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COMMENT: The importance of the UAE logistics market

The UAE is facing unprecedented opportunities.
Srinath Manda, Frost & Sullivan.
Srinath Manda, Frost & Sullivan.

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Srinath Manda is the programme manager for transportation and logistics practice for regions of Middle East, North Africa and South Asia at Frost & Sullivan.

With billions of dollars being invested in fast-track development of transportation infrastructure, the United Arab Emirates, a dominant provider to global energy markets, faces unprecedented opportunities and challenges to retain its position as a world-class logistics hub.

The total logistics market in the UAE for 2013 was estimated at about $23.4billion. This includes the revenues from logistics services for domestic manufacturing, import-export trading, services and agricultural sector. This market represented approximately six percent of the country’s gross domestic product (GDP) value last year.

This total logistics market is expected to reach $27billion in 2015 with a surge in import and export trade volumes and steady upward trend of local manufacturing.

The UAE is the second-largest economy next to Kingdom of Saudi Arabia in terms of GDP amongst the Gulf Cooperation
Council (GCC) nations. In terms of functional segments, the total logistics market in the UAE comprises transportation services, warehousing services, freight forwarding services, and value added logistics services (VALS).

Freight forwarding represents the largest share with about 62 percent and transportation is the
second largest contributor with about 18 percent of total logistics revenues, owing to significant distribution
activity.

The final two contributors to logistics revenue are warehousing at about 16 percent and VALS, such as packaging and labelling, at about four percent.

Logistics services offer significant benefits and wider opportunities to the GCC economies. Overall, the sector is on a growth trajectory and is witnessing the mega trends that would help establish it as a prominent logistics hub.

The GCC benefits from two unique opportunities: strong growth of volume in the trade lane between Europe
and Asia and steady growth and development of manufacturing activities driven by predominantly
Saudi Arabia.

Capitalising on the availability of world-class port infrastructure, and developing the GCC-wide rail and
surface transport capability are essential factors for future economic development of the GCC countries.

The important elements making a strong and efficient transportation and logistics sector a strategic
necessity in the GCC are enhancement of industry competitiveness; development of a multimodal logistics
hub; support of infrastructure like free zones around the port or airport; focussed investment in
infrastructure; and adjusting the policies and regulations to promote logistics sector development
and synergy across all GCC countries.

The transport and logistics sector in the UAE enjoys a number of unique strengths, including its location, world
class infrastructure, and a progressive non-bureaucratic government that has played an active role in developing
the sector.

A positive economic outlook, corresponding population growth, and increasing potential for per capita consumption
also foster the positioning of the Middle East as a core business market with the need for a stronger logistics
sector.

The logistics fraternity is in for interesting times, as railways will become the game changer in GCC transportation and its consequent impact is seen on the UAE logistics market.

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