Logistics, shipping, handling and clearing are now key to Qatar. Any breakdown in the chain can lead to cost escalations in projects. As the country is preparing hard to host the FIFA 2022 World Cup, timely completion of projects is also essential; supply chain disruptions can no longer be an excuse.
The government, as well as the private sector, are doing their very best to develop the logistics sector. Examples of work going on are the setting up of additional warehousing facilities and special economic zones (SEZs), especially catering to the logistics sector. With logistics, shipping, handling and clearing now becoming a booming sector for the country, the local private sector is playing its role while international firms like Rand Global and Inchcape have entered in a big way.
Piggybacking on the country’s economic expansion, there may well be over 100 firms now operating in the field, boosted by the opening of Hamad International Airport (HIA) and the upcoming New Doha Port. Such is the future of the logistics and associated sectors, it will account for a significant 8.4 percent of the country’s GDP by 2018. Little wonder firms are making a beeline for Doha.
In 2014, the country’s logistics market earned revenues of USD 7.55 billion and by next year, earnings will stand at USD 11.93 bn, a significant and impressive jump.
Transportation and logistics expert for South Asia, Middle East and North Arica at consulting firm Frost & Sullivan Srinath Manda says: “At an overall level, there has been a significant improvement within Qatar’s logistics sector over the past seven years. This is very well reflected in the form of the country’s enhanced ranking with the World Bank’s Logistics Performance Index from 46 in 2007 to 29 in 2014.
This could be attributed to the large-scale development of logistics infrastructure projects being pursued by the country across all segments, such as seaports, airports, free zones, roadways and railways.” A recent Oxford Business Group report also suggested there are opportunities galore in Qatar’s logistics sector, with USD 70 bn worth of domestic transport projects to help push it along.
In 2014, Gulf Warehousing Company (GWC), Ali Bin Ali, Barwa Real Estate Group and Al Asmakh Real Estate Projects signed build and operate contracts for four warehouses in SEZs, involving an investment of QR 2.78 bn, as part of the Storage Areas Project. To be built simultaneously on four different sites, the warehouses are expected to be completed by next year.
Significantly, Prime Minister and Minister of Interior H.E. Sheikh Abdullah bin Nasser Al Thani was present at the event, indicating how seriously the government is taking logistics.
In fact, the government has provided 500,000 sq. metres of land per warehouse which will be operated under the public-private partnership (PPP) model. Three warehouses will be located in the north of the country and the other in the south.
The idea behind the Storage Areas Project is to ensure SMEs also have access to warehousing facilities, which should not be just for the so-called big guns. The project has made allowances for plots for two warehouses in Umm Shahreen, one in Bu Fasila and another in Bu Salba. The warehouses will provide electricity and water and SMEs will have full access to a comprehensive transportation and communication network.
Making a mark
An example of companies aiming to grab a chunk of the logistics pie is Con-X-ion Logistics & Heavy Equipment. Con-X-ion’s Rupert Bernabe says: “We offer local and international transportation within the GCC, freight forwarding and heavy equipment. We can say we are different from similar companies in Qatar in that all our tools and equipment are owned by the company, so we do not have to outsource anything.”
He adds: “We have our own fleets, clearing agents and a strong, qualified staff operation managing the business.” Like many other firms who do not have to overly depend on the government for business, Con-X-ion boasts a strong client list, which includes the likes of Qatar Petroleum, Qatar Steel and Schlumberger, among others. It has tie-ups with Qatar Airways, Maersk and United Shipping to help move along its logistics and freight forwarding business.
Not just in Qatar, but globally, there has been a sea-change in the logistics sector. Bernabe states: “There has been development beyond all expectations in a very short period, especially the last 15 years, as the world has become a small village because of the development of the shipping and logistics fields. Airlines and shipping lines now are covering all parts of the world and you can reach anywhere within days or hours because of this development.”
Another firm in the logistics business is Gulf Star Freight, where a company official stated that the problems faced by the company are dealing with Customs and there are also issues with Doha Port. Speaking on the company’s services, he said: “We provide world-class logistics and freight forwarding services and 24/7 customer service We can ship anything, anywhere, to any part of the world, no matter how remote. State-of-the-art web-based IT systems and track and trace, which provides easy and quick data crunching, helps the team in reaching you swiftly and with reliable information.”
Single-window Customs facilities (Al Nadeeb) recently introduced by the government are seen as being beneficial to the logistics sector, doing away with long and tedious formalities, the official said.
However, issues on warehousing remain, which Qatar is trying to address on a war-footing. A lack of warehousing space, for instance, has been blamed for the rise in food prices in the country. The costs of rentals of warehouses are passed on to the consumer, leading to what could have been at least a partly avoidable rise in the prices of food items. In fact, the situation had become so bad at one stage that many retailers were even willing to shift storage to warehouses in other GCC states, where, they claimed, storage costs were up to one-sixth of rents being charged in the Industrial Area.
Much as in the case of housing, warehouse owners have been taking advantage of a dearth of facilities and pushing up rents by 5 to 10 percent per annum. As a result, essential items like food and pharmaceuticals find themselves battling for space, an issue which was raised in a meeting with the Prime Minister and members of the Qatar Chamber last year. However, judging from the latest developments in the logistics sector, these points have been duly noted and acted upon.
