Building Blocks: the UAE's Transport Sector

Signs of this predicted recovery are evident for the industry, with advisory firm KPMG finding a large increase in the value of deals announced in Q1 of this year. In fact, this first quarter witnessed $19.7bn in global deals, with the combined value of both completed and announced deals for Q1 at $27.9bn: larger than any of the previous four quarters.

These encouraging numbers are reflected regionally in figures by Booz & Co., which estimates the Middle East transport and logistics market to be worth $27bn, having witnessed double-digit growth in 2008-2009. While logistics represented just 2.3% of the GDP for GCC countries, Booz estimated that this would grow at a CAGR of 10% until this year.

Figures are also encouraging for the UAE's transport and logistics market, with totals by Frost & Sullivan showing revenues hitting $9.40bn by 2014. This will mainly be due to the UAE being the entry point for GCC goods, along with increased economic integration amongst GCC countries. Lack of use of the latest technology and a reliance on manual labour were cited as issues affecting growth of the UAE's market in this report and investment is required.

Geographically situated at the base of the Arabian Gulf and with status as a trading hub in the Middle East, the UAE's logistics service providers are set to find significant growth opportunities based on the air and sea volumes originating from India, China and other manufacturing bases in Asia and the Far East. The study notes that areas of growth include logistics infrastructure development, integrated global supply chain solutions, multimodal transport and specialised warehouse services.

UAE rises up the ranks of global logistics hubs

The 2012 Agility Index of Emerging Markets Logistics raised the UAE up one rank this year to fifth amongst 41 other markets (overtaking Indonesia), based on market size and growth, market compatibility and market connectedness. The last three decades has seen a boom for infrastructure development in the UAE and the Emirates benefits from 'strong shipping connections and liberal market access as a result of free trade agreements and low trade barriers'.

The trade lane from the EU to UAE is also placed in fourth place in the top 10 air cargo trade lanes from the EU/USA to emerging markets; as the UAE traded and estimated 163,373 tonnes of goods in 2011. However, in terms of 'connectedness' the UAE comes out on top in a ranking of countries with a GDP of less than $30bn (with the exception of Saudi Arabia). The Emirates also feature in the top five for 'market compatibility'.

The UAE's transport infrastructure is currently ranked first in the Middle East and 11th worldwide. Continual liberalisation of transport services in the Emirates is cited as a future benefit for trade on the Europe-Asia route.

Ports, aviation hubs and road networks are expanding or being redeveloped across the UAE and the capital city Abu Dhabi will be overhauling its infrastructure as part of a long-term plan, including the construction of a high-speed rail link. The Surface Transport Master Plan - part of the Abu Dhabi Master Plan 2030 - calls for comprehensive investment in the transport infrastructure, including motorways, freight rail and regional rail alongside increased public transport options. Distribution centres are also set to be developed in a number of key cargo areas, promoting a steady shift from the reliance on road haulage to rail and shipping services.