DHL Global Forwarding: Dubai now as important as Singapore
The outlook for the logistics sector in the UAE for 2019 is upbeat, DHL’s recent Global Connectedness Index put the country at number five among the most connected countries in the world in terms of logistics, and Emirates NBD’s Dubai Economy Tracker Index shows that the wholesale and retail sectors (major drivers of demand for 3PL services) are at their strongest outlook since the post-2008 years.
There is light on the horizon, then. But, despite this, the major players in the market are worried. At the World Government Summit in Dubai, DP World chairman and CEO Sultan Ahmed Bin Sulayem hit out at the UK government over its handling of the Brexit process.
“Our problem is the indecisiveness of the government,” he said. “We don't care as businessmen whether they have Brexit, or Brexit with an agreement, or Brexit with a good agreement, or Brexit with a bad agreement,” he said. “Once they decide, as businessmen, we are capable of running our business once all this basically indecisive environment disappears.”
The statement was unprecedented from one of the most mild-mannered (and most powerful) figures in the Middle East logistics industry. But, he was venting a frustration expressed privately by many executives this magazine has interviewed during the last year. The world’s sixth-largest economy is at risk of crashing out of the world’s largest trading bloc without a contingency plan in place for trade and logistics.
As the award-winning journalist James Ball wrote in a recent CNN piece, “The world needs to start panicking about Brexit”. The UK’s crisis was therefore a natural starting point for our wide-ranging interview with Amadou Diallo, DHL Global Forwarding CEO for the Middle East & Africa – but unlike many industry commentators, he insisted there was no need for concern in this region.
See our video interview below:
“Brexit is one of a handful of challenges we’re currently facing,” he says. “DHL’s Logistics Trends Radar has highlighted Brexit as a potential headwind, among evolving trade tensions between the US and China, and China’s own domestic economic slowdown, that will likely impact trade volumes transhipping through the Arabian Gulf.”
“This is an evolving and dynamic market. It’s always changing.”
According to Diallo, DHL’s history and sheer size (DHL Group is the largest courier in the world), gives it the stability and resources to mitigate these challenges. “DHL has been around for more than 24 years and we’ve seen our fair share of market shifts,” he says. “Because we’re present in more than 220 countries around the world, we’re sustainable and dynamic enough to find new solutions and opportunities amid these global dynamics.”
For this reason, he doesn’t see DHL Global Forwarding’s regional operations being unduly hampered by Brexit, whether it be hard or soft. In fact, he suggested the process might have a positive effect on the Middle East and African markets.
“The UK trades with many markets, our region covers anything that goes to or from Afghanistan, Turkey, the Middle East and Africa, and many countries in this region have a solid trading relationship with the United Kingdom,” he says. “So, any enterprises and people in the UK who find themselves suffering due to Brexit may look to their existing trade relationships in other parts of the world to find some measure of mitigation and stimulate these trade flows. If people are inward-oriented, trade flows are the first thing to suffer.”
For DHL Global Forwarding itself, the uncertainty and shifting nature of supply chains will likely drive demand for its services, he added. “DHL Global Forwarding is a sizeable organisation in the United Kingdom and we’re market leaders worldwide when it comes to logistics. We do supply chain services, customs brokerage, and other services that are going to be in high demand from UK companies if a hard Brexit occurs,” he says.
And while Brexit remains a question mark looming large over the industry, what Diallo feels is a certainty of support to the market is the EXPO 2020 Dubai, which the government is spending US $9-billion to host, as part of a wider series of infrastructure investments amounting to US $3.2-billion in 2019 alone for the UAE Vision 2021 and Vision 2030 initiatives to diversify the economy.
While UPS is the official logistics partner for the EXPO 2020 Dubai, other 3PLs like DHL Global Supply Chain will likely be contracted to pick up some of the additional capacity required for such a vast and complex logistics project.
“Dubai EXPO 2020 is definitely an opportunity for us, for growth,” he says. For a company like DHL Global Forwarding, providing air and ocean freight forwarding services and major logistics projects under the brand name DHL Industrial Projects, the opportunity is two-fold. “We had this experience in Milan and in China and we shouldered the burden of getting all the goods into the country for the expo itself for countries wanting to come and promote their cultures and countries, but also for the immense infrastructure development that comes with events of this kind,” says Diallo.
