trafﬁc. High and low scenarios correspond to GDP growth of 0.5

and trace” tools, once the sole provenance of the air express

per cent above long-term projections and 0.5 per cent below,

industry, are now commonplace at containership transport

respectively. Worldwide air freight is expected to more than double

providers. Better information and improved supply chain visibility

over the next 20 years, increasing from 195.4 billion RTKs in 2011

allow shippers to plan and manage their supply chains with a

to 550.0 billion RTKs by 2031. World airmail is forecast to grow

higher degree of conﬁdence, eroding one of the primary advantages

at a consistent 0.9 per cent per year. Risks that could affect future

of air cargo. Air cargo has traditionally served as a unique tool that

airmail growth include inroads by express operators into package

enables shippers to recover from unforeseen events and

mail, increasing reliance on internet communication, entry of

emergencies. Anecdotal evidence suggests that improved supply

traditional postal services into express air freight operations, and

chain visibility has reduced the occurrence of situations that

more stringent security requirements. The baseline forecast for total

demand the speed and reliability of air transport.

world air cargo predicts that trafﬁc will more than double between 2011 and 2031.

World economic growth outlook

Worldwide trafﬁc will grow from 202.4 billion RTKs in 2011 to more than 558.3 billion RTKs by the end of the forecast period.

The world’s economy is forecast to grow at an average annual rate

Sustained economic growth, along with decreasing yields,

of 3.2 per cent. The global economy is expected to outperform

contributes signiﬁcantly to the growth of the air cargo industry.

historic averages over the next ﬁve years and return to a long-term average of 3.2 per cent by 2031. The long-term growth rate for

Regional air cargo markets

North America is expected to average 2.5 per cent per year over the forecast period. Europe is projected to grow about 1.6 per cent

Air cargo markets linked to Asia, especially the Paciﬁc Rim

per year during those 20 years. In general, emerging market

countries, will lead all other international markets in average

economies, with an aggregate long term growth trend of nearly ﬁve

annual growth between 2011 and 2031. Intra-Asia trafﬁc will grow

per cent, continue to grow much faster than established economies.

faster than any other international world market, averaging 6.9 per

Asia will continue to lead the world’s major economies with

cent growth per year. The North America–Asia and Europe–Asia

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 92

markets will expand at average annual rates of 5.8 per cent and 5.7

countries within the Middle East in 2011 and 2012. Despite political

per cent, respectively. Domestic China will be the fastest growing

tensions, the region continued to perform well economically, with

contiguous market in the world, averaging eight per cent growth

GDP growth of 5.6 per cent in 2011. High oil prices and increased

per year for the forecast period.

oil and gas production gave the region’s economy a strong boost, sustaining the past decade’s robust GDP growth trend, which

The mature markets of North America and intra-Europe will grow

averaged 4.8 per cent per year between 2001 and 2011. Over the

slowly, with 20-year annual growth rates of 2.3 per cent and 2.4

next 20 years, the annual growth rate is projected to average 3.9

per cent, respectively. Also projected to lag behind the world

per cent. The largest economies in the region — those of Iran, Saudi

There also has been movement toward economic liberalisation and cooperation between countries. These changes should improve the investment climate and economic competitiveness of the region. New roads and trade agreements will facilitate increased cargo flows within the region average growth rate are the markets of North America—Europe at

Arabia, and the United Arab Emirates — commanded more than

3.5 per cent growth and Europe–Africa at 4.8 per cent growth.

60 per cent of the region’s GDP in 2011.

The Europe–South Asia market is forecast to exceed the world average at 5.8 per cent annual growth per year. The Europe–

The large volume of air cargo that ﬂows through Middle East cargo

Middle East market will grow at an annual average of 5.7 per cent.

hubs reﬂects the region’s history as the crossroad between Africa,

Europe– Latin America will grow 5.3 per cent, and North America–

Asia, and Europe. Dubai, in the United Arab Emirates, is the

Latin America 5.6 per cent. Market shares will continue to change

largest air cargo centre in the region and one of the largest re-export

as a result of varying regional growth rates. Although it will grow

hubs in the world, handling more than 35 per cent of the region’s

eight per cent per year over the next 20 years, domestic China will

air cargo trafﬁc in 2011. Doha (Qatar) and Abu Dhabi (United

still possess a relatively small market share, given its current size

Arab Emirates) follow Dubai in trafﬁc volume.

and the market’s relatively short average trip distance. The share of world air trade connected to all of Asia’s markets, including the

New infrastructure will reinforce the region’s role as a hub. Dubai’s

domestic markets of China and Japan and all international markets,

new Al Maktoum International Airport received its ﬁrst cargo ﬂight

will increase from 51.5 per cent in 2011 to 59.9 per cent in 2031.

in the summer of 2010 and is planned to be the world’s largest cargo hub. The airport will be home to an integrated operation, combining different transportation modes, logistics, manufacturing,

Middle East

and assembly in a single free-trade zone.

Air cargo traffic expands strongly on economic growth

The region also has a signiﬁcant sea-air market in which goods from South Asia arrive in the Middle East on ships and continue to Europe by air. Information systems in place today are not

Air cargo moving into, within, and out of the Middle East is

capable of disaggregating this component from the total air freight

estimated to have accounted for 8.2 per cent of the world’s tonnage

moving through the region.

and for seven per cent of the world’s RTKs during 2011. The Middle East is starting to diversify beyond the oil industry to Political instability related to the Arab Spring affected a number of

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

industrial and business development. A long-term effort in Dubai,

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 93

for example, has resulted in an economy that is strong in logistics,

This ﬂow is still small, however, compared to others in the Middle

tourism, banking, and construction. This expansion will lead to

East region. Middle East air cargo exported to North America has

growing air cargo ﬂows.

remained essentially ﬂat for the past decade, contracting 1.6 per cent annually. Total Middle East–North America trafﬁc is down

There also has been movement toward economic liberalisation and

13.2 per cent from its 2008 peak. The main Middle East countries

cooperation between countries. These changes should improve the

involved in air trade with North America are the United Arab

investment climate and economic competitiveness of the region. New

Emirates, Saudi Arabia, and Kuwait.

roads and trade agreements will facilitate increased cargo ﬂows within the region. Middle East nations should beneﬁt from combining their strength as trading hubs as well as from the growth of their own markets.

Middle East–Asia traffic In 2011, air cargo between the Middle East and Asia represented

Middle East–Europe traffic

35.4 per cent of the total Middle East trafﬁc at 1,193,000 tonnes. The most signiﬁcant products exported to Asia are personal items,

Air cargo growth between the Middle East and Europe has been

machinery, chemicals, ﬂowers, and perishable foods. Imports from

strong since 2001, with the smaller export market growing 12.2 per

Asia include apparel, luxury goods, electronics, ﬁnished goods, and

cent per year to outpace the import market, which grew at a rate

perishables.

of 7.8 per cent. A total of 1,193,000 tonnes of air cargo were shipped between Asia Accounting for 1,424,000 tonnes of air cargo in 2011, trade with

Paciﬁc and the Middle East in 2011. Liberalising markets, economic

Europe represented 42 per cent of the Middle East’s international

growth, increasing numbers of direct ﬂights, and lower costs will

air cargo market. The primary products shipped to Europe are

contribute to further expansion in this market, possibly diverting

garments and perishables. Leading commodities shipped from

high-value shipments from surface transportation.

Europe include telecommunication equipment, machinery, and ﬁnished goods.

Middle East forecast The Middle East exports market has grown faster than the larger imports market since 2001, averaging 12.2 per cent growth per year

Overall air cargo between the Middle East and Europe is forecast

while imports averaged 7.8 per cent. Overall air cargo trafﬁc in

to grow at an average annual rate of 5.7 per cent between 2011 and

both directions has averaged an impressive 9.5 per cent growth

2031.

annually between 2001 and 2011. Direct ﬂights connecting production centres in Asia and Europe pose some risk to air cargo trafﬁc between the Middle East and

Middle East–North America traffic

Europe. Nevertheless, increasing local exports, coupled with the continued European market for goods transshipped from Asia and

In 2011, North America accounted for approximately 8.4 per cent

Africa, should keep growth in the Middle East air cargo market

of the air cargo market in the Middle East at 283,000 tonnes. Air

healthy.

cargo shipments arriving from North America consisted predominantly of fruits and vegetables, machinery, small packages,

The price of oil will have a signiﬁcant effect on Middle East

chemicals, and scientiﬁc equipment. Shipments to North America

demand for products from Europe, as will the ability of the region’s

consisted mainly of telecommunication equipment, textiles, medical

economies to diversify and become more competitive. In particular,

supplies, and scientiﬁc equipment. Growth in the Middle East

the competitiveness of local products, including perishables, ﬁsh,

imports market from North America has been robust, with an

and textiles, together with the products of emerging light industries,

annual growth rate of 9.8 per cent.

will affect long-term growth prospects.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 94

ON A HIGH Despite high oil prices being the biggest challenge to the air cargo industr y, Emirates Sky Cargo has been creative in finding solutions. Ram Menen, Divisional Senior Vice President, Cargo, speaks to Munawar Shariff about managing costs and improving their load factor. Give us a brief overview of the state of the air cargo industry in the region currently.

industry whose expenditure on perishable goods when staying at the growing number of hotels will continue to drive demand for food items being moved into the region by air. All signs point to

The Middle East cargo market is buoyant with on-going

on-going positive momentum for growth.

investment in expansion by regional players supporting the continued ﬂow of cargo volumes both into and through the key markets in the Middle East. In the GCC, the infrastructure

What were expectations for the ﬁrst quarter in terms of cargo volumes?

developments continue to drive the need for materials and supporting logistics, this is particularly noticeable in the UAE,

The cargo market is experiencing a sustained period of ﬂat

Saudi Arabia and Qatar. The continued expansion and

conditions and with consumer spending at a low point, production

development of airport facilities across the region is also driving

in the traditional manufacturing centres has dropped. As a result,

growth, once again particularly in those countries mentioned and

the global cargo industry is experiencing a challenging period:

we then add Oman and Jordan as well as the long term

exports from Europe have risen and are performing better than

opportunities that will be seen in Iraq. A thriving and growing

imports, the market in China remains soft, while trade in India,

consumer society with spare capital to invest and spend on luxury

Africa and the Middle East is steady. We expect the ﬁrst quarter’s

items as well as more standard consumable items, a growing tourist

global cargo volumes to remain relatively ﬂat. This is due to the

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 95

slow recovery of the world’s economy and the current high oil prices.

Which is your most proﬁtable route in terms of yield performance and volumes? Which region is the most promising one to look out for?

