It could be argued that ever since dhows first plied the Gulf and goods-laden camels strode across desert sands, the Middle East has represented a ‘logistics hub’, its souks acting as meeting and trading points for commerce between cultures.
In recent decades, the emerging sophistication of Middle Eastern cities has transformed the region from oil producer to an economy in its own right. It is an economy that increasingly demands multi-purpose logistics centres that can handle the myriad needs of growing populations – indigenous and expatriate, consumers and businesses. The users of these hubs are now generously served by a range of facilities across the Middle East, each vying with the others for market share by providing international-standard facilities.
Familiarity in the UAE
The United Arab Emirates (UAE) is home to some of the better known logistics centres and of them, Dubai is particularly well endowed. The Dubai Airport Free Zone, for example – one of the best established, having been in existence since 1996 – offers state-of-the-art office and industrial units within easy reach of the international airport.
Location is probably the most important attraction of the free zone’s attractions, but others include simple licensing procedures and a strong network partnership with lawyers and other business advisers. On announcing a 42% growth in sales at the end of Q1 2008, the zone’s sales director, Mohamed Ali Suwailem, said these factors were responsible for attracting businesses such as Armstrong Floor Products, JCDecaux Dicon and Star Cruise Management. In tougher economic times, such results might be difficult to sustain but they demonstrate what is possible under favourable conditions.
Four logistics centres in the Emirates are operated by Economic Zones World, a global developer and operator of economic zones, technology, logistics and industrial parks that is part of the Dubai World Group. The Jebel Ali Free Zone (Jafza) describes itself as “the world’s fastest growing” zone, spread over 49 square kilometres and housing more than 6000 companies.
Jafza is located close to Jebel Ali port and the still-to-be-completed Jebel Ali International Airport. Once the airport is operational, Jafza says it will be the “only free zone located between two major logistics enablers” and will be able to facilitate the transfer of goods from sea to air in just 20 minutes.
In terms of facilities, Jafza offers purpose-built warehousing, office space and undeveloped plots of land for larger operations, including manufacturing and processing. The regime is business friendly, with incentives such as 100% foreign ownership, zero corporate and income taxes for up to 50 years. Added to this is exemption from local labour restrictions, full repatriation of profits and capital, and a total absence of currency restrictions.
Credit crunch or no, Jafza has announced ambitious plans for new developments including the creation of clusters for the chemical and food and beverage industries, two 34-storey business towers (incorporating a convention centre and a 322-room hotel) and an additional 30-floor office complex with retail opportunities to boot.
A strategy for the downturn
In these difficult times, all governments will be keen to differentiate themselves from their competitors and to send a strong message to business that they represent an adaptable destination and the right launchpad for recovery. In a January address to business leaders in Dubai, Mohamed Alabbar, chairman of the emirate’s government advisory council, insisted that in the past two months of 2008, the government had issued more than 1200 business licences – up from about 1000 for the same period the previous year. But, he added, the government was making “structural changes”, including a freeze on taxes but an increase in public spending – to meet the needs of the “new economic reality”.
In Jordan, the government has recently published a national investment strategy, which it believes should help to cut unemployment from 13% to 5% by 2020, boost per-capita income and increase gross domestic product.
The Jordanian Investment Board (JIB) has set itself three priorities as its key steps in this direction:
- reducing the costs and risks of investing and doing business in the country by making changes to legislation;
- adjusting regulation – paying particular attention to the streamlining of the business licensing process; and
- increased transparency in the legal system.
Other strands of this transformation include a focused effort to improve the country’s core competencies. This includes “maintenance and improvement of Jordan’s physical and informational infrastructures”, and a renewed emphasis on education and the alignment of vocational training to investors’ needs.
Finally, the government will pursue what it describes as the targeting of long-run success of high performance investments through promoting greater investment in high value-added sectors that “relieve supply constraints” and create a more competitive supply of goods and services. Jordan’s logistics parks will play a role in the achievement of these goals.
Aqaba Logistics Village (ALV), currently being developed by Agility Logistics and the Kawar Group, is a case in point. The village is five years from inception and construction began only recently. But when fully operational it is intended that ALV will provide cargo-handling services including transloading and cross-docking, warehousing facilities and support facilities, including a weighbridge, hard stand open yards and a marshalling area. It will cover some 43 hectares.
The development is being planned for completion over three phases: the first phase, which commenced in 2007, is due for completion in 2010 and will see the construction of the key infrastructure, a container freight station, distribution centre, service centre and a concrete open yard to accommodate heavy and oversized items.
When fully complete, the ALV will be zoned into four main clusters of activity, including: container freight station activities, distribution centre activities, office and commercial activities and land areas to be leased to private developers for activities complementary to the main business of the village.
Back in the Gulf, the Bahrain Logistics Zone (BLZ) welcomed its first tenant in May 2008 and began operations later that year. Located 40kilometres from the Bahraini/Saudi border, the BLZ lies 13km from Bahrain International Airport, almost adjacent to Bahrain’s Sheik Khalifa Bin Salman Port, and it is predicted it will increase the port’s capacity to 2.5 million TEUs (20-foot equivalent units) a year by completion.
The BLZ has substantial backing from the government of Bahrain. Designed as a catalyst for economic development in Bahrain and the northern gulf, it is described as a ‘boutique’ logistics zone focused on re-exportation and value-added logistics from local and international companies.
It would be foolhardy to be bullish about prospects for growth in the Middle East or elsewhere for the next few years. But these hubs are long-term projects and will be essential to continued trade, investment and commercial opportunities generally. They may even be essential to the creation of a new role for the region as the world anticipates a transition to a post-oil future.
- Dubai Airport Free Zone has been operational since 1996. In Q1 2008 it reported 42% growth in sales. Businesses include JCDecaux Dicon and Star Cruise Management.
- Jebel Ali Free Zone, also in Dubai, covers 49 square kilometres and houses more than 6000 companies. It offers purpose-built warehousing, office space and undeveloped land for manufacturing and processing operations. A planned expansion will serve the chemical and food industries.
- Bahrain Logistics Zone began operating in May 2008. It is located13km from the airport, and 40km from the Bahrain/Saudi border. BLZ focuses on ‘re-exportation and value added logistics’.
- Jordan’s Aqaba Logistics Village will cover 43 hectares when finished. It will offer cargo-handling services including transloading and cross-docking, warehousing facilities and support facilities, including a weighbridge, hard stand open yards and a marshalling area.