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June 9, 2020

The Growth Pipeline™ Company Powering clients to a future shaped by growth

Presented at: Webinar by

COVID-19 and IMPLICATIONS ON SUPPLY CHAIN & LOGISTICS

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COVID-19: SIGNIFICANT IMPACT BEYOND CHINA

Source: WHO, Frost & Sullivan analysis

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3000000

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, 20

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, 20

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Feb

28

, 20

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Mar

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, 20

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Mar

26

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0Nu

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China Asia excl. China Europe North America South America

Number of cases in China between 01 Feb 2020- 18 March 2020 Rest of the World cases higher than China

Note: Number of Cases in GCC 48954, 1.67 % of global total of 291.6338 cases. Africa and Oceania accounted for 1.38 % and 0.30 % respectively.

Covid-19 Confirmed Cases, Feb 2020 – April 2020

Covid-19 Epic Center shifted from China to Europe and North America

North America (33.5 %) Europe (46.0 %) Asia (16.2 %) China (2.8 %) South America (2.9 %)

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FORCES SHAPING BUSINESS ECOSYSTEM

Source: Frost & Sullivan analysis

Cargo Capacity Challenges Business Continuity Border Closures

Demand Supply Shocks Emergency Response Systems Stimulus Initiatives Air Travel Restrictions

Work From Home Health Hazards Social Distancing E Commerce

Plant Closures

Concurrent demand and supply shock impacted the ecosystem

Today’s Norms…

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CHINA AS A MAJOR SOURCE OF IMPORTS

0 10 20 30

European Union

Central and Eastern Europe

North America

Latin America

Middle East

Africa

ASEAN

Share of Imports from China (%)

846

548

151

136

113

360

63

Value Figures (in Map above) indicate GDP in Trillion US dollars

Share of Chinese Imports, Global, 2019 Impacted Economies in Top 10 GDP List, 2019

14.6

15.3 22.3

1.81

`1.9 3.2

Figures indicate value of imports in Billion US dollars

• Major Countries hit by Covid-19 contribute nearly 70 % of Global GDP. Seven of the Top 10 economies affected • Top 20 exporting economies under stress, countries hit hard account 50% of global trade • Chinese exports accounted for 12 % of World Exports, High reliance on Chinese imports causing disruptions in

global supply chain

Source: Frost & Sullivan analysis

Europe, North America and ASEAN accounted for

$ 1.7 trillion of imports from China in 2019

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GLOBAL VALUE CHAIN HIT BY LACK OF PARTS SUPPLIES

15.6

5.8

5.2

3.8

2.3

2.2

1.9

1.4

1.1

1.1

0.0 10.0 20.0

European Union

United States

Japan

Korea

Vietnam

Singapore

United Kingdom

Mexico

Switzerland

Malaysia

Trade Impact (USD Billion)Source: UNCTAD, Frost & Sullivan analysis

Cost to global value chains ~$50 billion in exports in Feb: Precision instruments, machinery, automotive, communication equipment, and consumer electronics most affected.

Main Industrial Clusters ,China Key Economic Indicators, China, Q1 2020

Impact on Exports of Selected Countries, Feb 2020

BEIJING

TIANJIN: Electric cars, new energy, battery,

environmental protection, electronic products

Suihua: Linen products

Tonghua: Pharmaceuticals, steel

Dandong: Measuring instruments

Yantai: Sweaters, wine

SHANGHAI

Shaoxing: Textiles, such as socks, pearls,

ties Changsha: Fireworks, firecrackers

Quanzhou: Plumbing hardware

Shantou: Innerclothing, toys HONG KONG

Zhongshan: Machinery, electronic products

Zhuhai: Aviation

Langfang: Furniture

Huizhou: Shoes

Zhuzhou: Electric cars, high speed railway

Changchun: Automobile,

pharmaceuticals

Danyang: Auto parts & accessories

Anlu: Auto parts

and accessories

Dazhou: Chemicals, oil and natural gas

Qarhan salt lake :

Salinization chemical

Hainan: Oil and natural gas, chemical

Pinghu: Textiles, such as cloth

Chengdu: Pet food

Kenqu: green food

products

Baotou: Steel, rare

earth

Guilin: Cement

Benxi: Cement

Shenzhen: Electronic products

Shi jiazhuang: Pharmaceuticals

Chongqing: Pharmaceuticals,

transportation equipment

High-speed railway

Beijing:

Aviation

Qingdao: Marine engineering equipment

Panjin: Marine engineering equipment

Urumqi: Wind energy

equipments

-24.8

-14.8 -13.8 -19.7

-30.00

-20.00

-10.00

0.00

Road Ocean Air Total

Fre

igh

t Tr

affi

c G

row

th(%

)

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World trade growth expected to decline by 20 % in 2020

IMPACT OF VARIOUS GLOBAL CRISIS ON GLOBAL TRADE

Global Merchandise Trade, 2001-2021

Source: WTO, Industry sources, and Frost & Sullivan analysis

Global Merchandise Trade value

(O) Optimistic Scenario

(P) Pessimistic Scenario

E: Estimated

0

5

10

15

20

25

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E

Mer

chan

dis

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T

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SA

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CO

VID

-19

Merchandise trade dropped 22% in 2009 and the economy was able to bounce back in 2010

20

12

MER

S

(O)

(P)

SARS hit the economies when it was in the growth stage, hence slightly staggering the growth with minimal impact on merchandise trade

Merchandise trade experienced a drop, however the was able to recover quickly

SARS was primarily contained within Asia having a limited impact on US and Europe

Trade war between US and China led to decrease in growth rate of merchandise trade, followed by COVID-19 affecting the trade badly.