What are the current challenges impacting revenues? The high oil price is the biggest challenge impacting on revenues. The priority for us is to be creative in ﬁnding ways to improve load factor and yields along with managing our costs. High oil prices has an effect throughout the value chain and affects everyone,

Due to commercial sensitivities we would prefer not to answer ﬁrst

including consumers who have to spend more on fuel and as a

part of question.

consequence they spend less on consumer goods, which reduces

Africa, the Middle East and the Indian subcontinent have all

demand.

sustained the global economic downturn better than most parts of the world. These regions are also growth regions and we have great conﬁdence in the future of these markets. The Middle East is

How are growth markets coping with the current fuel issue?

strategically located between East and West, and as companies seek to expand their supply chains, Emirates SkyCargo with its hub in

The growth markets are also impacted by the fuel price and it

Dubai, is able to move cargo from the manufacturing hubs in Asia

requires on-going planning, both long term and short term in

and the Far East to our extensive network in Europe, the Americas

managing cost as efﬁciently as possible. For Emirates, our network

and Africa. The Middle East is therefore perfectly positioned for

is a key strength - we connect all continents and multiple

growth, and like Africa, is developing fast with an expanding

destinations. We have the capacity to help markets grow and it’s

consumer base, which leads a greater demand for goods. Our

about ensuring we have the right capacity, in the right place at the

geographical positioning, along with growth in the region and our

right time.

distribution capability, has been a key contributor to the success of Emirates SkyCargo and growth over the years. In recent times there have been widespread discoveries of oil, gas and other

Finally what's new at Emirates Sky Cargo in terms of innovative products, services for its customers?

minerals across Africa, which has attracted large investment into the continent, both in terms of infrastructure and in business. This

Emirates SkyCargo continues to expand its route network.

bodes well for the future of Africa as the shift for demand for goods

Emirates now ﬂies to 132 destinations in 77 countries, 12 of which

moves from the traditional markets of Europe and the US to these

are freighter only destinations. We also recently acquired our eighth

developing markets.

Boeing 777F, bringing SkyCargo’s freighter ﬂeet to 11. Following the recent formalisation of the partnership between Emirates and

How is demand increasing / decreasing in the above mentioned region? Any possible reasons for this increase / decrease in demand?

Qantas, Emirates SkyCargo’s customers from around the world can now also access the large Australian market, creating further trade and business opportunities. This also enables us to offer our customers greater connectivity, seamless connections and schedule

As the economies of these regions grow, the consumer base grows

options. We continue to promote and implement “e-freight” which

and therefore there is greater demand for goods.

allows for most cargo processes to be done electronically, thereby simplifying the business and eliminating costs of paper printing,

How do times of the year affect demand from different markets?

handling and processing. E-freight also reduces time by decreasing the waiting time to process freight and increases productivity. It aims to reduce the carbon footprint and contribute to a greener world.

There a number of factors that impact on demand throughout year.

Emirates SkyCargo continues to prove that we have the capability,

For example, the demand for perishables, especially fresh produce,

capacity and expertise to move nearly all kinds of cargo around the

is determined by the growing seasons of the year in different parts

world, from temperature sensitive goods to large items through our

of the world.

freighter and charter operations.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 96

TAKING CONTROL WITH SAP The Panalpina Group, based in Basel, Switzerland, is one of the world leaders in intercontinental air freight and ocean freight shipments as well as global supply chain management. Its 13,500 employees in over 80 countries are living proof of the firm’s motto “door-to-door ser vices in six continents.” As a result of extensive external growth, Panalpina had six SAP software applications in place. As each of these had its own access and authorisation processes, it was impossible for Panalpina to determine the related risks. In order to establish an efficient, central risk evaluation that would provide the security and validation expected from a company’s internal controls, Panalpina sought to introduce a global authorisation concept and was looking for an IT application to suppor t it. The Swiss logistics company was glad to find a proven, comprehensive, and flexible solution in the SAP Business Objects Access Control application, efficiently customised by SAP Consulting exper ts.

The result was that Panalpina struggled with an inconsistent mixture

Introducing a global authorisation concept

of user proﬁles and roles, which made it impossible to monitor risks associated with tasks that required monitoring for compliance reasons. External auditors pointed out in their annual report that

The basic requirement of an internal control system is to help a

risks related to access and authorisation couldn’t be determined

company detect risk and provide methods to help the company

sufﬁciently. It was the signal for Panalpina to get active.

manage it. Putting such a control system in place was the challenge Panalpina was gearing up to take on. “At one time, there weren’t any standardised criteria for risk determination and evaluation in place. We used to decide case by case if there were any risks related

Enlisting industrial, technological and process expertise

to a certain transaction or not. We were in need of an extensive, clearly deﬁned, well-documented, and obligatory risk evaluation,”

The Swiss logistics ﬁrm came up with a strategy to introduce

remembers Kaloian Soukmandjiev, Project Manager for Corporate

global, unifying authorisation processes, the core of which was the

Finance within Panalpina. The six SAP software applications in place

deﬁnition of the essential criteria for risk evaluation. The strategy

lacked a uniﬁed, automated process for access and authorisation.

consisted of four phases, the results of each slated for eventual

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:56 AM Page 97

global rollout. It soon became clear that the strategy could only be

with the experts from SAP Consulting – and we needed them on

realised through an IT implementation. Panalpina started to look

this mission-critical project. Their in-depth industrial, technology,

for an experienced software partner with a proven IT solution that

and process expertise convinced us: they were able to relate to both

could fulﬁll its requirements.

sides – IT and compliance – which was very valuable for our project,” states Soukmandjiev.

“For the realisation of our global authorisation concept, we soon decided to go for SAP Business Objects Access Control. We liked the comprehensiveness and ﬂexibility of the application, as we knew we could customise it to the extent needed. Yet, it offered a

Getting help for self-help for additional rollouts

useful set of predeﬁned risk rules, which we could easily integrate by plug and play at the same time,” says Soukmandjiev. The

Panalpina decided to initiate the implementation of its global

application would enable Panalpina to manage its processes for

authorisation concept in Switzerland and Germany with its 500 SAP

compliant access and authorisation control efﬁciently. And just as

software users there. The strategy was simple yet compelling: lay the

important, SAP Business Objects Access Control would completely

foundation for compliant risk evaluation by cleaning up and then

support the company’s internal control mechanisms, which was the

staying clean. Panalpina was thrilled that it could execute this strategy

ultimate goal of Panalpina.

solely with SAP Business Objects Access Control. In the area of access risk analysis and remediation, the application offered Panalpina the

In order to adapt the application to the ﬁrm’s requirements,

opportunity to detect risks related to access and authorisations in real

Panalpina chose to get the professional support from SAP

time, analyse them precisely, and promptly correct them. This turned

Consulting. “So far, we have always had very good experiences

out to be valuable in combination with thorough, compliant user

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 98

provisioning. As a result, Panalpina

Soukmandjiev. “Thanks to the

QUICK FACTS

found that it was indeed in a position to manage and unify the underlying processes, its overarching objective.

on time and within budget – to the great satisfaction of Panalpina. “The implementation went well in terms of quality and speed. We received professional support from SAP Consulting, with timely responses and valuable feedback on how to proceed with the project. We felt we were in very good hands with the SAP experts,” says Soukmandjiev. Panalpina beneﬁted as well from the philosophy

espoused

SAP

Consulting: enabling customers to realise further rollouts on their own. This was key in enabling Panalpina to

establish

global

• • • • • • • •

Name: Panalpina Group Location: Basel, Switzerland Industry: Transportation and logistics Products and services: Air freight, ocean freight, and supply chain management Revenue: SFr 8.88 billion ( 6.02 billion) Employees: 13,500 Web site: www.panalpina.com Implementation partners: SAP® Consulting and Keneos AG

Challenges and opportunities • Comply with the legal requirements applicable to the company’s maintenance of internal control • Standardise the access and authorisation processes within the company’s six SAP applications • Establish consistent roles and proﬁles across multiple instances of SAP software

Objectives • Implement a global authorisation concept with a single IT solution • Execute precise, transparent, and real time risk evaluation • Unify the access process, resulting in lower IT effort and thus costs

authorisation in France and Italy

SAP solutions and services

using its own resources, with the

SAP Business Objects Access Control application, speciﬁcally functionality supporting access risk analysis and remediation and compliant user provisioning

eventual target of rolling out to some 60 additional countries being a very realistic goal.

Implementation highlights • Implemented on time and within budget • Enabled by SAP Consulting to execute further rollouts independently – no external support required

Dramatically reducing time spent on user maintenance

corresponds to an internal control system, we expect to reach ﬁve to 10

Company The implementation was performed

transparent risk evaluation, which

Why SAP • Long-term, trusted partnership with SAP • Completeness and ﬂexibility of SAP Business Objects Access Control • Unrivalled industrial, process, and technology expertise of SAP Consulting

per cent savings for external audits this year.” The

process

for

authorisation

access now

and

uniﬁed,

resulting in a signiﬁcant rise in transparency and a major relief for the IT department. “Thanks to SAP Business Objects Access Control, we were able to reduce the time spent on user maintenance by 20 to 30 per cent, and we ﬁrmly expect to reach a 75

per

cent

reduction.

Our

management is now capable of running real-time reports centrally, providing them with an up-todate decision basis whenever needed,” says Soukmandjiev.

Looking forward to totally automated processes Panalpina has more plans for SAP Business Objects Access Control and SAP Consulting. In order to enhance the operative handling of roles, the Swiss logistics company is

The implementation of the SAP

Beneﬁts

thinking

Business Objects Access Control

functionality for extensive enterprise

awareness for authorisation related

• Thorough risk evaluation based on common standards and definitions • Significant rise in process transparency • Expected reduction of external auditing costs by five to 10 per cent • Expected time savings involved in user maintenance of 60 to 75 per cent

risks could be raised signiﬁcantly

Existing environment

the fully automated process as soon

within Panalpina. Our employees

6 SAP software applications

application soon started to pay off from

both

compliance

and

operative point of view. “The

are now sensitised to the amount of

about

implementing

role management and dedicated superuser privilege management. Both are already part of the SAP application. “We would like to have possible.

investments

With

further

SAP

Business

possible risks and how to deal with them. This can partly be put

Objects Access Control, we are expecting some signiﬁcant time

down to the intuitive use of the application,” remarks

and cost savings,” sums up Soukmandjiev.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 99

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 100

A D V E R T O R I A L

[From Left Mr. Khalid Al Ghamdi – COO of Almajdouie, second Hamad Obaidalla Chief Commercial Officer of flydubai giving the award and third is Mr. S. I. Mustafa - CEO of Almajdouie Logistics. Almajdouie Logistics won the title “Best 3PL service Provider of the year”]

Almajdouie Logistics won “The Best 3PL Service Provider award” for two consecutive years On April 24, 2013 Almajdouie Logistics has been awarded after a thorough evaluation process & meeting of criteria lay-down by the jury board of the Supply Chain and Transport Awards (SCATA) as “Best 3PL Service Provider of the Year” in Middle East region. “This is our second time winning in a row, so this is very exciting, it was great teamwork and we are very happy as a team” stated Mr. Mustafa. The awards ceremony took place at the prestigious Jumeirah Emirates Towers hotel in Dubai and was attended by more than 200 senior figures from the regional logistics industry, where for the seventh time; companies were recognized in 17 different categories This event was organized by ITP, publisher of arabiansupplychain.com and Logistics Middle East as the ultimate celebration of the Middle East logistics industryʼs achievements over the past 12 months. The SCATA recognize and reward those regional and international players that have gone above and beyond in terms of their industry contribution. “We are extremely honored to receive this award as one of the Best 3PL Service Provider of the year in Middle East” said Mr. S. I. Mustafa, CEO of Almajdouie Logistics. Such recognitions are earned through teammateʼs commitment to implement timely solutions to our valued customers through improving process and delivering initial and ongoing value that makes our and our partners success possible. I am receiving this award on behalf of all Almajdouie Logistics Employees as it is a great team work.” Almajdouie Logistics, from its humble beginning as a land transport and trucking company in 1965, is now considered the largest logistics service provider in the region with its own assets, more than 6,000 employees and a total area of 2 million square meters of terminal and storage facilities in Saudi Arabia. Al Majdouie, the leading Project Logistics and Supply Chain Company has been in limelight as first Saudi private company to be in Guinness World Record Books for moving the Worldʼs Largest Evaporator and the heaviest load ever moved in the Middle East. In size, the evaporator was equivalent to a football field and with an assumed weight of 5000 cars, as it measures almost 124 meters long, 34 meters in width and 12 meters in height, with weight of 4891 tons. Almajdouie moved 8 units of similar weigh.

