The UAE logistics industry is likely to grow by 4 per cent in 2016. In addition, capacity expansion and infrastructure investment are likely to strengthen the competitiveness of logistics service providers (LSP). This is the conclusion drawn by Frost & Sullivan which has also noted that new technology solutions and transport infrastructure enhancement will be key to surviving disruption and transformational growth of the logistics industry in the UAE. Moreover, despite lower oil prices, the economic growth is expected to be driven by non-oil economic sectors and construction activities relating to capacity expansion.
With the logistics market expected to grow at a compound annual growth rate (CAGR) of 5.7 per cent between 2015 and 2020, the report notes that the key drivers for economic growth are the infrastructure investments associated with national logistics development plans, EXPO 2020, and trade with Asia and Sub-Saharan African countries. “Airport expansion and the GCC rail network will strengthen alternate mode for freight and cargo transportation and, despite lower oil prices, manufacturing industries will support demand for domestic logistics services,” the report states.
The GCC logistics infrastructure is increasingly becoming important as the region has emerged as an important trans-shipment point for Europe-Asia trade and also as a multi-modal logistics hub to cater to the needs of increasing trade within the block. The GCC’s economic and logistics services integration is likely to derive creation of integrated multi-modal transport system and strengthening of multi-modal transportation corridors in the region.
Some of the key trends identified in the UAE logistics industry include: a) economic diversification, growing domestic demand, and development of export-oriented industrial centres and free zones that are likely to support both trans-shipment and regional trade growth, b) transportation infrastructure development and new technology solutions that are likely to strengthen the infrastructure required for the multi-modal transportation system, c) airport expansion and the GCC rail network that will strengthen alternate modes for freight and cargo transportation, d) integration of logistics functions and harmonisation of the GCC customs regulations that will lead to synchronised, coordinated, and interconnected regional logistics network, and e) lifting of sanctions on Iran that will increase trade activities in the Middle East.
According to available data, the transportation and logistics segment accounted for around USD 29.8 billion in the UAE’s GDP in 2015. Dubai leads the transportation and logistics market in the UAE with around 45 per cent share, followed by Abu Dhabi. The strategic geographical position of Dubai and improved infrastructure facilitate a substantial share of international shipments directed to the UAE. The logistics industry constitutes more than 14 per cent of Dubai’s GDP, the highest amongst all emirates.
Source: Frost & Sullivan.