Middle East logistics sector receives redundancy warning

Future development could be impacted by a series of recent cutbacks throughout the Middle East.
Hy-Tech Logistics' John Halpin says that companies who lay off staff need to reconsider how they will be able to replace them when the market returns.
Hy-Tech Logistics' John Halpin says that companies who lay off staff need to reconsider how they will be able to replace them when the market returns.

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A recent spate of redundancies in the Middle East could hamper the logistics industry’s long-term growth, a recruitment consultant from Hy-Tech Logistics has warned.

Regional heavyweights such as Gulf Agency Company (GAC) and DP World have announced plans to reduce their workforce as a result of the global recession. However, such measures could “prove costly” as the market turns and demand increases, according to John Halpin, general manager of Hy-Tech Logistics.

“Redundancies may produce short-term savings, but what will the long-term cost be? Companies that make knee-jerk decisions to reduce their headcounts need to consider how these skills and experience will be replaced,” he explained to Logistics Middle East.

“Playing the guessing game about when the upturn might come is a difficult balancing act and costs are generally at the heart of this conundrum. Leaner companies will survive the current climate and the focus should be holding onto experienced personnel while creating an environment that will attract new talent,” Halpin added.

During an interview last month, GAC’s group president Lars Säfverström revealed that the company was considering plans to axe 30 people from its Dubai workforce of 1000 employees. “We have discussed redundancies,” he admitted. “We haven’t talked specifically about numbers, but I wouldn’t be surprised if there is a 5% reduction. We are increasing the amount of training and cutting down on overtime, but I’m afraid it will not be enough for some of our operations.”

Säfverström added that further redundancies across GAC’s other businesses could be possible if the market continues to deteriorate. However, while the company is forecasting a growth of between 12-13% this year, compared to 20% in recent times, business was expected pick up next year. “We’re planning for the upturn to come at the latest in mid-2010,” said Säfverström. “Our strategy is such that we are flexible and we want to stay close to the market so we can immediately adjust to circumstances, rather than making a [snap] decision now and reviewing it six months later when we have to take drastic action.”

GAC’s announcement was shortly followed by a statement from Dubai-based port operator DP World, which revealed that 100 employees had been made redundant following a decline in consolidated volumes. “The volume deceleration we saw in the last quarter of 2008 has continued into early 2009 and shows little sign of easing in the foreseeable future. Falling utilisation rates across container terminals globally mean the demand for new capacity in the short-term is much diminished,” said DP World chairman Sultan Ahmed Bin Sulayem. “Taking into account our existing pipeline of committed capacity, the company has decided to defer much of our planned new capacity until such time as higher utilisation rates return.”

However, despite the recent spate of redundancies, recruitment specialists such as Hy-Tech Logistics believe opportunities are still available for logistics professionals in the Middle East. In fact, the company has expanded its regional recruitment team in recent months, with a senior official from its Dublin headquarters being transferred to Dubai because of growing demand.

“While we continue to monitor developments, our plans for Dubai are still bullish and our team will continue to increase over the remainder of the year,” concluded Halpin. “The talent required to maintain and build on the emirate’s achievements to date will continue to grow apace and companies that are making redundancies will find this talent extremely difficult to replace when the upturn arrives.”

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