Upper hand - CPI Industry Maagma | [email protected] database/ subscriptions Manager purwanti Srirejeki [email protected] adVeRTisiNG eNQUiRies naz hassan +971 50 9964945 [email protected]

THEsupply chainand logistics

The official publicaTion of The Supply chain and logiSTicS group

New old ways: Is the global credIt crIsIs over or poIsed for relapse?

Vol i, no 7 | September 2009 www.sclgme.orgA harmonised

transport policy in India will advance its

logistics industry

Dubai rules the global trade and

logistics arena

Mideast needs a strategy promoting sMe development

Upper handaramex looks to emerging markets for growth and development

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‘Difficult but manageable’

The Image

IT can be saId that the future of the logistics industry depends upon the economic managers and central bankers, whom analysts say brought about the present economic crisis. This would make the market “difficult but manageable”, says a transport analyst, as volumes increase while the economy recovers. There could be higher inflation, as the price of fuel grows due to increasing demand for oil. Carriers would then pass on their higher operating costs to clients, as central bankers try to impose higher interest

rates to counter growing inflation. This is one of the three scenarios

painted by an official of Transport Intelligence (Ti), a provider of research and analysis for the European logistics market, on what does the next economic cycle hold for the logistics industry. Considering claims that the recovery may just be a few months away, Ti CEO John Manners-Bell says the two other scenarios are the return to growth after the downturn, but in the midst of low interest rate and low fuel costs, and the so-called stagflation, wherein volumes

remain flat but inflation is high due to stimulus packages injected by central banks into the financial system.

The last scenario would be worse than the present financial turmoil, as “interest rates are raised to control inflation, but have the side-effect of suppressing economic growth further”, he says. (At least carriers now are not facing high oil prices and interest rates.) “Some may see this as a good thing in the long term, although it would not suit forwarders which work best with a large pool of high quality, but low cost suppliers.”

September 2009 The Supply chain and logiSticS liNk 3

03 THE IMAGE

‘difficult but manageable’

06 THE NEWSROOM

• dear reader

• our cover

07 NOTES & QUOTES

• Buy the Book: dubai register

• Quotes: on a scenario during the

economic recovery, the

need to create the best trading and

distribution environment for dubai, a

cleaner fuel for the aviation industry and

the launch of dubai Metro

08 INSIDE SCLG• yuppies asked to strengthen dubai as

logistics hub

• Sclg hosts iftar for members

• business gurus inspire Sclg-ypg

• Members’ corner

14 NEWS & VIEWSemke to invest $1bn in Mideast; Single-hull

supertankers head to scrap yards; amgen

may build logistics centre at dubiotech; bVT,

adSb team up; dp World in brazil; almarai

to raise capital; asia-pacific to lead global

air cargo market; boeing-damco seeks ScM

improvement; Mideast only region to grow

in air freight demand; Saudi railway awards

$707m contract; KcT’s new quay; dgcX,

Structured Solutions to launch benchmark

indices; al futtaim brings transport business

in-house; uia to serve abu dhabi-Kiev route;

Seatrade europe ends on a positive note;

no dramatic cuts in future aviation fuel

consumption; Train-ing day

22 ROUNDUPagility clinches 4-yr rasgas contract; dubai’s

passenger traffic to rise 13.6%; air arabia,

Travco group sign joint venture; oman air

receives first airbus a330-200; ded, dubai

bank work on e-payment; SSi Schaefer’s

satellite system; panalpina gets more projects

24 OVERSEAS

• on deutsche post losing 560 jobs; the

acquisition of Veolia

group; Severnaya Verf shipyard’s

innovative vessel; lufthansa’s threat to

close freighter aircraft; uK’s growing road

transport market; Spedair becoming

greencarrier latvia; surface transportation

trade in north america; faster shipments

and Manila’s major rail project

• aTa supports 100% screening of cargo on

passenger aircraft

• ba World cargo enhances ‘constant

climate’

• delta may invest $550m in cash-strapped

Jal

28 THE INDUSTRY• china chance: golden opportunities

await stakeholders in the

global freight industry

• food trip

• nifty sights

• drive on

34 FUND FOLIOnew old ways: is the global crisis over or

poised for relapse?

38 FOCUS• logical move: a harmonised transport

policy will advance the logistics industry

• Jazeera makes waves in Me aviation

Vol I, no 7 | sepTember 2009

42 COVER STORY upper hand: aramex looks to emerging

markets for growth and development

46 THE GULF right step: dubai rules the global trade

and logistics arena

50 OPINION• Towards a more socially integrated city

• Supply-chain integration: Who calls the

shots?

54 MENA REGIONVital enterprises: The region needs a

strategy promoting SMe

development

58 FACES & PHASES • Sclg-endorsed ev Musty is lloyds TSb’s

business head in Me

• flydubai appoints obaidalla, Mills

• ukra joins planet pharmacy

• captain olson moves to gac branzil

61 CALENDARMoney & Ships to discuss financing

challenges

• Sclg-endorsed events

• other forthcoming events

62 SIDE VIEWcareer advancement

25

8 46

contents


Publisherdominic de Sousa

Managing director& associate Publisher

frédéric paillé[email protected]

editorial director& associate Publisher

b [email protected]

editorJose franco

[email protected]

Commercial directornaz hassan

[email protected]

design rey delante

[email protected] gubanova

[email protected]

head of digital servicesnadeem hood

[email protected]

webmasterTroy Maagma | [email protected]

database/subscriptions Manager

purwanti [email protected]

adVeRTisiNG eNQUiRiesnaz hassan +971 50 9964945

[email protected]

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dubai, uaeTel: +971 4 375-6830 fax: +971 4 434-1906www.cpi-industry.com

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copyright © 2009 cpi industryall rights reserved

While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible

for any errors therein.

The official publicaTion of The Supply chain and logiSTicS group

our coVerFadi ghandour, cEo of aramaex, talks about the company’s planned expansion to emerging markets

For ITs September issue, The Link tackles Aramex’s plan to expand in developing markets, despite the extreme economic conditions that have seen many of its competitors falter. Take it from Fadi Ghandour, the company’s CEO, who says that Aramex has just had its “best year ever”. With its asset-light business model (outsourcing non-core business operations) and flexible cost structure, Aramex has been able to exploit excess capacity, and benefit from volumes which have stood up well in the Gulf and the wider Middle East region.

In its section on MENA, the magazine talks about the region needing a strategy that promotes the development of small- and medium-sized enterprises, which are vital for the growth of the private sector in emerging markets and form the backbone of most of the world’s largest economies. Based on an economic note released by the Standard Chartered Bank, in Dubai, the story stresses that the region must improve its legal framework, increase access to credit and provide technical assistance to encourage the expansion of SMEs.

The golden opportunities in China that await stakeholders in the global freight industry are the focus of the magazine’s “The Industry” section. How Dubai’s food fairs help generate opportunities in the travel and tourism industry as well as the emergence of the UAE as the fastest-growing auto market in the Middle East are also tackled in this section. Another feature in the section talks about the present economic downturn and stiff competition from neighbouring countries as holding back the reins of growth in Kuwait’s tourism section.

In the “The Image” section, the magazine talks about the return of the global logistics industry to growth following the bust, though in a low interest rates and low fuel cost environment. A less favourable scenario will follow wherein volumes increase as the economy recovers, but so does the price of fuel as demand for energy grows. And inflation won’t be far behind, with higher interest rates to be imposed by central banks. A logistics expert predicts a “stagflation” scenario, in which volumes remain flat in the midst of prolonged inflation. The industry’s future, therefore, depends upon the administrators and bankers who brought about the present economic downturn.

All the best,

The newsroom

An aerial view of Dubai Marina

The Supply chain and logiSticS liNk September 20096

THere are 77,000 of them, showing positive sign for the economic sector of Dubai. This five per cent increase in the number of companies listed in the new directory of the Dubai Chamber of Commerce & Industry is the result of support and protection it extends to its members, which were placed at 73,000 in last year’s directory.

Containing two parts, this year’s edition of the Dubai commercial directory 2009-2010 is a strong trading tool for all local, regional and international businesses. The first part offers valuable information on Dubai’s trade and economic activities, infrastructure, business licencing procedures and planned projects at free-trade zones, whose total trade shot up to $83.43 billion in 2008 from $5.71 billion in 1995. The other part enlists member-companies with their full contact details and areas of operation.

The directory, on its 21st annual

edition and with over 2,000 pages, is published separately in Arabic and English and on a CD. It serves the interests of Dubai Chamber members by facilitating good communication between businesses within and outside the country. This move “enhances the investment environment in the emirate”, says Hamad Buamim, director-general of Dubai Chamber.

Having undergone changes as it kept pace with economic growth, the directory also highlights efforts of Dubai Chamber in fulfilling its objective to support all economic activities in the emirate. “The new version of the directory lists all types of active businesses operating in Dubai and registered with Dubai Chamber,” says Dubai Chamber in a statement, “in addition to the updates and information on businesses and economic activities in the UAE in general and Dubai in particular.”

buy THe book

Dubai register

Some may see this as a good thing in the long term, although it would not suit forwarders which work best with a large pool of high quality, but low cost suppliers. – John Manners-Bell, ceo of Transport intelligence, on a scenario during the recovery in which interest rates are raised to control inflation

We need studies on this. – Michael Canon, chief commercial officer of the dubai World central, talking to Sclg’s young professionals, on the need to create the best trading and distribution environment for dubai

A cleaner fuel is indispensable – Frost & Sullivan, in a report, as the global aviation industry consumes three million barrels of jet fuel daily, or 3.4% of the liquid fuel supply.

This sector is one of the most promising ways for the UAE to meet its goal of economic diversification. We believe that the government is right to be pursuing its expansion aggressively. – Philippe Dauba-Pantanacce, senior economist (for Mena), at Standard chartered bank, in dubai, on the uae transforming itself as a logistics hub

It is another sign that Dubai is achieving world-class status in urban planning and quality of living. – Dr Nasser Saidi, chief economist of difc authority, on the dubai Metro, which was launched on September 9.

notes & Quotes


Inside sclG

Yuppies asked to strengthen Dubai as logistics hubyounG professionals in the supply-chain and logistics sector have been challenged to devise ways on how to strengthen Dubai as a hub for the Middle East, through the creation of the best trading and distribution environment for the emirate.

“We need studies on this,” said Michael Canon, chief commercial officer of the Dubai World Central (DWC), talking to members of the Supply Chain and Logistics Group (SCLG) in a networking session. He urged them to produce research papers that could even help them get through graduate school.

He stressed the importance of a collaborative effort between the police, customs,

municipality and other offices for the easy movement of goods and services to and from Dubai. “We have to make the eco-geographic road wider,” he said.

Already, the DWC is working with Dubai Customs and the police on how to bring in goods faster and more efficiently. It is also talking with the Dubai Department of Economic Development to set up a logistics council that would oversee matters pertaining to the industry.

DWC, the brand name of Dubai Aviation City Corporation (DACC), is set to be the aviation and logistics hub for Dubai and the wider region that includes the

Middle East, the Indian Sub-continent, Africa and the former Soviet republics now known as the Commonwealth of Independent States (CIS).

With this region’s two billion consumers, it is imperative for Dubai to integrate its logistics industry into a single platform, said Nermeen Mahmoud, business development manager of the Dubai Logistics City (DLC), one of DWC’s six specialised clustered zones.

She said that DLC is a global supply-chain hub where companies can reduce transport costs, reroute shipments after dispatch and speed up orders between Asia and Europe. It can also

Mahmoud (left) and Canon (with printed red necktie) pose for a souvenir photo with young professionals from SCLG

Canon (right) receiving a token from SCLG’s Naveen Arun

merge shipments from different continents, and connect remote markets with Europe and Asia.

The $33-billion DWC is an aviation-themed, multi-phase urban land development spread across 140 kilometres around the Al Maktoum International Airport, which is set to become the world’s largest airport upon completion by between 2015 and 2020.


By Naveen Arun

We came, we met, we networked!

WITH an aim of bringing together young professionals from the different industry sectors, and facilitate interaction and networking amongst them, the Supply Chain and Logistics Group-Young Professional Global (SCLG-YPG) Dubai Chapter hosted an Iftar networking night for its young members and non-members on the September 17 at Shangri-La Hotel, in Dubai. The event was a huge success, with more than 80 young professionals from various organisations attending, along with SCLG Board of Directors, Dr Satish Mapara and Geoff Wheatley, as well as Soma Sekhar, SCLG president – who all graced the event with their inspiring speeches.

A warm welcome by Dominic Monteiro gave the event a perfect start. Soon after the break for dinner, Mapara opened the evening with a lively speech. He was visibly excited and thrilled to see the conglomerate of young minds on one common platform. He recognised the efforts made by YPG to conduct such a networking evening, and his words were full of encouragement for the group. He was followed by Sekhar, who talked about

the importance of networking in the current challenging times. Further on, Wheatley addressed the audience with the key factors to becoming a success. All the three business gurus made the young professionals thirsty for more knowledge and the desire to interact with the “who’s who” of the supply-chain industry. The session ended with Kevin Thomas and myself (we’re both from the YPG Lead Committee), talking about the progress of the group and thanking the efforts of the team that put this event together.

The event was viewed as a vital initiative for professionals from the different industries share their experiences and ideas, as Tripti Pathak, from Morgan International, aptly remarked, “This is an excellent way to meet new like-minded professionals, and to keep in touch.” The students realised that in these difficult times, keeping in pace with what’s going on in the industry will give them a definite edge over their peers. As Deepti Batra, a student from

SP Jain, said, “I would love to come to each of these events, as this gives me an opportunity to meet and interact with so many professionals under one roof, and keeps me abreast with the latest developments in the industry.”

The SCLG-YPG thanked everyone who made this event a grand success, including the sponsors SSI Schaefer, University of Bolton-RAK, Acme Group and Morgan International. Companies and organisations realised the potential of this dynamic group and they wholeheartedly supported the event. The host hoped to exceed the expectations of its mentors, and connect more professionals together at the next networking evening.

Business gurus inspire SCLG-YPG

SCLG’s yuppies networking during an Iftar celebration

Geoff Wheatley, managing director for the Middle East and Africa at SSI Schaefer, talking about the key to success


Inside sclG

SCLG’s new members

SIEMENS LLC, established in the UAE in 1999, is a regional company of Siemens AG, the global powerhouse in electronics and electrical engineering. The group operates in the industry, energy and health care sectors, and has around 430,000 employees worldwide working to develop and manufacture products, design and install complex systems and projects and create customised solutions.

For over 160 years, Siemens has stood for technological excellence, innovation, quality, reliability and internationality. For more information, please visit www.siemens.ae.

MEMBERS’ CORNER

HEXOMATRIXX is a supply chain and logistics service provider in the Middle East and Southeast Asia. An organisation with core skill bases in all areas of business and operations management, Hexomatrixx offers consulting and implementation services that facilitate improved business profitability and cash generation.

It has ventured with the Matrix Petro Chemicals & Lubricants, to assist companies in determining the best approach in deploying outsourcing of supply chain and logistics. This is aimed towards creating a faster and safer supply chain.

SCLG hosts Iftar for membersBy Nishat Siddiqui

despITe the financial crisis, the UAE is on track to achieve economic growth, according to high-level officials from some major companies during the Iftar Party organised and hosted by the Supply Chain and Logistics Group (SCLG) for its members.

“This year’s Iftar get-together was nice and well-organised,” commented PN Pretish, manager for logistics and international consolidation

services at the Modern Freight Company (MFC).

The mood was upbeat at the party, held at the Atlantis Hotel on September 16, as everybody was relaxed and enjoying the grandeur and cozy ambiance of the hotel’s Silk Ballroom.

Senior professionals from leading organisations like Dubai Trade, Schaefer, Span, Al Futtaim, Kanoo, MFC, Itsalat, Godrej, 3M, Jacky’s, Agility, Workz and Dulsco, among others, were

exchanging notes and discussing growth for the next quarter.

The expansion of Jebel Ali Port, the launch of a new seaport in Abu Dhabi, a new airport in Dubai, the expansions of existing airports in Dubai and Abu Dhabi and numerous other initiatives and projects are all seen to contribute to economic growth.

The UAE’s central location at the crossroads of Europe, Asia, Africa and the Middle

East can take advantage of its strategic position. Dubai, the UAE’s traditional cosmopolitan trading hub, is transforming into a logistics hub as well.

And this is being supported by the country’s improved infrastructure, according to supply chain and logistics professionals.

The guests were at ease and ended the evening on a positive note wishing each other the very best for the last quarter of the year.

Supply chain and logistics professionals enjoying at an Iftar party, at the Atlantis

MORGAN International represents leading international institutions, and covers a wide range of programmes for designers in accounting, finance, logistics and human resources.

Established in Beirut in 1995, the company has since extended its presence to 27 major cities worldwide – stretching from India to Poland, and serving thousands of candidates per year in the following programmes: CPA, CFA, CMA, CIA, CTP, CSCP, PHR/SPHR, IFRS and Essential Skills. For more information, visit www.morganintl.com.


CoRPoRaTe MeMbeRshiPMembership with the Supply Chain and Logistics Group (SCLG) is open to all organisations. Corporate members may nominate four to six members, depending on the category of membership – basic, privileged or premier – they opt for. All nominated members shall be allowed to vote at the Annual General Meeting (AGM) and at any Extraordinary General Meetings. The Board of Directors (BoD) and Executive Committee (EC) members shall decide the annual fees for membership.

iNdiVidUal MeMbeRshiPThis is open to any individual from any part of the world. The annual subscription shall be set from time-to-time as deemed necessary by the BoD and EC members.

sTUdeNT MeMbeRshiP Only full-time students can be SCLG members, but this membership does not convey voting rights to the individual. The annual fee shall be set from time-to-time as deemed necessary by the BoD and EC members.

SCLG membership

SCLG realigns leadership effortsThe Supply Chain and Logistics Group (SCLG) has realigned its leadership efforts, in order to attain its goals better and serve its members more efficiently.

Working closely with the Dubai Chamber of Commerce and Industry, the group’s roster of members has been growing, with new companies, individuals and students coming from various parts of the world.

