April 2017 Issue 36
ENHANCING THE BUSINESS OF LOGISTICS
IMPACT Road, rail, sea transport
Certifying safety at sea
Autonomous vehicles Here to stay
For successful SC management
Impact of global economics on road rail and sea transport SIGNATURE MEDIA FZ LLE P. O. Box 49784, Dubai, UAE Tel: 04 3978847/3795678 Email: firstname.lastname@example.org Exclusive Sales Agent Signature Media LLC P.O. Box 49784, Dubai, UAE Publisher: Jason Verhoven email@example.com Director: Peter Dass firstname.lastname@example.org Managing Editor: Munawar Shariff email@example.com Art Director: B Raveendran firstname.lastname@example.org Production Manager: Roy Varghese email@example.com
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Where are we headed? Multiple and simultaneous global indicators - China’s trade slowdown, Brexit, Trump as the US President - are pointing businesses towards making new decisions. So while there is optimism that things are forecasted to look up, the path leading to that forecasted upswing is going to be trying. The shipping industry hasn’t had it any easier. Oversupply has been a bane with all industry members cutting rates in order to be more competitive that the next creating perfect conditions for bankruptcy or the other option which is creating alliances of merging with other shipping companies. While all this happens, technology in the logistics industry is on a completely new path. Digital disruption is taking place at incredible speed within the logistics industry, and offers to completely change the way logistics operates entirely in the near future. Independent research suggests fleet management is probably the most mature IoT market segment. So while companies are learning and adapting to this disruptive change, the industry is poised to be bigger and better when market conditions finally change.
Distributed by Tawseel Distribution & Logistics – Dubai
Munawar Shariff Managing Editor firstname.lastname@example.org
Contributor’s opinions do not necessarily reflect those of the publisher or editor and while every precaution has been taken to ensure that the information contained in this handbook is accurate and timely, no liability is accepted by them for errors or omissions, however caused. Articles and information contained in this publication are the copyright of Signature Media FZ LLE & SIGNATURE MEDIA LLC and cannot be reproduced in any form without written permission.
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April 2017 Issue 36
ENHANCING THE BUSINESS OF LOGISTICS
29 06 News 16 Country report – Oman Oman invests in transport and logistics Oman, is a gateway to the GCC region, and a re-distribution point and transit hub
29 Cover Economic impact on road, rail, sea transport Albert Asool, CEO, Agility Dubai, tells Global Supply Chain about the major challenges affecting road and sea transport growth and operations
32 Heading towards growth Food logistics is a unique field, and requires tailored solutions. In 4 APRIL 2017
conversation with Ignatius Schotlz, Head of Operations, INL
36 Time is money Omnichannel has elevated an important issue for successful supply chain management – time compression
42 Oman’s Port perspective A chat with the three CEOs of Oman’s three major ports
48 Tasneef – certifying safety at sea Tasneef showcased key achievements for the first quarter of 2017 at NAVDEX, and established strategic partnerships
52 Guest Column Preparing for VAT Mark Leigh, Chief Operating officer, Xtrade, speaks about how to protect your wealth from inflation
54 GCC’s thriving insurance market S&P Global Ratings assesses the insurance situation in the GCC and what Governments are doing to fine tune the regulations
58 Autonomous vehicles are here to stay Dutch tech firm 2getthere has been awarded the autonomous transport contract for Bluewaters in Dubai
Turkish Cargo awarded ‘Fastest Growing International Cargo Airline of the Year’ Turkish Cargo was awarded the title of ‘Fastest Growing International Cargo Airline of the Year’ at the recently held Air Cargo Africa 2017 fair. A total of 3,000 participants from 61 countries, and a large number of companies operating in the African air cargo market, participated in the 4th Air Cargo Africa fair this year, held in Johannesburg, South Africa. Turhan ÖZEN, who received the award on behalf of Turkish Cargo, said,“Thanks to our dedicated efforts, we have been able to grow rapidly in recent years and become the 11th largest airline company in the African cargo market. I sincerely thank all Turkish Airlines employees who have contributed to this success. Our goal is to increase our growth rate even further, and enter the year 2020 as one of the top five air cargo companies in the African market.”
Saudi Arabia takes steps to boost trade with TIR
Impact of US and UK electronics ban
The Kingdom of Saudi Arabia announced its decision to accede to the global customs transit system for moving goods across international borders – the United Nations TIR Convention (www. IRU.org/tir), and to make the system operational in 2017. Due to its strategic location, the KSA is the critical link between the GCC countries and the wider Middle Eastern region. The country’s accession to TIR, with
be used to safely transport these batteries on planes. “Of course, the safety of passengers is paramount, but there must be concerns about exchanging one risk with another,” said conference chairman, industry analyst Alan Peaford, adding,“The Summit provides an ideal opportunity for the key industry stakeholders to discuss the challenge of finding the best solution to reduce overall risk.” The ban has been described as disruptive and operationally challenging according to Emirates President Tim Clark. The state-owned carrier is planning to permit devices affected by the ban within the security perimeter to allow passengers, particularly those flying in premium seats, to use laptops and tablets until the last possible moment. Nick Webb, Managing Partner at Streamline Marketing Group, organisers of the World Aviation Safety Summit commented,“The event will examine the impact of the electronics ban and how safety and security must always be made a priority. The rapidly changing nature of aviation creates fascinating debates, and we are looking forward to welcoming the world’s experts to discuss the best possible solutions for the future.”
its benefits of seamless crossborder connectivity, will therefore open new road corridors along the spine of the Arabian Gulf – transforming the trade potential of the region. Saudi Customs hosted IRU Secretary General, Umberto de Pretto, in Riyadh this week, at a workshop offering insights and guidance on the application of TIR to streamline trade facilitation.
The impact of the US and UK bans on electronics from Muslim-majority countries will be cross examined at the fifth edition of the World Aviation Safety Summit, to be held on April 11th and 12th, 2017, in Dubai. Industry leaders will debate how these bans will impact the industry, and what should be the best way to deal with such significant changes from both airlines and passengers. The United States and United Kingdom have announced that laptops, e-readers, and almost any other electronic device that is not a phone will be banned from cabin luggage on some flights. The US rule applies to 10 airports, and the UK to six - including Turkey and Middle-Eastern countries - starting from March 25th, 2017. A statement issued by the International Civil Aviation Organization (ICAO) stressed a balance between security risk and safety concerns, because incidents involving devices containing lithium batteries may be more easily mitigated in the cabin than in checked baggage. In 2016, ICAO announced a prohibition on shipments of lithium-ion batteries as cargo on passenger planes. Industry experts are now working to develop new and improved packaging standards that could
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Warehouse Safety Seminar by SPAN and Face Middle East When it comes to warehouse safety, ‘common sense’ is a subjective term that gets tagged onto several do’s and don’ts; unfortunately blurring the lines of what is safe and unsafe, and causing many avoidable warehouse accidents and fatalities per year. In efforts to emphasise the importance of defining and adhering to warehouse safety measures among industry professionals, the team at SPAN collaborated with Face Middle East to host consultants, contractors, clients and members of the authority across multiple disciplines in the UAE for an informative Warehouse Safety Seminar. The purpose of this seminar was to shed light on safety and raise awareness of risks associated with the negligence of proper implementation and enforcement of safety measures across the different areas of a warehouse; from the consideration of steel to the design of storage systems, storage/retrieval applications, loading docks, material handling equipment, facility and flooring, and, most importantly, inspection and maintenance. The teams at SPAN and Face covered each area concisely for an incredibly well-executed event that yielded positive feedback across the board. An upcoming session will be held in Qatar in May.
Flight of the future A new five-year research project to develop tiny hair-like sensors for use on the surface of aircraft is set to improve the control and sustainability of future aviation. Professor Christoph Bruecker recently became the Research Chair in NatureInspired Sensing and Flow Control for Sustainable Transport at City University, London. Supported by the Royal Academy of Engineering and BAE Systems, the research aims to
develop an aerodynamic ‘skin’ that can be evaluated for use on future aircraft. The research will bring together hundreds of tiny transparent ‘micro-pillars’ with optical fibres on an aerodynamic surface, providing a way to measure airflow around the surface with much more detail and precision than the relatively few sensors currently found on aircraft. By using an elastic material for the hair-like micro-pillars, the sensors
can also flex in response to the airflow, allowing them to be used not just as passive sensors, but for flight control, adapting to changing external conditions and providing finer control of an aircraft. Using optical fibre technology also means that, unlike current sensors, the micro-pillars would not generate electromagnetic waves, allowing them to keep control even in harsh environments. Applications for the smart skin technology could extend beyond aircraft. As the micro-pillars can adapt to changing conditions, they not only change the aerodynamic properties of a surface – for example, by reducing drag – but also its acoustic signature, so they could be used on wind turbine blades and other propeller systems. Such detailed flow measurement and control could also be useful inside pipelines or on marine hydrofoils.
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ALS Logistics W
e won’t say that automated systems are cheap, but they are definitely affordable if you are looking for long-term perspectives. The main challenge for a client is to understand the reasons behind the costs, and evaluate the ROI, and that’s where consultancy is necessary. Whether it is an Airport Cargo Handling, a Car Park System or Material Handling Solution, the suppliers’ reference list with proven records and strong market presence play the main role. Having more than 20 years of experience in these fields, we can definitely say that in such niche markets price is not the key factor on purchase decision, but surely not the last. Tenders’ competition allows participants to present expertise, to open the product benefits and to explain the price formation. There are several factors that define purchase decisions: country of origin, market reputation (and here we can say the company and its team), world presence and references, flexibility and guarantees offered. It isn’t easy to place the order for the technology
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that you’ve never used. And the dilemma comes between expectation and reality of the systems implemented. That is one of the reasons to understand the requirements, project plans and future development of the client on the initial stage. For example, the advantages of ASRS or ETV systems to a warehouse application are considered to boost the warehouse efficiency by allowing higher storage capacity in a smaller area than necessary and equally increase the revenue. However, we cannot put an equal sign (=) inside this correlation. Material flow, value of import and export, potential growth and evaluation of further intralogistics operations allow client and automation consultant to avoid the typical mistakes and assure the budgetary victory. To sum up, automation should not be defined and associated only by price. There is a set of parameters that covers the necessity and reasonability of technological integration. If you think good automation is expensive, try the bad one. Better safe than sorry.
New quality benchmark set at Barakah Nuclear Energy Plant The Emirates Nuclear Energy Corporation (ENEC) has successfully completed the welding of Reactor Coolant Loop piping and the Reactor Containment Building (RCB) dome structure for Unit 3 of the Barakah Nuclear Energy Plant. The completion of pipe welding for the Reactor Coolant Loop has set a new global benchmark for quality in pipe welding, and the RCB dome structure marks the completion of the major construction
activities for the building, which houses the main components. These achievements mark another set of safe and on-time milestones in the construction of Unit 3, which is now 69 per cent complete. One of the next steps in the construction process will be to test the structural integrity of the RCB, including the building’s ability to withstand high internal pressures. Said ENEC CEO, Mohamed Al Hammadi,“These milestones are a result of our extensive
collaboration with our Prime Contractor and Joint Venture partner, the Korea Electric Power Corporation (KEPCO), as well as sub-contractors such as the HyundaiSamsung Joint Venture (HSJV) and Sam Jin. Working together and benefitting from the experience gained when conducting the same operation of the first two Units at Barakah, the teams continue to implement the highest international standards of safety, security and quality.”
A true commitment to green energy crucial for success A number of oil and gas majors are going through an existential crisis in recent years, given that the world is decisively and rapidly moving away from fossil fuels. Therefore, the future of the industry in its current form seems rather uncertain, says an LBS expert. According to Dr Ioannis Ioannou, Associate Professor of Strategy and Entrepreneurship, London Business School, it is no surprise that a number of oil companies across the Middle East are already beginning
to invest in renewable forms of energy, hoping that such investments will act as a stepping-stone for the next phase of the energy landscape. Said Dr Ioannou,“For the oil and gas industry, perception and timing are critical – the recently announced US$ five billion investment in solar panels by Aramco, ahead of what could become the biggest IPO ever, warrants closer attention. A true commitment to renewables, and a credible pitch towards investors, should be embedded
throughout the organisational structures and processes – financial commitments alone may not be enough, especially given the increasing sophistication of the investment community in evaluating companies’ commitment to a more sustainable future. Research shows that companies perform better in the long run, and thus produce superior shareholder returns, only when environmental and social issues become part of a corporation’s DNA.” He also stressed that one
should also not underestimate the challenge of competing in the same industry – in this case, the energy industry – with two very distinct business models: fossil fuels and solar. Aramco’s long-term success – and hence, its ability to generate investment returns – will hinge upon its ability to evaluate whether the synergies generated by competing with two positions in the same industry outweigh the costs, and whether the resulting conflicts can be managed effectively.