In an interview, Qatar Association of Freight and Logistics President Abdulatif Al Misnad had stated: “The sheer size of infrastructure projects in Qatar demands the establishment of a world-class logistics set-up.” With the country’s economy still on the upswing despite the setback in terms of low oil prices, the logistics sector continues to be on a growth curve. The official said that the growth of the logistics sector serves as a key indicator of the maturity of an economy.
Logistics Village Qatar
The establishment of projects like Logistics Village Qatar (LVQ) will ensure that the high rental costs of warehouses are not passed on to the logistics companies and then onward to the consumer. LVQ, set up by GWC, is a major project which saw the start of its fifth expansion phase in July. Covering a sprawling one million sq. metre area, LVQ is a major step towards making the country a logistics hub, allowing it to compete with the likes of Dubai, which, admittedly, is still far ahead. Qatar, however, hopes that is just for the time being.
LVQ will allow Qatar to keep pace in the regional logistics stakes, and provide clients with facilities ranging from warehouses, a container yard and transport fleet, all the way to IT facilities, in short, anything a customer would require. LVQ has 330,000 sq. metres of warehouse; 100,000 sq. m of truck parking and maintenance workshops; 44,000 sq. m of container depots; 47,000 sq. m of lay-down area and auction yard; and 43,000 sq. m of residential and recreational facilities.
The first phase of construction started in 2010. From the outset, it was designed as an integrated and self-contained full-service logistics hub for a range of industries. Convenience is the byword as it is a one-stop shop for all logistics needs. Clearly, a firm like GWC, which was established as recently as 2004 with a relatively small 4,000 sq. metre warehouse to its name, is bent on making Qatar a logistics hub in the region. Its location a stone’s throw away from the upcoming New Doha Port is clearly a major asset.
Another major player is Milaha, which is developing additional warehousing, handling and distribution facilities near all Qatar’s entry points to ensure that projects in the country can be completed in time. It also has taken over operations and management duties at Doha Port. The group is focused on providing solutions and filling critical gaps in the supply chain for three core customer segments including the oil, gas, and petrochemical sectors; non-energy customers; and ship owners and operators.
An SEZ is being set up near HIA at Ras Bufontas, for which Sacyr Construction of Spain in a joint venture with Qatar’s UrbaCon Trading & Contracting (UCC) has been awarded the QR 1.69 billion contract. It will feature a warehousing and logistics hub with the first phase to be completed in 2017 with the remaining two by 2018 and 2019 and will cover an area of 4.01 sq. km. With this SEZ, the circle of marine and air freight convenience will be completed. Not to forget, a USD 1 billion cargo complex set up at the airport, which had a soft launch in 2013.
The complex is expected to cover an area of close to 300,000 sq. metres and have the capacity to handle 1.4 million tonnes of cargo annually, 75 percent above the previous figure. It has the capacity to move 5,700 shipments simultaneously, far and above the present figure and is one of the world’s largest air freight terminals. Moreover, Qatar Airways is also aiming to make its cargo division one of its core competencies as witnessed by recent additions of freighters.
Manda says: “The focused and dedicated efforts on infrastructure have truly benefitted Qatar’s logistics sector. Further, Qatar has also become the second most preferred air cargo hub after Dubai within the GCC nations. The completion of other key projects such as the New Doha Port project integrated with a free zone is also expected to provide a significant boost to ocean cargo volumes handled by the country.”
However, logistics management could prove to be a major problem for ports, not just in Qatar, but in the GCC, as soaring trade stays well ahead of expansions, according to the Agility Logistics Emerging Markets Index 2014. Manda, too, says: “Notable limitations currently faced by Qatar’s logistics industry are the capacity constraints at existing seaport infrastructure and low level of domestic manufacturing activity. While the former affects the timely receipt of large volumes of infrastructure development related cargo imported by the country, the latter limits the scope of opportunities available for logistics service providers in the country.”
With this in mind, it could well be that once all major projects are completed, the wheat would be separated from the chaff and smaller firms may well become less significant while the bigger foreign players could pack their bags and leave Qatar. However, that could be a dire scenario and only time will tell if that actually happens or not. Post-2022 would perhaps be a good benchmark to judge.
Qatar’s logistics sector is expected soon to contribute majorly to the economy and is a key part of Qatar National Vision 2030. An 8.4 percent contribution to GDP by 2018 as mentioned earlier, after all, is not exactly small potatoes.
The country’s strategic location is a major factor as well as HIA, LVQ, ports in Ras Laffan, Mesaieed and Doha, massive roads projects either underway or in the planning stages and of course, with the spike in warehousing , everything would seem to indicate logistics has a bright future. It would appear everything is tailor-made to making logistics in the country a major part of Qatar’s plans to move away from hydrocarbons as part of economic diversification moves.
While tourism is much ballyhooed as a diversification measure, logistics looks set to hold its own. Dubai, surely, is looking over its shoulder as Qatar starts making rapid strides to be the GCC’s logistics leader.