FROM MAGAZINE: UAE cements its status as a logistics hub

FROM MAGAZINE: UAE cements its status as a logistics hub

Posted By : STAT Trade Times

The UAE, home to the powerhouse economies of Dubai and Abu Dhabi, ranks ahead of much larger economies, thanks to its investment in infrastructure, logistics and ease of doing business.

Surya Kannoth

Well before oil prices took a plunge to their recent historic lows, oil economies in the UAE made a shrewd move. Diversifying its economic interests to develop non-oil sectors, such as retail, logistics, tourism and infrastructure, the country has gradually lessened its degree of dependence on hydrocarbon revenues and has made great strides scaling up performance and logistics indices.

On the logistics performance index issued by the World Bank once every two years, the UAE made a big jump - from 27th rank globally to 14 globally and is the first in the Arab region to do so. Meanwhile, on Agility’s Emerging Markets Logistics Index, the UAE ranked the third best logistics centre out of 50 emerging markets thanks to its investment in infrastructure and ease of doing business.

The UAE was also ranked first in terms of market compatibility which measures ease of doing business, business climate, market risks and other metrics. It was also ranked No 1 in terms of market connectedness given its highly developed infrastructure.

But the UAE is not resting on its laurels. The country is investing heavily on developing its transportation infrastructure. With ambitious plans for a new multi-billion dollar hi-tech transport system, travel times between Dubai and Abu Dhabi will be slashed to as little as 12-minutes. Dubai will soon be home to the world’s first Hyperloop One transport link, which is expected to begin operations for passengers in 2020. Once operational, passengers will be able to book travel on the magnetically levitated system with a smartphone app that the creators promise will provide a door-to-door service.

On the cargo side, DP World is exploring the possibility of using Hyperloop technology at Jebel Ali Port in Dubai. The company has signed a memorandum of understanding with Hyper­loop One, with a plan to move containers from ships docked at DP World’s flagship Jebel Ali Port through the Hyperloop tube to an inland container depot in Dubai 29 kilometres away.

"By embracing high-speed containers transportation technology, DP World once again leads other port operators around the world. The project will be a game changer in the future of transportation industry globally," said Sultan Ahmed bin Sulayem, DP World’s group chairman and chief executive in a statement.

Early in 2016, the Hyperloop One chief executive Rob Lloyd predicted the UAE would be one of the early adopters of the high-speed technology. Invented by Elon Musk in 2013, Hyperloop can potentially move containers or up to 40 people in a single capsule at speeds of up to 1,100 kilometres per hour – 89 per cent the speed of sound.

Dubai is also committed to expanding its world-class aviation infrastructure, which underpins the logistics of its rapidly growing and diversifying economy. Home to two major international airports, including the world’s busiest, the Dubai’s aviation footprint emerges to be a robust and healthy one.

Dubai Airports is a global hub for passenger and cargo and continues to grow at a faster rate than most other major international hubs and above the global industry average. “Dubai International became the world’s busiest hub for international passengers in 2014 and has since strengthened its position with annual traffic in 2016 hitting 83.6 million passengers and is eyeing the spot for the world’s number one in overall traffic. Dubai International is ranked third in the world for cargo volumes while DWC, which started cargo operations just over 6 years ago, is already among the world’s top 20 busiest cargo hubs, and growing,” shares Lorne Riley, director-corporate communications, Dubai Airports.

Given the fact that Dubai, and for that matter, the UAE are a re-export and trading hub for the region and also home to some of the world’s most advanced and largest/busiest sea ports and airports, cargo represents a very important part of UAE’s economy and this is evident in the billions of dollars that UAE has invested into the sector over the past several decades.

“In 2016 DXB handled 2,592,454 tonnes in freight, up 3.4 per cent compared to 2015, while annual cargo at DWC totaled 897,998 tonnes, a year on year increase of 0.8 per cent. As such Dubai’s airport of the future, the $32 billion Dubai World Central is being built at the centre of a project that includes a Logistics City which will provide a base for global logistics brands, and is connected to the Jebel Ali Sea Port and the Jebel Ali Free Zone by a bonded road for fast and easy connectivity for freight moving between sea and air,” informs Riley.

“Cargo plays a key role at both macro and micro levels.  At macro level, UAE is ranked amongst top air cargo performers with excellent linkages between sea, air and road.  This coupled with vast network of airlines and strategic location, which makes cargo vital for sustainability of airports and economies.  For RAK, cargo is similarly critical for our overall success.  Ras Al Khaimah is one of the major manufacturing hubs in the region with key industry leaders based in the emirate, and therefore we are keen to support their growth through our services at RAK Airport,” states Mohammed Qazi, CEO, RAK International Airport.

Logistics and transport have been key focus areas of economy for Dubai from the earliest part of the Emirate’s history when in the 1960s the city undertook a project to dredge the creek to enable bigger boats to use it and boost local trade. The city has come a long way in the past five decades, growing rapidly and emerging as a global logistical hub that’s home to two world class airports that are connected by over 100 airlines to more than 240 destinations across six continents; most modern and some of the world’s largest seaports, a state of the art infrastructure complete with a top-class road network and public transport facilities including the Dubai metro and plans for UAE-wide and regional rail network. “Dubai Airports has started work on plans that will see DWC transform into the world’s largest airport with an ultimate capacity for 240 million passengers and 16 million tonnes of freight annually,” Riley forecasts.