A non-profit organisation, SCLG is proud to be able to help connect Dubai to the world by working towards the further development of the supply-chain and logistics industry.

Global thought andIndustry leaders

shashi shekharEmirates Skycargo

Mohammed sharafdp World

Michael Proffitt

Clifford Cuttelle

sanjay NaikEmirates group

Jinendra sanchetitnt Express

Mishal hamed kanooKanoo group

Fadi Ghandouraramex

saadi al RaisRhS logistics

david wild

hamdi osmanFedEx

essa al salehagility


Inside sclG

Board ofDirectors

dr satish Maparaglobeapex Management consultants

Nigel Moore logistics Recruitment

Tayssir awadaFedEx

Roy a Pattersonuti

arup GuptaSharaf logistics

sanjay baburcosmos insurance

Madhav kuruphellmann Worldwide

logistics

Geoff wheatley SSi Schaefer (Middle East)

ConsultativeCommittee

Reinhard wind

Michael stockdale

dr Cedwyn Fernandesuniversity of

Middlesex

dr dermot Carey uK & ireland

RegionalDevelopmentCommittee

dr ernst schmiedEast Europe ciS, Russia

Pradeep Melakandypan-pacific logistics

Johnson soansExtron Electronics

dirk Van doorndhl

Usha kaul sarafuniversity of dubai

Jassim saifEmirates Skycargo

dave TootillSouthern africa

danie Vermeulenaustralia and new Zealand

dr kanak Madrechadubai World

dr dermot Carey uK & ireland

Ravi kashyapSteinweg Sharaf

Mark Millar asia pacific

why be aN sClG MeMbeRA membership allows access to educational training, seminars and networking evenings at concessional and rebated rates. It also provides rebates on subscription of membership to SCLG’s international partners. A membership card will soon be issued to members allowing them to receive discount offers from leading retailers and service providers.

There is also a certificate that distinguishes a member as a professionally focused individual or enterprise committed to the cause of the supply chain and logistics industry.

For more details, please visit our website on www.sclgme.org. If you wish to volunteer to help us foster a better supply chain and logistics community, please contact Kanchan Vora on [email protected].

The SCLG Middle East is a non-profit organisation working under the umbrella of the Dubai Chamber of Commerce and Industry to promote the cause of the supply chain and logistics industry. It brings opportunities for personal and professional development through networking prospects among like-minded professionals and corporations on a global basis.

The SCLG was founded with the help of senior management professionals representing a wide spectrum of industries in the supply chain. It strives to bring the best in education, seminars and interaction through partnerships and alliances with a variety of similar bodies across the globe.

The group’s official magazine, The Supply Chain and Logistics Link, addresses the needs of the supply chain professionals in the Middle East. It presents

news, views, developments and information drawn from industry experts. The first of its kind in the region, The Link aspires to be a benchmark for the industry community, offering valuable insights and information to the target market.

The magazine’s articles and news features cover innovative supply chain practices, emerging technologies, e-commerce

and market information from industry leaders.

sClG’s MissioNThe group aims to provide an accessible and dynamic networking environment that facilitates the achievements of its members in a community that encourages professional development and diversity in the logistics and supply chain management.

sClG’s obJeCTiVes To promote the cause of the

supply chain and logistics industry and raise the standards of all industries on end-to-end supply chain To protect the interests of

member organisations and support government bodies in the formulation of policy frameworks for logistics organisations To encourage the free

exchange of knowledge


and skills relating to supply chain and logistics among its members To provide members the

opportunity to network among one another and to help facilitate an efficient commercial environment To undertake studies and

gather information, statistical data and official documents relevant to the industry To establish and maintain

good relations with similar international organisations and other professional groups, and to provide members the opportunity to network with like-minded organisations To conduct training courses,

seminars, conferences and studies relating to logistics and supply chain and to establish a library and research centre to expand the knowledge base information on the industry To promote the cause of

education in supply chain and logistics among the UAE nationals, thereby contributing to build a cadre of professionals and highly-skilled citizens to take up current and future challenges in the industry.

ExecutiveCommitteeMembers

soma sekharSclg presidenttrackit

John halpin

Mohsen al awadhi dubai logistics city

sebastian Thomas

andreas durXvise logistics

Melvin Verghesetransworld group

brian Forbesdhl Express

stephen CrossatMS

hemant barkeprudence insurance

Brokers

Naveen arun

Board of InternationalAdvisors

abre Pienaar South africa

khalid bichouMorocco

Paul limSingapore

Mahendra agarwal Singapore

Gerald Mukyengauganda

dominique de Froberville Mauritius

Prof donald Thamcanada

alan walleruK

Tim senseniguSa

dr Craig VoortmanSouth africa

Tom FreeseuSa

dr harry angelopulosgreece

andrew salibaMalta

Vineet agarwal india

dr Ganesh Natrajanindia

dr dermot Carey ireland

dr ernst schmiedEast Europe ciS, Russia

edward sweeney ireland

igro hribarSlovenia

dmitriy bulaenkoukraine

dr Jörg Rissiek germany

Ferenc kovács hungary

Mark Millar asia pacific


news & Views

BVT, ADSB FORM JOINT VENTUREbVT Surface Fleet, a European manufacturer of naval ships, has formed a joint venture with the abu dhabi Ship Building (adSB) to support world-class naval support services for customers in the gulf, Jordan and Egypt.

called gulf logistics and naval Support (glnS), the new company will offer various services for the marine fleets of navies, coast guards, marine police, homeland security organisations, special forces and key commercial clients.

“this is a significant strategic move for BVt,” said alan Johnston, chief executive of BVt. “glnS will greatly enhance our customer base and global footprint. it will combine our outstanding naval support experience with the world-class and complementary capabilities of adSB in the gulf.”

initially, adSB will own 70% of glnS while the remaining 30% share will go to uK-based BVt, which has the option to increase its holding to 40% in the future.

adSB’s chief executive officer, William Saltzer, stressed the high degree of support services needed by military vessels in the region and the sophisticated equipment carried on board.

“glnS will provide this support, ensuring the maximum availability of vessels, and the efficient operations of their non-core base activities and facilities, allowing them to focus their efforts on the important duty of protecting their countries,” he said.

BVt and adSB signed the joint venture agreement in July, and have since been working to develop and finalise the necessary documents, prepare financial and business plans and form the organisational structure of the new company.

emke Group is set to invest $1.17 billion to increase its number of supermarkets in the Middle East to 100 over the next three years from 75, as it announced its entry into Egypt and India.

An operator of the biggest hypermarket chain in the region under the Lulu and Al Falah brands, Emke expects a turnover of $2.48 billion

for 2009 from last year’s $2.1 billion across its network of hypermarkets in the region.

Yusuffali MA, managing director of Emke Group, said it will open a store in Egypt later this year, and a hypermarket by 2010. He added that work has started on the biggest shopping mall in Kochi, at India’s state of Kerala, and will open to the

public in July 2011. Emke, which controls 32.5%

of the UAE’s retail market, will develop more malls across India gradually. Emke opened its 75th hypermarket in Al Ain early this month.

The group has a footprint in 15 countries in Asia and Africa, with interests in manufacturing, garments, trading and shipping.

seeInG demolition as the best option in a weak market, owners are sending their single-hulled supertankers to scrap yards, according to EA Gibson Shipbrokers in a report released in August.

This is seen to gain support for shipping rates, as three very large crude carriers (VLCC) have been sent for demolition since January, matching the total for the whole of 2008.

“Any significant increase in tanker scrapping could put the brakes on asset values from

dropping still further, and may have a positive effect on market rates,” Gibson said.

Rates for the benchmark Saudi Arabia-Japan supertanker route had fallen 42% in the 12 months to August, with income after fuel costs from the voyage dropping 14% to $11,660 a day on August 23. The amount, based on the Baltic Exchange, is less than what owners need from the vessels to pay crew, insurance, repairs and other running costs.

Single hulls will be phased

out by next year, as 150 countries endorsed oil tankers having two layers of steel as a better way to prevent oil spills. The scrapping of single-hulled supertankers could lessen the increase in the size of the world fleet.

According to London-based Drewry Shipping Consultants, 225 vessels, including 37 supertankers, will enter the fleet this year, raising capacity by 7.8%. At least 98 single-hull supertankers are on the water now.

Emke to invest $1bn in Mideast over 3 years

Single-hull supertankers head to scrap yards

A tanker with two layers of steel is better at preventing oil spills


amGen, the world’s largest biotechnology company, is considering building a logistics centre at the Dubai Biotechnology and Research Park (DuBiotech) that would connect to its main platform in Europe and serve markets in the Middle East and Africa.

Its present office at DuBiotech, a major life sciences hub, serves as the regional office for its operations in the Middle East, Africa and Turkey. The office provides various services, including marketing, medical, finance, supply chain and regulatory affairs.

“Our goal is to become the best human therapeutics company in this part of the

world,” said Ashraf Allam, regional managing director of Amgen. “In an area of over half a billion people, there is immense potential for Amgen to serve a range of patients.”

Rolf Hoffman, senior vice-president for commercial operations at Amgen International, said the company is interested in clinical research, and in developing clinical trials in collaboration with DuBiotech and research organisations.

“We feel privileged that the development strategy of DuBiotech is facilitating Amgen’s regional expansion plans,” said Dr Marco Baccanti, executive director of DuBiotech. “The biotechnology cluster gains significance from

the infrastructure point of view because of its laboratories, warehouses and offices.”

dp World will operate Brazil’s largest multi-modal seaport, as it teamed up with Odebrecht, a Brazilian conglomerate, in acquiring a majority stake in Embraport, whose initial development is worth $500 million.

The first phase development of the terminal will be completed by 2012, with a capacity of around one million 20-foot equivalent units (TEUs). This will be operated by DP World, the first project in Brazil of the world’s fourth-largest marine terminal operator.

Embraport, or Brazilian Port Terminal Company, is being built next to Porto de Santos, a port facility in Santos, a city in the state of Sao Paulo. Porto de Santos is the largest container port in the biggest economy in South America.

The project will pave the way for more business opportunities, said Marcelo Odebrecht, chief

executive of Odebrecht. He noted that more than 12,000 containers and 160,000 items were exported by his group of companies in 2008, generating an income of $1.4 billion in foreign exchange for Brazil.

“Embraport’s operation will bring opportunities for other Odebrecht companies, such as Braskem, which operates in the chemical and petrochemical sector, and ETH, which operates in the sector of sugar and ethanol – as both will use the port for the disposal of their products,” he added.

DP World has development plans in Abu Dhabi, China, France, India, Pakistan, Senegal and Vietnam, among other economies. Last year, it handled more than 46.8 million TEUs across its portfolio worldwide, or an increase of eight per cent from the previous year.

“This is a great opportunity

to strengthen Odebrecht’s relationship with DP World,” Odebrecht said, despite the construction of DP World’s container terminals in Callao, Peru, and the opening of its terminal at Doraleh, in Djibouti, in February.

DP World’s balance sheet remains robust, said its chief executive, Mohammad Sharaf, despite experiencing a slowdown during the first six months of the year. Revenue was down to $1.38 billion between January and June compared with the $1.59-billion turnover a year earlier.

“With concessions often for as long as 30 years, our business is a long-term one, and we invest accordingly,” he said. “While revenues had declined, as was inevitable with the downturn, we have a strong balance sheet, and are able to make the most of opportunities that a downturn also brings.”

Amgen planning to build logistics centre at DuBiotech

DP World to operate Brazil’s Embraport

ALMARAI TO RAISE CAPITAL TO $291MalMaRai, the gulf’s largest dairy firm based in Saudi arabia, will raise its capital by 5.5%, or $307.1 million from $291 million, as part of a cash-and-stock takeover bid for hail agricultural development company (hadco).

“the shares from this capital increase, which amount to six million shares, will be exclusively for shareholders of hadco, as part of the value of their shares,” the company said in a statement.

almarai, which offered in July to takeover hadco for $253 million, has been diversifying its business through acquisitions, and has set aside $1.6 billion for expansion outside the gulf arab region.

hadco is the fourth-largest poultry producer in Saudi arabia.

Amgen wants to be the ‘best human therapeutics company’ in the Middle East and Africa

Almarai’s tomato paste


news & Views

Asia-Pacific to lead global air cargo market in 20 years

Boeing-Damco team seeks SCM improvement

THe Asia-Pacific region will be a growth leader in the long-term global air cargo market, with a requirement for 8,960 new commercial jets worth $1.1 trillion over the next two decades.

This according to Boeing, which stressed that the routes within China, within Asia and those connecting Asia to other parts of the world are outpacing the projected 20-year worldwide average annual growth rate of 5.4%.

Contained in a new Asia-Pacific aviation market forecast published in Hong Kong by Boeing, a US aircraft manufacturer, the research note suggests that the region will need 8,960 new commercial jets valued at $1.1 trillion.

Strong domestic growth in China, India and other emerging Asian countries could contribute to high demand for single-aisle airplanes, which could make

up more than half, or 5,600, of the total aircraft deliveries over the 20-year forecast period.

With just 330 deliveries, the percentage of the fleet’s large category would drop to four per cent from 10% over two decades, as airlines preferred mid-size twins and larger single-aisle jets. About 2,590 twin-aisle airplanes and 440 jets would be delivered to airlines in the Asia-Pacific region, whose fleet would triple to around 11,170 airplanes from 3,910.

“Twenty years from now, more than 40% of the world’s airline traffic will begin, end

or take place within the Asia-Pacific region,” Randy Tinseth, vice-president for marketing of Boeing Commercial Airplanes.

The Asia-Pacific air travel could grow by 41% of the world market in 2028 from the current 32%. Accounting for more than 8,300 flights and 1.2 million travellers daily, the region will be the world’s largest air travel

market in less than 10 years. “Despite an unprecedented

contraction during 2008 and 2009, we remain confident in the strength of the global air cargo market over the long haul,” said Jim Edgar, regional director, Cargo Marketing, at Boeing Commercial Airplanes.

Boeing said Asian carriers might want to add 750 freighters to the region’s fleet, in order to accommodate growth and airplane requirement – or 27% of the global requirement – which is second only to North America, a more mature but slower growing market.

MIDEAST CARRIERS GROWCaRRieRs in the Middle East posted a one per cent growth in air freight demand in July from a year ago, the only region to grow worldwide, while international demand plunged by 11.3% for the same period.

But the drop in global demand in July was better than the -16.5% recorded in June, according to airline industry organisation iata. all regions, except africa, saw improvements in demand compared with the figures posted in June.

carriers in the asia-pacific, Europe and north america posted air freight demand falls of 9.5%, 16.2% and 14.6%, respectively. african carriers were the worst performers, registering a plunge of 25.9%. africa was the only region that saw a deterioration in freight demand in July compared with June, when it posted a decline of 20.2%.

the stabilisation of air freight demand during the first quarter and its improvement between april and June has helped reduce the growth of excess capacity.

boeInG and Danish logistics company Damco have struck a deal to pursue the development of industrial and technological logistics tool aimed at improving global supply-chain management (SCM).

“We look forward to working with Damco and integrating their optimisation capabilities into our own experimentation environment,” said Torbjorn Sjogren, vice-president of Boeing International Support Systems.

US-based Boeing, which

shipped over $350 million worth of aerospace goods and services last year, will incorporate Damco’s SCM expertise into a modeling and simulation tool to expand into commercial markets.

Called Joint Logistics Command and Control Environment, this state-of-the-art simulation tool developed by Boeing allows defence customers to experiment and evaluate supply chain tactics, processes and technologies to support complex defence missions.

“We will quickly seek out opportunities to deliver more effective outcomes within both defence and commercial supply chains, and we see a complementary of strengths between Boeing and Damco,” Sjogren said.

Damco’s chief commercial officer, Martin Thaysen, said the partnership has created a “powerful platform” for the development of optimal supply-chain solutions for customers.

“Damco is in the business of moving products, reducing costs

and improving service levels,” he said. “Working with Boeing’s supply chain experience and technology would allow us to develop new ways of reducing cost and freeing up cash for our customers – which is particularly important in these economically challenging times.”

Damco is the new, combined brand of AP Moller-Maersk Group’s logistics operations, previously known separately as Maersk Logistics and Damco. Its 2008 net turnover reached $2.8 billion.

Air travel in Asia-Pacific could grow by 41% of the world market in 2028 from the current 32%


Boeing-Damco team seeks SCM improvement saudI Railway Organisation (SRO) has awarded a $707.8-million contract to a consortium that includes China Civil Engineering Construction Corporation, to build a railroad linking Riyadh with Al Qassim.

The project is part of the kingdom’s railway linking its northern mineral built with the capital, and the industrial city of Jubail. The railway will be ready for freight movements by next year and passenger traffic within two years.

The Chinese firm, which will install the tracks, will be working with other consortium

members, including Al Ayuni Trading and Contracting Company and Al Abdulaziz Al Omer Establishment for Trading and Contracting.

The contract covers civil works for the 500-kilometre rail section of the project, which is seen to help improve antiquated logistics infrastructure, and provide ease of mobility to Saudi Arabia’s growing population and increasing number of goods and services.

Sponsored by the Public Investment Fund, the rail project has a total allocation of $4 billion, which is seen

to increase to $5.33 billion upon completion. It is vital for the planned phosphate and bauxite mining projects in the north which will link up with the smelters and processing facilities on the Gulf coast, shortening the distance between north and south by 500 kilometres.

The north-south railway will carry minerals from the Al Jalamid and Al Zabirah mines, in the north, to the industrial city of Ras Al Zour, and operate a passenger and freight service between Riyadh and Al Haditha on the kingdom’s border with Jordan.

eXpansIon work at the Khorfakkan Container Terminal (KCT) is proceeding well, with civil works on the 400 metres of new quay set for completion in November while the first two of the four new Megamax gantries with tandem lift facility to be delivered by mid-October.

This will bring the total number of terminal to 18, said a note sent by Keith Nuttal, group commercial manager at Sharjah-based Gulftainer Company. He added that the other two gantries will be delivered by the end of December.

