V I P I n t e r vi e w
UPS President JeanFrancois Condamine
Oman looking to invest in ports
Growth in the air cargo industry
Connecting trade professionals with industry intelligence
Why the Gulf could be in for a healthy future
Start 8 | News 16 | Sector Focus
How advances in ship handling tech and training are helping to green shipping
Features 22 | Transport
How the Middle East defies global cargo trends
26 | VIP Interview Catching up with UPS regional president JeanFrancois Condamine 30 | Cover story: Healthy supply chains How the healthcare industry is changing logistics 36 | Case Study Behind the scenes at Teslaâ€™s under-construction Gigafactory
40 | Coutry Focus
Omanâ€™s road to digital transformation
44 | Viewpoint Industry experts weight in on the defining issues 52 | Q&A Softdator shares the latest industry trends
54 | Supplier News
58 | Diary
52 Logistics News ME | February 2017 | 3
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n its unending quest to be at the centre of the world for (almost) everything, last year the UAE began to publicise its plans to add one more string to its figurative bow: a health, medicine and aid logistics hub. In June 2016, the Dubai Industrial Strategy launched with the intention of nurturing six strategic industries, including logistics. Then last month, DP World became the latest name to announce it will provide pro bono expertise and resources as a member of the UN’s Logistics Emergency Teams (LET), aiding in the shipment and storage of humanitarian aid. The news is a natural progression of the UAE’s existing reputation for aid donations. The UK’s Prince Charles praised International Humanitarian City as “second to none” on a visit in Q4 last year, while a few short weeks later, local reports stated Sheikh Mohammed bin Rashid Al Maktoum sent his own private jet to Haiti following Hurricane Matthew in October, with his wife Princess Haya bint Al Hussein personally overseeing the operation. Whether import or export, such products – perishable, lifesaving – are subject to stringent regulations and require a complex and heavily regulated supply chain in order to travel from A to B. They are also (largely) moved in bulk: GCC states import 80% of their pharmaceutical requirements.
Hubs such as International Humanitarian City, the Dubai-based aid logistics complex housing nine UN aid agencies and over 50 other aid groups, are phenomenal achievements, but some in the industry report kinks in other parts of the chain. In this month’s cover story, we examine the plans to create a pharmaceutical and aid centre and asked those in the industry for their insight. The advice from the experts, whether carrying bulk orders or impromptu emergency shipments, was simple: while cutting-edge technology and infrastructure are paramount to the plan, so too is the efficiency of customs and a widespread adoption of the same best practice guidelines. With many countries employing variations of the same regulations, the likelihood of write offs, delays and unfulfilled orders is significantly increased, thus undermining the success of the whole operation… not to mention the treatment of the patients, and aid recipients, at the end of the chain.
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Indust ry N e ws Jafza issues new company regulations
ebel Ali Free Zone (Jafza) has issued a new set of guidelines, allowing foreign companies to transfer and continue operations in the free zone without the need to open a branch or establish a new company. For the first time, Jafza has brought together all the legal entities such as the Free Zone Establishment (FZE), Free Zone Company (FZCO) and Branches under one regulation and has introduced a new legal definition, Public Listed Companies (PLC). Companies can restructure and rearrange their operations by converting from an FZE or FZCO to a PLC and vice-versa, enabling continuity of businesses in the free zone. Foreign companies will also be able to transfer to the free zone keeping intact all their commitments, so attracting 8 | Logistics News ME | February 2017
international businesses to Jafza. In another amendment, businesses can now be set-up with capital sufficient for the activities applied for in place of the existing regulation that mandates a minimum amount of capital. This leaves owners to decide the adequacy of their capital for their business. Meanwhile, the number of shareholders in a FZCO will now be set at a minimum of two and a maximum of 50. The concept of different classes of shares provides flexibility to owners to offer different voting rights to shares. This could allow structures with management rights shares providing flexibility to owners for raising equity while retaining management rights over the company. Sultan Ahmed bin Sulayem, group chair and CEO of DP World and chair of
ports, customs and free zone corporation, said: â€œThe new regulations streamline all the mandatory legalities related to the registration, administration, legal benefits and obligations of organisations in the free zone. These changes reflect the needs of an ever evolving market in terms of providing facilities that are prompt, secure and form the best international practice.â€? Under the new regulations, the current FZE and FZCO type of entities will let customers list their company on the stock exchange by establishing a new legal definition namely the Public Listed Company. This will allow PLCs incorporated in the free zone to access capital through capital markets. The relevant Markets Laws in the UAE apply to a PLC.
