Logistics sector adds 14% to UAE GDP

The location and sophisticated transport infrastructure of the United Arab Emirates has made it a transit point for the global movement of cargo, by sea, land, and air, as well as a crossroads for world trade. Recent estimates indicate that around 14 per cent of the UAE’s GDP is now being generated by the supply chain and logistics sector. The importance of shipping, ports and cargo industries in particular, cannot be underestimated. These industries form an integral part of the country’s economy and are in the enviable position to have weathered the financial crisis, that have played havoc with so many other sectors. At the start of the global financial crisis in 2008, the World Bank reported the total throughput of UAE ports at 14,756,127 TEU [twenty foot equivalent container units]. According to a World Bank report, the container port traffic in the Emirates 2009 was 14,425,039 TEU, which although it constituted a slight slowdown in volume still marked an increase in its share of global container traffic. By 2010, World Bank data reported the UAE’s total container traffic at 15,174,023 TEU, an increase of 748,984 TEU, despite the impact of the global economic slowdown, making it clear that the sector saw growth even during the downturn. World Bank and the OECD - were predicting a downturn in all the major world economies and the Eurozone crisis began to affect demand out of China and as a result the UAE in its capacity as a conduit for East-West flows of goods. Yet, while the annual growth rate of global port throughput almost halved from 14.7 per cent in 2010 to around 7.2 per cent in 2011, the change in the Middle East was only from 9.0 to 6.0 per cent for the same period. Fast-forward to 2012 and the prospects for the UAE’s shipping and ports industries are definitely looking more than merely promising. With the global economy finally showing signs of stabilising and the increase in globalisation and offshore sourcing, supply chain management is becoming an increasingly important segment of many businesses. The result is that the global demand for seaborne containers is expected to increase by 4 to 6 per cent in 2012; with Asia-Europe trades possibly showing lower increases, while higher increases are foreseen on north-south trades. The increasing size of vessels deployed on the Asia-Europe port calls will further strengthen the position of the UAE as a major transhipment hub in the region. The key reasoning behind this statement is that in an atmosphere of slow demand/growth and increasing size of vessels, shipping lines would consolidate container distribution at a hub port like Khorfakkan and feeder these containers to final destinations. This would have the advantage of cutting costs for shipping lines as any cost advantage of using large vessels would be lost if they would call multiple ports with lower vessel utilisation. Commenting on the future of ports and shipping in the UAE and GCC region, Peter Richards, MD Gulftainer, the largest privately owned port operator in the world, based in Sharjah, said: “The Middle East will continue to grow as it has done over the last few years. Growth over the last decade has been encouraging at over 12 per cent and, with more trade with the fast growing BRIC nations, the Middle East is set to enjoy continued success.” He also said: “With the predicted GDP growth in the Middle East over the next 5 years ranging between 4 per cent and 10 per cent and with container volumes typically in excess of GDP growth, we will see a continued and strong progression in the Middle East. There may have to be some rationalisation of capacity or co-operation of Lines together, but this will not mean a reduction and it will most likely lead to larger vessels and the need for terminal operators to plan for this.” Established in Sharjah in 1976, Gulftainer manages and operates the container terminals in Port Khalid and Khorfakkan on behalf of the Sharjah Port Authority, as well as handling operations and logistics in Ruwais, Abu Dhabi, where it manages the facility on behalf of the international plastics company, Borouge. From gulftoday