Trade and logistics are flourishing, and Dubai South is attracting new businesses with the promise of greater efficiency
If you want to know about logistics in the Middle East, talk to Nour Suliman, CEO of DHL Express Middle East and North Africa. His company has committed over $170 million on regional expansion projects, and has seen the Middle East become a pivot for freight movement between Europe, Asia and Africa as new trade patterns emerge.
The large investments by GCC governments on transport infrastructure are also making his job easier, with Suliman pointing to a remarkable change from 20 or even 10 years ago. “This has had a tremendous impact on the regional business scene from a trade and commerce perspective.”
The transportation and logistics industry makes a significant contribution to GDP in the GCC, accounting for $40 billion in revenues in 2013, or 2.5 per cent of GDP, according to a recent report from Al Masah Capital. The wider MENA region generated approximately $66 billion in revenues that year, 2.7 per cent of GDP. “The significant rise in external and internal merchandise trade activities will spur demand for the rapid evolution of transportation and logistics in the MENA region,” said Shailesh Dash, the asset management firm’s founder and CEO, on the report’s findings. Dubai in particular is viewed as the primary entry point by many global enterprises considering exports to the MENA region, he said.
Trade may be one of the oldest businesses in the Gulf, but that hasn’t stopped regional governments and businesses from working to constantly reinvent it. One of the most ambitious projects in the region is the Dubai South development, renamed in August from Dubai World Central. At its centre is Al Maktoum International Airport (AMIA), projected to eventually be the world’s largest, with a planned capacity of 220 million passengers and 16 million tonnes of cargo per year.
The 145 square kilometre site—roughly double the size of Hong Kong Island—is designed as a complex project with the airport as its focal point. Logistics, aviation and SMEs are the current focus, says Paolo Serra, vice president, Business Park, Dubai South. The Logistics District has attracted major freight companies such as DHL and Aramex, while IKEA is building its Middle East distribution centre—its first direct investment in the region.
Outside of the freezone, Nestlé Middle East is working on a $136 million factory, which is its eighteenth in the region. The new facility will give the food producer more flexibility to adapt its products to local consumer preferences says Rainer Mueller, the company’s communications director.
Nestlé also has its Middle East headquarters in the Business Park, and the number of companies housed in Dubai South’s eleven office buildings has grown fast says Serra—from a couple of hundred just two years ago, to now more than 2,000, including Sinopec, Siemens and Samsung. Maersk Training has opened its first facility in the Middle East inside the park. The focus on logistics and on aviation (businesses can have office space as well as air-side warehousing) has brought in companies, he says. SMEs is another focus, with smaller offices available at competitive prices.
The Business Park is proving attractive to companies that are setting up in the region for the first time to explore commercial opportunities, says Serra, and they recently conducted road shows in India and China to raise awareness. They also have business centres to cater to firms in China, with customer service representatives fluent in Chinese, translation services and consultation on UAE laws and regulations, as well as a similar centre for Japanese firms.
Workers at the firms can also benefit from growing air connections with the region: Passenger flights began in 2013 but are gradually ramping up. Low-cost operator Flydubai has said it will add extra flights from October.
There’s also a logistics corridor between the Jebel Ali Port and Dubai South freezones, allowing the flow of goods without having to clear customs, something which many companies that are operating in the business park benefit from, says Serra. “This makes life for logistics operators extremely easy.”
With major projects and infrastructure, including Expo 2020, Etihad Rail, new roads and the extension of the Dubai Metro, the connections to the planned city are set to continue to grow. According to Serra, their research suggests that almost 35 per cent of the GDP of Dubai will be produced between JAFZA and Dubai South. “This area is going to be the area of development in Dubai. We’re talking a major shift to the body centre of the Dubai economy.”
Announcing the recent name change to Dubai South, His Highness Sheikh Ahmed Bin Saeed Al Maktoum, the chairman of the Dubai Aviation City Corporation, said that the Government of Dubai had been working to build a new destination where individuals can empower themselves to achieve their legitimate aspirations to the greater good of society. “Dubai South is the emirate’s flagship urban project that will set benchmarks for the rest of the emirate in terms of manifesting the themes of happiness as set out in Dubai Plan 2021,” he said.
There are also forecasts that trade in the region will continue to grow: In air freight traffic the Middle East is set to outperform all other regions until 2032, says DHL’s Suliman. He’s witnessed a substantial surge in trade across the GCC bloc in the past five years, which has been mainly driven by the governments’ focus on economic diversification, and significant investments in infrastructure development, multi-modal capabilities, regulatory frameworks and connectivity. “The new shape of globalisation has also helped boost economic activity and prompted new trade patterns and capital streams across the GCC.”
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