KCT, which is being operated by regional ports management and logistics firm, Gulftainer, on behalf of Sharjah Port Authority, has got an additional connection following the start of China Shipping’s service operating in

conjunction with CMA-CGM which calls weekly at KCT.

“Volumes this month (September) have been good, and as the completion of the expansion works at KCT draw ever nearer, we are confident that this trend will continue,” said Peter Richards, group director and general manager of Gulftainer.

With the addition of two gantry cranes earlier this year,

KCT has been better-equipped to handle larger container ships efficiently.

Strategically located outside the Straits of Hormuz, close to the main East-West shipping routes, KCT is three hours away from the major UAE emirates of Dubai, Sharjah and Abu Dhabi. It has many feeder-ship connections to other ports in the Gulf and in Iran, India, Pakistan, East Africa and Asia.

Saudi Railway awards $707m railway contract to Chinese firm

KCT’s new quay set for completion in November

KCT gets additional connection with China Shipping’s service

DGCX TEAMS UP WITH STRUCTURED SOLUTIONSdUbai gold and commodities Exchange (dgcX) has forged a partnership with germany-based Structured Solutions to launch a series of benchmark indices, which are valuable financial tools in identifying trends and assessing investment performance.

“commodities have emerged as a crucial asset class and economic indicator during the downturn,” stressed Stefffen Scheuble, chief executive officer (cEo) of Structured Solutions. “investors are not only increasing exposure to this asset class, but also using it to enhance fundamental research and analysis.”

Structured Solutions, an integrated service provider in the derivatives sector, will create new commodity indices based on dgcX commodity prices, and dedicated to the global investment banking and fund industry.

a fully automated, online commodities exchange, dgcX is the first international commodity derivatives marketplace between Europe and the Far East. it is an initiative of the dubai Multi commodities centre, Financial technologies, of india, and the Multi commodity Exchange of india.

Scheuble remarked, “as dgcX is the first and largest derivatives exchange in the Middle East, its prices and data are invaluable in our development of new commodity index products.”


news & Views

Al Futtaim brings transport business in-houseTIred of bad service and high prices, Al Futtaim Logistics has purchased more customised vehicles and brought its transport business in-house – a move seen to reduce operation costs by 15%.

“The current economic climate has helped us look at all aspects of our business and, after a thorough review, we felt there was a solid business case to move our transportation function in-house,” said Tom Nauwelaerts, head of logistics at Al Futtaim.

This fresh approach in operation follows the cancellation of third-party transportation contracts for

domestic transportation, the company said in a statement. This also indicates a strong confidence in the firm’s ability to gain fresh business initiatives during tough times.

Al Futtaim recently purchased 35 tractor heads from Hino and Volvo, and 60 customised container flatbeds, box-vans and taut-liner trailers from Munro International. The delivery started from March.

This will “enable the company to reduce operating costs by 15% over the lifetime of the vehicles,” the statement said.

Nauwelaerts cited deteriorating service, increased

prices by subcontractors and substandard equipment as reasons for Al Futtaim to buck present-day trends of outsourcing.

“This move has enabled us to become extremely competitive by combining daytime transportation with nighttime operations, thereby ensuring maximum utilization of the vehicles,” he said.

Al-Futtaim Logistics offers a full-range of supply chain solutions that include temperature controlled warehousing and distribution, road transportation, sea and airfreight forwarding. It has over 200 Volvo and Hino vehicles in its fleet.

AL FUTTAIM ELECTRONICS EXPANDS IN SAUDI al FUTTaiM Electronics, a part of al Futtaim group, has bought a major stake in Saudi arabia’s Best Electronics, expanding its operations in the gulf’s biggest economy.

this brought to nine the number of its outlets in the gulf, including four in Riyadh and one in Bahrain, with a total retail space of 300,000 square feet.

“We will expand to other parts of Saudi arabia slowly,” said Vishesh Bhatia, group director for electronics, engineering and technologies at al Futtaim.

he added that al Futtaim Electronics, which pioneered the multi-brand consumer electronics and it retailing concept in the Middle East, also plans to expand into Egypt and Qatar over the next 12 months.

While sales are now stabilising, Bhatia described the last quarter as tough due to large inventory. the rest of the year is going to be stable, he said, although it doesn’t offer anything exciting.

al Futtaim Electronics closed two plug-ins stores at BurJuman and Madinat Jumeirah, and cut down staff to help ride out the global economic meltdown.

“personally, i would like to see some consolidation in the retail market as it is very fragmented,” Bhatia said. “We are looking at further opportunities as the market needs a consolidation for retailers to sustain.”

At Doha Corniche: Qatar is one of the markets being eyed by Al Futtaim Electronics for expansion

Al Futtaim has over 200 Volvo and Hino vehicles in its fleet


sTarTInG from September 25, Ukraine International Airlines (UIA) will have its first direct service between Abu Dhabi and Kiev, said the Abu Dhabi Airports Company (ADAC).

Meanwhile, Etihad Airways enjoyed its busiest month in July, servicing over 616,000 passengers, a nine per cent increase from a year earlier.

“Whilst we expected July to be busy, we are delighted to have beaten our previous records, especially during the final week of the month…” said James Hogan, chief executive of Etihad.

UIA will operate a Boeing 737 aircraft configured in two product classes – business and economy – for the flight which is estimated to take about five and half hours in each direction.

Set to depart from the Abu Dhabi International Airport, the initial flight will be followed with twice weekly flights due to arrive in Abu Dhabi Mondays and Fridays, and depart Tuesdays and Saturdays.

This will also allow easy transfer for passengers onto the wide network of onward services offered from the airport.

Mohammed Al Bulooki, vice-president of Airline Marketing and Aeronautical Revenue at ADAC, said the service offers both business and leisure travellers to experience the city of Kiev.

He added that passengers can take advantage of the links provided international carriers and Etihad Airways to other destinations worldwide.

“We are delighted to be expanding our operations in the Middle East with this new service to Abu Dhabi,” said Yuri Miroshnikov, president of UIA.

Wholly-owned by the Abu

Dhabi government, ADAC operates and manages the Abu Dhabi International Airport. It is also tasked to spearhead the development of emirate’s aviation infrastructure.

UIA to serve Abu Dhabi-Kiev route

A UIA plane

THe mood was upbeat as Seatrade Europe closed its doors for another two years, following two and a half days of networking among participants and showcasing of new products and services in the shipping sector. More than 3,000 participants took part in the conference, exhibition and social programme while over 60 speakers discussed a broad range of topics from pricing strategies to shoreside electricity (cold ironing) and from hospitality to itineraries. Travel agents were also given an opportunity to meet with, and question, officials of some of the leading cruise lines.

Early figures show that 75% of the trade visitors had direct influence on procurement decisions –

which was good news for the 250 suppliers from 50 countries which showcased their products and services on the exhibition floor.

One of the first-time exhibitors at Seatrade Europe was New York Cruise. The company’s director of cruise operations, Thomas Spina, already has plans to return. “We were looking for contact with the European shipping companies, and we have found it,” he says. “More and more European providers are calling to New York Cruise. There is still a lot of potential here. We will definitely return to Seatrade Europe, in 2011.”

New products included the iPort, an interactive touch-screen monitor for passengers which made its debut on the Atlantic Alliance stand. “The great interest in the iPort,

including from ports which are not part of the Atlantic Alliance, surprised us and made Seatrade Europe a total success for us,” summed up Dirk Moldenhauer, managing director of Atlantic Alliance. The iPort will be installed at all 17 Atlantic Alliance member ports.

On top of the formalities, the event held on September 15-17 included various receptions, parties and networking opportunities. The 2009 Seatrade Insider Cruise Awards, sponsored by Fidelio Cruise, was presented at the Schmidts Tivoli Theatre. David Dingle, Carvical UK chief executive officer and chairman of the European Cruise Council, was named Seatrade European Cruise Personality of the Year. Press conferences included the

announcement of a new cruise terminal in Dubai, by Hamad bin Mejren, director of the Dubai Cruise Terminal.

Bernd Aufderheide, chairman of Hamburg Messe und Congress Gmb, remarks, “This year was the first time that the congress trade fair took place at the Hamburg Messe Fairground. With the new, modern congress and conference facilities, we have created a perfect setting for Seatrade Europe.” Christopher Hayman, chairman of Seatrade, adds: “Our co-operation with Hamburg Messe has proven itself [successful]. I look forward to our next collaboration in 2011.”

The next Seatrade Europe convention will take place at Hamburg Messe Fairground, on September 27-29, 2011.

Seatrade Europe ends on a positive note


news & Views

IT may or may not worry the taxi drivers, who earn a living on a commission-basis, but the Dubai Metro sure has convinced many people, if not everybody, that it is vital for the growth of the emirate. The advent of the mass railway transit system has turned a page in Dubai’s history, drawing an ecstatic crowd on its journey offering ecstatic sights and connecting old areas with new developments.

Skyscrapers, shopping malls, lush gardens and well-manicured lawns are seen from the metro’s glass windows, bringing to mind whether the taxis will now have fewer customers and threaten the livelihood of their drivers. “I don’t think so,” says a Pakistani driver from Peshawar. “It will, in fact, complement our services, as many commuters will have to take cabs to their respective destinations from the metro stations.

Many members of the ruling family, led by His Highness Sheikh Mohammad bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, graced the formal opening of the Dubai Metro on September 9. “The metro is Dubai’s socio-economic future,” Sheikh Mohammad said.

Overjoyed by the launch in the presence of the Ruler of Dubai, a crowd gave out a burst of applause as Sheikh Mohammad walked past in front of them to lead the opening ceremony at the Mall of the Emirates Station, in Al Barsha, from where the first train left for the Al Rashidiya Station.

“I thank everyone from the bottom of my heart for this great job,” Sheikh Mohammad said. “If it weren’t for this collective effort, we would not have achieved this. My message to the world is that life is all about challenges , and the

people of the UAE, under the leadership of President His Highness Sheikh Khalifa bin Zayed Al Nahyan, love challenges – and we are up to them.”

He was accompanied by Sheikh Hamdan bin Mohammad bin Rashid Al Maktoum, Crown Prince of Dubai, Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and Minister of Finance, and Sheikh Maktoum bin Mohammad bin Rashid Al Maktoum, Deputy Ruler of Dubai, and senior officials of the emirate.

The Dubai Metro is part of Sheikh Mohammad’s vision to develop an integrated transport system – including a bus network, marine transport and advanced road infrastructure – for the emirate. This $7.61-billion project is the world’s longest automated driverless train system, and will carry 1.8 million passengers daily by 2020.

Train-ing day

No dramatic cuts in future aviation fuel consumptionWHIle efficient engine design and route optimisation have cut fuel consumption and carbon emissions by 70% over the past 40 years, there won’t be any dramatic cuts any time soon, prompting a business research and consulting firm to push for the production and use of biofuels.

“A cleaner fuel is indispensable,” according to a report by Frost & Sullivan, saying that the global aviation industry consumes three million barrels of jet fuel daily, or 3.4% of the liquid fuel supply. In the US, plane flights burned 16.1 billion gallons, or 382.4 million barrels, of jet fuel last year.

The report stressed the world needs alternative fuels

that are cost-competitive with fossil fuels, and do not require the changing of airplane design or fuelling infrastructure. Today’s biofuels, however, are just complementary to petroleum fuel for, at least, the next five years.

This means the aviation industry would not be able to switch to biofuel by 2014, as very little biofuels are being mixed into aviation fuel these days. And the number of commercial aircraft fleets is seen to almost double to 32,000 by 2025. Carbon emissions due to air travel would climb to three per cent in 41 years from the current two per cent.

The report cited algae fuel

as one of the most promising biofuels being developed by startups and big firms for aviation. This was tested by Continental Airlines and Air New Zealand earlier this year, courtesy of Sapphire Energy. For its part, the US Department of Energy awarded Science Applications International

Corporation a $25-million contract early this year to develop a $3-a-gallon algae derived fuel for military jets.

It is no secret that jet fighters can fly on fuel extracted from algae. But how can this be done at a reasonable price is not yet known.

The aviation industry needs biofuels that are cost-competitive with fossil fuels

Reed Exhibitions FZ-LLC, PO Box 60799, Abu Dhabi, UAE, Tel.:+971 2 409 0424, Fax: +971 2 444 3768, Email: [email protected], www.reedexpo.com

Under the patronage of

H.H. Sheikh Ahmed bin Saeed Al MaktoumPresident, Dubai Civil Aviation Authority & Chairman of the Emirates Group

WWW.SITLDUBAI.COM

Linking the world of logistics in Dubai

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LogisticsReal Estate

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& Technologies

Organized by Supported byGold Sponsor

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n Business & Investment Forum: An excellent platform for the latest products and services presented by industry leaders. Free admission for visitors - limited seats only.

n RFID Area: A unique live demonstration, showing the daily use of Radio Frequency Identification (RFID) in logistics. Enjoy exclusive VIP access.

Venue: Sheikh Rashid Hall - Time: 10:00am to 6:00pm

3-5 November 2009 Dubai International Convention and Exhibition Centre

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Reed Exhibitions FZ-LLC, PO Box 60799, Abu Dhabi, UAE, Tel.:+971 2 409 0424, Fax: +971 2 444 3768, Email: [email protected], www.reedexpo.com

Under the patronage of

H.H. Sheikh Ahmed bin Saeed Al MaktoumPresident, Dubai Civil Aviation Authority & Chairman of the Emirates Group

WWW.SITLDUBAI.COM

Linking the world of logistics in Dubai

Transport and logisticsservices

LogisticsInfrastructure

LogisticsReal Estate

Transport and logisticsInformation system

& Technologies

Organized by Supported byGold Sponsor

N A F L

Register now and benefit from the exclusive business networking and content opportunities!

n Global Shipper’s Conference: Organized in partnership with the renowned Global Shippers’ Forum, a powerful assembly of the world’s key shipper representative groups. Benefit from the early bird discount.

n Business & Investment Forum: An excellent platform for the latest products and services presented by industry leaders. Free admission for visitors - limited seats only.

n RFID Area: A unique live demonstration, showing the daily use of Radio Frequency Identification (RFID) in logistics. Enjoy exclusive VIP access.

Venue: Sheikh Rashid Hall - Time: 10:00am to 6:00pm

3-5 November 2009 Dubai International Convention and Exhibition Centre

Register Now

WWW.SITLDUBAI.COM

executive officer of Dubai Airports, noted that Dubai International Airport has seen traffic tripled in eight years, with more than 125 carriers serving 210 destinations on six continents.

budGeT carrIer aIr arabIa has signed a 40/60 joint venture with the tour and travel company, Travco Group, for the establishment of a low-cost airline in Egypt. This will help UAE’s Air Arabia to compete in the European budget aviation market dominated by Ryanair and Easyjet. This is the airline’s third hub, after Sharjah and Morocco.

Called Air Arabia Egypt, the new company will have a start-up capital of $50 million. Air Arabia will deploy a fleet as soon as the joint venture starts operating commercially a few months from now. The airline has 20 aircraft on the fleet, and 44 on order.

sTaTe carrIer oman aIr took delivery of its first Airbus A330-200 as part of an order of seven

aircraft placed in 2007. The remaining six A330s will be delivered in the coming years, said Peter Hill, the airline’s chief executive.

In March, Hill said Oman Air would take delivery of nine new Boeing and Airbus aircraft in the coming months. This would expand the airline’s fleet to 23 by the end of 2009.

THe dubaI deparTmenT oF Economic Development and Dubai Bank are working together in facilitating electronic payment of trade licence fees, following an agreement giving more flexibility to investors and customers. The bank will present a detailed weekly report to DED, and also provide it with electronic systems services to review banking settlement.

“The agreement with DED complements the bank’s vision of partnering with leading government departments that contribute to building the future of Dubai,” said Mohammad Amiri, head of retail banking at Dubai Bank. “We seek

aGIlITy Has clIncHed a “multibillion-dollar” four-year contract in Qatar from RasGas Company, that country’s premier liquefied natural gas (LNG) enterprise. The contract covers local and international services in global freight forwarding, transportation and customs clearance. “Qatar is crucially important to the growth of Agility in the region, and this deal represents an important milestone in our company’s six-year history locally,” said Elias Monem, the company’s chief executive officer for the Middle East and North Africa.

Owned by Qatar Petroleum and Exxon Mobil RasGas Incorporated, RasGas operates

production facilities to treat, liquefy and export LNG to Asia, Europe and the US.

by 2010, InTernaTIonal passenger traffic at Dubai International Airport and Dubai World Central-Al Maktoum International will increase 13.6% to 46 million from 40.5 million by the end of this year. This forecast done by Dubai Airports was based on improving economic conditions, state-of-the-art infrastructure, strong expansion by Emirates Airline and the establishment of low-cost carrier flydubai.

Paul Griffiths, chief

news & Views

roundup

‘Qatar is vital to Agility’s growth in the Middle East’

Air Arabia forays into Egypt


to be a leading financial corporation that offers Sharia-compliant electronic payment solutions, and the partnership with DED will further enable us to reach out to the larger investor community.”

ssI scHaeFer, a WareHousInG and logistics systems provider, has introduced a satellite system that is safe, fast and intelligent, following more than 18 months of development. Called the

Schaefer Orbiter System (SOS), the new product consists of a satellite with docking station, thereby increasing the efficiency, performance and safety operations of the satellite storage concept.

The SOS can be used with any conventional forklift as well as in deep-freeze applications continuously, without loss of power or operational efficiency. Also, its operational cycle time for pallet movements can be increased substantially,

since the system requires no battery change.

ForWardInG and loGIsTIcs provider Panalpina has been awarded additional business in Anglola, Gabon, Libya, Azerbaijan and Kazakhstan for the oncoming three years. This increases the company’s overall commercial relationship with KCA DEUTAG, one of the largest international land drilling contractors outside the Americas.

“Expectations from KCA DEUTAG’s side are to work with a professional partner, and base the renewed partnership on credibility, capability and competence,” said Frank Goerke, leader of materials and transport at KCA DEUTAG. “This vision, combined with a very strong focus on efficiency, will be a major improvement and achievable target for a professional freight forwarder like Panalpina, to deliver door-to-door service for KCA DEUTAG globally.”