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 101

BY SEA

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 102

FULL STEAM AHEAD 102

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 103

DP World’s Mohammed Al Muallem, Senior Vice President and Managing Director, UAE Region talks to Munawar Shariff elaborating on how the container terminal plans to maintain its top position. What is the outlook for the year 2013?

The developments in T2 and T3 will enable Jebel Ali Port to handle 10 of the next generation 18,000 TEU mega vessels at the

Operating conditions in each of our markets in the ﬁrst two months

same time – the only port in the region able to do so.

of 2013 have been consistent with those experienced at the end of last year and the economic environment continues to remain uncertain. We remain conﬁdent about the long term outlook of our industry and remain well positioned to deal with a changing

Plans of a landside intermodal link with Etihad Rail had been announced last year, how is that progressing?

economic environment as well as continue to focus on our established high standards of service to customers.

In May 2012, Etihad Rail and DP World signed an MoU for the development of an intermodal rail terminal in Jebel Ali Port. We

What infrastructure investments are currently underway / being planned for the year?

have earmarked a strategic potential plot for the intermodal rail terminal, adjacent to Jebel Ali Maritime Terminal 1 and close to Terminal 2.

In addition to the expansion of Jebel Ali’s Terminal 2, which will add one million TEU capacity to the existing 14 million TEU in the second quarter of 2013, the new Container Terminal 3 is under

How do you plan to integrate Jebel Ali port to become a multi modal port?

construction at present and will be ready in 2014 with a capacity of four million TEU. This will take capacity at Jebel Ali Port to 19

Jebel Ali is already a multi-modal port with state-of-the-art facilities

million TEU by 2014.

able to serve the largest vessels in the world, supported by the latest

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

103

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 104

e-trade technology, and the Dubai Logistics Corridor which

region because of the high volumes destined for this market.

links sea-land-air via the Dubai World Central airport. With the planned rail link, Jebel Ali will be fully multi-modal,

What challenges are you facing at the moment?

connecting sea-road-rail-air. This will add enormously to the efficiency of the supply chain and reinforce Dubai’s status as

Sustainability and capacity will be an overriding theme of the

both a regional hub and a gateway for cargo for the United

industry’s development in the coming years, as we see the next

Arab Emirates and the wider Middle East, Subcontinent and

generation of ultra large container ships (ULCS) coming on line.

East Africa region.

The industry also needs to invest in people, technology and the environment to keep pace with the changes.

What was the capacity handled by the Jebel Ali Container terminal last year and the ﬁrst quarter of 2013?

How is capacity being remodelled at the port to handle the bigger ships on the sea?

In 2012, DP World, UAE region continued to operate at very high

The new ULCSs need deeper berths and cranes with a signiﬁcantly

levels of capacity utilisation, increasing the number of containers

wider reach, and to realise the economies of scales these giants

handed to 13.3 million TEU for the year. Throughput of ﬁrst

bring to the shipping lines, they demand faster handling quay side

quarter of 2013 will be announced on 25 April.

crane moves, all of which is putting pressure on operations both on quay and inside the terminal.

What are current transshipment trends within the region?

At Jebel Ali Port we are adding 400 metres to the quay of Terminal 2 bringing it to 2,000 metres, and this will give us the ability to

Transhipment continues to be driven by origin and destination

handle ﬁve mega vessels of 18,000 TEU capacity at the same time.

cargo – it makes sense for the shipping lines to tranship at the same

Also, and in preparation to handle more of the bigger ships at one

port they are loading and unloading cargo for that market. Jebel

time, DP World has successfully completed the largest dredging

Ali therefore continues to be the preferred transhipment hub in the

programme at Jebel Ali Port in 10 years, deepening the draft. n

104

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 105

JEBEL ALI EXPANSION ON TARGET DP World is making good progress on two major development projects at its flagship por t Investment at DP World’s home port in Jebel Ali is being stepped up. This will not only provide the additional capacity required as healthy container trade growth returns to the region, but also will allow the company to better meet the operational requirements of its liner shipping customers as they deploy ever larger container vessels onto Middle East trade routes. Work is well underway on a 400 metre long quay extension at Jebel Ali Terminal 2, increasing capacity at this facility by over one million TEU a year. The construction work was scheduled to be complete by the end of the ﬁrst quarter of this year, allowing the port to handle six 15,000 TEU class vessels simultaneously,

DP World is now developing Terminal 3, investing around US$ 850 million to create a four million TEU capacity container facility, which is on track to commence operations in 2014. The T3 facility, converted from an existing general cargo berth in the port, will comprise 1,860 metres of quay and 70 hectares of yard space

thereby improving operational efﬁciency and reducing turnaround times.

simultaneously. This will send an important message to the trade that we are committed to getting ready to meet their needs.”

DP World is not planning any major equipment purchases in connection with the T2 extension. Mohammed Al Muallem,

The T3 project will require substantial investment in equipment

Senior Vice President and Managing Director, UAE region,

as well as infrastructure. DP World is ordering 19 super-post-

explains, “We are going to focus on improving efﬁciency at T2.

panamax quay cranes, amongst the largest of their type in the

The existing equipment on this site will be used more intensively

world and 50 rail mounted gantries with a high degree of

to handle the extra volumes.”

automation. Ten of the quayside gantry cranes will be built in Abu Dhabi and the remainder in China. As Al Muallem points out,

In addition, DP World is now developing Terminal 3, investing

“By splitting the order we can support the local UAE economy

around US$ 850 million to create a four million TEU capacity

while also getting the delivery times we need.”

container facility, which is on track to commence operations in 2014. The T3 facility, converted from an existing general cargo

Container trafﬁc levels at Jebel Ali have continued to recover after

berth in the port, will comprise 1,860 metres of quay and 70

the effects of the global ﬁnancial crisis in 2009. In 2011, Jebel Ali

hectares of yard space. With an alongside draft of 17 metres, the

handles around 13 million TEU, 12 per cent higher than in 2010.

new terminal will be able to handle the world’s largest container vessels, berthing four 15,000 TEU containerships at a time.

Throughput growth in the ﬁrst nine months of 2012 was slower at 4.6 per cent, but still robust enough to suggest that the port will

Al Muallem adds, “The investment in both these projects is

handle close to 14 million TEU in the full year. The T2 and T3

needed to meet the challenges we face as the containerships are

investments will give Dubai a total annual capacity of 19 million

getting bigger. We have to be able to handle several of these large

TEU, providing some breathing space as the economic

vessels at the same time without delay and the development of

development of the UAE and surrounding countries gathers pace

these facilities will allow us to handle a total of 10 mega ships

once again.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

105

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 106

Al Muallem points out, “Our philosophy is to always be ahead of

more widely with other railway systems in the GCC countries. Al

the game, and to make the right investments at the right time. The

Muallem says, “Jebel Ali has been proactive to make sure we are

spending we are doing now will make sure we can accommodate

onboard with this exciting initiative. we have done our homework

future demand for local imports and exports and also cater for

so that Jebel Ali will be connected by rail, possibly by 2016.

wider regional trade growth.” We are currently exploring the best options for intermodal rail Looking to the future, one of the priorities for DP World is to

services, which will add another mode of transport for our

enhance connections with its hinterland. In this context, it is

customers.”

working closely with Etihad Rail, the Abu Dhabi-based organisation which has been tasked with developing a passenger and freight rail network in the UAE and which will also connect

Reprinted with permission from Seatrade UAE Special Report 2012 www.seatrade-global.com n

ABU DHABI CONTAINER OPERATIONS TRANSFERRED TO NEW PORT Khalifa Por t is already ser ving latest generation containerships Abu Dhabi Ports Company (ADPC) has been making tremendous

According the ADT’s CEo Martijn Van De Linde, “International

strides towards establishing its newly-built Khalifa Port as an

shipping lines are making use of the deep sea berths at Khalifa port

important new gateway for the region’s container trades. By the

to send larger container vessels to Abu Dhabi than we have ever

end of November 2012, all container handling operations had been

seen before. By enabling big ships to berth in Abu Dhabi the new

successfully transferred from Abu Dhabi’s Mina Zayed port,

port is eliminating the need for goods to travel by feeder ships from

located close to the city centre, to the new, state-of-the-art Khalifa

other ports to reach the local market and this is driving down the

port at Taweelah 60 kilometres away.

cost of trade.”

The semi-automated container terminal at Khalifa had handled its

A key feature of the Khalifa port container terminal is the fact that

ﬁrst commercial container vessel, the 14,000 TEU 366 metre long

landside operations are undertaken by 20 automated stacking

MSI Bari in September 2012.

gantry cranes (ASCs), supplied by Konecranes of Finland.

The move to Khalifa is well-timed as container trafﬁc growth, had

These cranes, the only ones of their type in the region to date, are

outstripped capacity at the old port. In 2011 Abu Dhabi Terminals

supported by an advanced Terminal Operating System called N-

(ADT) a joint-venture between ADPC and the Mubadala group

4, delivered by the US ﬁrm Navis.

handled over 760 000 TEU at Mina Zayed and a further growth of arounf four per cent was achieved in the ﬁrst 10 months of 2012.

For ship-to-shore operations Khalifa port is equipped with six

Consequently Abu Dhabi’s total container throughput for 2012,

super-post-panamax cranes manufactured by ZPMC. These have

split between Mina Zayed and Khalifa port is expected to be well

an outreach of 65 metres, allowing them to work the largest

over 800 000 TEU.

container vessels in service. Movements between the quayside and

106

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 107

container stacks are undertaken by a ﬂeet of 20 Terex Noell

Right next to Khalifa port is the new KIZAD Industrial Zone, one

SC624E diesel electric shuttle carriers.

of the biggest of its type anywhere in the world. As investment in Kizad picks up, the companies based there will generate additional

“The port’s technology is proving to be a big draw for our

local cargo ﬂows for the port. Emirates Aluminium (EMAL) is a

customers,” says Van De Linde. “World class operational

base tenant for Kizad and has its own dedicated berth in operation

efﬁciency and automation means we can unload ships faster than

since November 2010.

ever before.” Abu Dhabi’s economy is relatively buoyant and this is reﬂected in ADPC plans to acquire a further six quayside cranes and 22 ASCs

positive ﬁgures for non container cargoes, currently still being

over the next few years. Once this investment has been made,

handled at Mina Zayed. Ro-ro volumes in the ﬁrst 10 months of

Khalifa port’s annual capacity will be around 2.5 million TEU.

