Local Business

Logistics on track for growth path in 2021

Muzaffar Rizvi/Dubai
Filed on January 23, 2021
An Emirati man looks on at the port of Fujairah. The UAE logistics industry, which is estimated at Dh220 billion, is likely to lead the growth in the region due to excellent infrastructure, technology advancement and conducive government policies. — AFP

GCC governments will continue to focus on development of logistics infrastructure to sustain economic growth in coming years

The logistics industry in the Gulf Cooperation Council region looks set for a promising future after experiencing some temporary disruptions due to the Covid-19 pandemic last year, experts say.

Referring to latest Frost and Sullivan report, industry specialists and analysts said the region’s logistics industry will sustain a steady growth trend in next five years due to infrastructure development, boom in e-commerce and increase in cross-border trade.

“The GCC logistics industry is evolving rapidly due to rising non-oil sector contribution to the GDP, infrastructure development, the emergence of free trade zone, industrial parks and increased trade cooperation in the region. The industry is expected to grow by 4.3 per cent between 2020 and 2025,” according to a Frost and Sullivan report.

Governments in the region have undertaken policy measures to reduce their dependency on oil exports by strengthening economic diversification initiatives, tax reforms, improving the investment climate, increasing investment in food security and encouraging private sector participation, it said.

The report said the Covid-19-related disruptions such as lockdowns, travel restrictions, and slowdown in customs clearance caused a significant slowdown during the first half of 2020. However, it pointed out that digital transformation initiatives will play a key role in growth of logistics industry in the region.

“With governments focusing on digitalisation and increasing contributions of knowledge economic sectors, launch of 5G services supported by several initiatives relating to artificial intelligence and cybersecurity are expected to aid the transformation of the logistics ecosystem,” the report said.

Cross-border trade

The region’s geographical location on the transcontinental trade has facilitated its focus on the development of logistics hubs for both domestic and transit goods. Governments across the region accord high priority to the development of free zones to increase cross-border trade and e-commerce, according to the report.

“Number of licences issued to the e-commerce sector is on the rise due to behavioural shift towards online purchasing and primary focus shift to the development of e-commerce zones in the region,” the report said, adding that Dubai Commerce City is developed to support global and regional brands to expand their e-commerce trade in the GCC region.

Geoff Walsh, country manager at DHL Express UAE, said the UAE’s logistics sector is substantial, and makes up about 13 per cent of the UAE’s total GDP.

“As we get closer to Expo 2021, and with the UAE’s 2030 industrial plans in place, the logistics and supply chain segment is expected to strengthen even further,” Walsh told Khaleej Times.

“We are very optimistic of the industry’s growth potential which we anticipate will be primarily driven by e-commerce activity,” he added.

Infrastructure development

The experts highlighted that the governments across the GCC region will continue to focus on development of logistics infrastructure to sustain economic growth in coming years. The UAE logistics industry, which is estimated at Dh220 billion, is likely to lead the growth in the region due to excellent infrastructure, technology advancement and conducive government policies.

“Port infrastructure development projects in the UAE ‘s Khalifa Port, Oman’s Duqm Port, Saudi Arabia’s Jizan Port and Mubaral Al Kabeer Port in Kuwait are expected to improve regional connectivity. Al Khomra Logistics Zone in Jeddah Port launched by Saudi Ports Authority will become one of the largest integrated logistics zone in the region,” according to the report.

Shailesh Dash, financier and entrepreneur, said the UAE’s logistics industry is poised for tremendous growth in the near-term despite the health crisis and other unprecedented events shrouding much of 2020.

“The Covid-19 crisis and the consequent rise in e-commerce sales during lockdown periods have already fuelled the sector’s growth. With pent-up demand continuing to build, the UAE has depicted a steel resolve to enhancing its logistical capabilities. Most significantly, its focus on embracing digital technologies to drive value within the supply chain, has well-positioned the country to exploit fresh opportunities in new avenues,” Dash told Khaleej Times.

In the coming months, he said vaccine dissemination drives are likely to incite an increased government push towards enhancing the UAE’s cold-chain capabilities.

“We now expect logistics companies to enhance last mile efficiencies, increase collaborations, and intensify the use of AI/robotics in logistics. This will create more agile supply chains, further building on the imminent growth the industry is set to witness in 2021 and beyond,” Dash said.

Back on track

M. Sikander, group CEO and managing director at Sitics Logistic Solutions, said the onset of the Covid-19 pandemic caused a huge disruption to the logistics industry.

“The initial period of lockdowns everywhere freight movement was completely at a standstill across the world. After the initial couple of months, things started to come back to some sort of normalcy. It would be fair to say that it is coming back to some sort of normalcy,” he said.

Looking at 2021, he said the major drivers are going to be e-commerce which still shows huge traction, supply chain planning and execution are going to key in getting produce from farms and factories to the market.

“Purchasing power is expected to improve across the world as it was affected due to job losses. With the possibility of more employment, consumer purchases will go up giving a boost to all economies and thereby better prospects for Logistics Industries,” he said.

“Covid vaccine delivery is another area where logistics is becoming critical. Other trends catching on and will be making a change in 2021 will be Direct to Consumer (D2C) and Direct to Retail (D2R). This is expected to reduce inefficiencies, reduce costs and speed up the process of reaching the products directly to consumers and retailers,” he said.

He said cross border e-commerce will be another trend to watch out for, borderless commerce is will improve with larger trade blocks. This will make brands reach out across the world seamlessly, he said.

“Major disruptions to trade happened during this period due to trade wars and new trade policies. This is likely to have a different outlook in 2021 with changes in trade treaties with a new administration in the USA and a new trade policy of RCEP signed in the APAC region in 2020. This will augur well for the logistics industry across the world,” Sikander said.

— muzaffarrizvi@khaleejtimes.com

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