Schaefer’s SOS


hull, including all hardware, the setting of pipes and the painting of the vessel.

Delivery of the first fully completed vessel is within this year while the second will be delivered by December 2010. Besides the production of hull and systems, the Russian shipyard also carries out assembling, wiring and start-adjusting works, equipment testing and conducting sea trials in the Gulf of Finland and Baltic Sea.

luFTHansa Has THreaTened to close its fleet of freighter aircraft if restrictions on night flights are imposed on its hub at Frankfurt, saying that having its own cargo fleet might no longer be practical. This according to Carsten Spohr, chief executive officer of Lufthansa, in reaction to a German court judgement on the service limitations around the expansion of Frankfurt airport.

Politicians in the state of Hesse agreed to limit the number of night flights to just 17, following

opposition against the airport expansion. Lufthansa challenged this, but the court upheld the position of the local politicians, who it said had the right to agree to such limitations.

THere Had been a 124% rise in domestic freight for UK’s road transport market between January and June, said Teleroute, a pan-European provider of electronics solutions for the transport and logistics industry. Mark Appels, area manager for North Europe at Teleroute, noted that the UK market has been hit badly by the global financial turmoil. But there was a 54% rise since February in overall freight in the Teleroute freight exchange for the UK market for domestic and international loads.

Teleroute also noted a 25% increase in the UK spot-freight market being exported from the UK to France, Benelux (Belgium, The Netherlands and Luxembourg), Germany and Spain in the six months to June.

news & Views

overseas

deuTscHe posT dHl WIll lose 560 jobs due to the collapse of its mail-order business, following the bankruptcy of the German retail and leisure firm Arcandor, owner of the department store Karstadt. Heavily exposed to Arcandor, the break-up of the group and the looming closure of its component businesses would situations more difficult for Deutsche Post DHL.

In 2005, the supply-chain and logistics group assumed a deal worth $733 million per annum, covering retail store logistics and mail-order distribution activities for one of Germany’s largest retailing operations. More than 2,000 employees transferred to DHL from KarstadtQuelle, the former name of Karstadt.

THe sncF and euroTunnel groups have teamed up to acquire Veolia Cargo, which belongs to the Veolia group that has 20 subsidiaries and posted a turnover of $275 million in 2008. “This acquisition is part of our drive to develop rail freight, notably by intensifying international links for full train loads in Europe,” said

Pierre Blayau, deputy chief executive officer of SNCF and head of the SNCF Geodis division.

The SNCF group has taken over the rail companies based in Germany, The Netherlands and Italy while the Eurotunnel group acquires the French branch of Veolia Cargo. The transaction has strengthened SNCF’s rail network in Europe, especially in The Netherlands and Germany. As Europe’s leading private rail freight operator, Veolia Cargo has a particularly strong presence in Germany, Benelux (Belgium, The Netherlands and Luxembourg) and France.

unITed IndusTrIal corporaTIon’s Severnaya Verf shipyard has launched a vessel equipped with special capacities for the transportation of oil-rig mortar, and for the rescue and firefighting missions around the oil-producing platforms in the North Atlantic. Known as VS 485 PSV, the vessel’s customer is the Norway Company Solvik Hull Supplies, which wants a well-equipped

The DHL headquarters at Frankfurt-Main

Lufthansa Airbus 380 at Frankfurt airport


laTVIan TransporTaTIon and freight forwarding company Spedair has been renamed Greencarrier Latvia, and began operating under its name from this month. Acquired by Sweden-headquartered logistics group Greencarrier International in September 2008, Spedair has helped Greencarrier International to strengthen its position in Eastern Europe and the Baltic region. Spedair provides air, road, ocean and rail freight forwarding, multimodal transportation, warehousing and storage services and customs brokerage services.

“Spedair has enabled us to expand our operations significantly, and we feel now is the right time to rebrand the company, so taking the Greencarrier name into new market areas,” said Niklas Olsson, managing director and chief executive officer of Greencarrier International. “It will also emphasise the fact that shipments entrusted

to our care are under Greencarrier’s control from door to door.”

sHIpmenTs beTWeen selecT cities in Vietnam, Germany, Italy and the US may now arrive up to a week earlier, following the launch of the weekly direct less than container load (LCL) services of DHL. These connect Ho Chi Minh City to Hamburg, Genoa and Los Angeles. “Our ability to continually expand our service portfolio underlines our commitment to offer best-in-class solutions for customers,” said Amalou Diallo, chief executive officer of DHL Global Forwarding, South Asia Pacific.

Through its in-house carrier Danmar Lines, DHL is able to tap into the key trade lanes for businesses in Vietnam. Key sectors will include agricultural goods, apparel, crude oil, furniture, technology and textiles. Vietnam exported $10

billion worth of garment and apparel-related goods during the first half of the year.

manIla Is abouT To FInIsH a major rail project that will help develop the Clark Special Economic Zone, formerly a US airbase, into the best transhipment logistics hub in the Asia-Pacific region. Set to open

by early next year, the 80-kilometre long Northrail project connects northern Manila to provinces in Central Luzon, and is seen to ease traffic congestion in Manila by giving residents more transport options.

Northrail is one of the flagship projects under the administration of President Gloria Macapagal-Arroyo. The initial

Boats, in Halong: DHL launches weekly LCL services in Vietnam

Subic Bay, Philippines: Manila’s Northrail project will improve transport facilities at Manila-Clark-Subic economic triangle


news & Views

phase involves the construction and

upgrading of the rail line from the Philippine National Railway station, in Sangandaan, to the Diosdado Macapagal International Airport (DMIA), in Pampanga province. Section 2 of the first phase completes the service from Malolos, in Bulacan province, to DMIA, improving access to major transportation facilities in the Manila-Clark-Subic economic triangle. Subic is a former US naval base.

Trade usInG surFace transportation between the US and Canada and Mexico dropped by 31.5% in June from a year ago,

according to the Bureau of Transportation Statistics (BTS), of the US Department of Transportation. Surface transportation consists mainly of freight movements by truck, rail and pipeline. About 88% of US trade by value with Canada and Mexico, moves by land.

BTS said that surface transportation trade between the US and Canada dropped 36% to $31 billion in June from a year earlier, with Michigan leading all states with $2.9 billion. US-Mexico surface transportation trade totalled $19.7 billion in June, or a drop of 21.8% from June 2008. The three countries form the North American Free Trade Agreement.

ATA supports 100% screening of cargo on passenger aircraftan orGanIsaTIon of leading US airlines is supporting the congressionally-mandated August 2010 deadline for 100% screening of all cargo on passenger aircraft, and has urged shippers to contact the US Transportation Security Administration (TSA) to learn more about its benefits.

“Air carriers are working closely with their partners in the shipping and forwarding sectors to ensure that service levels remain high, and the integrity of shipments is protected as the new screening mandate is implemented,” said the Air Transport Association of America (ATA).

It stressed that TSA’s Certified Cargo Screening Programme (CSSP) benefits shippers, as this allows cargo to be screened before individual cartons are secured to shipping pallets with banding or shrink-wrap.

“This is critical because TSA-certified screening methods available to forwarders and airlines significantly restrict the size of cargo that can be screened, and there is no TSA-certified technology capable of screening large air freight skids and pallets,” ATA said.

James C May, president and chief executive officer of ATA, described as challenging the requirements to screen 100% of all cargo. “We believe that CSSP offers our customers the best solution to meeting 100% screening mandate, providing maximum security with minimal disruption to the supply chain,” he said.

ATA said that for certain pharmaceuticals, electronics and fresh produce, CSSP allows screening of the normal sealing and packaging process.

In Ottawa: Surface transportation trade between the US and Canada drops

TSA’s CSSP benefits shippers


BA World Cargo enhances ‘Constant Climate’

Delta may invest $550m in cash-strapped JAL

brITIsH Airways World Cargo has made investments in a new SMS customer update service and a dedicated product-care team, to broaden the scope of its temperature-controlled

product for pharmaceuticals. Called Constant Climate,

the expanded product also covers passive temperature-controlled packages and shipments. Launched globally across all Constant

Climate stations in early September, the new elements are being implemented after consultations with pharmaceutical forwarders.

“These enhancements come as a result of thorough development work involving our customers, and we are confident that the new service will deliver significant benefits to pharmaceutical logistics suppliers,” said Stuart Forsyth, global product manager of BA World Cargo.

The advanced SMS offering updates customers by text messages or email regarding their shipment. Information

on the temperature inside the unit and the condition of the battery is included in the update for Constant Climate Active shipments using Envirotainers.

A 10-man specialist team and 500 personnel across the network ensure quality assurance and operational procedures are in place.

Forsyth remarked, “The investment in training and improved standard operating procedures has been as important as the use of technology, and the introduction of our care team.” BA’s new product benefits suppliers of pharmaceutical logistics

us carrIer Delta Airlines may invest up to $550 million in cash-strapped Japan Airlines (JAL), which this month announced cutbacks in its all-cargo service schedule between Japan and Europe.

The Nikkei business daily and public broadcaster NHK reported that JAL, Asia’s biggest airline, was holding talks regarding capital aid of billions of yen from Delta. This would give Delta a stake of up to 11% in JAL.

“If JAL ties up with Delta and expands code-sharing, that would lead to higher efficiency in its international services,” Nikkei reported, citing a high-ranking official at the transport ministry, which appears to support a deal with Delta.

The tie-up could prove difficult, though, as JAL belongs to the oneworld global alliance, of which American Airlines Incorporated, Delta’s rival, is the North American member.

Delta and Air France-KLM are both members of SkyTeam, another global airline alliance.

JAL said it will discontinue from October 25, the second half of its current fiscal year, three weekly freighter services to date operated between Tokyo (Narita) and London, via Amsterdam. The present Tokyo

(Narita)-Frankfurt route served by three freighter flights per week will also be revised, and then be operated via Amsterdam.

“JAL is conducting ongoing review of its passenger and cargo network, and is prepared to respond with further amendments to routes, fleet and flight frequencies in efforts to maximise profitability while maintaining high standards of service to our customers,” the Asian carrier said in a statement.

Kyodo News, meanwhile, reported that JAL was also sounding out Air France-KLM on expanding its alliance.

The deals with Europe’s top airline could alter the makeup of the global airline industry, it added.

JAL, which lost more than $1 billion in the second quarter, has announced more than 11,000 job cuts since 2005. By March 2012, 5,000 employees, or 10% of the airline’s workforce, could be terminated, reported Kyodo News.

Having entered its second straight year in the red due to global recession and swine flu fears, JAL asked the Japanese government for clearance to revise its international cargo fuel surcharge for flights from Japan effective October 1.

JAL announces cutbacks in all-cargo service between Japan and Europe



The Industry

CHINA CHANCEGolden opportunities await stakeholders in the global freight industry

IN CHINA, crisis means not only a threat but also an opportunity. As governments of western powers focus their attention on mitigating the impact of the global recession on their constituents, China picks up the slack in global power politics. Propelled by its buoyant

economy, Asia’s largest nation inconspicuously but effectively spreads its political and economic sphere of influence not only among its Asian and European neighbors but also in the Middle East and North Africa, consequently redefining traditional global trade routes in the process.

When China initially opened its economic doors to the West, the country was perceived mostly as a source of cheap labour for the assembly and manufacture of goods from Asia for re-export to other countries. China back then was simply a “processing hub”. With the increased incomes of the Chinese, the massive government stimulus programme and continued entry of foreign direct investments (FDIs), China is now a major consumer market.

{ Consumer }

< In Beijing: Crisis as a threat and an opportunity


China’s GDP per head is pegged at $2,000, just a tenth of US GDP

per head. However, China’s population is 1.33 billion while that of the US is only 307.4 million, according to the latest UN estimates. Economists predict that China’s GDP might surpass that of the US in two or three decades. Premier Wen Jiabao’s $586-billion stimulus spending has further spurred consumer demand. The government’s major infrastructure projects, tax cuts on property and car purchases, subsidies for low-income families, comprehensive healthcare and the recently-announced broader “Old Age Insurance” have empowered Chinese consumers and encouraged them to be more liberal in their spending.

Foreign investments continue to pour into China. It accounted for one-third of global expansion in 2008, the IMF said. Its average growth this decade is 10.2% while its projected GDP next year of $5.3 trillion is expected to surpass that of Japan. The IMF also projected China’s economy to reach $8.5 trillion in the next five years. Clearly, China has become not merely a processing hub but a major global consumer in its own right. Government figures show that 2007 re-exports accounted for 39% of exports, though that figure dropped to 33% last year and is expected to drop further in the coming years.

Today, China is the No 1 export market for Japan and South Korea. Greater employment and business opportunities from FDIs bolstered by government stimulus packages have boosted the incomes of millions more Chinese citizens. Their enhanced purchasing power created a huge demand for foreign goods, translating to imports of $608 billion from trading partners.

The continually growing domestic market of China makes it a major global final destination of foreign goods. Moreover, as manifested in the recent World Economic Forum (WEF) hosted by China, underdeveloped countries have started turning to China for economic aid amid the worldwide economic slowdown. These developing countries have relied so much on western export markets that, when the crash hit the West, developing countries were left out in the cold with no market for their goods. As western governments

The Industry

At Beijing International Airport: Logistics and supply infrastructure has to adapt to China’s growing economic power


focused on saving themselves from the downturn, underdeveloped countries felt that their trading partners in the West turned their backs on them.

China’s dynamic economy was the lifeline for these countries. China provided them with capital at lower interest rates than what the West offers, access to cheap Chinese labour and, most importantly, a thriving export market for their domestic products. In so doing, China has endeared itself not only to its neighbouring Asian and European countries but also to African, Middle Eastern and Latin American nations. When the dust of the crisis settles, China will emerge with more potent political and wider economic influence in the world stage.

Global suppliers and logistics providers have acknowledged this reality at the WEF. DHL observed that its freight volumes between China and Africa have been growing 15% annually. The company is confident that this level of growth can be sustained in the long run.

China, Asia’s largest emerging market, is leading the shift in correcting imbalances in world trade. Recent figures show that trade between the Middle East and Asia has surpassed trade between the Middle East and Europe or between the Middle East and the US.

As China spreads its influence and economic power, it taps into previously neglected trade lanes such as marginal countries in Africa and Europe. The opening of these new trade lanes necessitates adjustments in traditional supply and logistics networks. Undeniably, China is changing the world economic scenario. Its economic growth potential and its expanded political clout will play a dominant part in the post-crisis years.

Forwarders and cargo handlers have to position themselves to supply what China’s expanded economy needs. Logistics and supply infrastructure has to adapt to China’s growing economic power. Future developments in ports, airports and other freight services have to factor in the Chinese connection in their equation. As China dictates a make-over of the global freight industry, stakeholders should focus not on the threats but on the golden opportunities.

EDC staff and visitors during a food fair in Australia last year

DUBAI, a traditional food importer, stimulates tourism and trade through its food fairs. Thousands of exhibitors and their staff flock to the food fairs to showcase their products and match up domestic and international buyers. The events rack up a number of tourists which visit Dubai and increase the volume of trade in the region. Based on statistics from the Dubai Export Development Corporation (EDC), Dubai’s food exports totaled $952.9 million in 2008. Sugar and confectionery accounted for the largest share of 37% of food exports.

Its strategic location, coupled with superb infrastructure and transport facilities, makes Dubai the prime export and re-export hub in the country which boasts numerous delicious foods. Food fairs, such as Sweets Middle East, slated in November at the Dubai International Convention and Exhibition Centre, bring sellers and buyers under one roof to accelerate trade relations.

Food fairs offer domestic food suppliers the opportunity to meet international buyers. An International Buyers Centre manned by experienced staff will provide guidance and advice on export opportunities. A workshop called “Understanding Food Trade Regulations in Dubai” will acquaint international exhibitors on how they can tap into Dubai’s domestic food market.

Renewed consumer confidence in Dubai and the upsurge in oil prices have boosted consumer spending, making Dubai attractive to food manufacturers. Moreover, Dubai’s affordable hotel rates add another come-on for international exhibitors and their staff to join the Dubai food fairs. For those paying in US dollars, Dubai hotel rates are currently 26% lower than a year earlier. Tourists from the UK who pay in pound sterling get a room for four per cent less than last year’s rates. In contrast, hotel rates in nearby Abu Dhabi increased by 15% compared to last year for those who are paying in pound sterling, but these dropped by nine per cent compared to last year for US dollar-paying guests.

The changes in rates resulted to fewer British and Russian tourists in Dubai during the first half of the year, but this was more than compensated by the increased number of visitors from the US and Italy.

Trade and tourism opportunities generated by Dubai’s food fairs are exactly what the EDC is working for to live up to its mandate of providing exporters with support to expand their foreign markets.

FOOD TRIP


The Industry

FEARS of AH1N1’s ‘second wave’ worsened prospects for the tourism sector which is already battered by reduced tourist volumes due to the global economic slowdown. However, hope shines in the horizon for stakeholders with creative imagination and a pulse for shifting tides in the tourism market.

The UN World Tourism Organization (UNWTO) noted in a recent study that, from January to April 2009, there had been an 18% drop in Middle East tourist arrivals. The decrease can somehow be compensated by a projected modest 2-6% increase in tourism growth in the Middle East, as holidaymakers prefer to travel within the region to reduce expenses and minimise exposure to the dreaded virus.

As for Kuwait’s tourism outlook, another study by the World Travel and Tourism Council (WTTC) predicts that travel and tourism earnings will slump by 11% this year but will recover and grow for the next decade, albeit at a sluggish barely one per cent rate.

With estimated earnings of $5.6 billion, the tourism sector contributes 3.7% to Kuwait’s economy for this year but it is expected to comprise only

three per cent of the country’s economy in the next decade. Notwithstanding the miniscule decrease in tourism’s contribution to Kuwaiti economy, its actual value is expected to grow more than double to $12 billion in the next 10 years.

