The MENA Region is all set to become a global logistics hub in the next few years, an Al Masah Capital Limited Report on “Transportation & Logistics in MENA” has revealed, which experts believe will be driven by the emergence of the MENA-Asia trade corridor that will redefine global supply chains. Notably in 2013, India and China ranked as top merchandise export and import destinations for MENA markets. In addition, the MENA Region is strategically located between the West and the East, serving as an ideal transshipment hub for international trade and commerce.
The transportation and logistics industry in MENA generated approximately USD 66 billion in revenues in 2013 (2.7 percent of the GDP) of which the GCC accounted for USD 40 billion (2.5 percent of the GDP) cited the report. “As countries in MENA seek to diversify their economies, significant investments are being made into the development of state-of-the-art infrastructure and logistics facilities. Along with the region’s expanding consumer base, rapid adoption and growth of e-commerce and current vast transportation infrastructure are driving the MENA Region’s positioning and potential to become a transportation and logistics hub for the world. The region has also witnessed a rise in the demand for transshipment services augmented by the overall growth in international trade,” Mr. Shailesh Dash, Founder and CEO of Al Masah Capital commented.
Infrastructure spending in the region is expected to reach USD 4.3 trillion by 2020 including an ambitious GCC rail network worth US$128 billion, several light-rail projects worth USD 76 billion across the region’s metros, and port development projects across different markets such as the US$750 million second terminal at Dammam’s King Abdulaziz Port in Saudi Arabia, Khalifa Port in Abu Dhabi, and Sohar Port and Free Zone in Oman. The region also has developed many free zones such as the Dubai Airport Free Zone Authority (UAE), Tanger Free Zone (Morocco), Salalah Free Zone (Oman), Aqaba Special Economic Zone (Jordan), Bahrain Logistics Zone (Bahrain), and Jebel Ali Free Zone Authority (UAE).
“All in all, we find that the significant rise in external and internal merchandise trade activities will spur demand for the rapid evolution of transportation and logistics in the MENA Region. The new trade corridor between MENA and Asia is witnessing steady growth and given the geographic similarities between these regions, many MENA-based logistics companies are seeking to expand into Asian markets and other high-growth countries resulting in brighter future prospects,” Mr. Dash added. Another finding after assessing current industry trends is that MENA companies are increasingly seeking contract logistics services to focus on primary activities and simultaneously carry out logistics activities with better expertise and at a lower cost.
In the report, the industry has been categorized into four segments with Transportation being the most important segment, accounting for 40–60 percent of the total logistics cost, followed by Warehousing (15–20 percent), Freight Forwarding (10 percent) and Value-Added Logistics Services (5 percent). Corroborating the findings of the report by Al Masah Capital, Transportation including road transport, sea and air freight, Warehousing and Freight Forwarding in the MENA Region accounted for 52 percent, 27 percent and 21 percent of the total cost respectively, a Booz & Co research report revealed.
The report has also revealed that despite robust growth prospects, MENA’s transportation and logistics industry faces various challenges. Currently, the transportation and logistics industry is highly fragmented, which leads to inconsistent market regulations, poor service quality, and unskilled manpower, amongst many others issues.
Pitching on a high point on Dubai’s strategic positioning on the world trade map, it has been reckoned that global enterprises considering exports to the MENA region view Dubai as their primary entry point to the market. With well-established, modern port facilities, attractive free trade zones, and a locally headquartered marine terminal operation (one of the largest in the world), the region has much to offer to companies.
“Overall, the Middle East is receiving significant attention from the global players in logistics and transportation. Attractive opportunities for business biodiversity, alluring operating margins and sophistication in operational techniques will also contribute towards long-term profitability outlook that looks positive,” Mr. Dash concluded.