The Middle East is one of the regions that will continue to witness high growth in contract logistics despite worries that a worldwide economic slowdown would have a serious impact on volumes and revenues, said analysts and industry players.
With an anticipated growth of between 17 and 19 per cent, the region's logistics business is expected to outgrow the entire industry, which is expected to grow at nine per cent.
"The world economy might be struggling but huge volumes in the region will continue to drive growth in the Middle East's logistics Industry," Bengt Ekstrond, CEO of Gulf Agency Company (GAC), Middle East told Emirates Business.
"With increasing cargo volumes and strategic location between the West and Far East, regional economies are developing world-unique transportation logistics infrastructure, which will eventually impact global economy in terms of trade and commerce."
The worldwide contract logistics industry grew by nine per cent to just over $140bn in 2007, according to new figures published in Transport Intelligence's latest benchmark report, Global Contract Logistics 2008.
The logistics sector was helped in Europe by strong low double-digit growth in the UK, Europe's largest market. Finland, benefitting from its strategic location as a gateway to Russia, was also one of the fastest-growing markets.
All the markets in the Central and Eastern European region expanded significantly faster than their western counterparts, as foreign investment in manufacturing facilities and the trend towards 'near-sourcing' continued. Growth rates in Germany and France were solid as the manufacturing and retailing sectors in both countries held up well.
So far, the slowdown seems only to have affected the US market to any degree. That country's contract logistics market grew by just under seven per cent in 2007 which represents a significant drop from its 10 per cent plus growth in 2006.
"The world economy might be struggling but huge demand in the region will continue to drive growth in the Middle East's logistics Industry," said Hussein Hachem, CEO for Aramex – UAE.
Dubai remains among the top five fastest-expanding airports in terms of cargo traffic with a growth rate of 11 per cent compared with Memphis International, home and headquarters of Fedex Express whose traffic grew by four per cent, but remained number one last year in terms of tonnage handled.
Dubai International Airport handled 1.6 million tonnes of cargo in 2007 through Dubai Cargo Village, compared with Memphis's 3.8 million tonnes.
"Dubai is a viable gateway for cargo to Europe and Asia and transit point for cargo from Africa," said Jean Pierre De Pauw, Senior Vice-President of Dnata Cargo.
According to analysts, investments in the regional logistics industry will reach $60bn (Dh220bn) next year as new international companies set up offices and existing companies embark on aggressive expansions of their operations.
Investments in warehouses alone, a key element in the logistics industry are expected to reach $50bn in the next two years as a result of both private and government funded developments.
Gulf countries such as the UAE, Bahrain, Qatar and Saudi Arabia are setting up logistics zones to attract major investments in the logistics sector. Plans to increase the size of Bahrain Logistics Zone (BLZ) site by 150 per cent could attract up to $600m in direct investment, according to experts.
Bahrain is currently ranked second in the Middle East in the World Bank's Logistics Performance Index and it is expected the BLZ will become the focal point for international, regional and local businesses wishing to expand and trade more efficiently within the region.
Bahrain Logistic Zone remains to be pivotal Middle East hub.
Already an established hub of commerce and development within the Middle East, the opening of the Bahrain Logistics Zone will cement the kingdom's position as the region's most strategically important trading centre and generate investments exceeding $280m.
Further plans to increase the size of the site by 150 per cent could attract up to $600m in direct investment.
The numbers
9%: The expected growth of the region's logistics business.
7% : The growth of the US market in 2007. This represents a drop from its 10 per cent plus growth in 2006.
1.6m : Tonnes of cargo handled by Dubai International Airport in 2007 through Dubai Cargo Village
$60bn: Investments in regional logistics industry ar expected to hit this amount next year