Dubai Logistic Condition

Running head: DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 1

Dubai’s Fete as a Global Logistics Hub

Name of Student

Institutional Affiliation

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 2

Table of Contents

List of Abbreviations ...................................................................................................................... 3

List of Tables .................................................................................................................................. 4

Dubai Fete as a Global Logistics Hub ............................................................................................ 5

Introduction ..................................................................................................................................... 5

Methodology ................................................................................................................................... 5

Critical Literature Review ............................................................................................................... 6

Conclusion .................................................................................................................................... 16

References ..................................................................................................................................... 17

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 3

List of Abbreviations

FDI Index

FDI-Foreign Direct Investment

GCC- Gulf Corporation Council

GDP-Gross Domestic Product

HIA-Hammed International Airport

LPI-Logistics Performance Index

UAE-United Arabs Emirates

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 4

List of Tables

Table 1: Table of the Dubai’s Logistics Cluster and Transportation Overview ............................. 8

Table 2: Table showing the Advantages, which makes Dubai a Global Logistics Hub ............... 10

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 5

Dubai Fete as a Global Logistics Hub

Introduction

The United Arabs Emirates has been ranked by the World Bank’s logistics performance

Index (LPI) as the best performing trade logistics provider within the Gulf Corporation Council.

The result indicated that it scored 3.64 points thereby emerging at the 24

position among the

over 150 world countries hence leaving much far behind the other Gulf countries in terms of

logistics development. Logistics therefore has emerged one of the fundamental activities for

quite a number of firms in Middle East from where it is being treated as a strategic or tactical

function towards achieving a competitive advantage over the other business competitors within

an industry. it is widely gaining recognition to the general public particularly in the millennium

when business organization are expanding their operations in terms of volume and range of

products. The logistics value and worth is also gaining recognition because globalization and the

advancement in technology considering that more multinational companies are currently

distributing, manufacturing, or sourcing materials on an international scale thereby making their

supply chain quite a task in management. This paper is therefore aimed at understanding the

current logistic scenario in the United Arabs Emirates particularly in Dubai with a special focus

on whether the United Arab Emirates will lose its Logistics’ Rank to Qatar as an Integrated

Logistics Hub.

Methodology

The study will be based on a critical review of the existing articles concerning the

position of both Dubai and Qatar in the logistics sector. These will be achieved through careful

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 6

analysis of the “Dubai's potential as an integrated logistics hub” by Fernandes and Rodrigues,

(2009) including other related articles.

Critical Literature Review

Logistics often plays a vital role in strengthening the nation’s economy for quite a

number of countries. The UAE is also not left behind considering that it witnesses a progressive

economic growth with a comparatively strong position in both global and local economy

(Ziadah, 2018). The utmost strength for the UAE is its strategic position because it is situated

cross roads of key transport routes, which links Europe and the Far East and further serve as a

border between Western and Eastern worlds commerce and trade (Fernandes & Rodrigues,

2009). It is therefore considered as the gateway of a good number progressive market of the

world, which includes China, India, and Africa. An access to the mainline infrastructure and the

country’s geographical position make Dubai a multimodal transport hub with regard to sea-air

worldwide, with cost-effective and improve the efficient means of transport which generating a

advantageous cost saving freight cost and transit time as opposed to sea or air freight mode. The

needs or requirements of these multimodal hubs are driven by the desire of optimizing the cost

efficiencies of the sea freight with those of the expensive and quicker airfreight (Fernandes &

Rodrigues, 2009).

The fusing together of the land transport modes, aviation, and the global-level maritime

in one place has made Dubai among the UAE states one of the most significant centers for

logistics in the world. Dubai is often above or ahead of other countries due to its continuous

process of innovation that is difficult for other places to catch up with. Its location is a greater

added advantage considering that within four hours of flying about one-third of the global

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 7

population, it is positioned midway between Asia and Europe (Ziadah, 2018). Moreover, in

terms of maritime routes, the emirate on among the world’s most busy and close to important

lanes between Asia, Europe, and Middle East. The government determination towards building

up the sector with the inclusion of quite a number of logistic dedicated hubs is another

advantage, which has benefitted the Dubai south in particular. The laid-out procedure has been

streamlined such that it contains one-stop facilities secluded for customs clearance, the

establishment of permits and the issuance of free zone incentives, which will lower the cost of

operation as low as possible (Shayah, & Qifeng, 2014). When these are combined and extended

to include the other facilities of the UAE, the value of logistics industry is projected increase by a

bigger margin. It is further worth noting that Dubai led the UAE market in 2015 with a share of

45 percent (Fernandes & Rodrigues, 2009).