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Farnek enters Abu Dhabi security services market
Back to the future: Why retrofitting may be a key answer for energy efficiency Existing buildings, as opposed to new construction, account for the vast majority of energy consumption in the residential and commercial sector. But a building doesnâ€™t need to be new to be energy efficient. Owners and facility managers are now realising that retrofitting key components with the latest technology can significantly reduce energy consumption, maintenance calls, and operating costs. Emerson, who has always tried to raise the bar in energy efficiency, communicated the importance of new technology through their participation and sponsorship of the 2017 Retrofit Tech UAE Summit, held on March 20th and 21st. Last year, the Dubai government announced a strategy for reducing energy demand by 30 per cent by 2030, which lead to a partnership between Dubai
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Supreme Council of Energy (DSCE) and the United Nationâ€™s Building Efficiency Accelerator (BEA). And given the emphasis on sustainable commercial buildings and reducing their energy footprint, retrofitting is a hot topic. In the US, evidence suggests that building construction is shifting away from new builds to retrofits. According to data provided by McGraw-Hill, as much as 61 per cent of all construction projects are retrofits. Even in a city such as Dubai, where many of the buildings are under 20 years old, there is still a strong case to retrofit for energy savings. In addition, there are several quantitative benefits, including reduced management and operating costs, extended equipment lifespan, increased property value, and enhanced occupancy rates.
Farnek is now operating in the Abu Dhabi security market, providing full protection services across the entire range of real estate assets, such as commercial and residential buildings, shopping malls, hotels, and industrial premises. The move follows the formal signing of a business partnership agreement with HE Badria Almulla, Chairperson of the Abu-Dhabi-based International Emirates Business Group (IeBG). With existing customers in the banking, residential real estate, and industrial HE Badria Almulla, Chairperpremises, initially Farnek son of the Abu-Dhabi-based International Emirates Business will station 100 guards Group (IeBG) at its Abu Dhabi offices and increase resources in line with market demand. Farnek plans to have over 500 security personnel permanently based in Abu Dhabi by 2020. Farnek has been providing total FM services in the UAE for more than 37 years, and until now has subcontracted its security Markus Oberlin, CEO, Farnek services in Abu Dhabi. According to the research company TechSci, the facilities management (FM) industry in the UAE is expected to grow at a Compound Annual Growth Rate (CAGR) of up to nine per cent over the next five years, driven by mega projects like Abu Dhabiâ€™s Emirate-wide Vision 2030, and Urban Development Master Plan 2020.
JTECO inaugurates all-new premises and warehouses
With over 19 years in the Saudi local market, Juffali Technical Equipment Company (JTECO) recently celebrated the opening of another new showroom for the sales and promotion of Bosch Power Tools and Bosch Automotive Aftermarket Parts. The JTECO new premises is located at Kilo 14, Madina Road in Jeddah. Officially inaugurated by Sheikh Khaled Juffali (Vice Chairman and Managing Partner of Juffali Group), Steven Young (President of Bosch Turkey & Middle East), Holger Hellmich (Regional President of Bosch Automotive Aftermarket Europe
and Middle East), and HE Holger Ziegeler (Consul General of Germany) last month, the showroom hosts the entire range of Bosch Professional and DIY Power Tools offerings, including Bosch Automotive aftermarket parts, and the latest solutions for construction, industrial, and home users from Kärcher Cleaning Equipment, Hunter Wheel Alignment, Rotary Lifts, METS Generators, Snap-on Hand Tools, FIAC Air Compressors, TELWIN Welding Machines, and many other technical equipment brands that are exclusively represented by Juffali in Saudi Arabia.
Servcorp Middle East: Bahrain’s burgeoning business environment set to attract further foreign investors Bahrain’s burgeoning business environment continues to create foreign investment opportunities, despite the knock-on effect of an uncertain globally economy, according to Servcorp. The Bahraini Government has ambitious plans to develop its non-oil sector, which, according to the IMF, accounts for 76 per cent of Bahrain’s total GDP. In 2016, the country secured a total of US$ 280 million of foreign inward investment from 40 new companies. “At Servcorp, we have witnessed an uptick in the market as both regional and global companies invest in the region. The government is actively seeking foreign and private sector
investment – highly promising growth sectors include the financial services, industrial and manufacturing, logistics, tourism and information communications technology (ICT),”said Laudy Lahdo, Servcorp’s Middle East General Manager. According to Servcorp, regulatory reforms have helped to pique investment interest among foreign companies – Bahrain was the first country in the MENA region to integrate limited partnerships laws into its legal system nationwide with the introduction of the Limited Investment Partnership Law. New measures have also been adopted to support start-ups including reduced minimum capital requirements.
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Jetex was handling partner for Breitling DC-3 World Tour in the UAE
Hamad Obaidalla, Chief Commercial Officer, flydubai
flydubai Cargo continues to deliver flydubai Cargo has built a network that, due to interline agreements with other airlines, extends globally, allowing the transportation of a variety of goods from Dubai across the GCC, Middle East, Europe, Africa, Russia, CIS, Central Asia, and America. flydubai Cargo now offers its services to 300 destinations around the world. With flydubai operating flights to 62 destinations which did not previously have direct links to Dubai, the opportunity to transport goods directly has seen strong demand for services to get shipments to their destination faster and more efficiently. Having successfully completed the EU Aviation Security Validation in 2014, flydubai Cargo has received the ACC3 designation, which allows the carrier to provide uninterrupted cargo services into or through the EU.
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flydubai Cargo has continued to invest in a number of electronic cargo systems, which enables its customers, free of charge, to have access to a real-time online booking system, process their air waybills, and track their consignments. The airline only uses electronic air waybills (e-AWB), and in Dubai, a fully-automated warehouse storage facility and retrieval system enhances operations and transit times. As a recent signatory of the IATA Multilateral e-AWB agreement, flydubai Cargo has been recognised by IATA as the highest ranked airline for its e-AWB penetration worldwide. flydubai Cargo received the Cargo Operator of the Year award at the Supply Chain and Transport Awards (SCATA) in Dubai, and was recognised at the Payload Asia Awards as the Rising Star Carrier of the Year.
Jetex was the handling partner of Swiss luxury watchmaker and aviation chronograph specialist, Breitling, during the UAE leg of the Breitling DC-3 World Tour. The flagship Jetex FBO Terminal, located at Al Maktoum International Airport, played host to the Breitling DC-3 last month. Jetex provided a full range of ground support services for the aircraft and crew during its fourday stop in Dubai. The Jetex FBO Terminal provided ground handling, aircraft fuelling, and trip planning services throughout the event. Featuring a 1,500 square metre lounge, this unique facility shatters expectations by bringing upscale contemporary interior design and five-star hospitality to the aviation arena. On-site customs and immigration and VIP ground transfer services served to further enhance the experience for Breitlingâ€™s passengers and crew.
75 per cent of UK businesses eyeing Dubai for overseas expansion
As the nation awaits the triggering of â€˜Article 50â€™, the uncertainty over Brexit is making UK businesses more open to overseas expansion, with 42 per cent of UK businesses confessing to having more appetite now than previously to expand their business presence overseas. Thatâ€™s according to new research released by the DMCC, a Dubai Government entity on trade and enterprise. Amongst the top reasons for UK businesses eyeing overseas expansion, include: emerging markets becoming increasingly attractive (63 per cent), the growing business need for a global presence (47 per cent), availability and wealth of overseas talent (44 per cent), and too much uncertainty in the markets with the UK no longer being an attractive option (36 per cent). Out of the UK businesses open to expanding into overseas markets, a staggering
75 per cent say they are eyeing Dubai as a possible overseas location to expand into. And out of the UK businesses that are still undecided, 40 per cent say they would consider the Middle East as a territory to have a presence in if they are open to overseas business expansion. Amongst the UK businesses that are still hesitant about overseas expansion, 34 per cent say it is because their business is not applicable for an overseas market, however, certain features could make it more attractive for them to consider overseas business expansion. For 43 per cent of UK businesses, tax free incentives would make it more attractive to expand into overseas markets, and for 29 per cent, the ease at which they can arrange paperwork (trade license, visas, office space) would help them consider an overseas expansion.
Solutions for a healthy world Tranzone operates a state-of-the-art 3PL warehouse in Jebel Ali Free Zone. We have partnerships with the leading pharmaceutical, medical device and animal health companies around the world.
Healthcare Logistic Services: Air Freight Sea Freight Land Transportation Value Added Services Warehousing & Distribution Return logistics Documentation Tranzone FZCO (Member of Banaja Holdings)
Jebel Ali Free Zone (South) Plot No: S20129 P.O Box : 262955, Dubai, United Arab Emirates, Tel : +971 4 811 0000
Web: www.tranzone.ae APRIL 2017 13
Etihad Airways engineering becomes first middle east MRO to receive production approval from EASA Etihad Airways Engineering is now entitled to manufacture interior parts such as seat covers, carpets, curtains, decals, and markings, alongside composite and other cabin structures, and release them with a EASA Airworthiness Certificate. This will allow installation of these parts onto aircraft registered in Europe or in any country recognising EASA certificates, such as the UAE, and many countries in the Gulf. Jeff Wilkinson, Chief Executive of Etihad Airways Engineering, said, “We can now offer shorter lead times and competitive modification services as a package, in combination with our EASA Part21J Design approvals and the testing labs operated with our partners. We remain focussed on developing our maintenance, repair
and overhaul capabilities as a one-stopfacility while focusing on new platforms and delivering the highest standards of safety and quality. Etihad Airways Engineering is an AS9110 certified organisation and already holds EASA 145 approval, alongside EASA 21J approval for designing and undertaking minor and major changes and repairs. The company is the Middle East’s leading aviation maintenance, repair and overhaul (MRO) provider.” Caption: The Etihad Airways Engineering team display their Production Organisation Approval certificate. (L-R) Michael Adams, VP MRO Operations; Bernhard Randerath, VP Design, Engineering and Innovation; Jeff Wilkinson, CEO Etihad Engineering; Stephan Keil, Senior Manager Projects.
Yakult establishes distribution throughout the GCC Yakult, Japan’s leading probiotic drink, have officially launched their first office in the UAE. Now, distribution lines will be available in the UAE and throughout the GCC, supplying Yakult across major supermarket chains. In 1964, Yakult propelled its first overseas operation in Taiwan, and since then has extended its reach to over 38 countries and regions worldwide, making Yakult the leading global probiotic drink. The many health benefits of Yakult have been scientifically proven in
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numerous clinical trials. The results have shown that simply one bottle of Yakult a day can stimulate and improve the activity of immune cells, which help the body to better fight infections and diseases. In order to demonstrate Yakult’s effects scientifically, the company has also developed a worldrenowned laboratory, which evolved into the Yakult Central Institute for Microbiological Research, in order to guarantee they maintain their high health standards and benefits.
Empower’s transmission pipelines to cross 236 kilometres in Dubai Emirates Central Cooling Systems Corporation (EMPOWER) is constantly expanding its network of district cooling transmission pipelines, which has crossed 236 kilometres at the end of 2016. The remarkable expansion of Empower’s network of district cooling transmission pipelines is the result of the ongoing growth in its business and projects in Dubai, following signing new contracts to provide cooling services, and starting new phases of the already existing projects. In 2010, Empower catered to its need for Ahmad Bin Shafar, CEO, Empower transmission pipelines by co-founding ELIPS, which manufactures pipes of high standards. Empower uses in its transmission pipelines the latest technologies that guarantee delivering the best cooling service for its clients, also by maintaining the operational sustainability. In terms of quality, Empower’s transmission pipelines can keep operating for more than 50 years with full productivity. These pipelines are remarkably efficient, and they can keep providing the best district cooling services, even when the temperature goes extremely high especially during summer, which helps delivering quality chilled water. At the same time, Empower always makes sure that the process of installing, operating, and maintaining these pipelines is going smoothly and in an ecofriendly way.