All is not good news for Kuwait, based

NIFTY SIGHTSA coast in Kuwait: The country’s tourism industry will grow in the next decade after a slump this year

on the WTTC study. It cautioned that employment in the tourism sector will contract. Kuwait’s travel and tourism industry presently employs, directly and indirectly, 71,000 people, who comprise 3.5% of the country’s total employment. The employment percentage is almost 50% lower than the global average of 7.6% for the travel and tourism industry, but it is still expected to dip to only 2.6% or 65,000 jobs by 2019.

Despite the government’s heavy investment and the private sectors active involvement in Kuwait’s tourism sector, it still cannot accelerate to as rapid a growth rate as it desires. Holding back the reins of growth are the economic downturn and the stiff competition offered by Kuwait’s neighbours in the region.

Syria and Jordan entice tourists with their mix of historical sites and luxurious accommodations. Oman entices adventure and nature lovers into its fold. Bahrain heavily invested in upgrading and expanding its business and conference-hosting facilities and infrastructure while Dubai poured billions of dollars into developing its hotels, resorts and conference centres, with a goal of luring 15 million tourist arrivals yearly by 2015.

Prospects may not appear very bright in the face of the dampened economic climate and the heated competition from nearby countries but, for the imaginative and innovative Kuwaiti

The Bel Temple, in Palmyra: Syria entices tourists with its mix of historical sites and luxurious accommodations


WITH the UAE emerging as the fastest-growing automotive market in the Middle East, and with Dubai accounting for almost half of UAE total vehicle stock, the emirate is in an excellent position to dominate the country’s auto sector.

High disposable income, renewed consumer confidence and resurgence in oil prices were noted by the Dubai Chamber of Commerce &Industry as factors which can drive the country’s car sales up by five per cent and car ownership by 55% in the coming months. The modest projected increase in sales is encouraging for auto dealers who have resigned themselves earlier to, at best, a stagnant scenario.

The UAE’s car ownership ratio of 54 per 100 inhabitants is higher than that of most developing countries. Half of the total vehicle stock is in Dubai, though it comprises only 30% of the UAE population of over four million.

Dubai’s Statistical Centre reports that, although less than 28% of vehicles in Dubai are owned by Emirati citizens, they own an average of 2.35 cars while the expatriates own an average of only 0.92 car. Thus, Emirati households in Dubai and the entire UAE present a major growth potential in auto sales, more so now that notable economic improvements have caused lending institutions to offer client-friendlier auto financing loans.

Since UAE has no substantial auto manufacturing industry, it relies mostly on imported vehicles. The auto sector’s growth potential and the continued positive economic trend should hasten the establishment of the country’s very own auto industry. Dubai’s rapid economic growth and its strategic location make it the ideal auto manufacturing and re-exporting hub within the UAE and the entire region.

The global financial downturn gives Dubai and the UAE lessons on the auto industry. The “big three” US automakers are still reeling from the effects of their high cost of production and propensity for gas-guzzlers.

European Union countries offer subsidies for car owners to switch to more fuel-efficient and environment-friendly models while Asian countries provide tax-breaks for cars with smaller engines. Even in the recent Frankfurt Auto Show, electric cars stole the show amid rising concerns on gas emissions reduction and green fuel.

Most auto firms have their eyes on China, the world’s largest auto market. China provides a viable alternative for the beleaguered US auto industry, but the US is not improving its chances of tapping into the lucrative Chinese market when it unilaterally slapped steep import duties on Chinese tyres.

The US-China friction works to the advantage of other countries viewed by China as “more economically reliable”, such as the UAE. The country should accelerate the development of its auto industry, with Dubai as its centre to tap into its promising domestic market as well as the vast Middle East and Chinese markets.

DRIVE ON

UAE’s car ownership ratio is higher than that of most developing countries

tourism stakeholders, the country still has its distinctive edge to be on a par with the attractions of other Middle East tourist destinations.

Kuwait’s appeal is in its reputation as a wholesome holiday destination for the entire family. It offers various attractions like the Al Shaab Leisure Park and Entertainment City, which is one of the best and pioneering theme parks in the region. Only in Kuwait can be found the largest aquarium in the Middle East, which provides inter-active learning for the children, and the Aqua Park, which is equipped with modern facilities and equipment for almost all water sports and adventures.

Lately, the United Entertainment and Tourism Company (UETC), which developed the Al Shaab Leisure Park, opened a unique theme park called “THE 99 Village”. What sets it apart from the other theme parks is that it is built around Muslim superhero characters created by Tashkeel Media Group head, Dr Naif Al Mutawa. The comic series about the Muslim superheroes carries stories revolving around Islam’s inherent values.

While THE 99 Village is highly entertaining, its more important aspect is the experience-based learning of the values of tolerance, teamwork and respect which visitors to the park can get, Al Mutawa said during the opening of the facility. “THE 99 theme parks will provide a safe and fun environment for families to be entertained and educated by characters drawn from their culture and values,” he stressed.

Adel Hassan Omoor , chairman and managing director of UETC , concedes that Kuwait cannot compare with the likes of Dubai when it comes to tourist attractions, but he is still confident about the country’s business tourism potential and its strong domestic family-based demand for leisure and amusement activities.

Kuwait is a pioneer in bringing theme parks into the Gulf region as well as conceiving a family-based entertainment and educational holiday destinations. The entry of its distinct comic book-based Islam superheroes gives the country’s tourism sector the needed boost to surpass the present economic challenges, and still retains its unique attraction.


Fund Folio

New old waysIs the global crisis over or poised for relapse?

SO grimly has the global crisis been painted that the slightest indicators of improvement – such as the airline passenger and cargo traffic worldwide,

demand for energy and business mergers and acquisitions – tempt people to believe that the worst is over. So sharply has its effects been felt that even seasoned economists tend to interpret the slightest rebound as the first tentative step out of the quagmire.

FaR FRoM oVeR But while some analysts claim that the global economy has hit rock-bottom and that it has no other way to go but up, a recent survey conducted by global business advisory firm FTI Consulting Incorporated states otherwise. A

substantial majority of the respondents (64%) believe that the crisis is far from over. Between 73% and 80% of British and North American respondents do not believe that the crisis has ended. Asian and European investors are slightly less pessimistic, with only 59-62% of them thinking that the crisis is not over.

Such pessimism must have something to do with investor sentiment that the root cause of the problem has not been sufficiently addressed, says Jack Dunn, FTI president and chief executive officer. He concedes that the economic stimulus by governments succeeded in pushing markets to improve, but investors are wary about a scenario when government coffers run dry. But then again, investors are willing to look beyond the fundamental factors that

brought about the economic crash, he says, owing to the significant rally in global equities markets in the preceding months.

Be that as it may, investors’ uneasiness still hampers numerous companies with huge financing needs to improve their public image and bring their businesses back on track. According to a research by Standard & Poor’s, US companies alone have approximately $163 billion worth of corporate speculative grade debt, which matures in 2010, and another $266 billion set to mature the following year. These companies need huge credit infusions which government stimulus and fragile credit markets might not be able to provide.

Where will these companies source

{ Global finance }

Banks are back to their care-free trading ways

{ Advertorial }

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the much-needed additional investments? If these debt-laden

corporations cannot make good on their obligations, how will their failure impact the present financial crisis? These apprehensions might have compelled FTI Consulting survey respondents – 153 senior fund managers from more than 15 countries managing a combined equity fund of almost $3 trillion – to exercise restraint in evaluating whether the crisis is over. These concerns do not seem to be serious issues for some sectors in the finance industry, however.

‘sCaRy PaRallels’ Government officials and financial analysts are alarmed that the same big banks which received billions of dollars of government bail-out money are back to their old, merry ways which plunged the entire banking system into turmoil last year. With the bail-out, these banks are bigger now and their “appetite for risks” has correspondingly increased, analysts say. “We’re seeing the same kind of behavior from the banks and that could lead to some huge and scary parallels,” warns Simon Johnson, formerly IMF chief economist.

Wall Street is again placing enormous bets on bonds, commodities and exotic financial products. Once again, banks are running risks over and beyond what their reserves can cover, in case things go awry. The collapse of the Lehman Brothers and the consequent mergers among banks reduced the number of players in the industry and increased the market share of the surviving banks. The bail-out money only made these already gargantuan banks bigger still. The ready availability of bail-out funds and the receding memories of last year’s crash emboldened these banks to get more aggressive in their marketing campaigns, thereby posing a greater and more serious threat to the entire financial system.

“You cannot rely on the scars of past crises to ensure against practices that will lead to future crises,” says Lawrence Summers, White House National Economic Council director. He underscores the need to revise existing financial regulations to protect the financial system from a relapse.

For the past year since the financial crash, no significant legislation has been passed to avert a repeat of the banking system’s unbridled practices.

Measures to regulate the financial system and proposals for more responsible marketing practices have been repeatedly shot down by industry interest groups.

Risk-taking goes hand-in-hand with banking and finance. Lending and investments generate employment and encourage consumer spending, spurring economic activity and growth. Too much risk-taking – lending to customers with highly questionable credit-worthiness and investing in complex, over-valued securities – is another matter, particularly when a bank’s exposure is way beyond its cash reserves.

Now, banks are back to their care-free trading ways.

At the height of the financial crisis in the last quarter of 2008, Goldman Sachs almost stopped trading in risky assets. For the second quarter of this year, Goldman’s trading revenue reached almost 50% of its total revenue, similar to its trading revenue share for the same period in 2007 when the economy was still strong. Reportedly, JP Morgan’s penchant for trading is not far from that of Goldman’s, as its trading revenue share compared to overall revenue is

Fund Folio

Employees at work at the Montreal Exchange, in Canada


similar to that of Goldman’s.When it comes to potential losses

for an average day of trading for the second quarter of 2009, the combined figure for Goldman, JP Morgan, Citi Group, Bank of America and Wells Fargo exceeded an astonishing $1 billion, or 76% higher than the average potential daily trading losses for the same period way back in 2007. Profits posted by these five biggest banks for the second quarter of 2009 reached $13 billion, a 100% increase compared to the second quarter of 2008, or just one-third lower for the same period in 2007 when the economy was substantially more robust.

The risk is proportionate to the return. Hence, the real-estate bubble ballooned until it consequently blew up in the face of investors and, unfortunately,

on the global economy. Now, a similar investment scheme secured by risky mortgages is making its way back into the banks’ favourite portfolio.

As a creative way of cleaning-up their books, these banks lump bonds secured by high-risk mortgages with bonds secured by low-risk mortgages. They then market the hybrid as bonds of low-risk investments. Morgan Stanley reportedly said that the market for these products has reached $30 billion. No wonder then that this has become one of the banks’ favoured products.

ReCoVeRy, RelaPseThe way banks are going back to their free-wheeling practices prompted Nobel Prize-winning economist, Joseph Stiglitz, to lament that the problems in the

Responses to FTI survey, broken down by region Source: fTi consulting incorporated

banking industry are more now than before the crisis. As the global economy teeters between recovery and relapse, fears of further bank failures stand in the way of making a significant step towards recovery. One year after the crash, credit markets are still “shell-shocked” and are very cautious even when they are dealing with asset-backed securities.

For companies in need of additional investments to survive the crash, this credit crunch can mean nothing else but trouble. Though central banks in the UK, US and Europe slashed interest rates to record lows, credit remains tight. So risky has lending become that concerns have been raised about the ability of some debtor-companies to live up to their commitments. Last year, Moody’s Investors Service downgraded ratings on a record $3.5 trillion worth of US corporate debt.

Corporations strive to secure new loans or refinance existing ones, but they are having a very hard time. Inadvertently, it is the US government itself which deprives corporate America with needed investments as investors prefer to safeguard their funds in US Treasury bills. Corporate officers report that they have to spend more time getting bank commitment letters than they used to two years ago. It costs corporations more to raise capital now compared to the years before the crisis. For the US, this hampers the recovery and growth of businesses at this time when unemployment has reached 26-year high.

The added cost of raising capital will hold back business growth and restrain consumer spending. No way does this present state of financial affairs contribute to hasten global economic recovery. In fact, fears of further bank failures can lead to a relapse.

Joseph Stiglitz

Significant rally in global equities markets reflects optimism among investors


Logical move A harmonised transport policy will advance India’s logistics industry

BLAME it on poor cargo terminal services at most of its domestic airports. Count in inadequate infrastructure, complex regulations and taxation laws – and you have India’s logistics industry in a bind, despite the country having robust growth in its gross domestic product

and manufacturing sector. Movement of cargo by sea is also problematic, owing to limited cargo handling facilities, while travel along national highways is beset with congestion.

In the metros and a few cities of the world’s second-most populous nation, next-day connectivity might be the norm, but 24-hour delivery cannot be said for the rest of the country. Products from any point in the world can reach Mumbai, India’s commercial and entertainment centre, within 24 hours. It will take several days or even a week, however, before the goods can reach their final inland destination. Timing of deliveries outside key cities is simply unpredictable.

DHL-owned Blue Dart, for instance, still operates within the same amount of area allocated to it more than a decade ago. Limited space and poor cargo facilities adversely impact turn-around time for this company. The managing director of Blue Dart Express, Anil Khanna, laments, “If one does not have the right facilities in terms of size and site within an airport, it is a huge challenge.” Though the company is the only Indian logistics player with seven dedicated cargo aircraft, Blue Dart occasionally has to resort to using belly space in passenger planes, thereby competing with other logistics players that mainly rely on belly space service.

Shipping operators, meanwhile, are not very keen on using India’s 200 ports along its 7,600-kilometre coastline because of slow turn-around time, which delays the ships’ voyages to their other destinations. And while the country’s national highways

{ India }

< In Mumbai: Products from any point in the world can reach Mumbai within 24 hours

Focus


comprise only two per cent of its road network, they carry 40%

of total road freight traffic. Naturally, traffic jams occur and transport time increases.

loGisTiCal woesComplex regulations and taxation systems compound logistical woes, as transport policies and procedures vary from state to state. Different government agencies also have divergent documentary requirements for the same set of cargo. Hence, the 1,666-kilometre truck transport from Kolkata to Mumbai entails a delay of 32 hours spent on various checkpoints, or approximately 1.5 hours delay per 100 kilometres, according to an earlier study made by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

In Western Europe and the US, the average speed of commercial vehicles is more than 60 miles per hour. “On average, a commercial vehicle in India runs at a speed of 20 miles per hour,” points out Vineet Kanaujia, general manager of Safexpress, a logistics firm with a fleet of 3,500 vehicles. Moreover, India’s logistics industry lacks the capability to offer integrated and multi-modal services. Transport costs consequently rise in switching between different modes of transport operated by individual entities.

All these factors contribute to India’s high logistics cost of 14% of the value of goods, compared to 10% in China and six per cent to eight per cent in other developing countries. Such a high logistics cost erodes the competitiveness of India’s products in the global market. India spends 13% of GDP on logistics, but this is seen to come down to 8-10%, following the industry’s acceptance of third-party

Focus

logistics (3PL) service providers. This has created a market for a range of logistics and supply-chain management solutions like transportation, material handling, warehousing, IT and inventory management, among other things.

A 3PL firm answers the outsourcing needs of companies for some or all of their supply chain management function. In recent years, express cargo companies have identified 3PL as a new growth opportunity. “Globalisation has led to increased movement of cargo across geographies,” says a paper by India-based logistics expert Zia Ahmed Khan and posted online in July. With the implementation of value-added tax (VAT), increased outsourcing and international trade, the express distribution sector will have a compound average growth rate of 20% over the next five years.

Titled Logistics industry in India, the paper stresses that logistics services are in demand, “as raw materials are sourced from one end, assembled in another part of the world and then distributed to some other location”. This requires specialised software and networks for the complete chain of logistics for the manufacture and distribution of products.

‘eXCiTiNG GRowTh’ “The logistics industry in India is

Stacked pallets in a warehouse: 3PL services like warehousing help customers reduce logistics costs

Victoria Memorial, Kolkata: Complex regulations delay truck transport between this city and Mumbai


Though it is barely four years in operation, Jazeera Airways has made its presence felt in the aviation industry as it garnered a substantial chunk of Kuwaiti passenger traffic and logged the highest number of landings and take-offs from Kuwait International Airport.

Jazeera Airways, the first privately-owned airline and one of the few low-fare airlines in the Middle East, stated that it is the preferred airline of 25% of passengers traveling to and from Kuwait and accounts for 25% of the number of flights originating from Kuwait International Airport, making it the airport’s most dominant operator.

It also has the highest number of take-offs and landings from the airport at 1,834 flights for the month of July, based on the report issued by the Kuwait Directorate-General for Civil Aviation, eclipsing by 4% the number of flights of the second largest carrier.

Marwan Boodai, Jazeera Airways chairman whose Boodai group owns 30% of the airline, credits the firms strong performance its earlier network restructuring and on its “continued commitment to growth despite market downturns”.

The International Air Transport Association, in its latest report issued August 2009 covering the month of July, noted that there was a 2.9% decline in global passesnger demand compared to the same period last year.

Despite the decline, IATA remained unperturbed as the July figure was an improvement compared to the 7.2% drop in June and the 6.8% decrease in the first seven months of the year.

Jazeera started operation on October 30, 2005 with a fleet of Airbus A320s flying to limited destinations in the Middle East. In less than four years, the airline now operates a fleet of 10 Airbus A320s and flies to almost thirty destinations not only in the Middle East but also to Europe, Africa and India.

Very recently, Jazeera added two additional flights weekly to its Kuwait-Jeddah route schedule. Starting September 16, Jazeera will fly its guests to the second largest city in Saudi Arabia five days a week every Monday to Thursday and on Saturdays. These extra flights are in addition to its existing twice-weekly schedule to the Saudi capital of Riyadh.

“The Kuwait-Jeddah non-stop route has proven to be one of the most popular in our network and we have added additional flights in response to the overwhelming demands of our guests. The extra flights will cater to the growing number of business travelers between Kuwait and Jeddah,” said Jazeera Airways CEO Stefan Pichler.

Jazeera chairman Marwan Boodai is proud that a quarter of all passesngers at Kuwait International Airport flies Jazeera Airways. “We would like to thank our valued guests for their confidence. We are poised for more expansion and a stronger drive to build growth at Kuwait Airport and the economy,” he stressed.