2012 were over 41 per cent higher year-on-year while bulk and general cargo also grew by ﬁve per cent.

Further operational improvements are being made all the time. Automation of gate processes has been enhanced in recent months

Commenting on the growth ﬁgures, Captain Mohamed Al Shamisi,

and preparations are being made for the launch of the new Port

EVP at ADPC says, “Port activity is often seen as the bellwether

Community System which will provide a single portal lining all

of the general economic climate and these excellent ﬁgures reﬂect

stakeholder services and clearing procedures.

the strength of the Abu Dhabi economy with its strong levels of consumer spending. It is great to see our customers placing more

Initially Khalifa port will primarily be a gateway port for the local

business with ADPC following major investments in our new

Abu Dhabi market and a key customer in this context is the

ﬂagship Khalifa port and at Kizad.

Bourouge petrochemicals plant. Khalifa is now handling containerised polyethelene and other products for Bourouge produced at its Ruwais factory 250 kilometres from Abu Dhabi.

Reprinted with permission from Seatrade UAE Special Report n 2012 www.seatrade-global.com

KHORFAKKAN EXCEEDS EXPECTATIONS The por t of Khorfakkan in Sharjah was the largest growing container terminal in the Middle East last year. Over the ﬁrst 10 months of 2012 Khorfakkan Container Terminal

lines have had to change to survive and this has led to greater

(KCT), operated by Gulftainer under a long term lease from

collaboration. Our biggest customers including Hanjin, UASC and

Sharjah Ports Authority (SPA) achieved a 26 per cent increase in

CMA CGM, have entered into alliances with other lines and this

volume.

has generated a signiﬁcant amount of transshipment growth at KCT.”

As a result KCT is expected to record an all-time high of nearly four million TEU for the whole year.

To some extent the level of increase caught Gulftainer ‘on the hop’. As Richards observes, “Nobody could have predicted the rate of

Peter Richards, Managing Director at Gulftainer says, “Shipping

growth we have seen in 2012. This has put pressure on our facilities

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

107

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 108

and at times it has been difﬁcult to keep up. We have however been

neighbouring northern emirates. This facility which will handle

proactive in addressing this situation by ordering new equipment

around 400 000 TEU this year, has been the subject of an

and taking on more staff.”

upgrade in recent times, including dredging down to 12.5 metres along the access channel and berths, a 300 metre extension to

As an ‘emergency’ measure Gulftainer has acquired two high

the usable quay, and the creation of additional container stacking

capacity Gottwald mobile harbour cranes, which are amongst the

space. Alongside upgrading its terminal capabilities in Sharjah, Gulftainer

With a further 20 per cent plus growth rate forecast at KCT this year as well, Gulftainer and the SPA are having to look at possible quay extension work to provide the necessary longer term capacity

has been developing new logistics facilities within the emirate through its Momentum subsidiary. The Sharjah Inland Container Depot (SICD) now comprises 45 warehouse units, all of which are fully utilised, while work is now underway on the Al Saja’a Logistics City on a 700 000 sq metre site that will be home to a variety of logistics activities and warehousing operations. According to Richards, “The UAE is increasingly being used as a staging post for the Gulf area, including Iraq, and the Saja’a facility is ideal for that role.” While Gulftainer has its base ﬁrmly in the UAE, the company is

largest of their type in the world. Gulftainer has also ordered four

increasingly becoming a global terminal operator. It is now the

new super-post-panamax ship-to-shore gantries, designed to handle

largest terminal operator in Iraq, with two facilities in Umm Qasr

18,000 TEU capacity container ships and 12 more rubber-tyred

port, including the Iraq Container Terminal which started

gantry (RTG) cranes. These cranes are expected to be in service

operations in early 2012.

by the end of this year. The company also has the concession to operate the Umm Qasr With a further 20 per cent plus growth rate forecast at KCT this

Logistics Centre, the only bonded facility outside of the port.

year as well, Gulftainer and the SPA are having to look at possible quay extension work to provide the necessary longer

Last year Gulftainer started operating at the Brazilian port of Recife

term capacity.

and Ust Luga in Russia. Moer recently the company has been awarded a 25-year concession to develop and operate the port of

The leading marine engineering consultants Halcrow have been

Tripoli in northern Lebanon. The company says it plans to invest

engaged to evaluate a number of scenarios, which could see a

around US$75 million in upgrading this facility, buying three ship-

further 1500 metres of quay wall constructed at KCT within

to-shore cranes and nine RTGs which will be operational by the

three years. This would boost capacity at Khorfakkan by around

end of this year.

two million TEU a year. “I am hoping that one of the options, squaring off and building at the end of one of our existing quays,

Further opportunities outside the UAE are being explored,

could be completed within a year, giving us much-needed

Richards says, “We are well known as a high productivity terminal

additional capacity in a reasonable time frame,” adds Richards.

operator at KCT. That makes us a popular partner and we are currently very much in demand.”

As well as KCT, Gulftainer operates the Sharjah Container Terminal (SCT) close to the city centre which is primarily a gateway terminal handling exports and imports for Sharjah and

108

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

Reprinted with permission from Seatrade UAE Special Report n 2012 www.seatrade-global.com

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 109

MANAGEMENT

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 110

110

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 111

LOGISTICS INFRASTRUCTURE IN THE GCC asset rich and cargo poor? Are the right steps being followed to have the GCC region streamlined as a whole in providing a complete solution? Tom Craig asks the question. Much has been built and expanded, is being built and will be built

redundancies, such as with regard to ports, with the logistics

throughout the region. Ports. Roads and causeways. Railroads.

infrastructure from a GCC perspective. They can be viewed

Airports. Each of these impacts the ﬂow of products.

collectively as over-engineered and under-customered. Logistics as an economic driver

From a logistics and supply chain management view, three things that stand out about all the projects

Logistics can be and has been an economic cluster to drive growth.

● They are impressive. State of the art.

Despite their geographical size, Singapore, The Netherlands and

● They are country centric. Each can be considered a standalone

Hong Kong are signiﬁcant examples of logistics economic

project. Each is meant to serve the businesses within its respective

successes. They have proven what logistics (and maritime) can

country.

mean to a country.

● Projects are not integrated among countries. There is not a GCC interconnection. They are not meant to facilitate the smooth ﬂow

There are beneﬁts with being the logistics and maritime centre.

of cargo among and within the countries of the region.

Four key ones are: 1 Economic growth. It would be in the important private sector. 2 Employment creation. The potential is there for 100,000+ jobs for GCC citizens. These would be at all levels. 3 Economic diversiﬁcation. This expands opportunities in the nonoil economy. 4 Attracting outside / direct foreign investment. In addition, other key value drivers of the logistics focus and what it generates are: ● Creating sustainable development ● Supporting linkages and connectivity for international trade ● Supporting linkages and connectivity for domestic ﬂexibility of labour and development ● Attracting international inward investment for development

As a result of the centricity and lack of integration, there are

of national primary clusters that require underlying logistics to

investment gaps, such as with roads and railways, and investment

support sustainable development

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

111

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 112

● Attracting international inward investment for international

Logistics is a critical element of any cluster activity, with its

purposes - hub-based trade or as offshore centres

combined physical goods, information, ﬁnance, and documents

● Supporting, and being a vital part of, the ease of doing

ﬂows and activities. It is both a supporting and necessary element

business in international trade

in all development. Given a multiple set of economic clusters, logistics is an economic activity and skill-set stimulant in its own

Clusters are viewed as key for improving the economic

right. As has been proven, logistics can be the driver to create

performance of regions. They orient economic development

economic clusters, growth and jobs.

toward groups of companies for common issues, such as training. Clusters build on the unique strengths of an area rather than trying

Competitiveness. There is not a united effort to establish a logistics

to copy other areas. They enable a region to have different sets of

centre in and for the GCC that is supported with infrastructure

economic development opportunities.

linking all the countries. Countries compete in varying ways within the GCC and the region with regards to logistics and trade. They

112

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 113

each compete for essentially the same business. How they are

extent to which individual economies have developed

viewed can be seen from three indexes that evaluate countries of

institutions, policies, and services facilitating the free ﬂow of

the world.

goods over borders and to destination. The structure of the

1. Logistics Performance Index (LPI). The World Bank has

Index reﬂects the main enablers of trade, breaking them into

developed a benchmarking tool for international logistics.

four overall issue areas that are captured in sub indexes—

The Index for 2012 ranks and compares 155 countries.

market access, border administration, transport and

Singapore had the #1 ranking with a 4.13 score, followed by

communications infrastructure, and business environment.

Hong Kong at 4.12. The World Bank surveys global freight forwarders and express

The survey recognises the rise of international supply chains and

carriers as to the logistics “friendliness” of countries in which the

the effect on trade. One hundred and thirty two countries are

ﬁrms operate and with which they trade. Scores reﬂect quantitative

ranked. Singapore is ranked #1, followed by Hong Kong.

and qualitative measures.

Singapore’s score is 6.14.

Scoring is based on six criteria: customs, infrastructure, international shipments, logistics competence, tracing and tracking

3 Global Competitiveness Index. The WEF assessed the

and timeliness.

competitive landscape of 144 economies, providing insight into the drivers of their productivity and prosperity.

Scores for Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United

Switzerland is ranked #1, followed by Singapore. Switzerland

Arab Emirates reﬂect the assessments for the six categories, and are:

had a score of 5.72.

Needed—Focus. The indices are about more than infrastructure For comparison, #1 Singapore had scores of 4.10, 4.15, 3.99, 4.07,

and assets. They reflect what is required to be a logistics / supply

4.07, and 4.39.

chain leader in the global economy. That is what the GCC

2. Enabling Trade Index (ETI). The World Economic Forum

should do—improve scores and focus on becoming a leader.

(WEF) issued its ETI report for 2012, titled, “Reducing

Implicit to that is who will be the logistics centre and leader in

Supply Chain Barriers”. Per the WEF, ETI measures the

the GCC.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

113

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 114

This requires a focus on what should be done—

Logistics is a critical element of any cluster activity, with its combined physical goods, information, finance, and documents flows and activities. It is both a supporting and necessary element in all development. Given a multiple set of economic clusters, logistics is an economic activity and skill-set stimulant in its own right ● Develop structure to being a leader. The ﬁgure below shows what is needed, namely, customers, various types of logistics assets, logistics service providers and technology. All of these elements that must be built and integrated into a cohesive programme and operation.

LOGISTICS LEADER STRUCTURE ● Segment the logistics market. The logistics market is not monolithic. There are multiple logistics markets—and opportunities. All industries and products do not have the same requirements. Segmentation is needed to determine which market is best for a particular country or port. Analyse and slice it as to industries and to unique opportunities, such as supply chain complexity. Then

114

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 115

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 116

the needed structure and other steps can be implemented.

logistics as the hub for their supply chain and trade needs.