DP World joins UN Logistics Emergency Teams
P World has become the latest name to announce it will provide pro bono expertise and resources as a member of the UN’s Logistics Emergency Teams (LET), aiding in the shipment and storage of humanitarian aid. DP World will team up with the initial LET partners Agility, Maersk and UPS, and will be called on by the Logistics Cluster, led by the United Nations’ World Food Programme to support immediate relief efforts in the aftermath of major natural disasters such as earthquakes, storms and floods. DP World signed an MoU with the World Food Programme at the World Economic Forum in Davos, last month. All work will be directed by the Logistics Cluster, which provides coordination, information management and facilitates access to common logistics services to
organisations responding to an emergency. DP World’s previous contributions to disaster response efforts have included providing aid through fundraising and gifts after the 2013 Typhoon in the Philippines and the earthquake in Nepal in 2015. Sultan Ahmed Bin Sulayem, chair and CEO of DP World, said: “Major natural disasters can have devastating impacts and the response efforts in the immediate aftermath are crucial to ensuring urgent aid reaches the right places as quickly as possible. “We take our responsibility to society very seriously, and by joining the Logistics Emergency Teams we can play a key role as part of a coordinated response across the trade and logistics industry. This crucial collaboration helps protect lives and we are pleased to be a part of it.”
Saudi Arabian logistics sector to see stable growth
Sustained industrial and retail expansion, along with infrastructural development is likely to drive Saudi Arabia’s logistics sector, according to a report by Ken Research, Market Outlook to 2020. Freight forwarding services in Saudi Arabia will increase at a compound annual growth rate of 6.4% during 2016 to 2020. This incline in share of the freight forwarding market will be on account of several expansion projects such as expanding capacity of Jeddah and Dammam port, and upcoming industrial cities in the country which will surge the demand for freight forwarding services. Major players in the kingdom such as Aramex, DHL and others have plans to expand in the coming years to maintain their stronghold in the market, said the report. “The companies should also upgrade their technology to modern digital technology which will increase the cargo handling capacity of warehouses. The companies should also focus on offering multiple value added services to the customers, as value added services is an important parameter for the clients to choose their logistics partners in the kingdom,” a research analyst said.
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Bids invited for second KKIA Cargo operator
audi Arabia’s General Authority of Civil Aviation (GACA) has confirmed that the bidding process for a second cargo operator’s licence at King Khalid International Airport (KKIA) in Riyadh will begin this month. GACA also confirmed that future investment opportunities in Saudi Arabia will include “full cargo airports,” according to its issued release. A statement by GACA and Riyadh Airports Co (RAC) read: “The bidding process for the [KKIA] licence comes within efforts by the GACA to improve the level of services, open the door for foreign investments and achieve the Kingdom Vision 2030, all in an effort to upgrade the services at the kingdom’s airports.
The director of the cargo concessions department for the Kingdom’s airports, Abdulrahman Al-Mubarak, has told media all meetings for the second cargo operator’s licence are concluded and the Request for Proposal (RFP) will be launched in February, allowing time for all joint-stock companies to submit offerings. He spoke of GACA’s “constant pursuit to improve logistics services and performance” to improve Saudi Arabia’s ranking in the World Bank’s Logistics Performance Index (LPI) to be within the top twenty-five worldwide. In the 2016 LPI, Saudi Arabia was ranked 52nd. Further investments in logistics parks and Bonded Zones, together with full cargo airports, will be announced by GACA in the coming months.