Boodai likewise intimated that more deliveries early next year will complement its present fleet of 10 Airbus 320s so that the airline can provide flights to more exciting destinations.

Pichler is unfazed by the economic slowdown since last October and expressed his strong belief that the airline will continue its growth. “We firmly believe that our superior affordable products provide ... value for money in these markets,” he said.

Jazeera Airways was established in 2004 as a non-governmental airline with main base at Kuwait international Airport. Its birth as the nation’s second national airline ended the 50-year dependency of Kuwait on Kuwait Airways.

The firm raised its US$ 35 million capital through an initial public offering in Kuwait which was over-subscribed for a phenomenal 12 times. Since then, it has been largely instrumental in popularizing low-cost carriers in the Middle East and has made its mark in Middle East aviation industry.

Jazeera makes waves in ME aviation

entering a period of exciting growth, with plenty of opportunity for companies that provide 3PL services,” says Dr DS Rawat, secretary-general of New Delhi-based ASSOCHAM. The industry has to integrate and offer more competitive, more comprehensive and more cost-efficient services to its burgeoning clientele, the group says, believing that India’s logistics market will reach $125 billion by 2010 from the current $105 billion.

The private sector alone, however, cannot accomplish this without government support. It is very encouraging for industry stakeholders that government has undertaken projects to develop its road networks, ports and airports. But more needs to be done beyond infrastructure development. “Of course, the support of the government is also instrumental in developing this industry, and, although a number of factors must be resolved in the coming years, the general response towards outsourced logistics is very positive,” Rawat says.

Presently, 55% of companies in the country’s logistics industry hire the services of warehousing and transportation providers. Customers want logistics partners that can help them reduce operating costs and increase supply-chain efficiency on a global level. “With the impact of globalisation, customers are eager to expand into new markets, creating a greater number of logistical challenges,” Rawat says. “This is driving companies to choose partners with international coverage, and give them more responsibility and input into their business processes.”

To create an environment conducive to the growth of the logistics industry, India has to harmonise the varying transport policies between different states; simplify documentation procedures among various government agencies; consolidate taxation measures and liberalise regulations on mergers and acquisitions among logistics players. With over $300 billion in current infrastructure investments; strong foreign direct investments in the manufacturing, agri-processing, telecoms and retail sectors; and the introduction of VAT, India’s logistics industry is strategically positioned to realise its full growth potential.


UPPER HANDAramex looks to emerging markets for growth and development

HUGE demand for business outsourcing continues in the Middle East, as companies devise ways to be more efficient and turn to logistics operators for support. And this is what Aramex

is trying to take advantage of, as it embarks on an expansion programme in the Gulf Co-operation Council (GCC) states and their neighbouring Levant countries of Lebanon, Jordan and Syria. The Middle East’s global transportation and logistics services provider also is looking at developing countries and emerging economies with high growth potential.

“There is an ongoing trend from companies in the region towards outsourcing logistics services, as a way to increase efficiency and manage costs,” says Fadi Ghandour, founder and chief executive officer of Aramex. “For that, we are further investing in developing our logistics infrastructure across the GCC and Levant.” Spending for infrastructure development is something which Aramex can afford even in the time of a recession, as it has no debt on its balance sheet.

FUTURe oPPoRTUNiTies Its good performance over the last year has also allowed Aramex to retain all its employees, despite the global credit crisis brought about by the risky subprime mortgage industry in the US. Not only this is good for the morale of Aramex employees, especially during a recession, it also means the company is well positioned to exploit future opportunities, according to Ghandour, in a recent interview with UK-based Transport Intelligence (Ti).

Focusing on its core operations by outsourcing minor businesses and staying away from asset-heavy balance sheets, Aramex has made

{ Logistics }

< There has been no redundancy at Aramex, owing to its good performance over the last year

cover story


medium-sized businesses. “We think our asset-light model has allowed us to remain flexible and agile,” Ghandour emphasises, “and has conserved our cash to invest in areas where we think we can have a competitive advantage.”

The company continues to invest in its existing operations as part of ongoing business development. It also indulges in franchising which, Ghandour says, has been a successful strategy. The company’s brand equity and independent international network serve as a platform for franchisees to grow their business further. For the domestic and regional transportation companies looking to boost their presence in their own environment and beyond, there’s nothing better than knowing the local market and having the support of a global brand like Aramex.

UNiFied sTaNdaRds Aramex leads the Global Distribution Alliance, a grouping of 40 independent express firms worldwide – specialists in their respective regions but serve the world through the same, unified business standards and procedures. Its shares have been traded on the Dubai Financial Market since June 2005, three years after it returned to private ownership from being traded on the NASDAQ stock

improvements in its gross profit and net profit margins. “This is

attributed to our asset-light model, and the fact that we have no debt on our balance sheet spared us the crippling effect of being overburdened by the requirements of capital expenditures or debt-servicing,” he remarks. Net income for the first half of the year hit $25.3 million (Dh93.1m), growing 25% from a year earlier. And having more cash means “we are continuing with our expansion plan”.

“Looking ahead, Ghandour believes that his biggest challenge will be to maintain the margins Aramex has been able to achieve,” says a Ti article written by its chief executive, John Manners-Bell. This depends on having the right talent to advance the company’s growth and expansion plan. “Being able to build infrastructure in the tough times will mean that Aramex will have first mover advantage when the economy eventually picks up.”

Being in the robust Middle East region also gives Aramex a strong platform for growth. The region, particularly the oil-exporting GCC states, is seen by economic experts as among the first to recover from the global credit crisis, owing to a perceived increase in demand for energy and increased government spending on infrastructure. Headquartered in Amman, the company also maintains facilities in Dubai, which is fast-becoming a global hub for the supply-chain and logistics industry.

“In addition, Ghandour believes there will be a huge demand for outsourcing in the region, with companies being forced to look at making efficiencies and turning to logistics operators for support,” Manners-Bell writes. “His company’s portfolio of express, freight forwarding and logistics, he believes,

will make it well positioned to exploit this trend.”

Aramex’s main target-countries for expansion are some of those in Africa, the Central Asian republics (former Soviet satellites now known as the Commonwealth of Independent States, or CIS) and Asia, particularly the world’s two most-populous nations, China and India. It’s not that it has yet to tap these markets; it is merely looking to flex its logistics muscle to create more product offering and an expansive territory for itself.

Aramex has armed itself with extensive knowledge of and expertise in emerging economies for geographic expansion. It continues to expand its global network via franchising, joint ventures and acquiring small- and

cover story

The Aramex facility at Dubai’s Jebel Ali Free Zone

Fadi Ghandour


market from January 1997. Created as an express operator in 1982,

Aramex, or Arab International Logistics, has since established itself into a global brand known for good service and multi-product offering. Its comprehensive transportation solutions range from domestic and international express delivery, freight forwarding, logistics and warehousing to publication distribution and specialised shopping services, including the Shop&Ship (US mailbox) and Shop the World (catalogue shopping).

Better known for servicing clients and providing them with customised solutions than about capacity-building, the company invests in facilities when and where these are needed mostly. Warehousing services, for instance, are a crucial element in the logistics industry in the Middle East and South Asia, where supply-chain solutions outsourcing is expanding. “Therefore, when appropriate warehousing space is

not available, we invest in purpose-built facilities in order to serve our clients better,” Ghandour says.

And once Aramex sets up shop in a certain place, it becomes committed to helping protect its environment, as it has introduced eco-friendly vehicles, started using biodegradable and recycled packaging materials and planted trees in many locations, among other initiatives. Well aware of the fact that it belongs to the industry that negatively impacts the environment, Aramex regards its environmental initiatives as extremely significant not only to its business but to the whole society.

soCial ResPoNsibiliTyIt regards corporate social responsibility (CSR) as a platform to becoming an active societal partner in development, and fulfilling its responsibility towards the communities wherein it operates. “Corporate social responsibility for

Aramex is not a programme, but rather, a strategy where sustainability is embedded in the business model,” Ghandour explains. It is the first logistics firm in the MENA (Middle East and North Africa) region and one of the few in its industry worldwide to publish a detailed sustainability report.

Believing that human capital is the most valuable asset, the company’s CSR initiatives are mainly related to education and youth empowerment. It also has interests in entrepreneurship (Aramex itself started off as an entrepreneurial initiative), owing to the sense of ownership and activism that it wants to instill in the youth. Sports promotion and sponsorship is another important part of Aramex’s CSR programme, as this represents a “positive platform for health, competition, teamwork, perseverance and many other values that we, at Aramex, respect and live by”.

In Dubai: Aramex is confident that its home market of the Middle East, including the UAE, will see continued growth

Its logistics portfolio, including express and freight forwarding, will make Aramex exploit outsourcing trend in the region


Right stepDubai rules the global trade and logistics arena

LIKE the centre of a radiating wheel, the UAE has emerged and redefined its position as an undisputed air and sea hub of the Middle East, Africa, Europe and Asia. Long deemed by Persian, Arab, Indian and African traders

and travellers as the centre of cosmopolitan trade and commerce, Dubai looks back to this prestigious history as it emerges an undisputed player in the global trade and logistics arena. The UAE has about $26 billion committed to current and upcoming air and seaport developments in the whole UAE.

As cited in the September 8 economic note by Standard Chartered Bank (SCB), in Dubai, the UAE is aggressively transforming itself as a logistics hub catering to a vast population basin. “This sector is one of the most promising ways for the UAE to meet its goal of economic diversification,” says Dubai-based Philippe Dauba-Pantanacce, SCB’s senior economist for MENA (Middle East and North Africa) and author of the study. “We believe that the government is right to be pursuing its expansion aggressively.”

Titled “Back to the future”, the SCB note says the UAE is vigorously pursuing the first pillar of hub diversification strategy, through eight major sea and airports developments on execution and three projects on EPC (engineering, procurement and construction) bid.

Managed by the state-owned DP World and accounting for roughly a third of Dubai’s GDP, Dubai’s Jebel Ali is the world’s largest man-made harbour spread across 152 square kilometres. There are plans to expand its capacity to 50 million 20-foot equivalent units (TEU) by 2030 (more than 40% of the world’s largest port capacity today). DP World is also opening a new port in Abu Dhabi – Sheikh Khalifa Port, in Taweelah – while Sharjah and Fujairah are also ramping up their port infrastructure.

On the air and aviation front, the UAE has enjoyed phenomenal airport growth, with passenger traffic continuing to rise in Abu Dhabi and Dubai despite a near-collapse in global air traffic. According to the Center for Asia-Pacific Aviation (CAPA), Dubai airport is now the sixth-busiest in terms of passenger traffic, beating Bangkok this year and Hong Kong (in June on a monthly basis), and overtaking Singapore last year. This is surprising since Dubai Airport wasn’t even in the top 30 in

{ UAE }

< At Dubai Creek: The UAE commits $26bn to current and upcoming air and seaport developments

The Gulf


the Airports Council International (ACI) 2000 ranking. Currently, the

ACI ranks Dubai the fourth-busiest airport in terms of international cargo volume which has continued unabated this year.

While global passenger traffic has declined by 6.8% year-on-year, Dubai’s rose by 12.6% in July from 10.3% in June, says the International Air Transport Association (IATA). Abu Dhabi, named the fastest-growing air hub in 2008 by ACI, posted similar gains with its passenger traffic, growing by 8.1% during the first half of the year and by 10.3% in July. This airport expansion push is supported by two key factors: government-backed airlines continue to add planes and equipment, and the country’s expanded infrastructure capacity.

The UAE government has recognised that even though hydrocarbons will remain the crucial and predominant GDP contributor in the short to medium term, establishing and promoting other economic sectors is crucial to the country’s long-term growth. With the UAE’s central location in the global arena, the economic benefits of turning the country into a logistics hub are multiple and necessary.

iMPRoViNG liQUidiTy Citing government and Central Bank support to the section, the liquidity in the UAE’s banking sector is seen to be vastly improving. Shayne Nelson, chief executive officer of SCB, MENA, reveals that the gap between loans and deposits has narrowed to $11 billion in July from $30 billion at the beginning of the year.

Banks from across the board were affected by the deterioration in the quality of all classes of assets during the last three quarters. The volume of non-performing loans (NPLs) is also expected to peak in the current quarter and subside in the months ahead. The current liquidity shortage in the banking sector is more structural in nature as bank deposits, especially the corporate deposits parked with banks, are relatively short term in nature, while their loans have longer tenures.

The UAE economy, in fact, grew by 7.4% in 2008, owing to high oil prices and the various measures taken by the central bank from September 2008, to support liquidity in the banking sector. Also last year, inflation jumped to 12.3% from 11.1% in 2007 due to property rental prices that rose by 13.4%, the

central bank says in its annual report released last month. It adds that money supply growth was up 29.1% to $245 billion last year compared with $189.2 billion in 2007.

“These developments indicate a contraction in monetary liquidity in the banking sector due to the lack of liquidity in the global markets,” the report adds, “after the exit of speculative money that entered the country in the second half of 2007 and the first quarter of 2008.” As evidence, the investment balance of banks operating in the UAE dropped to $12.82 billion at the end of December 2008. This is shown in deposit certificates issued by the central bank. The trade balance surplus grew 35.3% to $62.91 billion in 2008 from $46.51 billion the previous year.

FoReiGN owNeRshiPIn a move aimed at boosting foreign investment, the UAE Cabinet is finalising the industry law that will ultimately allow 100% foreign ownership in industries. Also being considered by the Cabinet is the raising of foreign ownership ceiling from the current 49%. There was no indication,

The Gulf

41

Standard Chartered Global Focus | 08 September 2009

UAE (con’d)

The UAE’s airport expansion push is facilitated by two key factors. First, government-backed airlines continue to add capacity aggressively. In June, Abu Dhabi‘s Etihad Airways announced USD 14bn in aircraft orders. Dubai‘s Emirates Airlines will receive eight more planes this year and has 160 planes on order for a total of USD 50bn. Second, the country’s expanded infrastructure capacity is supporting this push. Emirates Airlines opened a new terminal (reportedly the largest building in the world by floor space) at Dubai airport, while Abu Dhabi is extending its airport (Table1). The future Al-Makhtoum airport, although its later phases have been delayed, will have five runways and a planned 160mn passenger capacity (versus about 60mn for today’s largest airports). More importantly, the airport is building its freight and logistics platform in coordination with Jebel Ali port to form Dubai Logistics City, a 21.5 sq km logistics hub that links the airport and the port.

Key part of a broader diversification strategyWhile hydrocarbons will remain the predominant GDP contributor in the short to medium term (43% of exports in 2008), developing other economic sectors is crucial to the country’s long-term growth. The economic benefits of turning the country into a logistics hub are multiple. It encourages more firms to set up regional headquarters in the UAE. The meetings, incentives, conferences, and exhibitions (MICE) sector benefits from improved access. Meanwhile, infrastructure development benefits all sectors of the economy by lowering running costs for all businesses. Apart from oil, the UAE’s central location on the global map is the other natural asset it can bank on with certainty.

Sources: MEED projects, SCB Global Research

Table 1: UAE air and seaport developments as of 01-Sep-09

Project ProjectStatus

Budget(USD) mn Project Project

StatusBudget

(USD) mnAbu Dhabi Airports Company - Abu Dhabi Airport -

Air Traffic Control Tower Execution 110 DCAA - Dubai World Central (Jebel Ali) - Dubai Logistics City Labour Village Execution 300

Abu Dhabi Airports Company - Abu Dhabi Airport - Terminal Complex Execution 500 DCAA - Dubai World Central Al-Makhtoum

International Airport (Central Utilities Complex) Complete 165

Abu Dhabi Airports Company - Abu Dhabi Airport Expansion Execution 6,800 DP World - Jebel Ali Port Expansion: Offshore

Island EPC Bid 400

Abu Dhabi Airports Company - Abu Dhabi Airport: Midfield Terminal Complex EPC Bid 1,851 DPA - Jebel Ali Port Expansion Execution 1,300

Abu Dhabi Airports Company - Free Trade Zone EPC Bid 600 FFZA - Logistics Park Execution 150

Abu Dhabi Ports Company - Khalifa Port & Industrial Zone EPC Bid 2,100 Fujairah Government - Expansion of Fujairah

International Airport (FIA): Phase I & II Execution 100

Abu Dhabi Ports Company - Khalifa Port & Industrial Zone: Onshore Civil & Building Works Execution 381 Fujairah Government - Expansion of Fujairah

International Airport (FIA): Phase III, IV & V EPC Bid 445

Aldar/ TDIC - Saadiyat Island - Abu Dhabi International Airport Highway Execution 125 Fujairah Port Expansion Execution 200

DCAA - Dubai Airport Expansion (Concourse 3) Execution 1,334 Jebel Ali Free Zone Authority - South Zone Execution 550

DCAA - Dubai World Central (Al-Makhtoum International Airport) Execution 7,000 Nakheel - Dubai Maritime City Execution 500

DCAA - Dubai World Central (Al-Makhtoum International Airport) - Helipad & Tunnel EPC Bid 120 Nakheel - Redevelopment of Mina Rashid EPC Bid 1,000

DCAA - Dubai World Central (Jebel Ali) - Dubai Logistics City Execution 600 RAK Civil Aviation Department - RAK Airport

Expansion Execution 100

Total 26731

-20 -10 0 10 20

Africa

Asia Pacific

Europe

Latin America

North America

Dubai Airport

Jun-09 YTD (end July )

Sources: IATA, CAPA, * as of end July

Chart 1: Passenger traffic growth comparison% y/y, June 2009 and year to July

UAE air and seaport developments as at September 1 Sources: Scb, citing Meed projects, Scb global research


however, of the possible limit of foreigners’ stakes in private companies.

“The law to allow 100% foreign investment is ready, but still under study and should be finalised within the next two months. We are especially looking into certain sectors, such as hi-tech and hi-value,” says Sultan bin Saeed Al Mansouri, Minister of Economy. He also says that government would like to increase the contribution of non-oil sectors, which make up 64% of the UAE’s GDP, some of which include small- and medium-sized enterprises (SMEs) and various industrial sectors.