Segmenting is in contrast to much of what is happening in the GCC with regards to duplication of assets in pursuit of the same market.

Both customer sets are critical to generating and to sustaining

The present approach means dividing up the same market among

logistics activities and to developing the economy.

countries and missing out on economic growth and employment

● Implement a strong value proposition. Why should a logistics

potential.

provider or end-user customer use a certain port or country’s logistics park? How do multi-national corporations view it? How do major

Here is an example of segmentation:

logistics service providers view it? Why should they do business with a certain port, do more than shipping and transshipping containers of cargo directly from their warehouses or factories? Transshipping containers does not create all the employment and grow the economy that being the logistics leader does. The value proposition is not about what the port or logistics park does; it is not about assets. The value proposition is about what customers want and how that location meets - and exceeds - those wants. A strong value proposition separates an operation/facility from the competition. It will draw customers and make them stay. ● Develop training programmes. There would be many different job opportunities for citizens of the GCC. Education and training would be needed for all the different logistics needs and for all employment levels. Strengthening the logistics talent training will accelerate the development of the logistics industry in the GCC. This includes training for maritime, air cargo, warehousing, forwarding and customs (with the changed approach for the logistics center). In addition, there should be education for supply chain management.

Market Size Logistics Complexity

Conclusion

● Attract two sets of customers. There are two underlying sets of customers that the approach should target:

The economic beneﬁts of signiﬁcant development and job creation

1 Logistics service providers—these are major ocean carriers, air

driven by logistics are not being achieved. Each country in the

cargo ﬁrms, 3PLs, warehouses, forwarders, and others that are

GCC has advantages and disadvantages. The time is now to stop

important to provide needed supply chain services.

the “shotgun” approach to investing in various logistics

2 End-user customers—Multi-nationals located in Europe, Asia,

infrastructure. Instead, assess, identify, target and develop to meet

North America and elsewhere that will actually position their

speciﬁc logistics opportunities. It is also important to recognise that

products in the GCC. They will choose which country and its

being the leader will be an ongoing effort.

116

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 117

A D V E R T O R I A L

The one-stop solutions provider Tom Nauwelaerts, Managing Director of Al Futtaim Logistics, talks about his companyʼs capabilities. Headquartered at Jebel Ali in the United Arab Emirates, Al-Futtaim Logistics is ISO 9001:2008 Certified Company, one of the regionʼs leading logistics firms offering a full range of advanced supply chain management solutions. “AFL is a ʻone stop solutions providerʼ for all the logistics and supply chain needs of its clients. AFL ensures the customersʼ requirements are well understood and provides customised services to suit the business needs of the customer and ensures the solutions are delivered,” says Tom Nauwelaerts, managing director of Al Futtaim Logistics. “We have the experience and know-how to achieve the fine balance between cost and service requirements. We strive to achieve excellence in service by delivering on our customersʼ value proposition driven through: dedication to continual improvement; professional and proactive business partnership; simple and efficient customer interactions; and customer centric value added solutions.” AFL has facilities in Jebel Ali, Dubai Festival City, Dubai Industrial City, Rashidiya, Ramool, Dubai Cargo Village, Al Ain and Mussafah (Abu Dhabi). Al-Futtaim Logistics has many yearsʼ specialised experience in several key sectors and our wide ranges of capabilities extend to the following services: Freight Forwarding & Customs Clearance Service AFL is ideally placed to ensure seamless door -to- door delivery anywhere in the world via a combination of its air, sea and road transportation solutions. Services include: managing air/shipping lines, sending pre alerts, documentation handling and customs clearance. Automotive Logistics Al-Futtaim Logistics is the leading automotive logistics service provider in the UAE, and offers a comprehensive range of high quality services for leading automotive distributors, which includes Forwarding and Customs Clearance; Vehicle Storage; Accessory Fitting and Pre-Delivery Inspection; Vehicle Distribution and Parts Distribution.

Transport & Distribution Comprehensive road transportation services offered include: Container Transportation, Distribution, Specialised Road Transport Vehicles and People Transportation. With the full capability to meet every customerʼs specific requirements, we operate car carriers, refrigerated trucks and side loaders. Warehousing and Contract Logistics Al-Futtaim Logisticsʼ extensive warehouses comprise over 100,000m2 of ambient and temperature controlled storage that caters to the requirements of large and small businesses alike. AFL currently handles over a quarter of a million line items in multiple locations and caters for a diverse range of goods. The latest technology of web-enabled inventory visibility provides reassurance for customers ensuring full visibility of stock at every operational stage. AFL provides customers with a complete one stop, cost effective logistics proposition through a comprehensive range of value added services, which includes packing, repackaging, bar-coding, product labeling, tagging and promotional packaging for retail sales periods People transportation Al-Futtaim Logistics provides staff transport services to many business sectors throughout the UAE including hotels, airlines, retail and service companies and offices, at the desired frequency, on a daily, weekly or monthly basis. Al-Futtaim Logisticsʼ dedicated Staff Transportation division operates out of a centrally located base in the UAE with its head office at Jebel Ali, from which round the clock service coverage is provided every day of the week. Relocations and International moving Al Futtaim Logisticsʼ commitment to customer care along with our personalised service is driven by the understanding that each and every relocation in, itself is unique. Providing world class supply chain solutions since the 1980s, our advancement into the relocation industry has perfectly complemented our expertise in freight forwarding and other customer focused services. We provide complete solutions from origin to destination for local and international relocation, pet relocation, vehicle transportation, storage and warehousing, and comprehensive insurance.

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 118

ROCK STEADY SSI Schaefer is one of the biggest materials handling companies in the region. A solid future strategy with a presence in all major mar kets is their mantra going forward. Munawar Shariff spoke to Matthias Hoewer, MEA General Manager - SSI Schaefer

Tell us in detail the changes in the regional market from 2011 till 2013.

Areas for added value handling, specialised systems for case and piece picking operations etc. Coming from a market that evaluated the efﬁciency of a warehouse by a “number of pallets per sq metre”

We have seen a strong recovery of the markets over the last two

ratio has now matured and sees the beneﬁt of different subsystems

years. Especially in the UAE, we have witnessed a growing

within the same logistics facility.

demand both for domestic or export oriented projects. The quality of the inquiries and new projects have greatly improved and we see a lot of long term, strategic investments into the local market

What is the best way to get and maintain market share?

by major global players. Constant review and improvement of our service levels to our The political stability of the UAE and the continuously expanding

clients.

infrastructure for logistics services, be it by air, land or sea helps the regional market to keep up with global requirements.

This is why we took the decision three years ago to build our own facility in Dubai World Central that operates as a hub for SSI

Materials handling is all about continually ﬁnding ways to improve processes ... was there a marked change in companies' spending habits in the last few years? How has this changed (if it has)? What do you attribute this change to?

Schaefer in the Middle East and Africa or why we continuously

The quality of services that we have to provide to our clients and

What are the latest products and trends in the materials handling industry worldwide?

also what they have to provide to their end customers, saw an

invest into research and development of new products. What separates SSI Schaefer from other intra-logistic companies in the region is that we manufacture 98 per cent of our products within the SSI Schaefer Group.

immense jump in terms of quality requirements throughout the entire range of our products. The focus on process optimisation

Globally we have seen a huge demand for case and piece pick

has changed the layouts of logistic facilities completely.

operations especially in the food retail sector. Within our group,

118

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 119

the most advanced new technology that has been developed for

Nevertheless the growing demand from the consumers in the

the global markets is the fully automated SCP – Schaefer Case

region to provide better services in healthcare, delivery times for

Picking. The system allows our customers to build fully customised

products of all kinds (order fulﬁllment for e-commerce) or simply

pallets with mixed SKUs with the means of a robotic picking

by not accepting empty shelves in your local supermarket have

system extending the traditional goods to men principal to now

pushed up the requirements to all parties that are involved in the

“goods to robot”.

distribution network. Mid-term these growing demands will force the domestic supply chain and logistics companies to go to the next

How advanced, as compared to global supply chains, are supply chain and logistics companies in the region in terms of embracing the latest Materials Handling technology? The local market is still one or two steps behind the requirements

step and use automation technologies.

How do new trends and technologies come about at SSI Schaefer globally and how are new products tested in order to make them more efficient and better value for money?

that we see in Europe or the American markets simply due to the fact that cost for workers is still relatively inexpensive in our region.

Within the SSI Schaefer Group, research and development of new

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

119

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 120

The facility that we built in Dubai World Central is in total about 3,000 sq metre in size and will provide us enough space to develop the company in the next 10 to 15 years. We are absolutely happy with the decision to move into DWC products and improvement of existing products is one of the keys

the company in the next 10 to 15 years. We are absolutely happy

to our global success. Analysis of market demands in over 50

with the decision to move into DWC. The service is excellent and

countries lead us to always new requirements and force us to

we are located in between many of our customers and right in the

sometimes even re-invent the wheel.

center of the UAE with just 45 minutes to Abu Dhabi.

SSI Schaefer operates three technology and test centres world-wide

What are SSI Schaefer's plans for the region?

where new products are developed and tested before they are released into the market. For some of the products that have been

When we are looking at “The Region” I would like to include

showcased at exhibitions lately, like the SSI Schaefer Order Veriﬁer

Africa as well. We are following a clear long term strategy to be

or the SSI Schaefer Robopick this means that the systems have

present with our own ofﬁces and employees in all the major

gone through thousands of hours of testing and different

markets. Therefore we opened a subsidiary in Johannesburg, South

development stages before they are shown to the public.

Africa in 2011 and are now in the process of opening ofﬁces in Saudi Arabia.

What is the size of the new office and warehouse space at SSI Schaefer at Dubai World Central?

The target within the next few years is to provide the same quality of services and consultancy from these local branches as

The facility that we built in Dubai World Central is in total about

our customers are used to get from us in Dubai or even from

3,000 sq metre in size and will provide us enough space to develop

Europe!

120

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 121

LOGISTICS - driving regional economic growth The GCC region can safely attribute its economic growth to the logistics and supply chain industr y. Subir Shah, Team Leader, Transpor tation and Logistics Practice, Frost & Sullivan elaborates.

The Gulf Cooperation Council (GCC) constitutes six member

The GCC economies are energy powerhouses of the world

countries, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia,

witnessing robust growth momentum supported by high oil prices,

and the United Arab Emirates (UAE), forming a political and

strong government ďŹ nancial balances and a continued wave of

economic union of the Arab states.

public spending on infrastructure projects. The six GCC countries

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

121

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 122

recorded a combined nominal GDP of US$ 1.12 trillion in 2011

Christened the Union Railway, this network will later be integrated

growing at a compound annual growth rate (CAGR) of 14 per cent

into the GCC Railway Network. The Union Railway Network

over the previous year. Post the economic crisis the GCC is

potentially offers a signiﬁcantly cost-effective way to move large

continuing its economic reform programme, with a focus on

amounts of aggregates, steel, iron ore, sulphur and other cargo, as

attracting domestic, regional, and foreign private sector investments

well as large numbers of passengers across the Emirates. In

in the oil and gas, power generation, telecommunications and real

addition, it opens up a completely new industry for the country

estate sectors. The recent global economic recovery has resulted in

and the wider region, apart from reducing congestion, pollution,

a sharp rebound in the GCC’s economic activities.

and improving safety.

