Details

Middle East is fastest growing world region for the development of Trade and Logistic Services

Qualitative investments aim to maximise added economic value for Gulf states

The region’s countries have begun to take clear positions in relation to their logistical services and they have numerous opportunities to achieve further success – within a comprehensive and cooperative strategic framework. At the same time, certain sectors have the opportunity to lead financial and economic performance while there are slumps or a recession, which is witnessed by the regional and global economies from time to time.

Al Mazaya Holding Company’s Weekly Report has indicated that the volume and number of service projects, development plans, infrastructural development and the size of foreign trade, are all important for the success of logistics services in the region.

Oman

The Sultanate of Oman, for example, is looking to take advantage of its geographical location and huge investments spent on the development of its logistics infrastructure. From the outset of these plans, investments have been directed towards making the Sultanate an international destination to rank among the ten key logistical hubs – in the world.

As part of these plans, the Omani Government aims to attract foreign and domestic investment to raise the sector’s contribution to its GDP. In order to achieve this, Oman can make use of its existing strengths, as represented by its ports, airports, industrial free zones and economic districts.

The success of these plans will also have a significant impact on employment opportunities, support the growth of the national economy, and provide a diversification of income sources, in light of the continued price volatility of oil.

Further success in this domain will require more efforts in the field of legislation and regulations, in order to create a suitable environment for investment and providing an excellent infrastructure. Projects related to the development of seaports, free zones and railway projects would, therefore, play an important part in the activation of other industrial sectors, in the country.

KSA

Al Mazaya’s Report emphasises that the Saudi economy is increasingly moving towards developing its logistics industry, with strategies underway that will allow the sector to contribute no less than 12 per cent to its GDP, by 2018. This will, of course, be largely dependent on the recovery and growth recorded by the sector at the regional and global level.

With the Middle East currently one of the fastest growing regions in the world, in terms of the growth and development of trade and logistics services, significant economic and urban development will continue to back up and support this investment strategy. Investment in this sector promises more profits and success for companies operating in it, considering that all financial and economic indicators show the sector will continue to grow, in KSA, and its services increase over the next few years.

It should be said, at this point, that forecasts reflect the capability of the sector to maintain and build on its current pace and activity, having brought the size of KSA’s domestic logistics industry to more than SR 67 billion, at the end of 2015.

Over the next 10 years, infrastructure development projects in Saudi Arabia will amount to USD 140 billion, with emphasis placed heavily on metro and railway projects. They will be among the most important elements of success for the logistics sector, in the kingdom.

UAE

Al Mazaya’s Report also confirms that the UAE logistics sector is proceeding according to the government’s approved plans and strategies. Continued growth will contribute to the Emirates’ economic diversification and maintain secure thresholds of economic activity for many other relevant sectors.

Forecasts, similar to those of KSA, point to the sector’s ability to contribute up to 12 per cent of GDP, with the value of the industry already amounting to more than AED 92 billion, at the end of 2015. This is due to the country’s strengths, both in terms of strategic location and infrastructure, in addition to the absence of excessive bureaucratic procedures, which helps to vitalise and encourage the growth and development of the sector.

It should be noted here that logistics services will be the one of the most likely industries to benefit from Expo Dubai 2020 (and in the neighbouring state of Qatar, for the 2022 FIFA World Cup).

The sector will also benefit from strong growth in the volume of trade between Asia, Africa and Europe, in addition to the huge development of industrial projects across the GCC countries.

Key indicators show that the logistics industry in the region provides more new investment opportunities, as a result of the increasing intra-regional trade, and enjoys strong government support for further enhancements in the industry. Additional forecasts suggest that this will double the capacity of the sector in the coming years and enable it to play a leading role in facilitating international trade through the development of ports and facilities – to accommodate the expected increase in the industrial, commercial, retail, tourism and hospitality sectors.

Qatar

Current data suggests that the sector, in Qatar, will attract investments of up to QAR 30 billion, over the next years, which will also raise the sector’s contribution to GDP and support economic diversification. Al Mazaya’s Report states that Qatar considers the private sector a key strategic partner for the development of the logistics sector and will play a definitive role in supporting development across the country.

The Qatari government is working on the principles of equal opportunities, the realisation of added value for Qatar’s economy, and giving priority to Qatari companies. The Logistics Committee at the Ministry of Economy and Commerce has also recently signed agreements with a number of banks to provide funding for investors in logistics zones, on long-term financing terms of up to ten years. Clearly, this will facilitate and help these projects to be completed more quickly and easily.

It is also clear to regional observers that the Qatari authorities are working hard to provide support for all related projects, in order to reduce operating costs for investors and improve productivity, by providing high-level infrastructure and facilities for a variety of uses. This will reflect positively on the market and the price of products and logistics services. It will also raise investment attractiveness and competitiveness for the country.

Bahrain

Al Mazaya’s Report further highlights the investment and operational activity that has been recorded in the Bahraini logistics sector over the past few years; allowing the kingdom to establish advanced positions among the top specialised free zones, in the Middle East.

Bahrain’s free zones provide tenants with added value for export, import and re-export operations. It also offers competitive prices and high quality services, which has attracted a number of international companies to the island kingdom. The logistics sector receives a lot of direct government focus and support in all such circumstances.

Bahrain has also recently allowed companies with foreign capital to invest in land, sea and air-related logistics agents, as well as for re-export and value-added logistical services. By these actions, the authorities clearly intend to attract foreign investment, in light of the economic situation affected by the collapse of oil prices to below USD 30 per barrel. The amendments aim to improve the business environment, strengthen its competitiveness on regional and global levels and attract and nationalise more investment projects, in the kingdom.

Conclusion

Al Mazaya’s Report concludes that all the indicators show that the logistics industry in the region’s countries is capable of an annual average growth rate of up to seven per cent this year. The sector, therefore, is looking forward to more partnerships and contributions from the public and private sectors and companies of all categories and activities. This should be a key priority for those in charge of the region’s development plans, if they want to develop the sector, double its capacity and support the economies of the region, during the current year and future periods.