Expert sees 2010 as key year in turnaround for logisitics sector

The growth rates within the logistics and transport segment in the UAE will reach their expected levels during the next three years, a senior academician involved in studying the sector has said.

According to Professor Frank Straube, Managing Director at TU Berlin Chair of Logistics, the strategic partner of Abu Dhabi University, the logistics and transport market in the GCC countries will benefit from international development, especially by serving world players with global supply chains.

"If 2010 becomes the start of a turning point in the world trade downturn, which I believe it will, this will lead the UAE to expected growth rates in the logistics and transport market in the next few years," he said.

Straube is expected to speak at the Global Logistics Forum, which is to be held in Abu Dhabi on March 15 and 16. The forum is being organised by Aim Events.

Commenting on how the logistics and transport industry in the GCC is likely to fare in the next few years, Straube said: "Basically, despite the hard times, recession and global crises, the logistics and transport industry plays a crucial role for companies and governments in order to overcome those times and transform them into opportunities.

"Although the transport and logistics industry is coupled to trade volumes and is currently declining, production and retail companies are re-negotiating or even increasing outsourcing of transport, warehousing and value-added services in order to save costs," he said.

Such a development, according to him, moderates and partly compensates the downturn in logistics and transport markets. "This is especially relevant for countries with strong production and retail sectors. The logistics and transport market in the GCC countries will partly benefit from this international development, especially by serving world players with global supply chains," Straube said.

The challenge for the GCC countries in doing so will be to build and set up the right logistics and transport services, which will be required by international and local companies in the short and long runs. "These are mainly seamless, cost-efficient door-to-door transitions of goods by flexible use of different transport modes – sea, land and air – and especially their smart combinations," he said.

The GCC countries, especially the UAE, Straube said, have early on set the right course for this development by investing in logistics and transport infrastructure.

"These investments will pay off as time lines for developing new ports, hubs and infrastructure are usually long," he added.

According to Straube, the recent report of the Logistics Performance Index by the World Bank, which is based on a comprehensive assessment of the logistics performance of a country, indicates that the UAE is on the right path.

"The UAE scored very well among 155 countries and is ranked 24th. The capacities of large logistics and transport infrastructures in the UAE will be available in the near term," said Straube.

However, according to the WTO data, the decline in exports will be smaller for developing countries.

"The GCC is very well located between those developing countries and their trading partners, such as China, India and Africa, and reaches between the time zones of Europe and Asia a market of four billion people, within eight hours. For example, Africa, with high increases in exports and imports over the past decade, has China as its most important trading partner. Or India, where the demand for third party logistics [3PL] services is ever increasing, with a growing number of logistics and supply chain operations being outsourced to external companies," he said.

The logistics and supply chain industry in the GCC is predestinated to deliver – in addition to the local and domestic industry and the retail sector – to those countries and trading lanes with door-to-door transport services, value-added services and sustainable infrastructure platforms, Straube said.

"But the journey is still at its beginning. The ingredients of sustainable logistics industries, like in Singapore, Belgium, Germany and the Netherlands, are typically technology, assets, know-how and experience. This journey also requires, based on the strategic location, a careful, holistic strategy and its execution by the industries and governments. Having the infrastructure and the governmental commitment on hand, the UAE and its logistics market are now on their way to gain experience and to develop customised know-how for different markets," he added.

On the major emerging trends in the UAE's and the GCC's logistics and transport industry, Straube said despite the current economic downturn, globalisation as a mega trend still poses a big challenge for logistics.

"Companies need to formulate strategies to cope with the internationalisation of procurement, production and distribution. When it comes to procurement and production, China has a leading role and is preferred for the future. But even up-and-coming markets like China or India are struggling with rising wages and energy costs. As a result, companies that launched operations in these countries for cost-effective reasons are now on the lookout for new production locations with even lower cost levels," Straube said.

However, over the medium term, countries in Eastern Europe, South America, Russia, Africa and the Asean region are increasingly competing with emerging markets for the favour of Western European investors.

An international survey about 'Trends and Strategies in Logistics' run in 2009 by the German Logistics Association (BVL) and TU Berlin Chair of Logistics, covering companies across the US, Europe and China, clearly shows that global sourcing is expected to grow across all sectors by 39 per cent up to the year 2015, Straube said.

"However, global sourcing for local production is expected to grow by a massive 60 per cent, especially for globally positioned companies, one of the big challenges is increasingly that of integrating new locations in existing networks and optimising these locations over the long term. Companies are increasingly focusing on integrating the specific conditions of newly developed markets in their network to boost the efficiency of the overall structure of the company," he added.

Straube said the UAE is in a good strategic position and should take advantage by developing and serving the required global logistics and transport services – optimised and customised to industries, countries and customers in terms of costs, reliability and speed.

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