NAQEL Deputy-CEO Adnan Al-Mazrooa and Dubai Trade CEO Mahmood Al Bastaki signing the MoU
Engineering contracting company celebrates 42 years
NAQEL partners with Dubai Trade to train logistics community in the GCC Saudi Arabia’s logistics service provider - NAQEL has signed an Memorandum of Understanding with Dubai Trade to collaborate on education and training for the GCC Trade and logistics industry. Both organisations aim to provide training programmes and events to develop best practice and knowledge in the sector. The training division of NAQEL – the ‘NAQEL Excellence Center’ supports the Kingdom’s 2030 vision and its aim to transform its logistics and transportation sector. NAQEL also
aims to support the specific training needs of organisations and private companies in Saudi Arabia involved in trade, logistics, customs, port handling and associated services. Its Certified Trade and Logistics Professional (CTLP) programme has seen 1400 participants from local and international organisations. Dubai Trade also launched the Certified Customs Expert (CCE) programme, which addresses key elements and best procedures for customs processes in the region. Dubai Trade training programmes are endorsed by the Chartered Institute of Logistics & Transport (CILT).
Hatem Farah, Founder and Chairman, ECC
Engineering Contracting Company LLC (ECC), is celebrating 42 years of business in the UAE. Alongside the company’s anniversary milestone, ECC recently delivered eight per cent growth for 2016, despite the slowdown in the market, and has grown in terms of manpower and machinery, currently employing more than 7,000 highly qualified team members. ECC’s positive annual growth figures are largely attributed to its delivery, reputation and strong financial position. Key clients of ECC include: The Ruler’s Office, Emaar Properties, Dubai Properties, Dubai Islamic Bank, Dubai Investment, Deyaar, Damac, Union Properties, Emirates Telecommunications Corp (Etisalat), Abu Dhabi National Oil Company (ADNOC), Dubai Festival City (DFC), Zayed University, the Roads Transportation Authority (RTA), and many more.
Role of free zones in spotlight at the AIM 2017 In an effort to encourage international investments and enhance cooperation between countries, the Annual Investment Meeting (AIM), scheduled to take place in Dubai from April 2nd - 4th, 2017, will discuss the role of free zones in shaping and promoting competitive economy. Spearheaded by leading experts of the industry, the discussion will focus on efforts of free zones in providing business-friendly processes that facilitate ease of doing business. In addition, the discussion will also shed light on importance of free zones as innovation hubs and highlight the challenges and issued faced by these trade zones. A report by Dubai Silicon Oasis Authority (DSOA), the regulatory body for Dubai Silicon Oasis (DSO), in collaboration with Thomson
Reuters, identified cities where free zones are best positioned to drive the growth of Islamic economy sectors, and ranked Dubai as the world’s leading Islamic economy enabling free zone city, followed by Kuala Lumpur and Johor Bahru in Malaysia and Manama in Bahrain. Held under the theme ‘International Investment, Path to Competitiveness and Development’, this year’s edition of AIM will gather thousands of attendees, including renowned personalities, key decision makers in industry, finance and politics from the MENA region, and around the globe. The international forum will be host to 100 high-level officials, 500 exhibitors, and more than 100 media partners. This year’s edition of Annual Investment Meeting oversees a host of strategic partners including Dubai Airport Free Zone Authority (DAFZA), which is the Investment Awards Sponsor for the international forum.
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COUNTRY REPORT - OMAN
invests in transport and logistics Strategically situated at the head of the Indian Ocean, Oman, which borders Saudi Arabia and the UAE, is a gateway to the GCC region â€“ a re-distribution point and transit hub for shipments to and from Asia, the Indian subcontinent, and East and Central Africa. Oxford Business Groupâ€™s comprehensive report on the Sultanate presents their outlook for the near future
ransportation and logistics in the sultanate has emerged in recent years as a pillar of development, and a critical driver of the economy, benefitting all sectors. Seeking to develop Oman as a leading logistics centre in the region, and reduce its dependence on hydrocarbons, the government continues to generously fund logistics infrastructure programmes.
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COUNTRY REPORT - OMAN
Jabal Akhdar in Al Hajar Mountains, Oman
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COUNTRY REPORT - OMAN
Planning ahead The Sultanate of Oman Logistics Strategy (SOLS 2040), a blueprint initiated by the Supreme Council for Planning, lays out a general plan for government investment in the sector, aimed at helping to secure a place for the sultanate among the top logistics-centred economies of the world. Along with the Oman Logistics Plan 2020, SOLS 2040 lays out longterm objectives for increasing the contribution of the logistics sector to GDP, doubling the level of employment in the logistics industry to 80,000 jobs by the end of the decade, and improving Oman’s standing against international benchmarks set by the World Bank and World Economic Forum. Logistics initiatives that received strong support in 2015-16 included port-handling capacity and land-transport connectivity projects aimed at addressing infrastructure bottlenecks. Strategic objectives were broadly focused on easing congestion and enhancing capacity by investing in infrastructure and technology for the upgrade of ports, airport facilities, and new road links. These efforts showed significant promise in 2015, with the transportation and logistics segment combining to account for around US$ 8.81 billion of Oman’s GDP, according to market research company Frost & Sullivan. Transport infrastructure objectives for the Ministry of Transport and Communications (MoTC) in 2016 included completion of construction work on Muscat International Airport’s passenger terminal, early development of a service corridor connecting the Port of Salalah to industrial and free zones, the implementation of public transport plans, and completion of new roads and expressway extensions.
Road infrastructure Across Oman, the government is pursuing significant infrastructure projects aimed at connecting disparate regions, moving people and goods safely and efficiently, and accessing new economic opportunities. Productivity is a major focus of public transportation policy – a fundamental requirement of manufacturers is to distribute their products to appropriate markets quickly and inexpensively. As of February 2016, Oman’s government was working on 49 road projects worth a total
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COUNTRY REPORT - OMAN
The Sultanate of Oman Logistics Strategy (SOLS 2040), a blueprint initiated by the Supreme Council for Planning, lays out a general plan for government investment in the sector, aimed at helping to secure a place for the sultanate among the top logistics-centred economies of the world
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COUNTRY REPORT - OMAN
are currently being operated due to lack of infrastructure, including bus turn-out lanes and air conditioned shelters. Cahill told OBG that,“Of the proposed stops, we are probably only serving 60 per cent, because the other stops need road alterations in order to make them safe for use, and that work is currently being tendered by the municipality. We are waiting for their process to catch up with our development plans.” The company’s expansion plans aim at improving public transport in the country, beginning with feeder lines off the main Ruwi-Mabela route in Muscat, and gradually Public transport expanding networks to meet demand.“We The transport firm Mwasalat is the leading know that there is pent up passenger demand government-owned public transport in Muscat for public transport,”said Cahill, company in the sultanate, ferrying over two “What we do not know is how big that million passengers from December 2015 demand is. The only real way is to keep testing through the end of April 2016. The company and growing, and to get greater penetration. was re-branded from the Oman National That is what our future plans Transport Company in are all about, except those November 2015, introducing a plans have yet to be approved new fleet of 40 low-floor, redProductivity by the government.” colour buses in Muscat, and is a major There is a political appetite 10 larger white buses running to invest in public transport between cities. The company focus of public in Oman, but the market has since floated a tender for transportation is relatively small, and, in an additional 33 inter-city the current low oil price buses and 85 city buses, but policy – a environment, any plans has not yet received order that require public financial approval. fundamental support are dealt with on “We are in the process requirement of a priority basis, affecting of purchasing a total of 118 timelines and delaying buses. Once they have been manufacturers approvals. delivered, our oldest vehicles is to distribute in public service will only be three years old, so we Taxis and ferries their products will have completed a major Local public transportation in to appropriate overhaul of the fleet that has the majority of the country’s taken us through the first markets quickly urban areas is limited to whitetwo phases of expansion,” and-orange minibuses and and inexpensively baisa taxis. In June 2016, the Mwasalat’s chief operating officer, Bill Cahill, told OBG. MoTC granted licences to the Higher-than-expected passenger figures Ibtikar IT Company and Mwasalat to manage through the first five months of operations taxi services at high-profile destinations in indicate a positive market response to Muscat, including Port Sultan Qaboos, three- to Mwasalat services in Muscat, predominantly five-star hotels, Muscat International Airport, driven by expatriate commuters of various and commercial centres and malls. Each taxi nationalities. Two new services launched in management company will have to follow the 2016 bring to six the total number of routes design for taxis put forward by the ministry and operated by the company in Muscat. Each fix fare metres in vehicles. route has designated bus stops, though This follows the example of Oman only roughly half of the stops on the Airports Management Company (OAMC), primary Ruwi-Mabela route, for example, which introduced a new electronic metre of OR 2.1 billion, with plans to complete 10 during the calendar year. General objectives for the sultanate’s road construction programme include reducing gridlock faced by motorists travelling to neighbouring countries, and improving connectivity across various sectors in Oman. For example, the recent opening of a portion of the Al Batinah Expressway is aimed at reducing travel time to the UAE. Similarly, a 680 kilometres long highway through the Empty Quarter that was completed after a two-year delay shortens the distance to Saudi Arabia by 800 kilometres.
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payment system for airport taxis in April 2016, following several years of delays. Aimed at enhancing overall transparency of the system, fares for airport taxis now begin from OR six (US$ 15.60 / AED 57.30) and increase at a rate of 200 baisa (US$ 0.52 / AED 1.91) per kilometre, comparable to previous pricing, but providing a greater level of standardisation. Ferries comprise another element of the Omani public transport system, allowing direct transit between points at a capital cost much lower than bridges or tunnels. The National Ferries Company (NFC) registered roughly 15 per cent growth in passengers in the first three months of 2016 over the same period in 2015, from 42,083 to 51,824 according the company’s statistics. NFC also saw a 27 per cent growth in the total number of vehicles carried on board and, notably, a 512 per cent rise in the volume of cargo moved, from 1164 tonnes in 2015 to 7130 tonnes in 2016.
Logistics central Logistics performance, both in international trade and domestically, is central to the economic growth and competitiveness of the sultanate, creating thousands of jobs and contributing a significant share of GDP. “Logistics is a must if you want to diversify the economy,”Reggy Vermeulen, CEO of Port of Duqm Company, told OBG.“The efficiencies gained with proper infrastructure benefit the oil and gas industry, provide access to untapped mineral wealth by shrinking the distance between quarries and ports, and allow for economies of scale by providing access to international export markets, particularly Africa, India and the GCC region.” Whereas reductions in government support have stalled logistics development in other countries of the region, Oman is comparatively insulated, and logistics spending is expected to yield significant earnings.“Salalah is built. Sohar is built. Duqm is 85 per cent built. So yes, we still have to invest massively in the remaining 15 per cent to complete Duqm,”said Vermeulen, adding,“But once this is done, you can easily serve air-to-sea and vice versa, sea-to-sea and sea-to-road, for any of the three ports. Once Duqm is complete, it is more a matter of changing policies and soft infrastructure in the country to make it smoother and faster rather than investing on a large scale.”
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COUNTRY REPORT - OMAN
Taxis warten auf Kunden in Masquat, Oman
at transforming logistics into an economically viable sector. The project began as a government Airport infrastructure is likewise developing quickly, with US$ 6.1 billion earmarked through initiative to transform logistics into an economically viable sector by creating a city that to FY 2020/21 to support the completion of caters to the growth of logistics-linked activities new regional airports and major terminal and stimulates investment in indirect support developments at two international airports. elements. It was rebranded in 2016 as Khazaen. By capitalising on the benefits accrued from Work is scheduled to proceed in five reliable supply chain networks and increased stages, each phase consisting of five years connectivity to international markets, logistics in duration, depending on market needs performance has improved significantly over the past two years as measured by performance and trends. Development of Block one of Khazaen has already commenced, with OLCo in quality, Customs, infrastructure, and tracking floating tenders and awarding contracts for and tracing systems. Oman was ranked 48th infrastructure projects, service facilities and globally in the 2016 World Bank Logistics dry-dock operations and management. Performance Index, as against the 59th spot it occupied in the previous index in 2014. In the GCC region, Oman trailed the UAE Freight haulage (14th position), Qatar (30th) and Bahrain The increase in fuel prices, after subsidies (44th), but finished ahead on petrol and diesel were of Saudi Arabia (52nd) and lifted in January 2016, is Kuwait (53rd). having an impact on overland New legislation Spearheading the transportation costs in Oman, instituting load sultanateâ€™s ambitions to releasing a price pressure evolve into a logisticson all other categories of limits increases centred economy is the transported goods. Heavier the number Oman Logistics Company goods, including cement and (OLCo), a wholly construction materials bulk of trucks that government-owned entity loads, have seen the greatest companies must cost increases, along with food tasked with developing the countryâ€™s first integrated items transported in refrigerated operate, thus logistics hub in Al Batinah trucks. Another issue faced by South Governorate, aimed companies engaged in freight raising costs 22 APRIL 2017
haulage, particularly in the mining sector, is the reduction of truck tonnage limits. New legislation instituting load limits increases the number of trucks that companies must operate, thus raising costs. At the moment, there is no domestic rail option connecting interior quarries to ports. However, in 2016, provisional studies were carried out for a 337-kilometre freight railway project connecting the mineral-rich region of Shuwaymiyah, which contains substantial reserves of limestone and gypsum, with Port of Duqm. The railway would have the capacity to carry five metric/million tonnes of gypsum, five metric/million tonnes of limestone, and one metric/million tonnes of oil equipment each year. If given the go ahead, it is envisaged that the project will be carried out under a public-private partnership and, if an agreement is signed in 2017, it could be up and running by 2021, according to the local media. Considering the long distances that have to be covered by mining companies to reach the ports, authorities are reviewing all options to enhance efficiencies. One proposed solution under consideration is the concept of road trains. Widely used in Australia and New Zealand, this approach consists of a single engine pulling multiple lighter trailers, one behind the other, thereby reducing costs. The option is under review, with tests having been conducted between Sohar and Muscat.