Moreover, the logistics companies such as DHL and Aramex in the emirates have also

been in the frontline of trying out to incorporate new technologies into their systems. These

includes the use of apps to allow live tracking of shipments and lockers for business to consumer

shipments with the likelihood of drones coming in the line up in the near future. E-commerce has

also been spotted as a major growth area with considerable impacts for logistic company in

Dubai. The progressive growth of shopping malls within the emirate is also expected to increase

competition in these areas. Nevertheless, Dubai has ever been a member of the World Trade

Organization and hence has in most occasions supported stable trade relations and open trade

with other nations throughout the globe. It does this by taking the advantage of its continued

economic growth; attractive business environment and the open economy system, which has in

turn, make it emerge an important international trade hub within the Western economies

(Shayah, & Qifeng, 2014).

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 8

Table 1: Table of the Dubai’s Logistics Cluster and Transportation Overview

Source: http://www.tci-network.org/news/820

Furthermore, Dubai was in 2014 selected to host the world EXPO 2020 thereby preparing

way for the launch of the Dubai logistic corridor project, which was an integrated multi-modal

passageway (Santos et al., n.d.). It has over the years emerged as the leading logistic hubs

through the provision of unprecedented logistic facilities while extending various opportunities

for the foreign investors to set up business with tax-free income and 100 percent ownership

holding thereby adding advantage to its expansion. The entire logistics market size or the total

logistics spend in the UAE represents about 2.5 percent of the entire nation’s gross domestic

product (GDP) (Fernandes & Rodrigues, 2009). Furthermore, considering that UAE is positioned

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 9

close to the high-developed economies of India and China, it imports approximately 60 percent

of items from these countries and transits them mainly via the Dubai borders.

A number of logistic activities within Dubai occur via the utilization of the free zone

areas and ports. Having raised its freight facilities, developed infrastructure, and increased the

number of warehouses, its superiority in logistics service segment serve as the main factor

favoring most of the developments within the emirate. Dubai had attracted an array of foreign

direct Investment because of its strategic locality, which has made it a crucial element within the

universal shipment network. It has also been ranked among the top locations within the emirates

in terms of finance, tourism, trade, and more so for logistics. The freight forwarding, for

instance, contributes the largest share of 63 percent followed by the transportation at about 18

percent of the overall logistics revenues. The two fundamental contributing factors to the UAE

logistics market growth include the value-added logistics service and warehousing, which

accounts for 14.2 percent. The transport sector is further expected to witness a significant change

with the accomplishment of the future infrastructure expansion or development plans, which

comprises mainly the wide railway network of GCC with key segregated freight appearance. The

road networks are another salient factor expected to improve the efficiency and effectiveness of

the logistics activities that are projected to transform into freight line.

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 10

Table 2: Table showing the Advantages, which makes Dubai a Global Logistics Hub

Source: http://www.supplychainbrain.com/single-article-page/article/logistics-will-drive-saudi-

arabias-post-oil-era/

The surge in the export and import business operations is expected to boost or promote

the growth and development of Dubai logistics market by about 27 billion dollars. According to

the authors, Dubai is usually compared to Singapore and Hong Kong considering that it is safely

and strategically situated as one of the renowned logistical hubs within the Middle East region

(Bendell et al., 2015). Its expansion into an international logistics hub requires advancing or

upgrading the operational, tactical, and strategic capabilities (Madani, 1999). The authors have

also pointed out that Dubai a number of factors, which favors its aspiration of being a sustainable

logistics hub in the global realm. These factors majorly include the strategic geographic location,

multimodal connectivity, the city infrastructure that comprise of the financial, information

technology, and physical infrastructures, regulatory and institutional structure and the political

environment among others (Walter et al., 2006). The country also boasts of an attractive and

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 11

healthy free economy, synergy among the different free zone pockets, the availability of labor,

the competitive expenditure for carrying out business operation, and the critical mass of logistics

companies.