The logistics industry has emerged as one of the key drivers of economic activity in the GCC. Logistics in the GCC constitutes a major sector rather than being just a support activity to other

Exhibit 1: Saudi Arabia Rail Network and Union Railway Network

industries. The overall GCC logistics sector is estimated at around US$ 35 billion dollars, of which three major economies – Oman, Saudi Arabia and the UAE together account for around 85 per cent. Oil and gas, infrastructure and retail industry segments are the leading contributors to the GCC logistics sector. The domestic services segment (inland transportation and warehousing) is dominated by local players, while the international services segment (freight forwarding and international transportation by air/ocean) is dominated by multinational players.

Key trends impacting the expansion of the GCC’s logistics footprint Infrastructure and railways Occupying a strategic location on the global map and centred between the Persian Gulf, the GCC countries are blessed with world-class port infrastructure. However, they face challenging surface transportation issues due to unfavourable climatic conditions and harsh environments. To overcome these challenges, the GCC countries have started looking for alternative modes of surface transport and identiﬁed rail as a viable solution to counter passenger and freight challenges. Saudi Arabia has pioneered cargo transport rail projects Saudi Arabia Rail Services provides freight services on two main lines

Other GCC member states are also active in the rail transport

totalling 1,018 kilometres. In the GCC, the UAE is the second-

arena. Oman’s national rail network is being developed in three

largest economy and has been a forerunner in rail revolution with

phases. Oman also has plans to develop a metro system in the

the Dubai Metro Project. Apart from completing the remaining

capital city Muscat. Qatar’s railway network development is

phases of the Dubai Metro, it is building another ambitious rail

lagging signiﬁcantly behind its neighbours. The remaining two

project to link the seven Emirates by rail for the ﬁrst time.

GCC member states, Bahrain and Kuwait, are also busy planning

122

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 123

their own railway networks, which will eventually link to the GCC

be mitigated if exactly the same or compatible standards are

Railway Network. However, these two states are lagging

adhered to by each state.

signiﬁcantly behind the UAE and Saudi Arabia in terms of progress.

Transportation practices in the GCC are likely to change with various on-going and planned railway transport projects that would

The key challenge in building a seamless GCC-wide regional rail

be executed by the governments. However, while Saudi Arabia

transport network is to develop the six individual country networks

and the UAE are likely to witness signiﬁcant changes within the

according to uniform standards and speciﬁcations. Each member

next two to three years due to advanced progress in projects, the

state is already progressing with the development of a national rail

other GCC member states are not likely to reap the beneﬁts of

network based on its individual requirements. The integration of

railway networks for at least four to ﬁve years.

these different networks, each using a different set of engineering and construction providers, could later be a challenge. This could

However, in the long term, rail transport is expected to play a

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

123

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 124

signiﬁcant role in the development of every GCC member state,

logistics sector. Due to promotional policies in this regard, a

each of which has a prominent manufacturing and consumption

signiﬁcant number of multinational organisations are setting up

base.

their continent level distribution centres (for air and sea modes) here, which has been positively impacting the logistics services

Development of cargo-speciﬁc sea ports (spearheaded by the UAE

market. Operational free trade zones in the GCC include Jebel Ali

with Jebel Ali port) has been another mega trend that has resulted

Free Zone in the UAE and Salalah Free Zone in Oman.

in making the GCC a logistics hub for Europe-Asia trade activities. Focus on development of Free Trade Zones (or Free Economic

Industry

Zones) by the GCC nations has been a major driver for their nonoil economic growth, which has had a profound impact on the

124

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

Focus on development of domestic manufacturing industries

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 125

spearheaded by Saudi Arabia is another major trend, which is likely

within the GCC to address growth-driven industries across six

to impact and drive the logistics sector. Development of

GCC countries and provide transportation, warehousing, and

manufacturing activities will lead to emergence of allied industrial

value-added logistics services. Potential for LSPs to tap are inbound

activities, which would further evolve into a complete supply chain

and outbound logistics, in-plant logistics, warehousing and value-

The industrial activities in the UAE are growing at a steady pace driven by the construction and real-estate sectors. Other enabling sectors such as textiles, furniture and wood products, food and beverages are on its growth momentum in the UAE entity over the long term. Promoting the development of oil-related

added logistics services. LSPs should enhance their service offerings

(petrochemicals) manufacturing clusters as well as non-oil clusters

addressing the varied needs of end-users, designing industry-

(such as electronics, food, pharmaceuticals, and automotive) would

speciﬁc logistics solutions, best in class technology driven solutions

result in creating signiﬁcant demand and a sustainable market for

and world-class infrastructure to attract the potential end-user

logistics services.

industries. Collaboration with logistics end-users, building capacity of warehouses and logistics parks and a robust network design

Saudi Arabia has emerged as a regional logistics hub in the GCC.

facilitating transportation activities within the GCC and global

Rising auto sales in Saudi Arabia and other emerging markets and

connectivity are the key success factors for LSPs also being adept

lower energy costs in the region are drawing the attention of global

in providing end-to-end logistics solutions.

OEMs looking to tap into new growth opportunities. The contribution of industry to Saudi Arabia’s GDP stands to be 66.9

Conclusion

per cent showing a dominance of manufacturing in the Kingdom and thereby a positive trend for logistics growth.

Logistics services offer signiﬁcant beneﬁts and wider opportunities to the GCC economies. Overall, the sector is on a growth trajectory

The industrial activities in the UAE are growing at a steady pace

and is witnessing the mega trends that would help establish it as a

driven by the construction and real-estate sectors. Other enabling

prominent logistics hub. GCC beneﬁts from two unique

sectors such as textiles, furniture and wood products, food and

opportunities; strong growth of volume in the trade lane between

beverages are on its growth momentum in the UAE with a rise in

Europe and Asia and steady growth and development of

production and industries setting up production bases in the

manufacturing activities driven predominantly by Saudi Arabia.

Kingdom to address the regional and domestic demand.

Capitalising on the availability of world-class port infrastructure and developing the GCC-wide rail and surface transport capability

Oman too has an immense potential in driving the logistics

are essential factors for future economic development of the GCC

industry. The best performing industries in Oman excluding the

countries.

oil and gas sectors are metals, engineering goods, chemicals and food and beverage. The growth in industrial activities with

The important elements making a strong and efficient

increasing production in the country and the propensity of end-

transportation and logistics sector a strategic necessity in GCC

user industries shifting to logistics outsourcing being a

are: enhancement of industry competitiveness, developing a

cost-advantageous alternative are the drivers to the logistics

multimodal logistics hub and supporting infrastructure like free

industry in Oman.

zones around the port or airport, focussed investment in infrastructure and adjusting policies and regulations to promote

Multinational Logistics Service Providers (LSPs) and local logistics

the development of the logistics sector and synergy across all

companies are expanding their network and services locally and

GCC countries.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

125

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 126

WINNING SUPPLY CHAINS INTEGRATE TODAY'S CAPABILITIES WITH TOMORROW'S GOALS As supply chains grow, incorporating changes is key to helping them remain successful. A.T. Kearney tells us all about maintaining the momentum.

Supply chain performance is a measure of competitive advantageâ&#x20AC;&#x201D; both immediate and long term.

replenishment. Back then, supply chain performance was continually improving, with most performance indicators registering satisfactory or better levels of cost, service and inventory.

Not so long ago, the life of a supply chain executive seemed easy: The main objectives were to be cost effective and provide high-

Then all sorts of innovative technologies, ideas and concepts were

quality service. The tools and concepts to support these goals were

introduced to help improve performance. Companies centralised

relatively uncomplicatedâ&#x20AC;&#x201D;from just-in-time delivery and vendor-

their supply chain organisations, brought in expensive enterprise

managed inventory to collaborative planning, forecasting and

resource planning (ERP) software and outsourced manufacturing

126

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 127

and distribution to bigger and more capable third parties. Yet

Responding to supply chain pressures

despite these and other measures, supply chain performance from a cost and service perspective declined, stalled, or saw minimal

The world is changing. Ongoing consolidation has made

improvements (see ﬁgure 1).

competition and customers bigger and more powerful, emerging countries have developed into attractive growth areas, technology has turned ordinary customers into informed and cost-conscious consumers, and scarce commodities and natural resources are not only driving prices up but also raising environmental concerns (see sidebar: Managing Megatrends). Add to these the cadre of new channels, new products and services, shorter product life cycles and time-to-market, and pretty soon the impact on companies and industries worldwide becomes significant. Almost all sectors are more volatile and complex, and their supply chains have to change accordingly. An appropriate response to these trends usually means taking actions at three levels: fix the basics, transform the supply chain, and set the stage (see figure 2). Fixing the basics is for those who prefer continual improvements—

Suggestions on how to improve supply chain performance abound in industry magazines and journals, with most proposing solutions such as becoming more customer-centric, responsive and agile. Nice words, but few people seem to know exactly what they mean or how to turn them into actions. Even as supply chain processes changed, the world around us changed even more rapidly. Today, CEOs and supply chain executives continue to ask important questions: n How do we control mounting complexity? n How can we balance size and efﬁciency with ﬂexibility and responsiveness? n Is it possible to plan for demand volatility? n Which of the many companies in our supply chains should be

making incremental changes and building capabilities at a relatively

our closest and most trusted partners?

measured pace. Typical initiatives focus on areas such as inventory management, lean manufacturing, and sales and operations

Answering these questions requires taking a closer look at the

planning. Depending on the circumstances, the cost savings are

pressures on today's supply chains, the different improvement

generally in the range of ﬁve to 10 percent.

measures available, and the reasons why companies often fail to take the appropriate measures.

Transforming the supply chain becomes necessary when market

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

127

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 128

volatility and complexity begin playing havoc with business plans

to take the larger leap of seeking transformative change often fall

and market position. Here, next-generation tools often come into

short. There are several reasons why:

play, focused on segmentation and network optimisation, complexity management, and collaboration among suppliers and

After picking the low-hanging fruit, what's next? Say

customers. Improvements in these areas often lead to

you are the CEO of a company that is no longer growing, or at

transformative change that go deep into the corporate makeup and

least growth has slowed signiﬁcantly, commodity prices are rising,

include developing forward-thinking strategies, designing new

and your customers are laying low. What do you do? Cut costs,

organisation and governance structures, and pushing for cultural

and get lean. It is hard to ﬁnd a company that hasn't applied S&OP,

change. The beneﬁts are usually worth the additional effort, as

strategic sourcing, inventory management, lean principles, and Six

transformations can result in anywhere from a 10 to 25 per cent

Sigma programmes, or rolled out improvement initiatives in

improvement to either the top line or bottom line, or both.

manufacturing and logistics. The trouble is these only address the low-hanging fruit. Next steps and new opportunities are neither

Setting the stage is for industry frontrunners. These players are

identiﬁed nor pursued.

driven either by the intrinsic volatility and complexity of a sector (fashion, for example) or by their own cultures, ambitions, or

Benchmarking is analogous to goal setting. It is ﬁne

aspirations (Google). Frontrunners are all about preparing for the

to benchmark your supply chain setup and performance against

future — maintaining a strong vision and strategic mindset, developing

peers, but it is not fine to consider this the end game when

deep organisational capabilities, and understanding the risks and

ambitious goals are needed. Performing slightly better than peers

rewards associated with new techniques, processes, or structures.

may look good on paper, but it doesn't address the real issues

Some frontrunners work within the current market structure, while

or provide the right solutions—especially when everyone in the

others attempt to reshape the market structure to their advantage.

market is registering roughly the same performance levels.