Port Sultan Qaboos cruise terminal in Muttrah. Muscat, Oman
Rail network In the second quarter of 2016, the Omani government announced its intention to delay construction on an ambitious regional rail project connecting the sultanate with the rest of the GCC, in response to a decision taken by other Gulf countries to suspend work on their portion of the project. The estimated US$ 15.4 billion GCC Railway network – a 2,117-kilometre railway system intended to connect Kuwait, Bahrain, Saudi Arabia, Qatar, the UAE, and Oman – had been slated for completion in 2018. The plan envisaged a rail line running from Kuwait, down the Gulf coast and through the UAE to Muscat, where it would link up with a domestic line connecting to Duqm and Salalah in southern Oman. The decision of the Omani government to delay construction followed a January announcement by statebacked Etihad Rail to suspend the Stage two tendering process for construction of track inside the UAE, linking the country’s domestic rail network to the Saudi border at Ghweifat and the Omani border at Al Ain. The suspension of Etihad Rail’s plans made it difficult for Oman to award a deal for its own track, despite being ahead of its GCC counterparts in designing its part of the overall network. The sultanate subsequently cancelled a contract with a private consultancy company retained to
manage the rail project. The MoTC could not confirm when the project could be re-launched, and no new official timelines for the GCC Railway project have been presented. Oman is now looking to shift its focus from using its railways to distribute imports of goods around the region via the GCC network, to expanding a domestic rail network aimed at facilitating seaborne exports of items such as raw materials. “We are connecting the ports, as planned, but we might be utilising the railway for promising sectors such as mining,”Ahmed bin Mohammed bin Salim Al Futaisi, the minister of transport and communications, told local press in February 2016.“So instead of the initial plan of importing via Oman’s ports and then using the GCC rail project, we might start with exporting what we have in Oman.”
Port facilities Sea transport is the predominant mode of freight activity in Oman, facilitated by the country’s three major ports: Sohar in the north, midway between Dubai and Muscat; Duqm, approaching 85 per cent completion in the centre of the country; and Salalah in the south, acting as a trans-shipment hub and a bridge to East Asia. At the heart of the appeal of Oman as a shipping hub is its strategic geopolitical location and proximity to GCC markets that can be
accessed by road, if traditional maritime routes through the Strait of Hormuz are in any way imperilled. Oman’s location also affords a degree of separation from growing overcapacity within the strait. “I think I would be extremely worried if I was inside the strait, because they are really heading toward a tremendous overcapacity with mega-ports coming on-line in Abu Dhabi, Dubai, Qatar, and Kuwait,”said Vermeulen,“That said, we are outside the strait, and outside the strait, the number of big ports is more limited, and the market is much larger. For the time being, what is happening inside the Gulf will have a limited impact on our business in Oman.”
Sultan Qaboos Port With the transformation of Muscat’s Port Sultan Qaboos (PSQ) in Muttrah into a mixed-use waterfront cruise and leisure destination initiated in September 2014, most commercial cargo vessel and cargo operations have now been shifted to Sohar Port in the north. The decision to move operations was made in light of difficulties with expansion at the centrally located PSQ, and the additional capacity available at Sohar to absorb PSQ freight capacity. As a result of the significant reduction in the number of vessels and volume of cargo handled at PSQ, Port Services Corporation (PSC),
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which operates and manages the gateway, submitted a proposal to authorities in April 2016 recommending either its liquidation, or the total buyout of private shares in the company, turning it into a wholly-owned government entity.
Sohar Port The deep-sea Sohar Port, and adjacent free zone, lie at the centre of global trade routes between Europe and Asia, approximately 200 kilometres from Muscat and 160 kilometres from Dubai. The location of Sohar provides an advantage for handling break bulk and project cargoes, and positions the port as a strong option for trans-shipments across the Arabian Peninsula. Since operations began at Sohar Port and Freezone in 2004, cargo volumes across all categories have grown by double digits to an average of almost one
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million tonnes of cargo per week in 2015. From 2014 to 2015, the port experienced a 12 per cent rise in total throughput, and a 46 per cent increase in break bulk cargo shipments to over 1.9 metric/million tonnes. The port is also emerging as a significant regional automotive hub for the Middle East, handling over 200,000 vehicles per year. Capacity at the port’s container terminal – operated by Oman International Container Terminal (OICT) – has more than doubled since the relocation of commercial traffic from Muscat to Sohar in 2014, and cargo volumes have risen from 329,000 twenty-foot equivalent units (TEUs) in 2014, to around 540,000 TEUs in 2015. In the second quarter of 2016, OICT added four new post-Panamax quay cranes, capable of handling 20,000 TEU mega-container ships, as well as an automated truck appointment system, to
reduce turnaround times at the terminal. Current capacity at the terminal is around two million TEUs per year, and plans are under way to develop another container terminal, with the capacity to handle five million TEUs per year. The growth in size and efficiency at the current container terminal has helped to develop new lines and connections, including more direct links to Asia. Global container shippers Evergreen and Hanjin included Sohar as a regular port of call in 2015, and Mediterranean Shipping Services (MSC), the world’s second-largest container shipper, began calling at Sohar in 2016. With the lifting of international sanctions on Iran in early 2016, Sohar and the OICT are also eyeing expanded shipping and trade links with Iran, seeking to draw business from Iranian dry bulk and container line, the
COUNTRY REPORT - OMAN
The country is currently exploring the details of constructing an US$18.5bn urban metro system and US$6.6bn railway section, as part of the proposed GCC regional railway system
Port of Sultan Qaboos in Muscat, Oman
Islamic Republic of Iran Shipping Lines, and the National Iranian Tanker Company.
Salalah Port Situated in the Dhofar Governorate on the Arabian Sea, the Port of Salalah is a major trans-shipment hub and gateway to the Middle East, Indian subcontinent, and East Africa. Salalah Port handled 2.57 million TEUs in 2015, down 15 per cent from 3.03 million TEUs a year earlier. The decline in container terminal trans-shipment volumes – attributed to the rationalisation of services of its two largest customers and increased regional competition – was nevertheless partially offset by new volume records set at the port’s general cargo terminal, where throughput increased by 22 per cent from 10.31 metric/million tonnes in 2014 to 12.54 metric/million tonnes in 2015. That followed
an already robust 30 per cent growth in bulk throughput in 2014 over volumes for the previous year. In 2016, the downwards trend in container throughput was reversed. According to local media, during the first six months of the year, the port saw a 29 per cent increase in the volume of containers handled, at 1.58 millionTEUs, compared to the same period in 2015, while general cargo saw growth of 12 per cent. The handling of locally mined limestone and gypsum has been driving growth in the general cargo business at Salalah, and remains the largest commodity for the terminal followed by methanol, fuel and bagged material, mainly cement. Annual handling capacity received a boost in 2015, with the completion of an expansion project that added 20 metric/million tonnes of dry
cargo and six metric/million tonnes of liquid bulk cargo capacity in a new deep-water General Cargo and Liquid Bulk Terminal. Other recent developments at the port include a long-term land lease agreement signed between Oman Oil Company and Salalah Port Services Company in early 2016 to develop a new, mid-sized, marine-bunkering and product-trading terminal, providing ships calling at the Port of Salalah with fuelling services by the end of the year. Main line connectivity forms a critical backbone of the port’s supply chain solution, and Salalah has been successful in developing new feeder connections to other ports in the region, launching a new shipping line in April 2016 that connects Salalah and Jebel Ali in the UAE, along with the Omani ports of Duqm and Sohar. Intermodal connections servicing nearby oilfields, and
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overland cargo shipments to Saudi Arabia are less developed, and are likely to require greater investment over time. Infrastructure at Salalah will receive another boost in 2017, when a project involving the construction of new container berths at the terminal gets under way. Completion of the berths will raise the port’s container handling capacity by 50 per cent to reach 7.5 million TEUs.
Port of Duqm Situated on the south-eastern seaboard, overlooking the Arabian Sea and the Indian Ocean, Port of Duqm provides a gateway to Al Wusta Governorate, which is home to the majority of the sultanate’s hydrocarbons and mineral wealth. Currently 85 per cent complete, the port is being positioned as a multi-purpose commercial gateway, and the principal anchor of a 2000 square kilometre special economic zone (SEZ) – the largest initiative in the sultanate’s modern history. Envisaged within the SEZ are clusters earmarked for investments related to, among others, refining and petrochemicals, light manufacturing, heavy industry, seafood processing, tourism and leisure, and mineral processing. Investment in the SEZ is growing in line with the maturation of infrastructure serving various industrial clusters.“Duqm is currently going through the chicken or the egg period of its development,”Hilal Salim Al Sinani, chairman of the Marine Technology Company, a marine oil and gas operations contractor in Oman, told OBG.“Companies are very keen to invest, but want to see more significant industrial activity there first, and thus will likely need a stronger push from the government,” he added.
Trans-Shipment potential In support of government development commitments to the port and SEZ, an airport is under construction at Duqm,
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while a proposed rail-based freight and passenger transport network is expected to eventually link the industrial port city with the national rail system. The Master Plan for Duqm port envisions dedicated terminals for general cargo, containerised cargo, liquids, petroleum products, and bulk commodities. In the long term the port’s operators, the Antwerp port authority, from Belgium, envisage that much of the business of the new port of Duqm will be in the transshipment of goods. Short-term targets for the port are focused on supporting national growth objectives through 2020, whether in minerals, oil and gas, or construction of the port and SEZ facilities. The early container terminal, minerals terminal, and project cargo terminal were functional in late 2016, though none were yet complete or operating at peak efficiency. The early container terminal, for example, was handling around 15 TEUs per crane
per hour in August 2016, as compared to 35 targeted at a fully finished port.“For the moment, our success metrics are different than Sohar or Salalah,”Vermeulen told OBG, adding,“For us it is more the volume of cargo that we are handling and, especially the very large project cargo, which is a new business for the country. This used to go by Jebel Ali in the past, and now it is going straight to the country via Duqm, so that is something we are really looking at as a key performance indicator.” When completed in 2019-20, Duqm will have a capacity of 3.5 million TEUs, capable of handling containers and general and bulk cargo, and accommodating eight vessels at a time. A planned feeder line was up and running in late 2016, connecting Duqm to Salalah, Sohar and Jebel Ali. The port was also working to establish a direct connection to China to serve a 1200-ha Chinese-oriented cluster in Duqm,
COUNTRY REPORT - OMAN
as well as adding a leg to the existing feed line or creating a dedicated service in the area of Mumbai, India.
Oman is now looking to shift its focus from using its railways to distribute imports of goods around the region via the GCC network, to expanding a domestic rail network aimed at facilitating seaborne exports of items such as raw materials
The Port of Duqm aims to become a major international export hub for industrial minerals in the next few years, banking on the commercialisation of substantial mineral resources in Wusta Governorate to generate a considerable percentage of long-term cargo volumes. For example, the port’s first shipment of 50,000 tonnes of dolomite – used primarily in the construction and steel industry – was loaded in early 2016, bound for India. The dolomite is produced in a quarry located about 30 kilometres from the port that is proven to have a reserve of over 300 metric/ million tonnes of product. Given the potential for mineral-based industrial activities at Duqm, a dry bulk terminal with a capacity to handle up to five metric/million tonnes per annum of commodities was included in the port’s phase one development. Mining and mineral processing investment in mining activities is expected to grow once a pipeline bringing natural gas from central Oman becomes operational by 2018. The availability of gas as a fuel in the SEZ will enable investments in mineral processing units, cement and clinker plants, glass manufacturing, and other, valueenhancement activities. The proposed railway linking Port of Duqm with Oman’s mining centres is an important part of the port’s ambitions, as completion of the project stands to substantially increase the volume of minerals passing through the port and will reduce the cost of carrying such commodities to the port.
