The Middle Eastern express and logistics markets are some of the most dynamic in the global market today. Investment in the region's logistics industry is expected to reach $60 billion in 2008. Whether this growth can be sustained will be highly dependent upon the timely development of the region's infrastructure and operational efficiency.
Trade volumes in the Middle East are growing not only in terms of trade with other regions but also in imports and exports among Middle Eastern countries. There are a number of drivers of this growth. An increased flow of capital revenues to the region is being channelled to the oil and gas sectors, as well as new investment in tourism and transportation projects, including ports and logistics parks. In addition to this, the importance of the consumer market is increasing as GDP per capita rapidly increases throughout the region.
One pronounced driver of this growth is the increased use of Middle Eastern locations as hubs for cargo between Europe and Asia and as a transhipment point for cargo from Africa. Airlines and shipping lines are increasingly using hub and spoke networks to feed cargo into locations such as Dubai before being transhipped to their final destination. DP World, operating the ports of Jebel Ali and Port Rashid, near Dubai, handled 10.65 million twenty-foot equivalent units (teu) in 2007, representing a 19% increase on 2006 volumes. Jebeli Ali port is expected to expand its capacity from its current level of 11 million teu to 16 million teu by February 2009, and in the longer term to a capacity of 80 million teu by 2030. Dubai International airport is among the top five fastest expanding airports globally, handling 1.6 million tonnes of cargo in 2007, which represents an 11% growth on 2006 volumes.
The Middle East's international air cargo market is expected to grow at 8-10% annually, while the ocean freight market is expected to grow at annual rates of 6-10%. Overall, the regions logistics market is expected to grow at 9% in 2008.
Dubai World Central, a logistics and retail park, includes Al Maktoum International Airport, which is targeted to become the world's largest passenger and cargo hub by 2015, and Dubai Logistics City, which has attracted over 150 of the world's largest logistics and supply chain companies to set up their regional hubs in Dubai. This list of companies includes global logistics firm Kuehne and Nagel. Dirk Reich of Kuehne and Nagel International AG has said, "Dubai has developed into an important logistics and distribution hub for the Middle East, a region that is strengthening its role in global trade. Increasingly, major international companies are setting up production facilities and building up stocks in Dubai". Road freight is also expanding strongly. DHL, the region's leading express and logistics provider, is investing approximately $3m a year in its fleet of trucks serving customers in the Middle East.
Elsewhere in the region, Royal Jordanian Airlines is increasing services to London to support Jordan's growing exports to the UK and Continental Europe Geoffrey Weston, Vice President of Royal Jordanian Cargo, said, "We have experienced very strong growth in our operations in and out of London, with the cargo volume increasing by around 80%". Saudi Arabia, the most heavily populated of the six Gulf Cooperation Council states and the world's biggest oil producer, has, as a result of the oil price increases, boosted government spending power, allowing it to fund infrastructure and industrial projects.
In Djibouti, with its strategic position and access to the Red Sea, the construction of a new container terminal that is designed to meet the growing needs of this expanding market is underway. The $400m Doraleh Container Terminal is DP World's latest project and will enable the terminal operator to handle an additional 1.5 million teu annually.
However, these strong growth predictions for the logistics industry may be restricted if infrastructure capacity does not keep pace. The UAE daily, the National, reported last Sunday, "heavy delays at Jebel Ali Port, the UAE's largest container terminal, are having a ripple effect throughout the country's logistics network, leading to increased delays. Logistics firms first warned customers in early August of 'serious berthing delays' of up to 90 hours at Jebel Ali that are expected to continue through to the end of the month". The impact of this congestion has also resulted in a slowdown of the transfer of goods to other UAE ports, such as Sharjah and Abu Dhabi. The volume of containers handled in Abu Dhabi's Mina Zayed Port fell 17% in July, to 23,438 teu, with officials attributing it to a delay in feeder craft arriving from Jebel Ali.
As Jebel Ali is currently acting as a gateway for the bulk of the region's volumes, it will have a similar knock-on effect throughout the region if such levels of congestion continue. Volume on the Asia-Europe trade lane is lower than expected for the peak season, yet Jebel Ali is experiencing serious congestion. In the longer term, this does raise concerns for the future growth of the Middle East's logistics industry at the predicted growth levels. Bottlenecks in the flow of goods would severely constrict this growth. The phased expansion of Jebel Ali port and Al Maktoum International airport will have a strong impact on whether Dubai and the Middle East can absorb and harness the predicted growth. The major challenge for logistics company executives operating in the region will lie in the operational efficiency and capability of sea and air ports, as well as road infrastructure, to manage the rapidly increasing volumes. Fierce global competition for transhipment volumes means that the Middle East cannot afford to allow congestion to have a negative impact on its customers' supply chains. Furthermore competition within the Middle East means that Dubai and Jebel Ali will not automatically command all the volumes which head to the region.