“And then once the EXPO is over, there’s a lot of material that needs to be shipped by air or sea back to the point of origin, or donated, which is often the case, to other countries,” he says. “These are operations that need to be completely flawless and it’s something that we have become very good at.”
DHL Global Forwarding is working closely with key partners in the run-up to the event, such as Emirates SkyCargo. “Emirates SkyCargo is helping us ensure that we provide a seamless service to foreign and domestic clients ahead of EXPO 2020. They’re a key provider of air freight solutions for DHL Global Forwarding,” he said. “We operate in all the same markets as the airline and work very closely with Nabil Sultan, the head of cargo for Emirates.”
Emirates SkyCargo, like Emirates itself and DP World’s Jebel Ali Port, has turned Dubai into a major global logistics hub, and because of this DHL is significantly expanding its operations in the city. The DHL Group at the beginning of February established its first Global Competence Centre for Humanitarian Logistics in Dubai.
“The centre is a cross-business unit involving the entire DHL Group to help logistics companies and NGOs respond to the various disasters and humanitarian crises occurring in the region,” says Diallo.
“The competence centre will support the work of the International Humanitarian City. We see that many NGOs and aid organisation have offices and DCs here, and so this is the ideal city to use as a logistics hub for humanitarian relief.”
Dubai is one of three global humanitarian logistics hubs for DHL’s disaster relief teams, and this, along with the Competence Centre, underscores the city’s significance within the wider DHL network.
“This is the largest hub we have in the Middle East and Africa region,” says Diallo. “It’s up there with Singapore, Shenzhen, Germany and the United States.”
DHL Global Forwarding has around 300,000sqm of warehousing space in the Middle East, with 260,000sqm of that located in Dubai. It’s also in Dubai that it has the AOG competence centre for all the airlines carrying air cargo into and out of the region, and a dedicated team of 75 people working in Dubai on its infrastructure logistics solutions through DHL Industrial Projects. “With a lot of energy plants and oil & gas projects in the region, and immense infrastructure developments in Saudi Arabia and other GCC countries and in Africa, and Dubai’s global connectedness, it makes sense to concentrate a lot of these tools here in Dubai,” says Diallo.
When it comes to infrastructure and development projects in Saudi Arabia, as part of the massive Saudi Vision 2030 plan, Diallo says this represents another major logistics opportunity. When asked whether initiatives such as the development of King Abdullah Port and King Abdullah Economic City could challenge the UAE’s logistics dominance via Jebel Ali Port, he’s more hesitant.
“There is a long lag time between deciding on a goal and achieving it,” he says. And while the ultimate impact for the UAE may be so way away, he also doesn’t feel that the redevelopment of Saudi Arabia’s logistics industry is intended to challenge the UAE’s dominance.
“We are actively participating in, and working on, the Logistics 2030 strategy of Saudi Arabia, which is part of the Vision 2030 initiative. I’m part of the advisory board in that effort, so we know the ambitions and goals that are being worked on,” he says.
“The UAE has been a major driver of logistics development in Saudi Arabia organically, so many of its imports and exports still transit through Dubai and I don’t think that will change any time soon. And when it does, it won’t be a zero-sum game,” he adds.
According to Diallo, it’s not dissimilar to the rise of Singapore and China as major economic and logistics powerhouses. “Singapore was the first major logistics hub in the region, before China was the economic giant it is now,” he explains. “China is a logistics leader now, but that doesn’t mean that Singapore has suffered or been displaced as a regional and global logistics hub. I think the same will apply here in the region.”
In Saudi Arabia, the investments being made are aimed at supporting the domestic economy, and the Kingdom’s ability to diversify and grow. “These changes are related firstly to growing the economy to satisfy the needs of a growing population. Saudi Arabia is the largest economy in the GCC and there’s liberalisation, industrialisation, and diversification taking place,” he says.
These changes require an evolution in the country’s supply chains and logistics networks. “It’s logistically more economically feasible to have cars assembled in Saudi Arabia than shipped via roro in a turn-key state from Japan, South Korea, and Mexico. The same goes for other consumer goods. This creates more job opportunities, and therefore more personal wealth, and therefore more demand for goods.”
The goal then is to enable the economy to be more diverse, more self-sustaining and more stable. The changes taking place in Saudi Arabia’s logistics sector are going to boost the country’s ability to meet these targets, to become a larger, more diversified economy, says Diallo. “But it won’t take traffic or logistics capabilities away from Dubai.”