Dubai International Airport has grown at an average growth rate of over 13 per cent throughout its 56-year history and considering the order book of Dubai’s flagship carriers Emirates and flydubai, robust growth will continue in the coming years.

Emirates’ business model is to connect Dubai to the world, and connect the world through Dubai with efficient air transport services. Dubai’s strategic location at the crossroads of Europe, Africa, and Asia, has been at the foundation of Emirates’ success in building up a global hub for travellers and cargo. From Dubai, we are able to serve about one-third of the world’s population within a four-hour flying radius, two-thirds of the world’s population within an eight-hour flying radius, and almost 90 per cent of the world’s population with non-stop flights using the latest ultra-long range aircraft,” said an Emirates spokesperson.

Meanwhile, Dubai Airports has been steadily expanding its infrastructure since 2000 to keep pace with this growth and there are expansion projects underway at both DXB and DWC. “One of the main challenges for Dubai Airports is to continue to enhance the quality of our service while we accommodate this ongoing increase in traffic. This is central to our DXB Plus programme which will feature the smart application of technology on customer-centric processes to improve service while boosting capacity. Another area Dubai is working on is maximising airspace capacity by working with local and regional authorities,” Riley said.

Sharjah International Airport, another significant player in the UAE, is upping its game to become a leading hub for air freight in the Middle East, with a special focus on pharmaceutical transportation. With 29 scheduled airlines, and direct connections to more than 65 destinations around the globe, Sharjah International Airport is waiting to complete its 2030 master plan. Much of Sharjah’s growth over the past decade has been fuelled by the Gulf’s first low-cost carrier, Air Arabia.

The emirate also has three deep-water ports, providing vital access to the Indian Ocean and the Arabian Gulf. Port Khalid, Hamriyah Port, and Khorfakkan Port have a combined capacity of more than five million containers and are fully equipped to handle a wide range of vessels, from break-bulk to containers.

While cargo infrastructure is well developed across most airports in the UAE, there are still challenges in terms of storage, warehousing, cold-chain and livestock.  Lessons must be learnt from other developing economies where many investments have been made in bringing rail into play for cargo in particular.  “RAK being at the top of the Strait of Hormouz gives it strategic advantage for channeling cargo from air to sea or vice-versa through rail connectivity at sea ports and airports. These challenges give rise to many opportunities,” he added.

UAE’s capital city Abu Dhabi has also been betting big on transportation infrastructure. In 2012, the $7.2 billion megaproject duo of Khalifa Port and adjacent Khalifa Industrial Zone Abu Dhabi opened for business. Abu Dhabi is leading the GCC rail network with its Dh40 billion Etihad Rail project that will link major industrial zones, cities and ports in the UAE, and will eventually connect with the GCC railway. Once completed, this section of the network will connect the country's borders with Saudi Arabia and Oman, in addition to other areas within the UAE.

Abu Dhabi is also investing heavily in the aviation sector. Construction of the $2.9 billion Midfield Terminal at Abu Dhabi Airport will open by the end of 2017. The new terminal, with a capacity of 30 million passengers, is essential to support the UAE’s flag carrier Etihad Airways. The airline, that serves 103 destinations in 63 countries, is a phenomenal success that has made commercial aviation history as the world’s fastest growing airline.

“We are consolidating our position as a leading carrier in the UAE – during 2016, Etihad Cargo carried 592,700 tonnes, which was flat year-on-year but still quite an achievement given Etihad cargo capacity did not increase, while oversupply remained an issue in the global market last year. We continue to invest in the future in terms of new routes, products and assets. For example, we have partnered with the Abu Dhabi based Masdar Institute of Science and Technology, a research-oriented university focused on alternative energy, sustainability and the environment, to develop a new-generation cool dolly. We are also pursuing other, new ideas in conjunction with their researchers,” shares David Kerr, Senior Vice President Etihad Cargo.

“We are in the rightsizing our fleet for the future and taking delivery of a new Airbus A330 freighter in February, which will take our freighter fleet to 10 including five Airbus A330Fs and five Boeing 777Fs,” he added.

In 2016, Etihad Cargo expanded its freighter services to several new markets, including Columbus Rickenbacker, Ohio; East Midlands and London Stansted in the UK; Copenhagen, Brussels, Addis Ababa, Casablanca, Colombo, Muscat and Zhengzhou. This brings the number of our freighter-only destinations to 15.

Etihad Cargo is a billion dollar business which is a huge contribution, not only to Etihad but to the Abu Dhabi and UAE economies. The UAE’s geocentric location makes it an ideal transshipment point. As such, the government has made huge investments in logistics infrastructure throughout the country. In recent years in Abu Dhabi alone, ADAC (Abu Dhabi Airports Company) has made a multi-billion dollar investment in the Midfield Terminal Complex, which is part of the Abu Dhabi International Airport redevelopment. Abu Dhabi Ports has also announced multi-billion dollar plans to expand the city’s main container port so that it can handle more cargo.

The fact that connectivity is the cornerstone of good business and with the right infrastructure and investments in place, the UAE has become a more accessible market for the world.