Oman Shipping Company With a fleet of 52 vessels at the end of 2016, 38 of them managed in-house, Oman
Shipping Company (OSC) is the largest owner, manager, and charter company in freight shipping in Oman. The national carrier was incorporated in 2003 as an initiative of the government through the Ministry of Finance (80 per cent) and Oman Oil Company (20 per cent). Originally focused on the transport of liquefied natural gas, OSC has since diversified into crude oil, chemicals, dry bulk, container, and general cargo market segments. In 2016, the company received delivery of the last of 10 medium-sized MR2 Product tankers constructed at HMD shipyard of Hyundai in Ulsan, South Korea, as part of Project Silver, which aims to have a total of 50 newlybuilt vessels for Shell Oil Company in 2016. The container-shipping arm of OSC, Oman Container Line, also announced a new fortnightly feeder service in 2016 called Oman Express, which connects the ports of Salalah, Duqm, and Sohar to Jebel Ali in the UAE. A multi-purpose vessel that can move 350 containers or 8000 tonnes of general cargo will be used in the new feeder route. Wasam Moosa Al Najjar, general manager for corporate planning at OSC, expected substantial growth potential for the national carrier in mining and bulk cargo, going on to note the importance of introducing regulations that would have the effect of promoting the carrier as a first choice for exporters in the country. “I think we have a large opportunity in the local market. Shipping is a truly cyclical, capitalintensive, speculative and global industry,” Al Najjar told OBG, adding, “At present, the shippers and consignees in the sultanate take their shipping decisions only on spot economics, often overlooking quality and long-term sustainability. First-choice rights would enable us to provide stakeholders with long-term shipping solutions.”
Outlook Government investment in transportation and logistics drove development in the sector between 2015 and 2016, from port-handling capacity and land-transport connectivity projects, to port and airport facility upgrades and new road links. Performance in the sector, viewed as a central component of sustained economic growth and competitiveness, has improved significantly over the past two years. Mainline connectivity forms a critical backbone of the supply chain solution beginning at the country’s three major ports, and each has been successful in developing new feeder connections to other ports in the region. With the suspension of the GCC Rail project, Oman has also arrived at a key inflection point in strategic development of port infrastructure, balancing the relative merits of using ports for the internal growth of industry and export-oriented diversification, on the one hand, and logistics support in the regional and international arena, on the other. “For the ports, it can be quite simple,” Vermeulen told OBG,“If no growth is being seen locally, the port can restructure and diversify to an international approach. Oman has to diversify; it has to focus on using its available ports to boost internal growth, in order to be able to employ more people and meet Omanisation standards, for example.” In parallel to the growing volume of cargo throughput at Omani ports, warehousing is a market segment poised for growth in the country, meeting the needs of transporters seeking a strategic location to store goods en route.“Warehousing in Oman is of great interest for foreign investors given the country’s strategic location, allowing easy access to the Middle East, East Africa and Asia,”Al Sinani of Marine Technology Company told OBG. Ultimately, cargo volume growth to and from Oman could be challenged by surging competition from the UAE and Saudi Arabia, along with other countries which have similar portfolios and investment scenarios for the logistics industry. The task put to Oman is to consolidate its infrastructure and ease of doing business in order to increase efficiency and better compete with inner-gulf ports. -www.oxfordbusinessgroup.com
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Economic impact on
road, rail, sea transport
T Albert Asool, CEO, Agility Dubai, tells Global Supply Chain about the major challenges affecting road and sea transport growth and operations
he global macro-economic environment in 2016 has been a challenging one for logistics providers, hindering opportunities for growth, and forcing other operations into difficult business decisions. From stagnant global trade, including a slowdown in China, to uncertain geo-political circumstances driven by Brexit and the election of Trump, and fluctuating oil prices, logistics providers unable to adapt to these conditions will have suffered losses. “In order to compensate for the slowdown in trade, we saw many providers down-sizing their fleet, for example, in order to ensure standard market rates for cargo. Not doing so would run the risk of unnecessary fleet maintenance costs, as well as below market prices for services in the face of idle space. Others would perhaps, or in addition, be looking for ways to compensate for the decrease in supply and demand, by passing on costs to others, such as customers, or other logistics players. 2016 as such for many would have been an exercise in endurance,”says Albert Asool, CEO, Agility Dubai. Although it is now felt that the second half of 2017 will pick up on 2016, even though these challenging global trade conditions are likely to continue to impact the logistics industry.
Recent setbacks in the shipping industry The global economic environment has been particularly tough on ocean cargo carriers – growth for the industry certainly hasn’t been on the cards, as rates have continued to fall year on year.“We saw the first victim of the challenging economic environment, the first in two
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decades, with the bankruptcy of the world’s seventh-largest container shipper - Hanjin Shipping - the largest container shipping bankruptcy in history,” nods Asool. The oversupply of vessels in the face of falling demand created conditions ripe for bankruptcy, as competitors fought for business by undercutting one another’s rates. In response to these circumstances, the industry’s leading players have formed alliances and mergers to negate issues of oversupply for example.“In response, many believe that 2017 will be the most positive since 2010, with an increase of rates to be expected, as a result of both the market levelling out, as well as a high level of ship
30 APRIL 2017
scrapping last year. Others, however, are more dubious, pointing out that Hanjin’s assets are being snapped up by new competitors, and bound to result back to a situation of oversupply,”he continues.
New technologies enhancing sea and road Digital disruption is taking place at incredible speed within the logistics industry, and offers to completely change the way logistics operates entirely in the future. Independent research suggests fleet management is probably the most mature IoT market segment, and in 2015 alone, venture capital funding for freight forwarding companies
exceeded US$ one billion (AED 367.3 billion) in 2015, more than double the amount invested in the five prior years. “The effective usage of communication technology is helping the industry make savings on manpower, local travel, and financial transactions within the industry, along with higher levels of transparency. From smart technologies and applications designed to streamline day to day transactions and operations for both the industry and customers, these implementations can benefit our industry hugely, in instances such as customs, where shippers are still required to complete paperwork to move goods,” says Asool. Sensors, for example, which are
already being utilised for purposes such as temperature monitoring, can be applied for security purposes to record tampering. Tracking devices, on the other hand, could provide greater clarity over goods being shipped at sea, enabling companies to better plan around their supply chain. “At Agility, we have created a new technology venture to invest in disruptive technology related to logistics. Among them is a new truck engine designed to provide better power at lower carbon emissions, operating with renewable energy. Created by, Hyliion, one of Colle Capital’s portfolio companies, who we are partnering, this hybrid technology for the trucking industry
reduces fuel consumption and corresponding emissions by a staggering 30 per cent. These savings are achieved by recycling otherwise wasted kinetic energy and through a simple 30-minute trailer retrofit,”informs Asool, adding,“We have also invested in Cargo X, a platform that is looking to revolutionise how road freight is booked in complex markets like Brazil. Much like the uberisation of taxi services, Cargo X offers the opportunity to book idle space among in transport fleets that would help ensure maximum volume for trucks and ships for example, while offering customers cost effectiveness and efficiency.” Today, technology is being used in Agility for precisely these purposes - to improve cost
optimisation and operational efficiencies in order to balance the fuel price impact. Unlike the companies struggling in 2016, Agility enjoyed a profitable year, with a net profit of KD 59.1 million, an increase of 10.6 per cent over the same period in 2015. “For example, our fleet management system, which was developed in-house, Microtransport, offers driver management, maintenance management, fuel management, and operations management components. Providing full visibility on all the lorries, including maintenance carried out on every vehicle, all data is logged providing a historic overview of each vehicle including investments and upgrades,”he concludes.
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Heading towards growth Food logistics is a unique field, and requires tailored solutions, finds GSC, in conversation with Ignatius Scholtz, Head of Operations, INL
he UAE is regarded as a major hub in the food logistics market, and this is expected to further increase through Expo 2020, as global transportation and logistics players are looking to the GCC for future growth opportunities.â€œOver the past decade, the UAE government has succeeded in creating a world-class
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infrastructure in transportation (seaport, airports, and roads), communications, and tourism, and this has played an important role in encouraging companies to locate and operate in the country. Free zones in the UAE have succeeded in attracting capital, allowing for full foreign ownership of projects, and have generally highly modernised infrastructures and facilities, which are well connected to other free zones and transportation hubs,” says Ignatius Scholtz, Head of Operations, INL. Moving forward, logistics companies will be required to operate on an even larger scale, with a distinct global outlook through
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further expansion, and this could lead to an increase of mergers and acquisitions, along with increased standardisation supply chain fulfilment, he feels. INL has experienced positive growth since they began operations in 2012, and have increased their service offering over time. “Through close involvement from our clients, really listening to their expectations, and adapting to accommodate the continuous changing industry, INL is able to offer far more adaptable solutions. We do not only focus on one market in particular, and offer 40,000 pallet positions of automation, with adaptable temperatures ranging from frozen
(-18 to -30) and chill (0 to + five), to ambient (+10 to +14),”explains Scholtz. Automation is changing paradigms in traditional warehouse operations, and across the global supply chain. Companies are continuously seeking ways to maximise throughput, while enhancing order accuracies through the use of automated materials handling (AMH) equipment, highspeed conveyor systems, and automated crane applications. The concept of using drones inside a warehouse was recently introduced, and although this is still in the early stages, it can soon become an attractive option for upgrading and implementation.
“INL’s automated storage solution ensures the food products are kept at their best quality throughout the process, with an optimal tracking and tracing module providing all the information related to the stored goods. INL solutions fully comply with the storage requirements of food products, taking into account all aspects of the end products and speed to market, on the basis of that information,”informs Scholtz. No matter the industry, a company cannot survive without technology, and to remain competitive in the logistics industry, one needs to anticipate the most significant technology trends and then
develop innovative ways to use these to create a competitive advantage.“One can see that through automation, even in the larger warehouses, the work now requires little human intervention. Traceability has become increasingly important, and through advanced capabilities, this drives efficiencies throughout the order process, from picking to returns. Identifying a risk that can be traced back its source, swiftly isolating the problem, and preventing contaminated products from reaching consumers is easier. It’s significance is dependent of the type of reader, and the features the devices have to offer,” he says.
At INL, says Scholtz, challenges are always welcome.“This will test the resilience of your operations and business, regardless of the situation. This year will see more cold storage facilities becoming operational in the region, thereby increasing the availability and options to new and existing businesses in the frozen food industry. INL will be investing in the expansion of its fleet to accommodate the growing need for cross boarder deliveries to GCC DC’s, as well is local distribution. Plans are currently underway and in the early stages of design, location, and service offering for our second facility,” he concludes.
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Omnichannel has elevated an important issue for successful supply chain management - time compression. It is important to achieve inventory velocity, and to meet and exceed customer expectations. As the global supply chain revolution spreads across industries and markets, its importance increases. Tom Craig, President , LTD Management and supply chain expert explains the concept in detail
mnichannel has elevated an important issue for successful supply chain managementâ€” time compression. It is important to achieve inventory velocity, and to meet and exceed customer expectations. As the global supply chain revolution spreads across industries and markets, its importance increases.