Companies are generally most comfortable with a ﬁx-the-basics

Trouble getting past unfulﬁlled promises. Anyone

approach to supply chain performance. But as volatility and

with a supply chain is likely heavily invested in ERP systems, long

complexity increase, so will the need to move beyond the basics.

hailed as the panacea for most supply chain issues. But the promised harmoniszed processes, robust data, and end-to-end transparency never materialised. It becomes difficult first to

Trouble in transformation

admit that such a huge investment has fallen short and then to work up the energy (and appetite) to pursue the next big

Executives know they need to improve their supply chain

breakthrough.

performance and that simply cutting costs and improving service is no longer a viable option. Yet those who move beyond the basics

128

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

Measuring beyond cost and service. Measuring beyond

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 129

A D V E R T O R I A L

Port of Salalah employs over 2200 people and is managed by APM Terminals, one of the largest container terminal operators in the world. Port of Salalah, Oman's largest port, is astride the primary east-west shipping lane linking Europe and Asia and also holds a strategic position for shipping lines serving the upper Arabian Gulf, Indian sub-continent, Red Sea and East African markets. Since the start of its container terminal operations in November 1998, throughput at the Port of Salalah has grown over 600%, ranking this port among the top 30 globally. Primarily a transshipment port at present, the Port of Salalah is enhancing cargo linkages through air, road and even drawing up its future GCC Rail network linkage, as the portʼs existing cargo is guaranteed to be a major source of rail trade traffic. At the start of 2012 the port marked its 30 millionth container, and has averaged over 3 million TEU throughput for the past 6 years, while handling over 7.2 million tonnes of general cargo by end-2012. The general cargo business has been growing rapidly and the port is tripling its capacity to handle liquid and dry bulk cargo for a number of commodities. The Port of Salalah combined with the adjacent Salalah Free Zone and nearby Salalah Airport form an ideal location, together called the Salalah Hub, which offers value-add and distribution services that can take advantage of the excellent liner connectivity (over 3000 vessel calls per year, with direct links to over 54 ports worldwide). The Salalah Free Zone has seen major investments to the tune of US$3.5 billion in the past three years, due to the appeal of zero corporate tax for 30 years and 100% foreign ownership possibilities, not to mention the unique benefit of the US-Oman Free Trade Agreement. Oman is creating exciting new opportunities as a high-growth market at a key crossroads of global trade. The Sultanate's non-oil exports increased by over 16% in 2012, which are indications of value-added growth to the diversification of Omanʼs economy driven by respective downstream investments. The level of vessel traffic between Salalah and east Africa has increased in 2012 and the port expects further trade between Salalah and the upper Arabian Gulf and Indian Subcontinent to grow this year. As part of its master plan the Port of Salalah also seeking to capture the number of cruise vessels and tourists entering the port, which last year crossed 28,000 visitors, to better serve the tourism industry and in support small to medium-size enterprises (SMEs) through an enhanced business incubator space. Commenting on the portʼs significance, Peter Ford, CEO at Port of Salalah, says, “Our current customers continue to realize the value that Salalah offers. They have also grown significantly with us. One of the customers grew by over 40 per cent last year. We are working with one new customer in particular since we have identified $19 million savings to their network by utilizing Salalah. Incentivized by the world class container port and expansion of the general cargo terminal in progress, the expectation is that there will be substantial growth in cargo volumes and local job creation with these top companies taking advantage of Oman's best hub infrastructure."

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 130

cost and service. Finally, transformative change requires measuring

The analysis points to the key capabilities that must be explicitly

value. Companies know how to measure cost, service, and perhaps

defined and actively managed. In addition, it provides a

working capital but have not found a way to truly measure aspects

"language" to communicate the business value of the supply chain

of differentiation and competitive advantage derived from supply

beyond cost and service and helps to identify supply chain

chains. Supply chain value must be measured and linked to the

priorities in light of future goals.

overall business strategy. For every supply chain that fails to reach its full potential, others succeed. What do those with winning

Figure 4 illustrates a typical output of our AESC analysis, in this

supply chains know that the others do not? Winning supply chains

case a consumer packaged goods company. The company's strongest

integrate today's supply chain capabilities with tomorrow's goals.

performance is in its lean capabilities and in the ability to adapt to changing market conditions. The company is less effective in the areas of speed, reliability, accuracy, complexity, and collaboration and has

Setting the stage

ignored suggestions for building a green supply chain.

Supply chain objectives must be closely aligned to overall business objectives, especially if the goal is to gain competitive advantage. At this level, it is important that your supply chain capabilities can carry you into the future. An Assessment of Excellence in Supply Chains (AESC) analysis is designed for this purpose. Instead of benchmarking cost, service, and working capital performance or looking at the classic building blocks of processes, systems, and organisational structure, an AESC analysis focuses on supply chain capabilities. It identifies 11 fundamental supply chain capabilities and provides a framework for assessing the strategic importance and the stage of excellence of the individual capabilities (see figure 3).

Immediate impact, growing advantage Once you are looking beyond cost and service and including "new" capabilities among your strategic targets, the result is increased and growing competitive advantage. Consider the following case examples from our client work:

Green A leading Brazilian cosmetics company took its environmental and

130

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 131

social responsibilities so seriously that company executives included

Transparency

these as criteria in supplier selection, incorporating them into their ﬁnancial metric system and supplier selection process. We helped the

In volatile industries where demand is high, upstream

company implement a "triple bottom line" framework in which

manufacturing capacity is scarce, and production cycles are long,

economic criteria (costs and ﬂexibility, for example) are considered

the importance of supply chain visibility to forecast future demand

along with environmental effects (water usage, carbon footprint,

cannot be overstated. Technology is helping to obtain this much-

waste) and social impact (percent of disabled employees). The new

needed view. For example, a leading glass bottle manufacturer sets

framework resulted in selecting numerous new suppliers and

up its production planning processes based on the forecasts of its

excluding the larger incumbent suppliers. The result: a 17 per cent

key customers. Information is delivered directly to the production

economic beneﬁt, a two per cent environmental beneﬁt, and a nine

line and to raw material suppliers. Its supply chain is considered

per cent social impact. And the company's supplier base has become

one of the most ﬂexible and reliable in the industry.

proactively green.

Speed Collaboration Supply chains designed around speed are commonly found in fastWhen two large companies—a food manufacturer and a retailer—

paced industries like fashion where the ability to respond quickly

decided to build a more collaborative supply chain, their primary

to new trends can make or break a business. We have helped

goal was to work together to create lasting value. They wanted to

several companies ﬁnd creative and cost-effective ways to organise

go beyond talking about collaboration to become truly

supply ﬂow. For example, a fashion retailer is now able to source

collaborative, exploiting each other's capabilities to differentiate

the same item from different regions, with different costs and

their products and increase value for the consumer. Collaboration

different supply lead times. Part of its forecasted volume is ordered

would take place in all functions, from buying, manufacturing, and

from low-cost countries, such as Madagascar, and the remainder

logistics to ﬁnance, promotions, and the store shelf. They

from Morocco, Turkey, or even Portugal. With "smart orders,"

challenged each other with a few simple questions: How would

the retailer orders different sized bundles of the same items,

we behave if we were on the precipice of a merger? How closely

sometimes even at the store level. Products are cross-docked

would we work? What information would we share? What goals

immediately after arriving at the ports of entry.

would we meet? The results of their true collaboration: 40 per cent-plus proﬁt improvement that has proven sustainable over time.

The measure of a winning supply chain Supply chains have changed dramatically in a matter of a few years.

Complexity

They have gone from uncomplicated to complex, and the tools to improve their performance have changed almost as radically. Yet

Achieving the right level of complexity requires going beyond

the returns on supply chain performance have rarely lived up to the

simply "cutting the tail" to asking the right questions: How does

promise. That's because supply chains continue to be measured by

reducing packaging types affect our sourcing and manufacturing

costs and services rather than by the capabilities that lead to success.

costs? What is the impact of excluding a customer? To this end, we introduced a state-of-the-art multi-cube, an end-to-end decision

By aligning supply chain objectives with overall business objectives,

support system that links revenues to costs throughout the value

companies not only improve performance and competitive

chain using a smart combination of database information. When

advantage, but also have a supply chain that can carry them into

deployed with linear programming, it can calculate the impact of

the future. Winning supply chains integrate today's supply chain

any complexity scenario. Results range from two to six per cent

capabilities with tomorrow's goals.

increased earnings.

n Research and compilation by A T Kearney

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

131

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 132

LOGISTICS OUTSOURCING TRENDS - A strategic insight

132

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 133

Companies in the logistics industr y face a number of challenges when it comes to outsourcing a par t of the supply chain. Here are a few of the user challenges faced in the region with recommendations for improvement from the Transpor tation and Logistics Practice at Frost & Sullivan.

Overview

economies – Oman, Saudi Arabia and the UAE - account for around 85 per cent. Oil and gas, infrastructure, and trading

The Gulf Cooperation Council (GCC) is increasingly becoming

industry segments are the leading contributors to the GCC logistics

an integrated economic entity with consistent positive initiatives

sector.

from each member nation towards minimising political and The

domestic

(inland

services

segment

transportation

and

warehousing) of the GCC logistics market is dominated by local players, while

the

international

services

segment (freight forwarding and international air/ocean)

transportation

dominated

multinational players such as DHL Express, TNT Express, and Agility.

Key developments impacting the sector Development of a rail transport network

(initially

for

public

The primary reason for outsourcing logistics functions as reported by end users across the GCC is to reduce cost. Lack of required capabilities and preference to let professionals handle logistics activities are the other two important reasons reported by end users geographic boundaries. One of the key industry sectors set to

transportation and later to be used for cargo transportation as well)

beneﬁt is logistics. Frost & Sullivan’s recent research analysis found

can be considered the most important trend in the GCC logistics

that the overall GCC’s logistics sector revenue was estimated at

sector currently. Largely-traded commodities such as chemicals,

around USD 38 billion dollars in 2012, of which three major

petrochemicals, mineral ores and mining products, metals, and

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

133

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 134

basic materials such as stone, concrete and cement used in construction need to be transported in bulk quantities, for which,

Outsourcing trends, reasons and preferences

rail is the best suitable form of transport. Hence realisation of this new transport mode in the GCC can turn out to be a landmark for

Frost & Sullivanâ&#x20AC;&#x2122;s 1st Logistics Industry Benchmarking Study in

the logistics sector.

the GCC revealed the key trends witnessed in outsourcing of logistics functions, end-user preferences in selection of logistics

Focus on development of Free Trade Zones (or Free Economic

service providers (LSPs), and the major challenges. Overall in the

Zones) by the GCC nations has been a major driver for their non-

GCC, inbound freight forwarding (related to imports) and inbound

oil economic growth, which has had a profound impact on the

transportation (typically from ports) are reported to be the most

logistics sector, as well. Due to promotional policies in this regard,

outsourced logistics functions. Further, value added logistics

the GCC has seen numerous multinational organisations setting up

services (VALS) such as packing, labelling, inventory management,

their continent-level distribution centres (for air and sea modes),

etc. and reverse logistics are reported to be the least outsourced

which has had a positive impact on the logistics services market.

logistics functions.

