Mena to become global logistics hub

A View of the Dhow jetty at Dubai Creek on Monday 30 July 09.

The Mena region is all set to become a global logistics hub in the next few years, an Al Masah Capital report has found.
The report on 'Transportation & Logistics in Mena' has revealed that the change 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 $66 billion in revenues in 2013 (2.7 per cent of the GDP) of which the GCC accounted for $40 billion (2.5 per cent 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," said Shailesh Dash, founder and CEO of Al Masah Capital.
Infrastructure spending in the region is expected to reach $4.3 trillion by 2020, including an ambitious GCC rail network worth $128 billion, several light-rail projects worth $76 billion across the region's metros, and port development projects across different markets such as the $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.
"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," Dash noted.
One of the findings in the report revealed 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. 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.
Dash added: "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."
In the report, the industry has been categorised into four segments with transportation being the most important segment, accounting for 40-60 per cent of the total logistics cost, followed by warehousing (15-20 per cent), freight forwarding (10 per cent) and value-added logistics services (five per cent). 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 per cent, 27 per cent and 21 per cent of the total cost respectively, a Booz & Co research report revealed.
- rohma@khaleejtimes.com