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of delivered complete, accurate, and on Whether you are a manufacturer, timeâ€”a critical supply chain performance wholesaler, distributor, retailer, importer, metric. Increasing velocity, rapid response exporter, supplier, or customer, you are to changing market conditions, minimising dealing with time compression. Inventory time, and sustaining that velocity. It is issues are a pain point for many supply important for reducing waste. This is chains. Factor in that inventory increases especially true with international/global with longer cycle times. Inventory buffers supply chain, with the complexity, scope, and are related to uncertainty, such as extended number of stakeholders and participants. times. The longer the time, the more There are numerous financial inventory that is carried. and non-financial cycle time The required supply metrics, for example, onchain transformation Visibility of time customer order delivery, understands that time compression and inventory purchase orders, manufacture to order complete, cash conversion cycle, and days velocity are based on at suppliers, sales outstanding. A good one recognising supply should be a measure of the length chain management as a in-transit, and of time for a process, especially process. This contrast with at each step in one that crosses an organisation. traditional supply chains The cycle time compression management built around the chain, from metric is important â€“ it recognises a node-link activity, with vendorâ€™s plant pain points of delay. emphasis on logistics Value Stream Mapping is functions. to delivery at an excellent tool to visualise All this also plays into the times of current activities. having stock on hand the warehouse, It is a starting point to identify to meet demand. It is store or customer excess time. A key is Daysimportant to achieving in-inventory, which measures the perfect customer order is vital. 38 APRIL 2017
the number of days that inventory is held. For manufacturers, this would include raw materials and work-in-process. Days-ininventory is an important part of the cash conversion cycle. Reducing inventory levels and days of inventory improves profits and frees up needed capital; which is good news for CEO, CFOs, and shareholders. This measure is often calculated as Inventory (Cost of Goods Sold/365 Days). This method of calculation can be misleading, and understate the total inventory in the supply chain. It excludes inventory that is on order, and is being manufactured at suppliers and inventory that is in-transit. This is an omission that results in an understatement of the real days of inventory and the cash conversion cycle. Here, we will include the time from placement of purchase orders to suppliers, till delivery. With Section 404 of Sarbanes Oxley, adding this inbound portion to the calculation is valid for internal controls and risk assessment. Regardless of the technical issue of when title transfers, there is the company commitment and need for the material being ordered and shipped. Including the purchased order at supplier time and the in-transit time gives a better picture and understanding
of what drives inventory levels, days, and turns, which is useful for product lifecycle management (PLM). This new cycle time is the total inventory days in the supply chain; and it is consistent with the length and definition of a supply chain. The supply chain cycle time runs from the purchase order placed on suppliers, through to delivery to customers, or final placement on the store shelf. Studies have shown that manufacturers and wholesalers have over 60 days of inventory, and that retailers have over 90 days of inventory capital tied up. These times do not include the entire inbound inventory in the supply chain. Real supply chain inventory is likely 25 per cent higher. This is a very significant amount of capital tied up in inventory. Reducing supply chain cycle time takes analysis and effort. Points to consider are: Start. The first step to reducing supply chain cycle time is to measure the present process.You must know where you are before you can begin to improve. Identifying factors that add time to the cycle, and implementing changes also requires seeing that there is an interconnection and interdependence of events
and actions throughout the supply chain. Few events and actions have a singular cause and effect; there are often domino effects. 1. Recognise the basics. A supply chain is complex, made of many suppliers, located worldwide, each of whom has his own supply chain. There are chains within chains. The purpose of all this activity is to place the product correctly and on time in stores, or at customer facilities. It must be designed, directed, and managed as a process, not as a series of order and shipping transactions. Pushing bad logistics processes and practices up or down the supply chain impedes time. 2. Product and information should flow. Operational effectiveness depends on process, technology, and people that cross internally within the company, and externally with suppliers and customers. 3. The process should be assessed for gaps and redundancies. Measure the time required in each action, and the reason for the action. Watch for organisational dysfunction that can creep in and add unnecessary time. 4. Work with a cross-functional team. This will improve the quality of the assessment and prevent invalid assumptions that can flaw the effort.
5. Inventory is created as a buffer for uncertainty. Uncertainty increases, almost exponentially, as the time required to position it correctly increases. So inventory increases as time increases. 6. Time is not on any financial statement; but its effect is. Inventory is not on the monthly P&L; it is on the balance sheet. The point being that gaining needed commitment to reduce cycle time may be difficult because it is not readily identified and measured. It also contributes to a customer service paradox. Accounting systems have their origins going back to the Ford Model A; that can add to the challenge in a globally competitive business world. 7. External factors exist that impact time, and may be beyond control in terms of reduction. Homeland security for importers is one such factor. It adds to how promptly suppliers located outside the US can ship orders. Logistics infrastructure in sourcing countries is another factor that can add time and impede the flow of product from suppliersâ€™ facilities to ports and airports. 8. Supply chains work on a pull approach. This applies whether the product is made to stock or made to order.
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Focus. With the extended supply chain, there are numerous places to extend, not reduce, supply chain cycle time and inventory. Likewise, there are key points to concentrate on for reducing time. 1. Managing vendor performance is a critical requirement for reducing supply chain cycle time. Suppliers, at the supply chain source, have incredible impact on the supply chain regarding time, inventory and costs â€“ the impact goes far beyond pricing and placing purchase orders. Visibility of purchase orders, at suppliers, in-transit, and at each step in the chain, from vendorâ€™s plant to delivery at the warehouse, store or customer is vital. 2. Integration up and down the supply chain, both external and internal, is mandatory. Nonintegration adds to supply chain time, lack of responsiveness, and dead spots in the cycle time. Integrate demand forecasting or other inventory planning with suppliers for their build plans. Integrate purchase orders into transport load planning. Everyone should be working from the same data, information, and system or platform. Manufacturers integrate through the production process. Transferring data up and down the chain is not enough. Data is not information. To collect, analyse, and forward data takes time. Suppliers and service providers then re-enter the data into their systems. In turn, they do this to their suppliers. All this quietly adds to cycle time. Conversely, integration reduces time and increases accuracy. Integration may not be readily and easily doable with all parties in the supply chain. Do it with key suppliers and service providers, key as to volume or critical products, parts, or needs. Have key suppliers integrate with their key suppliers so the benefit ripples through the supply pipeline.
3. Collaborate with key suppliers and service providers. Work together as partners, and be open to the mutual exchange. Sending procedures and demanding compliance with requirements is not collaboration. Work to align the process between both parties, so that it flows smoothly and with minimal time. 4. Analyse how inventory moves, and where inventory sits or is transferred, for opportunities to move it more quickly and with fewer handlings. Lean requires improving the value, based on the customerâ€™s definition of value, when it is touched. 5. Multi-tier inbound logistics approach. What modes, carriers, service, and ports that are used can reduce transit time and increase inventory and cash conversion velocities. Inventory in transit is not inventory available for sell. Having a different approach for A inventory items (and some B items), as compared to many B items and C items, puts time emphasis where needed. 6. Bypass the distribution network where possible. Shipping inbound containers direct to store or customer; using a transfer facility at a port(s) to quickly unload containers and transfer directly to needed destinations, allocating inventory in transit, and cross docking containers at a distribution centre provide time reduction opportunities. Use technology. Technology is a necessity; it is a process enabler. However, technology by itself will not result in needed improvements; it is not a silver bullet that solves a flawed process. Technology should be used across the supply chain enterprise, both internal and external. It is a key to
gaining much needed supply chain visibility. Such visibility is needed for multi-tier inbound and bypass the distribution network programmes. 1. Global suppliers and transport providers cannot be readily managed with emails. Technology is needed. 2. Supply chain complexity and scope may require that more than one software be used for effective control. 3. Portals provide useful tracking information and shipment visibility. But they are an after-the-fact tool, and do not manage inventory or time. 4. Tracking and managing purchase orders and contents of an inbound container has great value as compared to just tracking a container number. The real issue is the PO and its movement. Supply chain execution technology may be the most valuable of the technology applications. It is a vital to integration and collaboration. 5. Ease of connectivity - web enabled, interfaces and mobile access - is important. 6. Maximum supply chain process coverageorder management, transportation, distribution, warehousing, vendor, finance, and more - important to directing and managing the process and reducing time and inventory. 7. Event management and exception management capabilities should be part of the technology used; they empower control of the process. Re-evaluate Outsourcing. Providers should not be supply chain service providers, nor logistics providers. How they contribute to time compression is important. With the focus on the process, and not the start-andstop of logistics, what they do and how they perform has changed. In turn, how they are evaluated and how governance works are different. To conclude, compressing supply chain cycle time, and the days of inventory on-hand, releases working capital, and improves supply chain performance. Tom Craig is a leading global logistics/supply chain management consultant, who develops and implements solutions that work.z
40 APRIL 2017
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42 APRIL 2017
This Oxford Business Group’s chat with the CEO’s of Oman’s top three ports - Mark Geilenkirchen, CEO Sohar Port and Freezone, David Gledhill, CEO Port of Salalah and Reggy Vermeulen, CEO Port of Duqm - provides a unique look into how they plan on putting the country on the forefront of progress in the coming years According to you, what more can be done to assist the growth of the transport and logistics sector?
Geilenkirchen: Oman has been investing significantly in the transport and logistics sector for years, and, combined with the development of some new trends in the industry, we have seen a few great years for the sector in Oman. While many ports around the world have been struggling with volumes – given the state of the global economy, the slowdown in China, and slower oil markets, among other things – we have actually seen growth in Oman in direct shipments and trans-shipments. This is a reversal of a previous trend of declining trans-shipments. Furthermore, the sultanate’s investments in ﬂagship projects, such as the Liwa Plastics Industries Complex in Sohar, will provide engines for growth for additional downstream activities. Captive cargo is obviously a big boon for port operators, so working to boost the downstream and manufacturing sectors in the country is key. Furthermore, we are hoping that Oman is able to successfully leverage its position and relationship with Iran to grow the domestic logistics sector. Apart from the direct trading
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to Oman, process them, add value, and relationship, Iran also offers a major access re-export them. This also means providing corridor to Central Asia. Lastly, Oman needs world-class services at the ports in terms to continue to attract direct shipping lines to of efficiency and productivity. Oman has the country, as well as to develop the smaller invested significantly in this area over the feeder services that serve the country’s ports past few years, and we are at productivity and connect them with those in the region. A levels that rival other regional ports. Not only good strategy will be to continue leveraging will such investments continue to cement the country’s position outside the Strait of the existing market share, but Hormuz, which gives they will also help attract new shipping lines the option to completely avoid entering Oman is currently markets to the country’s ports, including the world’s megaships. the Gulf. This is one of 66th in the We also need to leverage our Oman’s strong points. location. In the case of Salalah, Gledhill: More than World Bank’s this means our proximity to anything, Oman needs to ‘Doing Business’ Yemen. Given the current political focus on making it easier instability in that country, Salalah to do business in the rankings, but it is fast becoming a major gateway country. Oman is currently needs to get into to theYemeni market, but to 66th in the World Bank’s capitalise on this, we need ‘Doing Business’ rankings, the top 10 if the fully a change of mindset. This comes but it needs to get into the down to things as simple as top 10 if the country truly country truly understanding what transit cargo wants to become a logistics wants to become is, and easing customs regulations hub. We need to make around that cargo. The political it easy to bring goods a logistics hub 44 APRIL 2017
will is there, but it is often not sufficiently cascaded down through the civil service. As a result, there are often misunderstandings and complications. Unfortunately, there are still significant barriers to trade, which undermine the country’s efforts when we are competing with the likes of Dubai. Vermeulen: Significant steps have already been taken in this regard. On a general level, this has included the alignment of the strategies of different logistics entities in Oman. Those entities have also avoided competition amongst themselves and worked towards greater collaboration and cooperation instead. This is illustrated best by the creation of the Oman Global Logistics Group (OGLG), which brings all of the government stakes in various logistics entities under one roof, and will hopefully improve synergies in the sector. All these efforts increase Oman’s position as a logistics hub. There is immense competition throughout the GCC, with most of the competing ports located inside the Gulf. Oman needs to leverage its position outside of the Gulf, and use this as its unique
selling point. It is also essential that the country carries on investing in infrastructure, and continues to make doing business easier by streamlining the process and facilitating investment in the country and its port areas. To what extent will Oman’s growing non-oil export base be sufficient to sustain the transport and logistics sector in the years to come?
Gledhill: I think that any good logistics strategy has to be based around cargo. Consider the economies that have boomed over the course of the past 50 years; they are not only based around logistics, but also manufacturing. I think there is a really big opportunity for Oman to grow its manufacturing base, given its proximity to cheap labour and raw materials. To achieve that, you need to focus on making it easier to do business. This includes rethinking the labour laws. Either Omanis need to be willing to do jobs that they are not currently willing to do, or it needs to be easier to recruit foreign labour.