Since a large number of foreign companies and investors have shown interest in moving to the UAE, the introduction of a 100% foreign investment independent of an Emirati partner is a very important step for the UAE economy. “Liquidity will increase for sure, which will help increase the UAE’s GDP,” says Reda Musallam, a business analyst, in a report by Gulf News. “This decision will benefit all the economic sectors in the country, and also promote business affairs with the outside world without obstacles. I hope

this decision is applied by the end of the year, since it will benefit all of us.”

On another note, the implementation of the value-added tax (VAT) in Gulf countries is being reconsidered until the end of the year, in order to give authorities more time to study its mechanism. This is not an indication, however, whether Gulf countries would really adopt VAT. The UAE is the most advanced among the Gulf countries in studying the VAT system. In 2001, members of the Gulf Co-operation Council (GCC) agreed to boost regional trade by forming a monetary union. The UAE, which has a service-oriented economy, has been looking for other sources of income other than oil exports.

iNVesToR CoNCeRNs In a bid to help make Dubai a more attractive to foreign investments, more competitive and have a bright general outlook, the Dubai Chamber of Commerce & Industry recently met with business groups and council members to hear their concerns. Strict access to credit for SMEs, diminishing financing options, government fines and fees and

other administrative issues were put forth, for Dubai Chamber to take up with the relevant authorities.

Survey results also show that the participants expected government to facilitate and streamline administrative procedures, and reduce the fees of some services like issuing visas to workers and trade licences, helping facilitate access to finance for SMEs and developing targeted programmes to strengthen and improve confidence in various economic sectors.

Philippe Dauba-Pantanacce

Khalifa Port & Industrial Zone


ON THE momentous date of 09.09.09 Dubai initiates a global milestone – the Dubai Metro – which, when completed in 2014, will include some 318 kilometres of metro network, stations, depots and parking areas. This is the first major new railroad infrastructure in the Arabian Peninsula in several decades and the only urban mass transit system. It is another sign that Dubai is achieving world-class status in urban planning and quality of living. While the technological achievement of a fully automated metro is impressive, the economic benefits and consequences will be profound. Massive public investments in infrastructure represent the cornerstone of Dubai’s development strategy as envisioned by its leadership. These have included transportation systems (highways, roads, airports, ports and waterways), utilities (water, desalination, waste management, electricity and telecommunications) and other kinds of public facilities (schools, universities, post offices and media entities).

These investments have provided a powerful thrust for economic growth, and sparked off deep structural changes in the Dubai economy, leading to one of the most amazing and faster processes of economic diversification recorded in the world. Dependence on oil and traditional commerce gave way to a modern service economy hinging on global logistics, tourism, IT, telecommunications and finance. Without the enormous effort in endowing Dubai with state-of-the-art infrastructure, the human capital attracted by the emirate from all over the world would not have been used to its full extent. Infrastructure, in fact, generates positive network effects, the critical ingredient in high value-added sectors where cross fertilisation and synergic interactions are key elements of competitive advantage.

Public spending on infrastructure produces positive economic returns: the larger the stock of publicly-owned capital, the greater the overall productive capacity of the economy – i.e., its ability and efficiency in producing goods and services. In addition, a

higher endowment of infrastructure boosts the aggregate return on private sector capital investments. The bottom line is that well designed, business-oriented infrastructure is directly productive, benefiting the economy by reducing the cost of private business transactions, and is an asset for the future productivity of the private sector. Empirical research suggests that the payoff on public infrastructure can vary substantially over time and across sectors. First of all, it depends on the usefulness of the investments themselves and the extent to which the spending “crowds out” – or reduces the funding available for – investment in private capital. Secondly, returns on the initial phase of a system of public investments can be large, but the growth rate declines as the system expands.

Empirical analysis shows that for emerging economies, a one per cent increase in the stock of “core infrastructure” (transportation, water supply, wastewater treatment and power facilities) is associated with an increase in the level of national output of between 0.15% and 0.25%. Since national output is about four times the value of core infrastructure, then a $27.23 (Dh100) infrastructure investment can generate an increase in output of between $16.34 (Dh60) and $27.23 within a year. In the case of the Dubai Metro, the capital investment of $7.62 billion (Dh28bn) through 2014 will likely lead to an increase in national output of between $4.62 billion (Dh17bn) and $7.62 billion.

What sort of benefits can we expect from the Dubai Metro? We can expect an increase in productivity as a result of lower congestion costs (variously estimated at between $1.1 billion and $1.36 billion, or Dh4bn and Dh5bn, per year), a positive externality in terms of reduced road use (which, pushed up by population pressure, is causing bottlenecks, accidents and inefficiency). While the introduction of the salik toll system (a form of congestion pricing) led to more rational use of Sheikh Zayed Road, the introduction of the Dubai Metro network will provide an alternative

to road transportation, helping reduce congestion, pollution and environmental damage resulting from road transport. The Dubai Metro will also increase population and labour mobility by lowering the cost of travel, and facilitating movement between different sectors of the city. An additional benefit of the Dubai Metro will result from the greater integration of various modes of transport, with the road-rail-water and air networks facilitating the movement of people and goods. Inter-connected networks increase the overall value and effectiveness of independent networks.

In essence, the metro will substantially cut travel cost for lower and middle income people, expanding their ability to take jobs far from their dwellings and enjoy the amenities of the city and its social life.

Investment in infrastructure has been the major driver of Dubai’s spectacular economic growth over the past decade. Dubai’s central geographic location between Asia and Europe became a source of economic comparative advantage as a result of the infrastructure investment that made the emirate and its people, activities and businesses internationally connected. Network externalities are obvious when we think of telecoms and the internet: the more people connected the greater the value of the service. The same is true of transport systems, electricity grids, central cooling networks and water and waste management. The Dubai Metro will lower the cost of transport; create a more environmentally friendly means of transport; increase national output and productivity growth and lead to a more socially integrated city.

Dr Nasser Saidi is chief economist of the Dubai International Financial Centre.

Towards a more socially integrated city

opinion

DR NASSER SAIDI


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For more information or to registerTel: +971 4 364 2975 - Fax: +971 4 363 1938 - Email: [email protected]

www.jointmilitarylogistics.com

JOINT MILITARYLOGISTICS 2009

Pre-Conference Masterclass: 4th October 2009Main Conference: 5th - 6th October 2009

Researched and developed by: Silver sponsors:

Media partners:

Plus special

discounted prices for

military delegates!Transforming military logistics processes and systems to establish a comprehensive joint capability

Crowne Plaza Muscat, Oman

Attend Joint Military Logistics 2009 to address key issues including: • Coordinating airlift capability, afloat support and ground-based logistics to provide comprehensive support • Understanding the theory behind joint logistics and logistics transformation • Achieving total asset visibility • Optimising end-to-end joint supply chain • Operational perspectives on in-theatre logistics • Improving the planning, execution and control of logistics operations• Establishing a single joint service logistics information system

The speaker panel includes leading international logistics experts including: • Major General Brian Geehan (Ret.), Former Director, J-4, US CENTCOM • Philippe Martou, Deputy Chief of Aviation Service – OMLA, World Food Programme • Colonel Freek van der Vaart, Director, Movement Coordination Centre Europe • Professor Matthew Uttley, Dean of Academic Studies & Head of Department, Kings College • Dr. David Moore, Course Director, Acquisitions & Logistics Unit, UK Defence Academy • Wing Commander Roland McTeague, Team Leader Logistics Coherence Information Architecture Exploitation Team, UK MoD• Brigadier Charlie Hobson (Ret’d), Former Director of Equipment Capability, Expeditionary Logistics and Support, UK Ministry of Defence• Jeremy Smith, Integrated Logistic Support & Through Life Support, Defence College of Management & Technology, UK MoD

opinion

LEADING companies exercise control over supply chains in various different ways. In dyadic relationships between there are various examples of partnerships, contracts and supplier manuals or charters. We have recently seen an example of a partnership arrangement in a producer-driven chain in which the producer is providing knowledge transfer by investing in outside consultancy to work with a logistics service provider. This is to develop the capabilities of the provider to support well the changing business needs of the producer.

In other instances where main players are attempting to drive out cost, improve the speed of response and raise the standards at all levels of the supply chain, there are examples of pressure being applied to suppliers through coercion or persuasion or a mixture of both. In the auto industry, for example, there have been attempts by some key players like Toyota to structure supplier networks into hierarchies or tiers, and to devolve responsibility and accountability for managing costs and standards to the main suppliers.

In this case different forms of control are being exercised by different parties in the same chain, with the producer setting the standard and the tier 1 suppliers exercising the tracking and monitoring of performance of the lower tier suppliers. Capability may then be considered to be dispersed throughout the network or chain. That it’s the auto industry that has led the field in structured supplier networks is perhaps linked to the legacy of strong vertical integration in this industry. This was exemplified in the early days of Ford Motor

Company in which production, as well as many elements of supply and even transport infrastructure were under the ownership and control of the company.

A spectacular example of supply chain control following the changing sources of profitability in the chain is in the buyer-driven retail supply chains wherein main players, such as Tesco and Wal-Mart, have come to occupy very powerful positions in the chain, controlling the access of suppliers to mass consumer markets.

Given the low tech nature of most of the supplier base in these buyer-driven chains and the commodity-type products that are being moved, there has been a greater level of coercive practices reported. The matter is highlighted by the conclusions of the investigations carried out by the UK Competition Commission into the large grocery retailers’ activities in that jurisdiction.

Supply-chain integration: Who calls the shots?

The concept of a total product system as put forward by Ed Rhodes of the Open University in the UK is far more comprehensive in nature, and attempts to take into consideration this greater level of complexity that is being driven by new emerging trends and factors

PATRICK DALY

The author is managing director of Alba Logistics, in Dublin, Ireland.


The manufacturers and retailers are facing the challenges on how to maintain competitive advantage and ensure that they survive through the crunch time.In order to stay ahead of the competitors, firms need to identify what trends affect the distribution of their goods and services and what strategies they can implement to optimise their supply chain. We will debate the key issues

within logistics and supply chain management today.Join us in Berlin as we gather the leading logistics and supply chain executives to learn, benchmark, network and share best practice techniques in overcoming the key challenges businesses face in delivering the optimum value chain.

Discover Innovative Supply Chain & Logistics Strategies

• Takeadvantageofthedefinitiveglobaleconomic outlook with the biggest names discussing the current trends and strategies

• BuildSupplyChainofthefutureforyoursurvival and revival

• Profitfromnewinstrumentsandkeyindicatorswith anintroductionofintegratedLogistics&Supply ChainManagement

• Analyzehowtodriveanefficientcustomerservice with added value

• Optimizeyourworkingcapitalandenhanceyour procure-to-pay process

• Learnhowtocollaboratecloselywithsuppliersto sustain competitive advantage

• Answerthequestionof“Whatisanticipated?”and achieve value from global Logistics operations

• DriveSupplyChainFinanceeffectivenessthrough enhanced visibility and transparency

• StreamlineSupplyChainandservicewithTransport planning & solutions

Connecting to the Global Economic Trends while Cultivating

your Collaborations

November 19th-20th, 2009Berlin, Germany

Event organised by Uniglobal Research 2009.REGISTER TODAY! Tel.: +420 226 538 126 •Fax:+420226538118• www.uniglobalresearch.eu • Email: [email protected]

Speakers Include:Alfonz Antoni,President EuropeanLogisticsAssociation,Hungary

Prof. Dr.-Eng. Frank Straube,ExecutiveDirector LogisticsDepartment,BerlinUniversityofTechnology,Germany

Alina Monica Mustra,InternationalDevelopmentProfessional WorldBank,USA

Egil Møller Nielsen,VicePresident,GlobalDistributionLogistics Lego,Denmark

Zarko Mitic,SeniorFinanceDirector McDonaldsEurope,Austria

Dr. Oliver Philipp,GeneralManagerLogisticsGroupEurope PanasonicEurope,Germany

Lindsay Smith,LogisticsOperationsAnalystManager Kimberly-ClarkEurope,UK

Paul Reilly,GlobalSupplyChainStrategyManager BritishAmericanTobacco,UK

Malcolm Pope,HeadofLogisticsProcurement PremierFoods,UK

Duncan Lowe,SupplyChainDirector PepsiCoInternational,UK

Chris Carden,HeadofFoodReplenishment ASDA,UK

François Olsthoorn,PhysicalDistributionAssociateDirector Procter&Gamble,Switzerland

Ros Rivaz,ManagingDirectorofGlobalSupplyChain Diageo,Netherlands

REGISTER NOW

& Save 341 Eursos!

(Conference Fee: 1541

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Logistics09_ad.indd 1 19/8/09 15:54:49

< A night scene in Beirut: Lebanon’s young population is plagued by high unemployment rate

mena region

Vital enterprises The region needs a strategy promoting SME development

NOT only are they an important part of private-sector development in emerging markets, small- and medium-sized enterprises (SMEs) also form the backbone of most of the world’s largest economies.

They contribute 45% and 67% of gross domestic product in the US and the EU, respectively, and account for 60% of industrial output and 40% of GDP in some emerging markets like China. Yet they need government intervention – at least in the Middle East – to develop in the midst of a global financial turmoil.

In the next few years, the role of SMEs in the region will grow amid markets that are becoming more competitive. The SME sector can also help provide jobs for large populations of young people in high-income countries, such as those in the Gulf, and alleviate poverty in lower-income nations. “Therefore, a strategy fostering SME development is vital across the Middle East,” says the Standard Chartered Bank (SCB), in Dubai.

But the region must first improve its legal framework, increase access to credit and provide technical assistance, in order to expand the sector. SMEs can do this by building relationships with financial institutions, and becoming more financially transparent. The banks’ reluctance to provide credit facilities to SMEs is largely due to the lack of sufficient information on the sector, making it difficult for lenders to assess companies.

“Greater transparency and clearer financial reporting would likely make banks more willing to lend to these companies,” SCB says in a 12-page economic note, dated August 24 and written by its Dubai-based economist, Mary Nicola. “While governments are taking steps to help SMEs, there must be reciprocity from the SME side.”

eye oN PRiVaTe seCToRGovernments in the oil-exporting Gulf countries have, in the past few years, emphasised the

{ Private sector }


development of the private sector, implementing reforms to encourage

entrepreneurship crucial for job creation. SMEs used to play a major role mainly in Egypt and Jordan while public entities and large conglomerates defined the business environment in the region, particularly in the Gulf.

About 60,000 people living in poverty once told the World Bank that self-employment would be the best solution to their plight. There is a positive relationship between the levels of private investment as a proportion of total investment and the GDP growth rate, as shown by World Bank data for 2002-2006. And this same measure is “inversely related to poverty levels”, says SCB. “When private investment is higher, the incidence of poverty is lower,” it stresses.

Riyadh gives importance to promoting SMEs for a more diversified economy, though the sector currently accounts for only 14% of total industrial production, and eight per cent of the value of industrial goods exported.

A diversified economy will also help lessen the country’s exposure to oil-price fluctuations. Oil contributes over 80% of government revenues and over 50% of GDP, which is the sum of goods and services produced in an economy in a given period.

In the UAE, most SMEs are in the trading sector (mostly in textiles and electronics), which contributes 16% of non-oil GDP while the overall non-oil

mena region

sector accounts for over 60% of the country’s GDP. The bulk of SMEs’ business in the services sector is in transport, storage and communications, followed by contracting. SMEs involved in the trade and manufacturing sectors get the infrastructure support they need, as the UAE has developed into a logistics hub.

SMEs, which refer to companies having employees of between 10 and fewer than 200, are the backbone of the Egyptian

Country SMEs’ estimated contribution to GDP

SMEs’ contribution to emplyment

% of total businesses

Saudi Arabia

N.A 25% 90%70% of companies in industrial sector

uAe 30% 86% 90%

Egypt 80% 75% of private sector

99% of non-agriculture sector

Jordan 50% 60% 98% of registered companies

lebanon 99% of economic activity

82% N.A

Economic importance of SMEs to the Middle East Source: government agencies, as cited by Scb

At Dubai Marina: UAE’s housing-market speculation during the boom years could increase non-performing loans this year


Population under 24 years of age Source: uS census international database, 2008 statistics as cited by Scb

Private sector as % of GDP (importance of private-sector growth) Source: government ministries as cited by Scb

Mary Nicola

economy as they contribute about 80% of GDP. They are most active in the manufacturing and wholesale and retail trade sectors – the biggest contributors to the country’s well-diversified economy.

According to the UN Development Program, SMEs make up the bulk of industrial enterprises in Jordan, where there is no official breakdown of these companies by sector. Ninety per cent of SMEs’ exports come from the industrial sector, while the manufacturing sector contributes 18% of GDP.

eCoNoMiC diVeRsiFiCaTioNThe oil-producing Gulf Arab states have advocated economic diversification to lessen their vulnerability to oil prices, as well as to provide jobs to a growing population. Saudi Arabia and the UAE, for instance, are dominated by private-sector firms, most of which are in the hydrocarbon industry. “Enough jobs must be created to absorb a flood of new entrants into the job market in the very near future,” says SCB, noting that Saudi Arabia has 57% of its population aged under 24, and, UAE, 35%. The oil and gas sector in the Gulf oil states employs 1.5% of the labour force.

Lebanon, Jordan and Egypt also have young populations, and are plagued by high unemployment rates among the youth. Entrepreneurship could very well break that trend, SCB says, as SMEs can improve the standard of living in lower-income countries like Egypt, where over 40% of the population lives on less than $2 a day. A further development of SMEs could also pave the way for a stronger private sector in the UAE and Saudi Arabia, where per capita GDP is higher.

The services and trading sectors are set to generate the most jobs in Dubai, which is the world’s third-largest re-export hub after Hong Kong and Singapore. In Egypt, where population is growing rapidly and labour is relatively cheap, the services and other labour-intensive sectors are likely to prosper.