Focus on development of domestic manufacturing industries, spearheaded by Saudi Arabia, is another major trend, which is likely

The primary reason for outsourcing logistics functions as reported

to impact and drive this sector. Development of manufacturing

by end users across the GCC is to reduce cost. Lack of required

activities will lead to emergence of allied industrial activities, which

capabilities and preference to let professionals handle logistics

would further evolve into complete supply chain entities over the

activities are the other two important reasons reported by end

long

users.

term.

Promoting

the

development

oil-related

(petrochemicals) manufacturing clusters as well as non-oil clusters (such as electronics, food, pharma, and automotive) would result

The study reveals that logistics end users in the GCC prefer dealing

in signiďŹ cant demand and a sustainable market for logistics services.

only with reputed LSPs having proven capabilities. Their

134

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 135

A D V E R T O R I A L

SICK Automation offers comprehensive sensor solutions for the logistics industry, which requires intelligent technology for efficiency and reliability in various processes. As a technology partner and supplier of sensor technology, sensor solutions and service to the logistics segment, SICK offers plant builders, integrators, logistics providers and operators our longstanding expertise in the automation of logistical processes. Automating these processes is a challenging task for manufacturers of logistics facilities and suppliers of warehousing and handling systems, especially in identification and classification of logistical items, automation of plants in terms of instrumentation and control, as well as equipping them with certified safety technology for safe operation. SICK offers the appropriate portfolio of intelligent sensors and systems for nearly any logistics-related task, supporting their partners through industry-specific solutions and benefiting them with optimised throughputs in conjunction with maximum plant availability, a high level of process reliability and quality, as well as continuous and documentable ‘track and trace’ sequences. SICK’s scalable solutions can be customised for today’s applications and are also capable of migration to meet future demands. For instance, the contour and volume measurement systems for spatial detection in combination with ID systems are unique because they permit both simple and complex measurement solutions, even beyond the boundaries of

transshipment hubs. Our ability to provide global service ensures high availability and productivity as well as minimal downtimes. So, whether for parcel logistics or warehousing, for retail or mail order distribution systems, and for airport or port efficiency improvements, reliable data capture and optical detection systems are central requirements to ensure the stability of sortation, detection and transport processes. SICK provides laser and camera based code reading, legal-for-trade dimensioning systems and safety sensors that are the key in achieving the best performance of modern material flow systems in the logistics supply chain. Through a long-standing relationship with global logistics service providers and system integrators in material handling, SICK can offer a high degree of value-added service and consultation to find the best solution for your application requirements. In the Middle East, SICK is represented by SICK Automation International, based in the Jebel Ali Free Zone of Dubai, UAE, and who have strong local technical and sales support competencies. We have a well-developed distributor and integrator network across the MENA region. This is SICK Sensor Intelligence.

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 136

reputation and capabilities for time-bound deliveries have been

desert) climate prevalent across necessitates extra efforts and

reported as the leading parameters in selection of LSPs by end users

equipment in handling logistics for several industries including

on an overall GCC level. Ability to provide security and visibility

food, pharma, FMCG and chemicals, among others. These extra

of consignments has been reported as the next important selection

efforts include employing temperature-controlled transportation

parametre.

and warehousing facilities resulting in higher logistics costs for companies. Further, lack of an alternative to the road transport

Exhibit 1 shows the percentage values of most-outsourced logistics

mode for distributing goods within domestic markets of all GCC

functions by end users in the GCC as of 2013.

nations or across their borders means longer transportation time

Growth opportunities for LSPs in the GCC are linked with the typical nature of business operations here, which involves import and distribution for most industries. Accordingly, the greatest potential growth opportunities for LSPs in overall GCC as reported by end users include provision of freight forwarding and other international logistics services Exhibit 1: Most Outsourced Logistics Functions by End Users in

in the harsh environment, which in turn increases the scope for

the GCC, 2013

damage of goods. All of the above would ultimately result in higher operational costs for LSPs and costlier logistics services for end-

Key user challenges and opportunities for LSPs While capabilities for time-bound deliveries have been reported as

user companies.

Conclusions and recommendations for LSPs

one among the top parameters for selection of LSPs, end users reported that the most important challenge they are facing is

The logistics sector in the GCC has a higher reliance on

inefďŹ ciency of LSPs in adhering to timelines. Similarly, the second

international logistics activities owing to the typical nature of

most important challenge as reported by end users is ensuring

business operations in the Middle East. However, the importance

safety of goods in transit and warehousing; whereas ability of LSPs

of domestic logistics activity is growing due to the focus on

to provide security of consignment has been reported as one among

developing manufacturing bases by member nations such as Saudi

the top parameters for selection. Both these ďŹ ndings indicate high

Arabia and Oman. Therefore, Frost & Sullivan recommends LSPs

level of mismatch between end-user expectations and LSP

in the GCC to actively focus on improving their performance to

performance.

match end-user expectations on key selection parameters such as timely deliveries and ensuring security of goods in transportation

Growth opportunities for LSPs in the GCC are linked with the

and warehousing. In addition, improving capabilities in

typical nature of business operations here, which involves import

international logistics and basic domestic transportation services

and distribution for most industries. Accordingly, the greatest

would prove to be beneďŹ cial for LSPs, as these two are reported to

potential growth opportunities for LSPs in overall GCC as reported

be high growth areas by end users across the GCC. Further, LSPs

by end users include provision of freight forwarding and other

should actively tap potential opportunities emerging from each of

international logistics services and domestic transportation services.

the key developments such as customised services for Free Trade

Other prevalent challenges faced by both LSPs and end users

Zone-based companies, providing end-to-end logistics services for

across the GCC include the harsh geographical environment and

growing manufacturing bases and active participation in gaining

lack of alternate transport modes for roadways. The harsh (dry

rail transport capabilities, among others.

136

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 137

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 138

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 1

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 2

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 3

SHASHI SHEKHAR Chairman Supply Chain and Logistics Group, SCLG

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 4

sclg-t2-5th may:Layout 1 6/1/13 8:57 AM Page 5

CONTENTS 08 What the future holds Experts from SCLG’s distinguished members panel look at the industry’s present and future

COUNTRY REPORTS 13

Logistics in the GCC

The emergence of a transcontinental hub

16 Bahrain Resilient progress

Kuwait

New opportunities up ahead

Oman

An expansionary ﬁscal policy

Qatar

A continuing balance-of-payments surplus

Saudi Arabia

Tempered growth

UAE

Core assets - trade, tourism, infrastructure - prove resilient

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:58 AM Page 6

BY ROAD 60 GCC rail connection Realising GCC unity

BY AIR 82 World air cargo forecast A round-up of the year

94 On a high Emirates sky cargo

96 Taking control with SAP SAP transforms Panalpina

BY SEA 102 Full steam ahead DP World remains conﬁdent about their long term vision

105 Jebel Ali expansion on target DP World talks about new developments

106 Khalifa port Abu Dhabi container operations move to Khalifa port

107 Khorfakkan exceeds expectations Sharjah’s Khorfakkan port experienced most growth in the Middle East

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:58 AM Page 7

CONTENTS MANAGEMENT 110 GCC’s logistics infrastructure Asset rich and cargo poor?

116 Rock steady SSI Schaefer has a solid future strategy

121 Logistics drives regional economic growth The region’s supply chain and logistics industry is in the driving seat

126 Winning supply chains integrate today’s capabilities with tomorrow’s goals A bullet proof supply chain is the way forward

Design and Layout by Design Bucket Email: merw@designbucket.me

Deepak Chandiramani Email: Deepak@signaturemediame.com

Printed by United Printing Press (UPP) – Abu Dhabi

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:58 AM Page 8

Bob Collier, Owner and CEO of Lydon Consultancy

Although this is marginally off-set by increased volume

How mature and steady is the region's supply chain industry?

What do you see as the major challenges going forward?

The industry in the region is long established and is very steady.

I do not see any major challenges going forward as the region’s

Although

throughput.

volumes

fluctuate with seasonal demands

there

members have the experience and capability to plan ahead for positive growth.

and client focus helping

From here where do you see the market going and how does it compare internationally?

the region maintain its

We are in a vibrant, growing region with a growing purchasing

importance

power, which places it ahead of most International regions to

history of continuity

the

supply chain.

attract major investment.

How have the equations changed coming into the present?

Which is the most promising country in terms of growth in the MENA region?

With

competitor to further develop as a regional transhipment hub to

the

constant

demand for lower priced goods

and

Because of international sea lanes and the proximity to the Red Sea route to Europe, then Oman must be considered as a major serve both the Middle East and African markets.

services,

have switched their sources of supply. This has been a gradual

Where is your area of concentration today and in the future?

switch from USA and European suppliers to South East Asian and

My main focus today is establishing a niche market for discerning

Far East sources. This affects the supply chain transit times and

customers where service and commitment are more important

documentary requirements and with lower prices this means a

than a low price.

buyers in the region

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:58 AM Page 9

SGLG MEMBER INSIGHT Mark Millar, Managing Partner at M Power Associates

are also seeing an expanding proportion of intra regional trade and the development of substantial E2E (emerging to emerging) business.

logistics

personnel

easily

outstrips

the

available demand, further compounded by the industry

How do the two regions - the Asia Pacific and MENA - compare in terms of supply chain efficiency and maturity in the logistics industry?

talent pools frequently not expanding rapidly enough at the

There are many similarities between the Asia Pacific and MENA

chain management. Both regions comprise multiple different

How much are the emerging markets (India and China) contributing towards propelling trade through the GCC? How have those figures changed in the last few years?

emerging and developing markets, all at various stages of

The ‘Chindia’ trade will continue to expand apace, with south-

development and maturity – and therefore cannot be serviced by

south trade flows projected to grow faster than most. GCC will

a one-size-fits-all approach.

continue to play an essential pivotal role in many of these

regions – both are complex and dynamic with plentiful opportunities and challenges in the context of logistics and supply

intake level.

expanding trade routes and will also increasingly act as the

What excites you most considering the present scenario of markets improving and businesses experiencing more success than previous years?

fulcrum for sea-air supply chain options between Asia and

There are many exciting opportunities – particularly with the rapidly emerging consumerism across the regions which is driving

Where do you see the industry headed over the next couple of years?

exponential growth in FMCG, retail and electronics sectors. We

We will see further rapid growth of economic prosperity across

Europe.

SCLG YEARBOOK 2013 | WWW.SCLGME.ORG

sclg-t2-5th may:Layout 1 6/1/13 8:58 AM Page 10