Looking ahead, for us to be successful, we cannot just depend on trans-shipments - we also have to increase the amount of imports and exports that we handle. To this end, we are working alongside the Salalah Free Zone to develop more import and export industries. This sort of collaboration will be further bolstered by the Omani government’s decision to create the OGLG. The ability of the country’s ports and economic zones to work well together, and have a common direction, is extremely important for the development of the logistics strategy in Oman. Now that the rail project is indefinitely delayed, we must ensure that the ports are effectively linked with each other via feeder services, as well as with the country’s industrial areas. Vermeulen: This is the million-dollar question. Oman must decide what its growth strategy will be for the logistics sector. On one hand, the country’s ports can be used to support the growth of the domestic industry and manufacturing sectors. On the other hand, they can also be used primarily to
cement Oman’s position as a logistics hub in the regional and international arena. However, it is clear to me that Oman should leverage its port facilities to boost internal growth, and to help spark new investment in domestic manufacturing and industry. This is essential, especially considering the country’s employment targets and Omanisation requirements; manufacturing and industry can be employment engines for this country. In this regard, we see a lot of potential in Duqm’s automotive market, including in manufacturing, assembly and logistics-related operations. Therefore, part of making Oman attractive for new industrial investment is, of course, ensuring that the country has the appropriate infrastructure to support the growth of these industries. Accordingly, we are currently investing in a roll-on/rolloff terminal in Duqm to be able to attract investments specifically to this subsector. Geilenkirchen: Low oil prices and the slowdown in China have of course hit the domestic manufacturing sector, which has also undermined exports. Apart from trying
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Port of Duqm
to keep the engine oiled here at the port, this also means we are focusing significantly on improving logistics, making the supply chains more efficient and minimising costs as much as possible. We also see this as an important time to look towards diversification, and we have some new projects that are coming on-line in the near future that will move in this direction. The big question is how to bring companies to Sohar, and how to keep them there. The answer is by ensuring co-operation between the port and its tenants, building solid logistical networks, establishing a clear plan for the future, and investing in infrastructure. How will the Bayan single-window clearance system help make doing business in Oman easier?
Vermeulen: Bayan has been a positive development in terms of the ease of doing business, but Oman should continue to innovate. It is all about services, and we need to keep in mind that we are competing with many other countries in the region. Therefore, we need to consider the provision and cost of utilities, the need for solid logistics systems and sound infrastructure, and the need for efficient decision-making. What an investor wants more than anything is predictability. Beyond this, Oman needs to continue to institute reforms and changes with its eye on encouraging development and investments in certain sectors that have already been identified. Consider the mining sector, which has significant potential for investment. Recently, Oman lowered the weight limits for trucks on its roads, which has had a serious impact on operators, especially with the recent changes to fuel subsidies. So the question is, how do we offset this? We
46 APRIL 2017
should be looking at how we can make it easier for mining companies. One concept that has been explored is road trains – basically, a single massive engine pulling multiple trailers behind it – which has been hugely beneficial to the mining industries in Australia and New Zealand. But even more important is the further development of the rail network, which would improve the logistics of minerals and reduce road congestion. Furthermore, we should be looking at the development of infrastructure, such as jetties, in parts of the country with significant potential for mining investment. By using a public-private partnership funding model, the need for government finances could be lowered, while the attractiveness of these areas to investors is still improved. Geilenkirchen: Logistics is very simple: in the end, it is all about communication, whether that is with the new Bayan system, or by other means. Anything that works to improve connectedness and strengthen collaboration will help the sector in the end. Where we can play a role is by connecting tenants with one another to their benefit – for example, connecting a tenant that needs warehousing space with an investor that has a warehousing project. Apart from the Bayan system, there are various other strategies the government is using, such as the introduction of the InvestEasy platform, to which we are connected. If these efforts continue to evolve in the right direction – and there is nothing that indicates that they will not – we will see further improvements to speed and efficiency across the sector and the economy. Something else that should be considered is the cost of doing business. Currently, given the state of the its finances, the government is considering removing electricity and water
subsidies across the board. As a country, we need to look at costs for our manufacturers and ask ourselves if these outlays will still be competitive if the subsidies are removed. In a regional context, we have to ensure that we do not price ourselves out of the market by moving too quickly. Therefore, any measures that increase the cost of doing business should be taken with consideration of what our neighbours are doing. We must constantly examine our prices, infrastructure, labour, and efficiencies vis-avis our competitors. We should routinely ask ourselves what further incentives are required to ensure that Oman remains competitive and continues to attract new investment. Gledhill: The Bayan system is a good step in the right direction, but the programme needs to be developed further, and to be made quicker and more efficient. It must also take on a true ‘one-stop shop’ approach, in that it should be connected to all the relevant government departments. In relation to this, to support the growth of certain sectors in Oman, we need to ensure that our infrastructure and systems continue to improve. This equates to investments in new equipment, adequate planning and concrete strategies. Lastly, if we really want to continue to attract investment to the country and improve the ease of doing business for investors, then our free zones actually need to be free zones. If you look at the path taken by places like Singapore and Hong Kong, they based their success on very liberal policies in terms of governmental intervention. Oman benefits from its geographical location and impressive political stability, so if it can capitalise on these two strengths, and also have a more liberal regime for doing business, we could see fantastic growth. -www.oxfordbusinessgroup.com
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“[The Actros] contributes to the achievement of our objectives through its outstanding performance, low cost of maintenance compared to other models, and lack of malfunctions (…).” Mr. Farooq Al-Fakih Dep. General Manager, ALDREES Comp. Fleet of 1,326 trucks, Saudi Arabia
48 APRIL 2017
Tasneef certifying safety at sea
Tasneef showcased key achievements for the first quarter of 2017 at NAVDEX, and established strategic partnerships
mirates Classification Society, Tasneef, has much to celebrate this quarter. It recently showcased its key 2017 first quarter achievements at the Naval Defence Exhibition and Conference 2017 â€“ NAVDEX - in Abu Dhabi. The event also provided the opportunity for Tasneef to establish strategic partnerships with similar organisations, exhibit its projects, and connect with customers. Tasneef made significant headway there, strengthening its industry relationships, agreeing on future cooperation with classification societies such as the British maritime classification society, Lloydâ€™s
Register, the American Bureau of Shipping (ABS), and the Italian classification society RINA. The first Arialah vessel was also commissioned at the event, for which Tasneef had developed the standards of building - from planning, through to construction, and its first sea trial. The Arialah project represents an important milestone for Tasneef as a strategic partner for the national shipping industry, which supports a wide range of maritime sectors, such as fishing boats and yachts, to the largest oil and gas exploration platforms exported all over the world. An MoU was also signed during NAVDEX between Tasneef and Tawazun Safety, Security, and Disaster Management City, Jaheziya. During this two-year MoU, Tasneef will provide its expertise in safety and training for all Jaheziya training programmes. The event also witnessed Tasneef handing over the ISO quality management system certificate (ISO 9001:2015) to Abu Dhabi Autonomous Systems Investments, the first company in the autonomous system industry to receive the certificate.
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The Floating Seahorse project was showcased by Tasneef at NAVDEX, featuring floating villas that are unique feats of architecture and engineering, and which combine luxury yachting and water housing development. Tasneef has already overseen the construction standards of these villas, and is currently working on developing pioneering engineering standards, representing a world first for architecture and engineering. This project is carried out in partnership with UAE regulatory authorities in the navigation and maritime transport sector. Eng Rashed Al Hebsi, CEO of Tasneef, emphasised,“Tasneef empowers a number of UAE industrial and strategic sectors through the development of Emirati technical expertise and standards. Today, we have established ourselves as setting a new benchmark for the UAE marine industry’s development, having developed the Sahara Notation for vessels operating in warm waters. Our organisation also issues certificates of compliance to the UAE Yacht
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Code, the first of its kind in the world, which is issued by the Federal Authority for Land and Maritime Transport. Tasneef is certified to issue inspection and technical examination certificates in the GCC and many Arab countries. We provide expertise, quality standards and business assurance certificates that are essential for the advancement of the global competitiveness of the UAE industrial and commercial sectors.” “Our first quarter results have provided much cause for optimism this year compared to last year, demonstrating remarkable progress and diversified projects serving multiple sectors. Our partnership with Jaheziya is an important step, through which we contribute to the continuity of the UAE’s vital sectors and infrastructure facilities, creating a robust infrastructure that can withstand natural disasters which meets the highest international standards,” he added, “We are proud to provide technical standards to oversee ship building. The UAE’s geographic location sees it as the centre of
trade routes, providing great prospects for the country to become one of the largest ship manufacturers in the world. We have also expanded our remit beyond traditional shipbuilding, contributing towards many new marine industry innovations. Our contribution to the ‘Seahorse’ project is a turning point that opens up new horizons for the development of luxury and innovative waterfront housing. We believe that this sector will see significant demand in the coming years. We are working on a strategy that will soon be launched for Tasneef to be a core of expertise for realestate and tourism developers that want to develop and invest in waterfront projects.” Tasneef’s projects attracted the attention of many NAVDEX visitors and VIPs, including His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, who visited Tasneef’s stand at the exhibition. His Highness Sheikh Saif bin Zayed Al Nahyan, the Minister of Interior, also received a briefing on Tasneef’s key projects.
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GSC talks to Mark Leigh, Chief Operating officer, Xtrade, about how to protect your wealth from inflation
52 APRIL 2017
hanges in the global political climate have resulted in increasing uncertainty in trading markets and economies around the world. For investors, this could be either a great time to invest in assets, or a better time to protect their net worth. Although positions may vary, the one thing that many economists believe is that the inflation is set to rise, leading up to 2020. The introduction of value-added tax (VAT) could push the cost of living and doing business within the GCC region higher. This is because VAT will increase business costs, and this will be passed on to the consumer, which would, eventually, lead to a rise in prices, and therefore result in inflation. For the UAE, inflation rates are projected to reach 2.5 per cent by Q4 of 2017, and potentially reach 3.3 per cent by 2020. Furthermore, Saudi Arabia is projected to realise a 3.5 percent inflation rate in Q2 of 2017 and forecasted to reach 3.1 percent by 2020. On the other hand, with the adoption by the Bahrain Finance Minister and the Shura Council in Saudi Arabia of the GCC Value Added Tax (VAT) Framework Agreement, greater regional integration and commerce can be expected in 2018, when compliance is set to begin. This has the potential to lower compliance costs and to be highly simulative, generating new business opportunities throughout the region. Given that the economy is set to grow, and inflation is forecasted to rise, it is evident that individuals in the region need to educate themselves on how to protect their wealth in real-terms and make decisions that will enhance the opportunity to achieve financial freedom. A diversified portfolio will usually help protect any individual from inflation. However, the portfolio needs to be balanced with commodities, stock and currencies that are carefully chosen based on how they react to rising prices. Gold is the one commodity that everyone should have in their portfolio. Gold is a store of value, and when prices rise, so too will the price of gold, thus protecting an individualâ€™s wealth in real-terms. Certificates of Deposit (COD) are quite popular in this region as people purchase and hold these from local and international banks for a certain period of time in return for interest. Usually speaking, the interest
rate is higher than the inflation rate, however, in some situations, there is risk involved if inflation rises faster than interest rates. Another form of investment is Treasury Inflation Protected Securities (TIPS), which are quite popular in the West, as the principal is always adjusted to account for inflation. For example, if you purchase a US$ 100 (AED 367) TIPS with a two per cent inflation rate, then the principal amount after adjusting for inflation will now be valued at USD 102 (AED 374). TIPS are available in many countries, and it is advisable to contact a bank and request more information about this kind of security. In terms of stocks, with the introduction of President Trumpâ€™s Manufacturing Council, consisting of many C-Level executives from renowned multinational companies, it is worth mentioning that these companies are the forerunners when it comes down to shaping the future of the global manufacturing industry. Some of these companies include: Intel Corporation; Dell Technologies, Ford Motor Company, Johnson & Johnson, General Electric, Tesla, Boeing, Under Armour, 3M, and many more The potential for growth of these companies has significantly increased, and by investing in them, or perhaps the companies that they collaborate with in the automotive, technology, aviation, FMCG industries, and more, will certainly contribute to protecting investors from inflation and increase their overall net worth in the long-run. Lastly, currency trading. Search engines, mobile newsfeeds and push notifications are keeping people at the forefront of what is happening during the age of information. Furthermore, online trading Apps like Xtrade empower investors to make trades in realtime. Global events shape the rise or fall of certain currencies, and by being aware of the macro- and micro-economic environments, individuals can make educated decisions on which currencies are on path to inflation, and make trades to mitigate the losses incurred from a weakening currency. Protecting oneself from inflation is not a simple task. It is very complex and involves a plethora of economic, financial, and political factors. However, by equipping oneself with the knowledge on options and how to react, the chances to succeed in protecting the realvalue of their wealth are, in fact, quite high.
