Technology and transport infrastructure enhancement will be key to surviving disruption and transformational growth in the UAE logistics industry, according to Frost & Sullivan.
The consultancy said the logistics market is expected to grow by 5.7% between 2015 and 2020. This will be driven by national logistics development plans, Expo 2020, and trade with Asia and sub-Saharan African countries.
Airport expansion and the GCC rail network will strengthen alternate modes for freight and cargo transportation. Despite lower oil prices, manufacturing industries will support demand for domestic logistics services, the Frost & Sullivan said.
The GCC region has emerged as an important trans-shipment point for Europe-Asia trade and also as a multi-modal logistics hub to cater to the needs of increasing trade within the block, Frost & Sullivan said.
Logistics infrastructure development and integration of transport and logistics services in the GCC regions is providing opportunities for logistics providers in the UAE.
Other trends and predictions included:
- Economic diversification, growing domestic demand, and development of export-oriented industrial centres and free zones is likely to support trans-shipment and regional trade growth.
- Transport infrastructure development and new technology are likely to strengthen the infrastructure required for the multi-modal transportation system.
- Integration of logistics functions and harmonisation of the GCC customs regulations will lead to a co-ordinated regional logistics network.
- Lifting of sanctions on Iran will increase trade activities in the Middle East, which is likely to support demand for logistics services outsourcing growth.
“The UAE needs to further its leadership position in logistics transformation, by leveraging technology to enhance infrastructure and process efficiency,” said Gopal R, global vice president, supply chain and logistics transformation practice at Frost & Sullivan. “We need to evolve into a supply chain nerve centre, beyond being just a logistics hub.”
However, surging competition from other countries in the GCC, a slowdown in global trade growth, and stagnation in global oil production, are all challenges to growth of the logistics industry in the UAE, Frost & Sullivan said.
Transportation and logistics contributed around $29.8 billion to UAE GDP last year. Dubai has around a 45% share of the transportation and logistics make, thanks to its geographical position and improved infrastructure, with the logistics industry making up more than 14% of its GDP. It is followed by Abu Dhabi.
Sea transport, which accounts for more than 90% of freight in the UAE, is likely to grow by 4% this year, driven by the demand from Asia, Europe, and Africa. Road freight in Dubai is higher compared to the other emirates due to its diversified industrial base. Air freight is likely to grow at 6.5% in 2016.