DUPLICATE STORY Sustained industrial and retail expansion, along with infrastructural development is likely to drive Saudi Arabia’s logistics sector to a point of “stable growth”, according to a report by Ken Research. Examining the logistics and warehouse market to 2020, the report also claims rising retail, e-commerce and FMCG activity will accelerate the demand for warehouses storage and transportation and logistics facility. Thirdly, Freight forwarding services will increase at CAGR of 6.4% through 2016 to 2020.This incline in share of the freight forwarding market will be on account of several expansion projects such as expanding capacity of Jeddah and Dammam port, upcoming 10 | Logistics News ME | February 2017
industrial cities in the country which will surge the demand for freight forwarding services in the country. The government has announced plans to invest $30 billion in upgrading facilities to enable the kingdom’s ports to compete on the global stage. Furthermore, the expansion in the railways and airline networks in the country will increase freight capacity. The report said: “Expanding industrial activities in the country has triggered the demand for logistics and warehousing services. The dominating companies in the industry should focus on expanding the distribution network to cater the untapped pin codes in the country.”
Agility invests $10 million in Bahrain hub
Agility is to invest $10 million to expand its regional logistics hub in Bahrain to 28,000 square metres, increasing storage capacity by an additional 19,000 pallet positions and increasing the workforce by almost 25%. The expansion, expected to be completed within ten months, will enhance Agility’s Bahrain-based regional logistics hub. Investments will be made in Agility’s warehousing, freight, transport and specialty logistics solutions in the Kingdom, according to a press release. Agility has been operational in Bahrain since 2003, with the main facility, located in Hidd, supporting contract logistics with ambient, chilled, and frozen storage, as well as unique solutions for high-value cargo. Zayed Alzayani, Minister of Industry, Commerce and Tourism, said: “Logistics has a key role in driving economic growth and attracting international investment into the country. The government is committed to delivering a more efficient and advanced logistics sector, and in order to facilitate this, the ministry has introduced a number of policies that directly contribute to the expansion of the logistics sector to build on Bahrain’s strategic location and regional connectivity. Agility has been a very important part of the logistic base here in Bahrain since 2003, introducing efficiencies to the sector never seen before.” The Kingdom is investing over $32 billion over the coming years in key infrastructure projects that will support the continued development of the logistics sector. This includes the expansion of Bahrain International Airport, and Hamad Causeway.
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IHC to triple in size Vice-President and Prime Minister of the UAE and Ruler of Dubai His Highness Sheikh Mohammed bin Rashid Al Maktoum has approved expanding warehouse facilities at the International Humanitarian City (IHC) in response to urgent demand from leading UN and NGO agencies, most notably the Red Crescent, UNHCR, ICRC and the World Food Programme. The approval gives the green signal for expanding warehousing facilities at IHC by more than 300,000 square feet to streamline and strengthen operations to support aid agencies, which are struggling to cope with growing global demand for emergency services. The expansion will help IHC members better pre-position stocks in the event of new pandemics, natural disasters and more armed conflicts and conduct more training of aid workers. Founded in 2003, the International Humanitarian City is already the world’s largest humanitarian logistics hub, following an earlier expansion in 2011 upon moving to near Jebel Ali Port and Al Maktoum Airport. Members include nine United Nations agencies and almost 50 NGOs and businesses working in the aid sector.
Discussions begin for Duqm Port rail connection
Drone advances qualify for award DEWA and Masdar Institute have qualified for the second UAE Drones for Good Award based on their joint efforts to develop drone technology for energy and water provision. The award was launched by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, to use drone technology to improve living standards and establish the infrastructure to provide services using drone technologies to serve humanity. Participating teams will compete in environment, education, logistics, transportation, construction, infrastructure, healthcare, civil defence, tourism, and humanitarian aid for natural disasters. DEWA has started using Unmanned Aerial Vehicles (UAVs) to check photovoltaic panels on its buildings and facilities.