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54 APRIL 2017
GCCâ€™s thriving insurance market S&P Global Ratings assesses the insurance situation in the GCC and what Governments are doing to fine tune the regulations Despite economic pressures, growth is set to continue across largest Gulf insurance markets When oil prices were at their peak, revenues from hydrocarbon products enabled governments in the Gulf Cooperation Council (GCC) region to generate fiscal surpluses, while spending heavily on infrastructure development. Oil prices were above US$ 100 (AED 367) per barrel for significant parts of 2011-2014, supporting this government spending and creating insurable activity that benefited both insurers and reinsurers. However, prices peaked in June 2014, and the picture has since changed markedly. It is now forecasted that Brent crude oil prices will average US$ 50 (AED 183) per barrel in 2017, and 2018, and US$ 55 per barrel (AED 202) in 2019 and beyond. Hence, the Gulf States have started to look much more critically at their expenditures. Most regional governments have taken steps to defer nonessential infrastructure spending,
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possible,to toshift shiftthe theburden burdenofof and, where possible, services such such as ashealth healthcare caretotothe the funding services insurance sector sectorand andaway awayfrom from private insurance Some authorities authoritiesare arealso alsonow now government. Some address uninsured uninsuredmotorists motoristsand and pushing to address sector employers, employers,who whoare areevading evading private sector obligation to to take takeout outcompulsory compulsory their obligation liability and andgroup grouphealth healthrisks. risks. cover for liability budgetary pressures, pressures,insurable insurable Despite budgetary remains considerable, considerable,as asselected selected activity remains infrastructure projects projectscontinue, continue,particularly particularly infrastructure in Qatar. varying degrees, degrees,insurance insurance Finally, to varying are leading leadinginitiatives initiativestotoadopt adopt supervisors are economically justifi justifiable, risk-based more economically able, risk-based leading in in practice practiceto topremium premium pricing, leading on most most lines linesof ofbusiness. business. increases on
victims, a move that could that could push motor ratespush evenmotor higherrates than even higher current levels.than current levels. This step was was part part of of aa Ministry Ministryof ofHealth proposalproposal in late 2016, which Health in late 2016,aimed whichtoaimed reduce thethe burden of car accidents on Saudi to reduce burden of car accidents on Arabia’s health health budget.budget. Moreover, the Saudi Saudi Arabia’s Moreover, Arabian principal the SaudiMonetary Arabian Authority, Monetary the Authority, the insuranceinsurance regulator, regulator, is expectedisto support principal expected thesupport efforts of trafficofpolice to ensure to thethe efforts the traffi c police drivers of illegally uninsured vehicles to buy to ensure drivers of illegally uninsured motor coverage. vehicles to buy motor coverage. It is estimated estimated that that 55 55 per percent centof ofvehicles are uninsured, so this step double vehicles are uninsured, so could this step the covered Furthermore, could doublepopulation. the covered population. government databases show that Furthermore, government databases show approximately 2.5 million SaudiSaudi nationals that approximately 2.5 million are working the private sector, but sector, are not nationals areinworking in the private
GROSS PREMIUM WRITTEN GROWTH RATES ACROSS GULF COOPERATION COUNCIL MARKETS
Copyright © 2017 by Standard & Poor”s Financial Services LLC. All rights reserved
Saudi Arabia moves to enforce compulsory covers low oil oil prices pricesand andmodest modestgrowth Despite the low growth levelsinposted it is considered levels posted 2016, in it is2016, considered that thatSaudi the Saudi P/Chealth and health sectors still the P/C and sectors still offer offer insurers opportunities. lateor 2017 insurers opportunities. By lateBy2017 early or early it is expected that hospitals 2018, it is2018, expected that hospitals will start will start the charging theofinsurers at-fault for charging insurers at-faultof motorists motorists forcosts the medical costs of accident the medical of accident victims, a move
56 APRIL 2017
covered by their employers’ medical but are not covered by theirgroup employers’ schemes. group medical schemes. During 2017, the authorities will seek to prompt private employers to provide medical cover for all their staff. Saudi Arabia has been raising money on the capital markets to continue funding future projects. In October 2016, it raised US$ 17.5 billion in a bond sale. Earlier in 2016, Mohammed bin Salman, the
deputy crown prince, announced that Saudi Aramco, the state-owned oil giant, may seek to ﬂ oat about per cent of its shares in 2018. float These measures will help the Kingdom fund future projects as part of the government’s Vision 2030 programme, which is designed to help reduce Saudi Arabia’s dependency on oil revenues.
United Arab Emirates focuses on actuarial pricing In a step toward more risk-based regulations, the UAE Insurance Authority (IA) is expected to move toward actuarial pricing in 2017, meaning that policies have to be priced sufficient at a level suffi cient to produce a technical profit. profi t. This should help reduce cut-price competition, especially on compulsory lines. 1st, 2017, 2017,the theIA IAintroduced introduced On January 1st, tariff system system for forcomprehensive comprehensiveand and a new tariff third-party liability liabilitymotor motorinsurance. insurance.The The third-party which includes includeshigher higherliability liability new cover, which and compensation compensationfor forreplacement replacement coverage and means that that insurance insurancecompanies companieswill will cars, means premiums for forthese theseadditional additional increase premiums benefits. However, this thisdoes doesnot notguarantee guarantee benefi ts. However, profits. increased profi ts. The burden of health care costs was already shifting toward the private sector, thanks to the Dubai Health Authority scheme, which required employers to provide their employees with health coverage. It is understood that coverage of this scheme increased to nearly 100 per cent during 2016, from roughly 60 per cent, leading to material premium growth during 2016. The deadline for the third phase was extended until the first end of the fi rst quarter of 2017, and this will further support premium growth this year. In Abu Dhabi, almost all residents have medical coverage under a similar scheme introduced a couple of years ago.
Kuwait acts to reduce the state’s medical costs undiversified. Kuwait’s economy is largely undiversifi ed. It derives about 60 per cent of GDP, more than 90 per cent of exports, and about 90 fiscal per cent of fi scal receipts from hydrocarbon products. However, despite subdued oil prices, economic growth has remained relatively resilient during the period of low oil prices because of the government’s capital expenditure programme, which
is supported by its accumulated wealth. Moreover, revenues in Kuwait’s P/C insurance sector depend partly on projects that are linked to government spending and partly on privatisation schemes. Again, this shifts the burden to the private sector from the government. In the second half of 2016, Kuwait’s Ministry of Health implemented a law requiring medical insurance for retirees. The new law is expected to generate about KWD 82 million (US$ 271 million) in gross premium written from the approximately 107,000 local retirees. It is anticipated that this line of business could also see price increases in future years. The Kuwaiti government is also expected to separate the health care of expatriates and nationals. This initiative aims to restrict foreign nationals from accessing subsidised public health care, and will likely increase annual health insurance costs for foreigners. According to the United Nations, there were 2.9 million foreigners in Kuwait in 2015. The premiums on this medical insurance and any construction projects relating to new medical facilities will likely have a positive impact on premium volumes in Kuwait.
Qatar presses ahead with infrastructure projects Despite unfavourable hydrocarbon prices, the gas-rich country is expected to stick to much of its huge infrastructure programme. Hence, it is expected that premium volume from commercial business will pick up again from the second part of 2017, as a number of projects are moving into the next phase ahead of the 2022 FIFA World Cup. Infrastructure projects range from new roads and railways to stadiums and high-rise commercial and residential buildings. In addition, it is anticipated that compulsory medical insurance for Qatari nationals will be introduced later this year, and for expatriates in 2018. This will likely add significant premium volumes for the larger local insurers. There is a overall gross premium growth projection of up to 10 per cent per year for 2017-2018, depending on the timing of the actual introduction of private medical business. Although S&P Global Ratings sees some uncertainty around the timing of individual
initiatives in the different countries of the region, the improvements are likely to outweigh the weakness in governments’ economic and fiscal positions. It is anticipated that GCC-based insurance and reinsurance companies will benefit from these developments. Continued growth provides companies with opportunities for profitable expansion, supporting their business profiles. At the same time, it will increase capital requirements under the risk-
based model, particularly where the risks are retained. Although insurers in the GCC are generally well-capitalised, the growth could put some insurers’ capital adequacy under pressure, particularly if the new business is poorly priced. -www.standardandpoor.com/ratingsdirect. Mario Chakar, London (44) 20-7176-7070; email@example.com; David Laxton, London (44) 20-7176-7079; david.laxton@ spglobal.com
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Autonomous vehicles are here to stay Dutch tech firm 2getthere has been awarded the autonomous transport contract for Bluewaters in Dubai 58 APRIL 2017
ontinuing the efforts to bring sustainable technology and development to the country, Dubai recently awarded a new contract for an automated vehicle system. Dutch technology firm, 2getthere, is a world-leading developer of sustainable mobility solutions, and has been awarded the contract to deliver a new automated vehicle system in Dubai. This system will link the new waterfront lifestyle destination, Bluewaters, with the cityâ€™s network of metro stations. The innovative new transport system will have a capacity of 5,000 people, per hour, per direction, with the automated vehicle connection between Bluewaters and the
Largest showcase of autonomous transport worldwide The awarded automatic transport system fits Dubai’s objective to have 25 per cent of all trips completed by automated systems by 2035. The automated transport system at Bluewaters will feature 25 driverless Group Rapid Transit (GRT) vehicles, capable of carrying 24 passengers each, connecting stations on the island and Nakheel Harbour and Tower Metro Station approximately 2.5 kilometres apart. The capacity will initially be 3,350 people per hour, per direction, with the possibility to increase to 5,000 people per hour, per direction. The trip time will be approximately 4.5 minutes. The application is also the first to feature a 2getthere’s third generation GRT vehicle. This automated vehicle can serve in Automated People Mover applications, as well as an autonomous transit system on public roads, integrating the necessary sensory technology.
Excellent track record
metro set to become the largest of its kind in the world, and set to become an example of the future of autonomous transport solutions. Home to Ain Dubai, the world’s tallest and largest observation wheel in the world, Bluewaters is a destination under construction 500 metres (1,600 feet) off the Jumeirah Beach Residence (JBR) coastline, opposite The Beach, and near Dubai Marina. The island is a colourful beacon adorning the city’s spectacular coastline and skyline, with a collection of townhouses, penthouses and apartments; retail and dining experiences, and two hotels, linked to
the shore by a multi-modal transport system ensuring easy access to the island. The centrepiece at Bluewaters will be Ain Dubai, the tallest and largest observation wheel, that will be taller than the 167.6 metre (550 feet) High Roller, which opened in Las Vegas in March 2014. It will also be 19.5 metres (64 feet) taller than the 190.5 metre (625 feet) New York Wheel planned for Staten Island. When completed, Ain Dubai will be able to carry up to 1,400 passengers in its 48 capsules, and provide views of Dubai Marina, and landmarks such as Burj Al Arab, Palm Jumeirah, and Burj Khalifa. Its base will also serve as an exciting entertainment zone.
Says 2getthere CEO Carel van Helsdingen, “We believed from the start that our system and technology provided the best fit for the application. The award of the project clearly shows the increased interest in 2getthere’s systems throughout the Middle East. This is based, to a large extent, on our excellent track record in Masdar City and Capelle aan den IJssel in the Netherlands, where we operate comparable systems with a high availability and reliability in harsh climate conditions.” 2getthere will implement the project through its Middle East Joint Venture with United Technical Services. According to 2getthere Middle East and United Technical Services COO Ziad Al Askari, the solution provided for the connection to Bluewaters is a perfect fit with the Autonomous Transport Strategy as a pillar to achieve a sustainable economy for the UAE.“His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, recently launched a strategy for smart self-driving transport, as part of Dubai’s strategy to become the smartest
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city in the world. By 2030, 25 per cent of all transportation trips in Dubai will be smart and driverless. As such, we are proud to contribute to this ambitious goal,”he says.
Logistical paradigm shift Van Helsdingen is convinced the automated vehicles will have great appeal, and will encourage more people to visit Bluewaters by public transit. He also sees new opportunities. “The Bluewaters application demonstrates the capability of 2getthere’s systems to provide significant capacities, making them
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a financially attractive alternative for the expensive, traditional rail-guided APM systems at airports and campuses. Basically, we are applying Level four autonomous vehicles on a dedicated track to provide a high capacity and throughput. We are working on introducing these vehicles in mixed traffic, similar to the extension of the Rivium application in the city of Capelle aan den IJssel (the Netherlands) just announced recently,”he explains. In that respect, 2getthere expects a logistical paradigm shift in the coming
years. “On one hand, it is led by metropolitan policy makers in the Middle East and Asia in search of smart city solutions. On the other hand, it will be increasingly driven by the technology and automotive sector in the US (eg, in Sillicon Valley and Detroit) responding to the call for cost-effective and environmental friendly last mile solutions. The latter ones connect medium-sized airports to city centres and convert corporate campuses, that are hosting 10,000 people or more, into smart cities,” he concludes.
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Published on Apr 19, 2017
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