On the contrary, Dubai has over the years experienced greater transformations towards

positioning itself as among the most preferred and talked of intercontinental logistic hubs. Most

of the fundamental issues, which the industry has been experiencing, related to the fact that

Dubai has a small geographical location, which often faces severe climatic conditions

(Sundarakani, 2017). In another angle, the absence of integration and assimilation among the

state firms can possibly further escalate more challenges. According to Akhavan (2017), Besides

these, Dubai has continued to face challenges and difficulties while attempting to sustain its

position as an international logistics hub. Such challenges include certain policies and

regulations, which affect the efficiency and seamless connectivity between the customs and the

administration, natural factors such as extreme temperatures, increased cost of living, and

competition from MENA regions, processing delay, and the regional unrest among others

(Fernandes & Rodrigues, 2009).

Moreover, it is important to note that an educated workforce acts as a valuable asset for

the logistics industry and Dubai is among the regions experiencing the shortages of the

professional logistics skills, which in turn affects the overall performance. This is a clear

indication that the gap between the requirements of what is currently available and the workforce

within the industry is affecting the potential capability of the country in terms of logistic hub

developments (Wang, 2013). The specialized organizations or institutions in logistics and supply

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 12

chain should, therefore, set out their chapters within the area to assertively pursue certification

and training opportunities in Dubai.

Research has established that Dubai experiences stern competition from the MENA

regions. Moreover, the preference and sustainability of Dubai as a logistics center is greatly

influenced by the growth and development of free zones and ports, which surround the regions

such as Egypt, Djibouti, Qatar, Bahrain, and Saudi Arabia. UAE in the Middle East was ranked

27th position worldwide while Qatar occupied the 29th position according to the Logistics

Performance Index (LPI) of the World Bank in 2010. Nevertheless, it has been established that

Dubai loses to Qatar in a number of perspectives, which include the logistic competence and the

international shipment. However, the other competitive corridors within the Middle East include

Port Salalah in Oman, Port Said Logistics city in Egypt, Jeddah Logistics zone, and the Doha

logistics park in Qatar that is expected to potentially create some level of competition to the

Dubai logistic hub.

The physical infrastructure of the Dubai’s logistics is excellent and in line with those of

the universally integrated hubs. However, the greatest issues involve retaining the cost advantage

of the logistics industry in Dubai as a result of the high inflation rates, which has been fueled

mainly by the increasing rates of rents and the subsequent rise in the costs of labor (Yudnikova,

2016). The free zone authorities of Dubai, therefore, will have to allocate or assign land at

friendly rates to the logistic companies and further provide cheaper accommodation to workers

compared to market rates to ensure that Dubai attracts key players to enable them to set up larger

operations base within the country (Sundarakani, 2017). Companies within Dubai also need to

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 13

understand the positive impacts of collaboration among different supply chain players

considering that the region imports about 90 percent of the consumer products (Wang, 2013).

The development of the industrial cities and free trade zones within the neighboring

nations are projected to reduce the number of firms opting for Dubai logistics hub for their

operations. Moreover, a regional logistics hub, which includes those in Kuwait and Saudi Arabia,

poses a greater threat and challenge in the search and quest for a premier logistics hub in the

country (Haeun, 2005). UAE should, therefore, strive towards developing facilities, which

comprises more logistics hubs to complement the existing infrastructure. However, some of the

large-scale infrastructure projects such as the groundbreaking and prestigious Al Maktoum

International Airport, Dubai world central, enhancing of the Jebel Ali Port, Dubai Logistics City,

and the Dubai Logistics Corridor among others are expected to help DLH maintain its position as

a dominant logistic hub within UAE.

The authors of the above article restricted the outside competition to Dubai with only

three regional countries, as an integrated logistics hub with special economic zones. These

countries are Saudi Arabia, Egypt, and Kuwait. While Singapore referred to as a benchmark and

ranked as number one, the authors relied on Logistics Performance Index (LPI) of 2007

developed and published by World Bank to assess and evaluate Dubai’s position (Arvis et al.,

2007). My argument against the methodology and approach is that the authors have missed other

key players in the region such as Qatar, which ranked number 46, and Bahrain 36th position,

while competition countries to UAE ranked in the 20th place, with Saudi Arabia, Egypt and

Kuwait ranking 41, 97 and 44, respectively. Their survey and questionnaire are used to answer

very restricted questions covering few areas and are limited to respondents within the

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 14

geographical location studied. Moreover, again, some questions are only used for those

competition countries. Another failure in the methodology is that the authors ignored other

important factors to assess and evaluate competition and identify gaps in deriving sound

recommendations and development agenda. Authors could have used additional rigorous

benchmark tools such as OECD FDI Regulatory Restrictiveness Index (FDI Index) for

measuring statutory restrictions on foreign direct investment (FDI).