12 | Logistics News ME | February 2017
he construction of a freight railway linking to Duqm Port for onward export to overseas markets, is currently being discussed by Public Authority for Mining (PAM) and Oman Rail. It marks the latest in a number of potential revivals of the GCC’s rail network plans with a 337-kilometre-long freight railway line between Duqm and Shuwaymiyah region also discussed recently by national diversification initiative, Tanfeedh. Speaking at the Oman Minerals and Mining Exhibition and Conference, Hilal Al Busaidi, CEO of PAM, said: “We are right now discussing (on building) a section of railway line from Al Shuwaymiya and Manji to the Duqm area,” Shuwaymiyah and Manji areas
have rich mineral deposits. “We have a well-established infrastructure in terms of ports and roads, but some of the minerals are located in areas where there is a need for logistics support. Rail is one way of transporting these minerals to the ports from where these can be exported,” added the PAM chief. The news comes amidst reports of recently discovered mineral deposits and a foreseen increase in bulk mineral exports at Oman’s gateway ports—Sohar Port and Freezone, Port of Duqm and Port of Salalah—where there is a lot of opportunity for investment in mineral development, mining and quarrying exploration and operations. For the full story on Oman’s logistics sector, turn to page 40
Gulfnav and Polimar forge partnership Gulf Navigation Holding and Polimar Turkish Holding have entered into a Global Strategic Partnership in the field of Maritime Agencies, Vessels’ Services and Marine Products, to create a new joint venture company as a subsidiary of Gulf Navigation Holding Group and headquartered in Dubai as of last month. The firm will provide an integrated set of marine services to support a wide range of its customers in the oil, gas, offshore vessels, container liner vessels, bulk carriers, cruise ships, yachts and marine facilities. According to this agreement the
Maritime Agency Fleet of the Gulf Navigation Holding will grow from four service boats to 10 crews, tugs and offshore support vessels with a value of $3mn per vessel. The expected Revenue from this partnership will be around $27mn Gulf Navigation Holding is working to achieve its vision of diversification, increase its assets and create shareholders added value as a listed company in the Dubai Financial Market. It owns several vessels and provides Integrated Marine Services and transportation of crude oil and chemical products.
Aluminium ME to welcome 200 exhibitors Aluminium Middle East, returns for its fifth edition from 15 to 17 May 2017 at Dubai International Convention and Exhibition Centre (DICEC). The exhibition will feature more than 200 exhibitors from 30 countries, and is expected to attract over 3,500 industry professionals from over 90 countries. This year, the Middle East posted the second highest year-on-year demand growth globally during the first quarter at 5.8%. The world now has its eyes set on witnessing how the GCC will continue to thrive in a post-oil world, with aluminium as one of the major economy
drivers. This regional growth is a major contributor to a growing global demand for aluminium, which is estimated to reach 70 million metric tonnes per year by 2020. The 2017 show will feature six international pavilions (Germany, Italy, India, China, North America and Egypt) and two new dedicated zones (Occupational Safety and SMEs) meant to underscore how the Gulf Cooperation Council will focus on other related sectors, in order to diversify their economies to ease their dependence on energy revenues.
Underwater Clean up for Khalifa Port Abu Dhabi Terminals (ADT) in cooperation with Al Mahara Diving Centre and Tadweer Waste Treatment LLC has completed an underwater clean-up operation at Khalifa Port. Organised to ensure the protection and sustainability of the marine
ecosystem, the operation took place recently and saw ADT volunteer divers, members of Al Mahara Diving Centre, and Tadweer plunge to the depths of the port’s waters to search for any garbage that may have collected in the berths.