But in Jordan, whose government has export-oriented policies, growth will be seen in the industrial sector. Another growth area in Jordan is its tourism sector, owing to Petra’s 2007 listing as one of the Seven Wonders of the World. The same can be said of Lebanon’s tourism sector, as political stability takes hold. Arab tourists love to visit this country occupied by Israel for two decades starting from

1982. A record-high of one million tourists visited Lebanon in July.

VUlNeRabiliTy, PoliCy oPTioNs Due to their size and the lack of access to credit, SMEs are more vulnerable compared with large corporations in a deteriorating economic environment. Falling exports to the US and the EU have also hurt Lebanon, Egypt and Jordan. Exports to the US from Jordan fell by 10% year-on-year in May while overall exports dropped 21% for the same period. “While export demand is stabilising, we do not expect a dramatic pickup as global demand remains subdued,” SCB says.

This condition will also put SMEs in the UAE and Saudi Arabia at a disadvantage compared with large companies, even if a stronger recovery is seen in Asia by

5

Special Report | 24 August 2009

Ref: GR_20Jul09

Lebanon, Jordan, and Egypt also have young populations. In Egypt and Jordan, over 50% of the population is under 24, while in Lebanon the figure is above 40%. These countries are plagued by high unemployment, especially among youth, and encouraging entrepreneurship can break that trend. Also, as mentioned above, SMEs can play a key role in improving standards of living in lower-income countries like Egypt, Lebanon, and Jordan. According to UNDP statistics, over 40% of Egypt’s population lives on less than USD 2 per day. In countries like the UAE and Saudi Arabia, where per-capita GDP is higher, SME development can foster competition and create a stronger private sector.

As shown in Charts 1 and 4 above, SMEs in oil-producing countries tend to be dominant in the services sector. Most of the SMEs in the UAE, for example, are based in Dubai, the world’s third-largest re-export hub and a service-based economy. The services and trading sectors are likely to generate the most jobs, as they are more labour-intensive than other sectors. The same is true in Saudi Arabia, where SMEs are most active in the commercial and hotel and the construction sectors. Saudi Arabia is also one of the region’s largest construction markets due to the government’s initiative to build and improve infrastructure and other projects. Given Saudi Arabia’s economic needs, these two sectors are poised for growth.

In Egypt, rapid population growth means there is a need for more labour-intensive industries. The minister of trade and industry has said that Egypt must maintain 6% annual GDP growth in order to keep the unemployment rate steady. Therefore, services and other labour intensive industries are likely to prosper, particularly given that labour in Egypt is relatively cheap. In Jordan, the industrial sector is likely to see high growth because of the government’s export-oriented policies. Tourism is also a key sector to watch. Jordan has become a popular tourist destination since Petra was named one of the Seven Wonders of the World in 2007. That year, the number of tourists in Petra reached a new record, and it rose by another 60% in 2008.

In Lebanon, SMEs dominate the trade sector; however, in the past few years, construction and the services sector have fuelled economic growth. Post-war rebuilding is a priority for the government, creating a need for more businesses in areas such as construction. Tourism is also set to grow as political stability takes hold. Lebanon has become a popular destination among Arab tourists, and the Lebanese diaspora is larger than the population living in Lebanon. In July 2009, Lebanon reported a record of 1mn tourist arrivals.

Chart 6: Population under 24 years of age

0%

10%

20%

30%

40%

50%

60%

Jord

an

Saud

i Ara

bia

Egyp

t

Leba

non

UAE

Source: US Census International Database, 2008 statistics

Chart 7: Private sector as % of GDP (importance of private-sector growth)

0%

10%

20%

30%

40%

50%

60%

70%

2006

2007

2008

Egypt Saudi Arabia UAE

Source: Government ministries

5

Special Report | 24 August 2009

Ref: GR_20Jul09

Lebanon, Jordan, and Egypt also have young populations. In Egypt and Jordan, over 50% of the population is under 24, while in Lebanon the figure is above 40%. These countries are plagued by high unemployment, especially among youth, and encouraging entrepreneurship can break that trend. Also, as mentioned above, SMEs can play a key role in improving standards of living in lower-income countries like Egypt, Lebanon, and Jordan. According to UNDP statistics, over 40% of Egypt’s population lives on less than USD 2 per day. In countries like the UAE and Saudi Arabia, where per-capita GDP is higher, SME development can foster competition and create a stronger private sector.

As shown in Charts 1 and 4 above, SMEs in oil-producing countries tend to be dominant in the services sector. Most of the SMEs in the UAE, for example, are based in Dubai, the world’s third-largest re-export hub and a service-based economy. The services and trading sectors are likely to generate the most jobs, as they are more labour-intensive than other sectors. The same is true in Saudi Arabia, where SMEs are most active in the commercial and hotel and the construction sectors. Saudi Arabia is also one of the region’s largest construction markets due to the government’s initiative to build and improve infrastructure and other projects. Given Saudi Arabia’s economic needs, these two sectors are poised for growth.

In Egypt, rapid population growth means there is a need for more labour-intensive industries. The minister of trade and industry has said that Egypt must maintain 6% annual GDP growth in order to keep the unemployment rate steady. Therefore, services and other labour intensive industries are likely to prosper, particularly given that labour in Egypt is relatively cheap. In Jordan, the industrial sector is likely to see high growth because of the government’s export-oriented policies. Tourism is also a key sector to watch. Jordan has become a popular tourist destination since Petra was named one of the Seven Wonders of the World in 2007. That year, the number of tourists in Petra reached a new record, and it rose by another 60% in 2008.

In Lebanon, SMEs dominate the trade sector; however, in the past few years, construction and the services sector have fuelled economic growth. Post-war rebuilding is a priority for the government, creating a need for more businesses in areas such as construction. Tourism is also set to grow as political stability takes hold. Lebanon has become a popular destination among Arab tourists, and the Lebanese diaspora is larger than the population living in Lebanon. In July 2009, Lebanon reported a record of 1mn tourist arrivals.

Chart 6: Population under 24 years of age

0%

10%

20%

30%

40%

50%

60%

Jord

an

Saud

i Ara

bia

Egyp

t

Leba

non

UAE

Source: US Census International Database, 2008 statistics

Chart 7: Private sector as % of GDP (importance of private-sector growth)

0%

10%

20%

30%

40%

50%

60%

70%

2006

2007

2008

Egypt Saudi Arabia UAE

Source: Government ministries

the second half of the year, because they don’t benefit from the economies of scale. The two countries depend upon Asia for imports and exports. Contracts by SMEs are also always the first to be cancelled, as banks are reluctant to lend to smaller companies.

Banks in the UAE, for instance, generally reject between 50% and 70% of credit applications from SMEs, owing to higher risks and the applicants’ difficulty to meet certain conditions. There could also be an increase in non-performing loans this year, owing to housing-market speculation during the boom years and the slowdown in the UAE economy. In Egypt, where SMEs contribute 80% of GDP, many of these companies are not considered part of the mainstream economy due to their size, limited business experience and location in far-flung areas.

Access to finance and working capital are needed by viable businesses against bankruptcy, and so government intervention may compensate for market failures adversely affecting the SME sector. The sector needs financing, assistance in technical know-how and better regulatory environment. Some governments in the Middle East are planning to emulate moves by the European Investment Bank, which announced to double loans to SMEs through 2011.

Egypt, for instance, announced that SME assets in banks would not be covered by the 14% reserve requirement by the central bank. In Lebanon, the International Finance Corporation provided a credit facility for SMEs while government and non-government organizations are helping SMEs to get funds from commercial banks.


Faces & phases

Musty is Lloyds TSB’s business head in MELLOYDS TSB Middle East has named Richard Musty head of its business in the region, as the bank anticipates a crucial period for the banking industry on the coming year.

“Richard’s broad skill set and leadership capabilities, together with his experience in managing businesses through economic cycles, will be fundamental assets to our business,” said Tony Wilcox, head of Lloyds Banking Group’s expatriate banking business.

Being with the group for 27 years, Musty has held many senior posts, including as regional chief executive for Lloyds TSB in Asia, island director for Lloyds TSB in Guernsey, head of offshore personal banking and head of offshore treasury and international business.

“I am excited to accept this position, and I look forward

to driving the business towards success and to build on the strength of our current platform,” Musty said. “I am passionate about capturing the potential of our business in the Middle East.”

Lloyds TSB Middle East, whose main branch is at Dubai’s Jumeirah area, has won the prestigious JP Morgan Quality Award for the fifth year straight for the quality of its international money transmissions.

“This is a fantastic achievement, and we will continuously aim to provide our customers with the most secure and efficient way of banking,” said Julian Ashall, chief operating officer of Lloyds TSB Middle East. “We remain committed to offering the highest quality products and services for the benefit of our customers.”

Paul Baker, senior manager

Ashall (2nd from right) and Baker (right) with Karim Sinno, assistant vice-president for Financial Institutions, Treasury Services at JP Morgan and the executive director at the bank’s Treasury Services, Peter Vernon

Richard Musty

EMiRatES airline’s former executive hamad obaidalla and neil Mills, formerly of Europe’s low-cost carrier easyJet, have joined flydubai as chief commercial officer and chief financial officer, respectively.

“Both hamad and neil bring a wealth of expertise to flydubai, and i am delighted to be able to warmly welcome them…” said gaith al gaith, chief executive officer of flydubai, dubai’s first budget airline.

obaidalla is a uaE national whose key management roles at Emirates involved operations in Saudi arabia, East africa, yemen and iran. he is the immediate past divisional senior vice-president for network operations at Emirates.

a British-South african, Mills had worked for 12 years at easyJet, where he oversaw purchases and sales worth billions of dollars as its immediate past procurement director.

“We are embarking on an exciting journey as innovators in the low-cost sector, and i am glad that we have such senior staff from two of the world’s most successful airlines to travel with us,” al gaith said.

FLYDUBAI APPOINTS OBAIDALLA, MILLS

of Money Transmissions at Lloyds TSB Middle East, said the bank’s customers are always assured that their payments reach their destination quickly.

Instituted in 1997, the JP Morgan Chase award has a rigorous selection process, with only one per cent JP Morgan’s fund-transfer clients meeting the criteria to vie for the award.

This year, only 100 out of 4,500 banks were recognised for various industry excellence awards.


Are we ready for future challenges in Supply Chain?

Are we ready for future challenges in Supply Chain?

Workshop 12th October 2009Forum 13th & 14th October 2009

Gulf HotelBahrain

The forum provides a platform for professionals to discuss the current trends and challenges in Supply Chain with specic focus on the Petrochemical & Chemical Industry in the Middle East Region. It would address key issues amongst which one would be impact of the present global crisis on the supply chain industry particularly in the region.

Who Should AttendThe forum is aimed at Leaders, Senior Managers, Managers, Executives, Consultants, etc from the following sectors in the Middle East Region.

Petrochemical / Chemical Manufacturing Companies (Upstream & Downstream; focusing on Supply Chain Management, Purchasing, Inventory, Planning Forecasting & Replenishment Departments) Supply Chain Service Providers (Shipping Lines, Ship Brokers, Rail & Road Transporters, Freight Forwarders, Multimodal Logistic Providers, etc) Storage & Packaging Companies (Tanks, Pallets, Warehouses, Inspection Companies, Tank Cleaning Companies, Engineering & Construction Companies, etc) Authorities (Ministries, Ports, Free Zones, Terminal Operators, etc.)

Association Partners: Media Partners:

Sponsors:

www. gpca.org.aeFor Registration & Sponsorship, please contact: [email protected]

Faces & phases

DUBAI-BASED pharmacy retailer Planet Pharmacy has appointed Hasan Ukra group professional pharmacy services manager, following the company’s rapid expansion and part of its growth strategy.

Ukra said the company, whose Health First stores are to be launched later this year, aims to lift the standards of pharmacies across the Middle East region.

“I am looking forward to playing a valuable role in this vision, and delivering on the needs and expectations of the Middle East consumers,” he said.

Ukra, who speaks Arabic and holds a master’s degree in Pharmacy from the School of Pharmacy at the University of London, is responsible for attracting, developing and retaining professional pharmacists into and

within the company. He joins Planet Pharmacy after four years

with Boots in the UK where he ran a range of stores, including the flagship outlet on Oxford Street, in central London. He is a member of the Royal Pharmaceutical Society of Great Britain.

“I am delighted to be joining Planet Pharmacy at such an important stage in its short history, and I look forward to bringing my experience—and hopefully adding value—to this exciting market,” he said.

Formed in December 2007 with a capital of $244.6 million (Dh900m), Planet Pharmacy is a joint venture between UAE’s Gulf Pharmaceutical Industries (Julphar) and the private equity division of Kuwait-based Global Investment House.

Ukra joins Planet Pharmacy

Hasan Ukra

gac, the global shipping, logistics and marine services company, has appointed captain Robert olson as marine representative to gac logistica do Brasil, from being the general manager of gac Shipping (uSa), in philadelphia.

Based in Rio de Janeiro, olson will be responsible for supporting and driving the growth of gac’s shipping, marine and oil and gas services in Brazil.

gac’s vice-president for the americas, lars heisselberg, said the appointment is part of the group’s strategy to strengthen its presence in the biggest economy in South america.

“he has great understanding and experience of the maritime industry, and i am confident that his competence and expertise will prove extremely valuable to the growing needs of our clients in the region,” he said of olson.

olson, who was in charge of gac’s nationwide port agency operations in north america, has been exposed to various aspects of maritime operations related to ship supplies, car carrier and oil and gas sector.

CAPTAIN OLSON MOVES TO GAC BRAZIL


calendar

SCLG- ENDORSED EVENTS solar economics Forum September 9-10 Washington, dc, uSa

Fourth southern asia Ports, logistics and shipping September 24-25 itc hotel park Sheraton & towerschennai, india

liquid Terminal and Tank integrity October 4-5 doha, Qatar

demand-driven supply Chain October 13-14london, uK

sCM logistics world October 13-16 Singapore

international Freight week October 18-20 abu dhabi, uaE

Fifth Thai Ports and shipping October 29-30 imperial Queen’s park hotel Bangkok, thailand

air Freight Middle east November 1-3 airport Expo dubai, uaE

siTl international week of Transport and logistics November 3-5dubai, uaE

supply Chain Cost Control November 8-9dubai, uaE

international logistics & supply Chain Forum November 19-20 Berlin, germany

Fifth Trans Middle east November 24-25gulf international convention & Exhibition centre Manama, Bahrain

Gulf Traffic December 6-8 dubai international convention &Exhibition centredubai, uaE

CilF China international logistics and Transportation Fair December 9-11 Shenzhen, china

Third annual defence logistics Middle east January 24-27, 2010 abu dhabi, uaE

Is THere an appetite for investment in the Middle East’s shipping industry amid a financial downturn? What will be the likely pattern for recovery, and where will the industry’s financing come from when banks have tightened credit facilities?

These are some of the challenges and opportunities to be discussed at the Middle East Money & Ships, a networking event for senior executives from the maritime and finance sectors, in Dubai on October 7-8.

The director of fund management firm Tufton Oceanic Middle East, Marcus Machin, who will chair a special session on financing the industry, stressed the relevance of developments in international capital markets to shipping, which is a capital-intensive sector.

“Forums such as the Middle East Money & Ships provide a valuable opportunity for the exchange of information

and ideas among all market participants, in relation to the biggest continued challenge in the shipping industry—that of attracting institutional investment capital,” he said.

Richard Coxall, chief financial officer of Abu Dhabi-owned Emirates Ship Investment Company, emphasised on the need for transparency and higher level of equity within the regional industry.

“The how-much, where-from and what-cost questions in the context of capital for financing need to be answered,” said Coxall, who will be speaking on the topic during the event.

About 800 senior executives from the region’s maritime industry are set to attend the gala dinner on October 8, for the 2009 Seatrade Middle East & Indian Subcontinent annual regional awards.

Seatrade, the organiser of both events, said the

award recognises efforts toward maritime safety and environment, ship and port operations and security and port and shipping business efficiency.

“The regional maritime industry has witnessed great changes, and never more so than in today’s financial climate,” said Christopher Hayman, chairman of Seatrade. “All market conditions provide opportunities for those who really want to find them, and we will explore the potential for growth and development of the sector.”

Money & Ships to discuss financing challenges

The region’s shipping industry faces the challenge to attract institutional investment capital

Marcus Machin


side View

THere is now a better way for interested students to acquire the necessary skills and knowledge in pursuing a career in aviation engineering technology. Not only will a deal between Etihad Airways and the Higher Colleges of Technology (HCT) realise this, but also support the development of the UAE national workforce, particularly in the aviation industry.

With work placements at Etihad for HCT students as its core objective, the deal provides specialist seminars and workshops in various areas like engineering, business administration, hospitality and human resource management. “This new agreement will play an important part in the development of the national workforce in the field of aviation,” says Sheikh Nahyan bin Mubarak Al Nahyan, Minister of Higher Education and

Scientific Research and Chancellor of HCT.

Sealed by a memorandum of understanding signed by Sheikh Nahyan with Etihad’s chief executive James Hogan, the deal gives emphasis also to the role that education play in the foundation for sustained economic growth. “Etihad Airways is fully committed to the development of UAE national talent within the airline, and this new agreement with HCT will enable both organisations to achieve their goal of having a strong UAE national workforce,” Hogan says.

Sheikh Nahyan remarks, “Etihad Airways has established itself as a leading global company, and the partnership with the HCT will be mutually beneficial to both organisations and, in the long term, the UAE as a whole.

Having launched its innovative Emiratisation in 2007, Etihad now boasts four streams under this scheme, namely, the cadet pilot programme, graduate management development programme and the contact centre. The scheme aims to have 15% of Etihad workforce composed of Emiratis by 2012. In June, the airline was honoured by the Abu Dhabi Tawteen Council for actively promoting its Emiratisation programme.

On February 23, Etihad announced the graduation of its first group of Emirati cadet pilots, who gained their airline transport pilot licence after completing flight training at the Horizon International Flight Academy, in Al Ain. The cadet pilots had to complete 750 hours of classroom tuition and 205 hours flight training in single and multi-engine aircraft.

Career advancement Etihad’s Emiratisation scheme flies high via education programme

Sheikh Nahyan and Hogan signing a deal providing students training in aviation engineering technology


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