UAE retains top logistics rankings
The UAE retained its third global ranking and first in the Mena region in terms of opportunities and business fundamentals while the outlook of the sector is also pretty strong on the back of initiatives taken by the government as well as backed by growth in e-commerce, say analysts and industry executives.
According to Agility Emerging Market Logistics Index 2020 released on Monday, the UAE's score improved in all three sub-indices, especially in business fundamentals. It was the first time that the UAE has been featured in the top 10 list of all three individual sub-indices _ domestic opportunities, international opportunities and business fundamentals. An improved international logistics opportunities sub-Index score saw the UAE rise two places to ninth.
Importantly, the UAE was ranked as the best county for business climate in Agility's survey. The credit for the improvement in the score is given to the UAE's continue open financial sector, transparent regulatory system, corruption protection frameworks and comprehensive national SME development programme. The Agility Index attributed to the rise of the UAE in domestic logistics opportunities sub-Index to growth in e-commerce market, which is forecast to expand at a CAGR of 19.1 per cent by 2023.
According to the Federal Competitiveness and Statistics Authority, the UAE's logistics industry's contribution is projected to grow from 5.4 per cent to eight per cent by 2021. Logistics sectors' gross output totalled Dh219 billion in 2018.
In January 2020, Dubai launched the World Logistics Passport at World Economic Forum in Davos to boost South-South trade which will play a very strong role, going forward. The passport links Customs World, DP World, and Emirates Group to enhance connectivity through Dubai and, through expertise sharing and process development directly between partner countries. A pilot project operational since July 2019 had seen an increase of trade by participants by 10 per cent.
The Agility Index data showed that China and India retained first and second positions, respectively, worldwide. Other countries that made to the top are Indonesia, Malaysia, Saudi Arabia, Qatar, Mexico, Thailand and Turkey. Other Gulf countries also rank high with Oman at 14th position, Bahrain at 15th, and Kuwait at 19th - thanks to business-friendly conditions and core strengths position of the Gulf countries.
Bassel El Dabbagh, regional director for chemical logistics at Agility, said the World Logistics Passport will considerably boost the logistics sector in the UAE in terms of commodities volume coming and transitioning to Dubai.
"It works by giving incentives to international traders to use the UAE as their hub. It is based on a loyalty points system. Now, the more traders use Dubai and UAE gateways and channel their goods through the country, the more they accumulate points. This initiative will definitely strengthen Dubai's position as a preferred logistics hub," he said.
He said the UAE has done a fantastic job by investing in its logistics infrastructure - from ports and airports to roads and railways.
"There has been also a lot of efforts directed towards developing the regulatory framework on trade and logistics. However, I think that the UAE can do a little bit more on that front in order to have more consistency in the rules and regulations. It can increase its digitisation efforts, to streamline trade flow. Initiatives such as the global logistics passport and the Dubai Silk Road will help move towards that direction although there is always more that can be done," El Dabbagh added.
"Not only do the UAE, Saudi Arabia and Malaysia offer highly attractive investment prospects, each continues to build strength through further reforms and incentives, increasing attractiveness for new investors and established operators alike," the report said.
Andrew Love, partner and head of investment and commercial agency at Cavendish Maxwell, said the UAE is proving to be an e-commerce hotspot due to its young demographic, high population density, and residents' disposable income.
"Existing e-retailers and new entrants are investing across the supply chain to provide customers a wider selection of products, more targeted sales and improved delivery times. As a result, distribution centres that support digital infrastructure, and last mile hubs within proximity to time conscious end-consumers are highly sought after," he said.
In 2019, Love said, logisticians also faced the impact of dampened global trade, instead focusing on value-added services such as freight forwarding, repackaging and handling.
"Some smaller operators succumbed to the pressures, whilst more established companies looked to mergers and acquisitions as a survival strategy. We expect the continued closure of smaller, local logisticians who have delayed adoption of modern practices, and potentially more mergers and acquisitions between the larger regional and international third-party logistics players," he added.
Eugene Mayne, CEO of Tristar Group, said the UAE has a well-developed logistics industry and this year will be a good one as Expo 2020 and strengthening relations between the UAE and China will drive demand.
"The expansion of the Khalifa Port announced late last year will further boost the local logistics sector and drive economic growth. However, there is more to be done in terms of reducing environmental impact. Logistics operators in the Middle East should consider directing their focus on conducting business in a responsible manner, protecting the environment and reducing pollution," Mayne said.