RSA Logistics launches new DIP warehouse facility
Dubai-based 3PL RSA Logistics, has expanded its operations to Dubai Investments Park (DIP) with a new warehousing facility strategically located within the DIP complex to serve customers with faster distribution in local markets. The new facility will add to RSA Logistics’ existing contract logistics capability and complements established facilities in Dubai South and Jebal Ali. The warehouse, which spreads across 2,500 sqm with a total capacity of 2,500 pallets, is designed to store general cargo and handle a diverse range of product categories including FMCG and beauty products. It will offer an extensive range of value added services such as distribution, cross documentation, and ecommerce to meet diverse customer requirements with international standards, according to a statement. Abhishek Ajay Shah, co-founder and MD said: “Our new facility in DIP is in close proximity to the Expo 2020 site making it a favoured location to begin operations in view of the projected increase in economic growth resulting from the mega event. It also reinforces our commitment to bridging gaps in the market based the market’s and our customers’ needs” RSA has received the Excellence in Trade award by Stars of Business 2015, and was ranked ninth in the Dubai SME 100 List 2015.
Logistics News ME | February 2017 | 13
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Retail industry “missing $506bn opportunity”
etailers remain in the early phases of a digital transformation and as such are missing out on a “$506 billion opportunity” according to new research from Cisco. With Internet sales outpacing store sales in the final weeks of 2016, the multichannel shopper is fuelling a wave of digital disruption that threatens to put nearly half of retailer leaders out of business if they don’t transform themselves digitally. In its Reinventing Retail report, Cisco reveals that despite the risks, retailers around the world are moving too slowly when it comes to digital transformation and may not be investing in the right places. The holiday season’s choppy sales report and the recent closing of big box stores is just the beginning, it is claimed. “The shakeup caused by digital disruption is already underway with many major retailers announcing the closure of hundreds of their brick and mortar stores in recent months, in order to better
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compete in a landscape where physical and digital channels are increasingly converging,” said Mike Weston, VP, Cisco Middle East. “Yet, there remains a tremendous opportunity, with the potential for retailers to generate more than $506 billion in value that can be achieved through digital transformation. Retailers need to make more progress in digitising their workforce and their core operations in order to execute on the innovative customer experiences they want to deliver, and to position themselves for success in the new retail landscape.” “Prioritising investments in these areas not only improves operational productivity and associate effectiveness, but also contribute to improved shopper experiences and increased loyalty. Just 6% of retailers’ investment priorities are focused on Employee Productivity use cases, despite the fact that Cisco estimates that these use cases deliver the greatest return on investment for retailers.”
IBTIKAR receives gold accreditation from ideasUK
Abu Dhabi Ports’ IBTIKAR programme (Arabic for innovation), has been awarded the gold level accreditation by ideasUK, one of the most prominent associations for the promotion of employee involvement programmes in the UK and beyond. The announcement took place at the annual ideasUK conference held in London last month. Captain Mohamed Juma Al Shamisi, CEO of Abu Dhabi Ports, commented: “Receiving the gold level accreditation from ideasUK is further proof of our dedication to stimulate innovation and adopt new ideas that promise to elevate performance. The practical application of those ideas is a vital cornerstone of our organisational development and growth. I thank and congratulate all those who have participated in IBTIKAR over the past four years and look forward to even higher levels of engagement in the years to come.” The ideasUK accreditation programme is a way for organisations to internally and externally promote their employee innovation scheme. The accreditation process subjects each employee innovation programme to an external assessment and end-to-end review by ideasUK. Following the assessment, guidance on areas of strength and where to focus improvement efforts is given and accreditation is granted based on the level of excellence.
