Location makes for great hubBy Peter A. Buxbaum, AJOTThe Middle East is experiencing an exciting period of development in transportation and logistics at the global, regional, and local levels. “The explosive growth of global and regional trade, and especially the trade between Europe and Asia and within the broader region,” said a report from Booz Allen Hamilton that was released earlier this year, “has provided the Middle East with unprecedented opportunities to capitalize on the strength of its geographic location. “The Middle East region’s excellent geographic location and very good accessibility by air, land, and sea have brought it to the top of the agenda for global logistics,” said the Booz Allen report. “The strong growth of global trade requires efficient transport and logistics structures.” The report outlined two primary global logistics opportunities for the Middle East. First, it can benefit from the accelerated application of more advanced logistics concepts in the region. The hub-and-spoke approach becomes more favorable as volumes and vessel sizes increase. “If volumes and vessel sizes achieve a certain threshold size, a hub-and-spoke approach is the ideal logistics concept to achieve cost-effective transportation,” said the report. Another factor driving the growth of the Middle East in global logistics is the need for multimodal hubs. “For most goods, a complete airfreight transport is still much too expensive to be viable,” the report noted. “Offering a conversion from sea transport to air transport becomes more important. Such a service allows the shipper to achieve better trade-offs on speed to market, stock availability, and transportation cost.” Industry insiders agree with much of the report’s conclusions. “Meaningful global transportation hubs are growing, with Salalah, Bahrain, Damietta, Jiddah, and Port Said being examples,” said David Larr, President, Americas region of Emirates Shipping Line. These ports are prospering because of the combination of factors, according to Larr, including regional economic growth, strategic location, competitive cost structures, affirmative private investment policies, and modern efficient facilities. “Damietta [in Egypt], for example, is only 70 kilometers east of the older Port Said,” he said. “Its location on the Mediterranean side of the Suez Canal is an advantage supported by a large investment in infrastructure minimizing already advantageous labor costs.” Transshipment strengthFor Anil Vitarana, President of United Arab Shipping Co., Middle East ports already have a strong history of serving as regional and global hubs. “This has always been the approach of the United Arab Emirates,” he said. “Jebel Ali is now the eight largest port in the world. A lot of the cargo that goes though there is being transshipped from the Indian subcontinent to the Gulf and East Africa.” The report particularly touts the Middle East as a natural location for sea-to-air transshipment, for three reasons. First, the Middle East is already the natural hub for refueling stopovers for the air freight industry. Second, the region is easily accessible by sea and is increasingly becoming a hub for the ocean freight industry. Third, sea-to-air transshipments through the Middle East achieve attractive reductions in transportation time while conserving the cost-effective sea transport rates for half the voyage. “Dubai has already made significant infrastructure investments in the integration of its airport and sea port in Dubai,” the report noted. “With an annual volume of more than 100,000 tons of freight converted from sea to air freight, this operation proves the viability of the concept.” The economics of transshipping through Middle Eastern ports are the key to their growth, according to Larr. “These ports benefit from being highly competitive for port calls, handling of transshipments, and volume capacity,” he said. “US ports, in contrast, are too expensive for the transshipment activity, whereas the po