In addition, more measures could be used to assess impact on employment and other

variables of the researched areas. Authors have also ignored totally a reference to the financial

turmoil of 2007/2008 and its impact on Dubai. Beyond the article’s publishing year of 2009,

major developments happened in the region as well as in benchmarks worldwide. First, there

have been shifts and aggressive competition in LPI Index where Singapore lost its position to

Germany for the survey 2 years 2014 and 2016 (Ennis, 2015). Qatar has advanced in this LPI

index achieving rank 30, with just 17 points behind UAE. Second, Qatar has launched in 2008 an

aggressive development plan associated to its Qatar National Vision 2030 (QNV 2030)

(Fernandez & Joseph, 2016). In 2010, Qatar won the bid to host World Cup 2022 with massive

construction infrastructure projects to pave the path for a successful event. Qatar’s award-

winning Hamad International Airport (HIA) opened in 2014 with a target to serve 50 million

passengers by 2022. HIA has been ranked five the best airport in the world by SKYTRAX World

Airport Awards 2018. A new seaport, Hamad Port, started its operations late 2016 that spans

over 26 square kilometers and is capable of handling more than 7.5 million containers per year.

Qatar has been building SEZs in strategic locations and logistic hubs; near its airport, seaport and

industrial zones and new transport networks (Fernandez & Joseph, 2016).

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 15

The above developments have put Qatar on a competitive edge in the region when added

to its wealthy status where Qatar’s rank one of the countries that has the highest GDP per capita

in the world. These privileges and advantages have allowed Qatar to get around the sanctions

imposed by the blockade countries, Saudi Arabia, UAE, Bahrain and Egypt, re-embracing Qatar

as a pioneering logistics hub and a strong economy to many countries and regions (Ennis, 2015).

Nevertheless, considering the other positive factors or externalities within the regional logistic

corridors, there is no doubt that the Dubai logistic hub will survive in the end and remain the best

logistics hub ahead of Qatar, which has also indicated stronger potentials of being the leading

logistics hub within the region (Yudnikova, 2016).

Moreover, despite the stiff competition faced by the DLH especially from Qatar, the

existing literature predicts that the logistics market in the United Arabs Emirates is expected to

witness or undergo a steady growth in the coming decade because it experiences a steadily

growing domestic market as well as a steady growth in the global trade volume (Su & Ke, 2017).

The UAE logistics market through the DLH in 2010-recorded revenues totaling to approximately

$ 7 billion thereby witnessing a rise of about 10.7 percent and it is still expected to do more

within the coming years (Ibnouf & Knight, 2014). It expected to increase its competitive

advantage by emerging as the world-class logistics hub that will be very detrimental to both the

region and the Indian sub-continent through providing halfway stage for Asia, East Asia, and

Europe bound goods (Fernandes & Rodrigues, 2009). Several researchers who have indicated

positive result and prediction for the Dubai Logistics hub contends that the competitive

advantage of Dubai is not only its strategic location but also its optimal combination of various

modes of transport such as roads, airport, and a port reaching all GCC countries with an

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 16

extension to Lebanon (Papadopoulos & Malhotra, 2007). It is also expected that the rapidly

developing GCC railroad networks would complement its growth.

Conclusion

Despite the stiff competition, which the Dubai logistics hub faces, there have been

massive infrastructural development plans initiated to ensure Dubai remains a world-class

Logistics hub. Although Qatar has demonstrated immense efforts towards being considered a

leading logistics hub within the Middle East, Dubai will still be the leader due to its well laid out

plan and supply chain within the sector. In addition, the physical infrastructural developments

have made progress towards improving its corporate governance system and logistics related to

research and education, as well as developing the financial market, which will ensure the

dramatical change of the logistics landscape in Dubai for better. Moreover, the country is on its

way towards an excellent logistics hub due to the physical infrastructure in place, which would

be complemented paying close attention to human resources that will ensure that the government

regulation systems are conducive to business.

DUBAI’S FETE AS A GLOBAL LOGISTICS HUB 17

References

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