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UAE logistics market set for 5.7pc growth

DUBAI, March 16, 2016

Driven by national logistics development plans, Expo 2020, and trade with Asia and Sub-Saharan African countries, the UAE logistics market is expected to grow at a Compound Annual Growth Rate (CAGR) of 5.7 per cent between 2015 and 2020, a report said.

The UAE logistics industry is undergoing structural changes due to economic diversification plans, harmonisation of regional trade and customs regulations, and expansion and modernisation of logistics infrastructure, explained a new press release from Frost & Sullivan, a growth partnership company.


Despite lower oil prices, the economic growth is expected to be driven by non-oil economic sectors, construction activities relating to capacity expansion, and modernisation of logistics-related infrastructure.

As a member of the GCC, the UAE is likely to benefit from trade policy developments and formation of regional transportation corridors in the GCC. The UAE logistics industry is likely to grow by 4 per cent in 2016; capacity expansion and infrastructure investment are likely to strengthen the competitiveness of Logistics Service Providers (LSP).

Airport expansion and the GCC rail network will strengthen alternate mode for freight and cargo transportation and, despite lower oil prices, manufacturing industries will support demand for domestic logistics services, the release said.

The GCC logistics infrastructure is increasingly becoming important as the region has emerged as an important trans-shipment point for Europe-Asia trade and also as a multi-modal logistics hub to cater to the needs of increasing trade within the block, the release said.

The GCC’s economic and logistics services integration is likely to derive creation of integrated multi-modal transport system and strengthening of multi-modal transportation corridors in the region. The logistics infrastructure development and integration of the transportation and logistics service in the GCC is providing opportunities to the local LSP in the UAE.

Some of the key trends identified in the UAE logistics industry are:

•    Economic diversification, growing domestic demand, and development of export-oriented industrial centres and free zones are likely to support both trans-shipment and regional trade growth.

•    Transportation infrastructure development and new technology solutions are likely to strengthen the infrastructure required for the multi-modal transportation system.

•    Airport expansion and the GCC rail network will strengthen alternate modes for freight and cargo transportation.

•    Integration of logistics functions and harmonisation of the GCC customs regulations will lead to synchronised, co-ordinated, and interconnected regional logistics network.

•    Lifting of sanctions on Iran will increase trade activities in the Middle East, which is likely to support demand for logistics services outsourcing growth.

“The UAE needs to further its leadership position in logistics transformation, by leveraging technology to enhance infrastructure and process efficiency. We need to evolve into a Supply Chain Nerve Centre, beyond being just a logistics hub,” said Gopal R, global vice president, Supply Chain & Logistics Transformation Practice, Frost & Sullivan.

However, this growth could be challenged by some major factors like surging competition from other countries in the GCC with similar portfolio and investment scenario for logistics service, slowdown in global trade growth, and stagnation in global oil production, which are likely to impact the growth of the logistics industry in the UAE.

The transportation and logistics segment accounted for around $29.8 billion in the UAE’s GDP in 2015. The services sector will be the growth engine for the UAE economy. Dubai leads the transportation and logistics market in the UAE with around 45 per cent share, followed by Abu Dhabi.

The strategic geographical position of Dubai and improved infrastructure facilitate a substantial share of international shipments directed to the UAE. The logistics industry constitutes more than 14 per cent of Dubai’s GDP, the highest amongst all emirates.

Amongst all freight activities in the UAE, sea transport is the predominant mode, accounting for more than 90 per cent of freight in the UAE and is likely to grow by 4 per cent in 2016, driven by the demand from Asia, Europe, and Africa.

Road freight in Dubai is higher compared to the other emirates due to its diversified industrial base. Air freight is likely to grow at 6.5 per cent in 2016, the key cargo contributors being precious metals, electronics, and pharmaceuticals. – TradeArabia News Service




Tags: transport | UAE logistics | expo 2020 |

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