SARS = Severe Acute Respiratory Syndrome, MERS = Middle East Respiratory Syndrome

Potential Trade Loss (Optimistic to Pessimistic Scenario)

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FREIGHTERS REPLACING SHORTAGE IN BELLY CAPACITY

Restricted passenger flight movement, charter flights replacing scheduled flights

Americas Europe ME APAC

Moderate impact: 30-50% cargo capacity reduction

Severe impact: 50-90% cargo capacity reduction

AIR FREIGHT CAPACITY BY TRADE LANE

of the air cargo is on passenger flights which are being converted for moving cargo

expensive are the charters in comparison to the passenger flights in GCC

Source: Frost & Sullivan analysis

Scheduled freighters are being operated, cargo also moving on an adhoc basis

No Guarantee on the committed capacity, all contractual tariff rates have been suspended

Passenger flights to and from Jordan, Kuwait, Saudi Arabia and Qatar were stopped (although flights continue via Doha)

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Source: Frost & Sullivan analysis

Changing consumer behavior – digital ready citizens

• New Saudi Arabia transit law restricting transit shipments to essential goods (food, medicine and relief shipments)

• Trucks are only permitted to operate and transport cargo when drivers have the required authorizations

• Unavailability of drivers and equipment due to high market demand on distribution and export shipments

• Disruptions in regional supply chain driven by mobility restrictions resulted in sharp increase in freight rates

• Sudden rise in e commerce put added pressure on last mile delivery

LOCKDOWN IMPACTING ROAD AND SEA FREIGHT

• Delays in customs clearance as Saudi customs authority applies restrictions on freight forwarders

• Closure of Saudi borders for transit cargo and due to congestions at land borders

• Implementation of priority bookings for containers with additional surcharges

• Slow down in demand, has resulted into additional blank sailing

• Restrictions on crew members of calling vessels except in emergencies in UAE ports

Saudi Arabia and UAE together contribute 90% of the total road transportation market. Most of GCC relies on land transportation for the distribution of goods produced locally or imported.

Road Freight Sea Freight

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IMPACT ON LOGISTICS INDUSTRY

Source: IMF and Frost & Sullivan analysis

(O) Optimistic Scenario: Growth is expected to null in 2020 and recover at 8% in 2021 driven by aggressive economy boosting initiatives.

(P) Pessimistic Scenario: Shut down of manufacturing plants and hit on economic activities create a higher impact, contracting by 1% in 2020 and growth at 6% in 2021.

Global GDP Growth rate

Transportation and Logistics Growth rate

Transportation and Logistics Growth rate (O)

Transportation and Logistics Growth rate (P)

SARS = Severe Acute Respiratory Syndrome, MERS = Middle East Respiratory Syndrome

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E

YoY

Gro

wth

%

20

03

SA

RS

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08

Fin

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20

12

MER

S

(O)

(P)

E: Estimated

GDP Growth Projections for 2020 and 2021 based on IMF

T&L Growth projections for 2020 and 2021 based on Frost & Sullivan Analysis

20

19

CO

VID

-19

Transportation & Logistics is directly dependent on the global economic growth and trade; IMF has projected the global economic growth to decline to -3.0% in 2020 and recover by 5.8% in 2021

Global GDP and Transportation & Logistics Growth, 2001-2021

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The Growth Pipeline™ Company Preparing clients to a future shaped by growth

Panel Discussion

Adli Delhelia VP and Managing Director Middle East, Turkey, Africa Roambee Rami Ghandour Business Development Manager Span Group

Disruptions and Changing Industry landscape amidst Covid-19

1. What have been the Disruptions you have observed and felt?

2. How do you see the Industry Landscape changing (Transport, Logistics & Material Handling) in current scenario?

3. What are Top 3 Changes you anticipate in your business post Covid-19?

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Ensure Workforce safety

Set up Quick Response Team (QRT)

Respond to Fulfilling capacities

Advanced booking system for freight

Diversify supply chain

Adapt digital connectivity solutions

Identify future industries

Create flexible solution model

Prepare contingency plan

MITIGATION IMPERATIVES

Reset Rebound Respond

Immediate actions Evaluate options Re-strategize

Source: Frost & Sullivan

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TRANSFORMATIONS TO EMBRACE…

Source: Frost & Sullivan

Big Data Marketplace Everywhere

‘Uberization’ of Logistics Rise of Digital Platform

Autonomous World

Digital Reality

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The Growth Pipeline™ Company Preparing clients to a future shaped by growth

Gopal R Global Vice President Transportation & Logistics Practice rgopal@frost.com Dubai, UAE