Dubai sees welcome returns on logistics infrastructure investment (page 1 of 2)

Dubai's significant investment in transport and logistics over the last decade has ensured that even in the wake of the global financial crisis and subsequent flight of capital from the emirate, it still boasts the highest quality and depth of infrastructure anywhere in the Middle East. Indeed, Dubai is the main reason that the World Bank ranks the UAE as the top Arab country in the world for logistics, a position which the country is using to diversify its economy away from hydrocarbon revenues.

"Dubai's infrastructure assets are important because they diversify the economies of the emirate and the country," notes Dr Nasser Al Saidi, Chief Economist at the Dubai International Financial Centre. "The future is about utilising those infrastructure assets and integrating the countries of the region into the new global supply chain which is focused on Asia. There's no doubt that there is a big opportunity for Dubai as a trade hub to harness the untapped potential of intra-industry and inter-industry trade."

In its most recent biennial Logistics Performance Index (LPI), published in 2010, the World Bank ranked the UAE as the top logistics hub in the Middle East. The study placed the UAE 24th out of 155 countries measured worldwide after an exhaustive study which detailed information on the logistics environment, core logistics processes, institutions, and performance time and cost data. And such prominence has proved hugely lucrative for the country: according to a report published last year by Frost and Sullivan, revenues from the UAE logistics market are expected to reach $9.4bn in 2014, compared to $7.03bn in 2010.

Shift in global trade patterns benefits Middle East

"The past decade has witnessed a seismic shift in international trade patterns and now a large portion of trade flows from East to West, originating in emerging markets such as China and India, and terminating in Europe, Africa, the Americas and the Middle East," says Aleem Khan, Regional Head of Structured Trade Finance at Standard Chartered bank.

"Dubai has a strong comparative advantage in facilitating these trade flows, and is positioned to be a strategic trade gateway," he continues. "Due to concurrent logistical capabilities Dubai can absorb a significant amount of supply chain demand, however factoring in future trade growth necessitates further development of infrastructure projects such as the Jebel Ali Free Zone and Al Maktoum Airport."

Dubai looks to increase cargo, shipping facilities

According to a recent Standard Chartered report, exports worth $7.26bn arrived within the UAE alone in 2011, a growth of 32.5% from the previous year. To avoid a bottleneck in the future, Khan insists that capacity must be increased. And it's a realisation that already appears to have been grasped by decision-makers at the highest level in Dubai: the emirate is already home to the 8th largest cargo airport in the world in Dubai International Airport, and Jebel Ali Port is the largest man-made port in the world and the biggest port in the Middle East.

Moreover, Dubai World Central's Al Maktoum airport, the first phase of which opened in 2010, has the potential to handle some 12 million tonnes of cargo each year. And Jebel Ali Port, thanks to a planned expansion of worth some $850m, will be capable of handling 19 million twenty-foot equivalent units, or TEU, by 2014, up from 14 million today.

"More than 90% of all cargo containers move by sea, and as trade movement grows, so will the demand from shipping lines to use facilities in Dubai, particularly on routes from East to West, from China to Europe or the USA," says Mohammed Al Muallem, Senior VP and MD for the UAE Region, at ports operator DP World.

"After the Arab Spring we are going to see huge social spending in the next ten years in the Middle East, and then there are countries like Iraq which need to be rebuilt completely, all of which will require huge amounts of cargo," he continues.