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Kizad confirms AED80m 3PL warehouse
third party logistics (3PL) warehouse with a total investment of AED80mn has been confirmed for Kizad, UAE following the signing of a Musataha Agreement with Khalidia International Shipping LLC, a subsidiary of Emirates Business Group (EBG). Located in “Khalifa Port Free Trade Zone” (KPFTZ), a dedicated new project that will serve as a platform for businesses looking to expand in the trade, logistics, and manufacturing sectors in the region, the warehouse will be developed on a 47,081.4 sqm plot of land with a total capacity of 33,318 pallet positions. It is expected to be completed in Q2 of 2018. Mana Mohammed Saeed Al Mulla, KIZAD CEO, said: “The development of Khalidia International Shipping’s new 3PL warehouse in KPFTZ provides existing and future customers with facilities that save transportation costs and streamline storage and distribution processes. “As a leading international gateway for trade and investments, KPFTZ allows foreign companies to expand their trade operations and reach regional and international markets; which in turn significantly boosts the competitiveness of the free zone’s industries and products.” The warehouse, which will handle international imports for Abu Dhabi and Dubai markets, boasts over 33,000 pallet positions. It also contains a cold store with temperatures as low as – 24 °C and a temperature controlled dry store at 24 to 26 °C. Khalifa Port Free Trade Zone (KPFTZ) is home to a wide portfolio of investments, specifically catering for aluminium, packaging, engineered metals, port logistics, food processing, pharmaceuticals and polymer industries, spanning a gross area of 100 sq km in total across Area A and Area B. 16 | Logistics News ME | February 2017
Petromin to build logistics service centre in KAEC Saudi lubricants giant Petromin, and the official Nissan Motors dealer in the kingdom, will build a major logistics service centre for Nissan vehicles in King Abdullah Economic City (KAEC), north of Jeddah. According to the deal signed by the two sides just before the start of the New Year, Petromin will lease 193,917sqm of land in the Industrial Valley of KAEC to build the logistics service centre. “King Abdullah Economic City’s efforts are focused on boosting the competitiveness of the Industrial Valley as a regional manufacturing and logistics hub,” stated Fahd Al-Rasheed, group CEO and managing director of KAEC, as he welcomed the company into the city and the Industrial Valley. “The unrivalled quality of our infrastructure, along with the continual reviews and enhancements of procedures and facilities presented to investors, are sure to attract national and global manufacturing and logistics giants, which, in turn, will give us further impetus to press on with achieving the strategic vision the government has set forth for this modern city.” With more than 600 service centres throughout the kingdom, Petromin Express is the kingdom’s biggest provider of quick automotive services. The company is the world’s eighth biggest automotive service network. Rayan Qutub, CEO of the Industrial Valley, added: “The automotive sector is a runaway success in the Industrial Valley. It is a natural outcome that the Industrial Valley is developing as the primary base of operations for this sector, thanks to the Industrial Valley’s strategic location on the coast of the Red Sea, its logistical access, the upcoming re-export zone, and the opening of the roll-on/roll-off pier at King Abdullah Port.”
THINKING AHEAD - MOVING FORWARD
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S e ctor F o c us
Sustainable shipping Logistics News ME profiles the advances in shop handling helping to make shipping greener
n 2009 science writer Fred Pearce, environmental consultant to New Scientist and published author, claimed 16 of the world’s largest ships produce as much sulphur pollution as all the world’s cars. To call it the dirtiest industry on earth may be an understatement, but that doesn’t mean to say the industry isn’t trying to innovate. When it comes to ship handling, a number of advances in both technology and technique have been discovered over recent years; mostly around fuel consumption, efficiency, and emissions. At the small-scale Port Revel, in Grenoble, France, operators and trainers are taking matters into their own hands. In early March 2012, the International Maritime Organisation (IMO) approved new guidelines for developing a Ship Energy Efficiency Management Plan (SEEMP) and calculating the Energy Efficiency Design Index (EEDI) for new ships. This followed guidelines published in July 2011 for use of the Ship Energy Efficiency Operational Indicator (EEOI) for existing ships. At Port Revel, these principles have been adapted into its ship handling training, including training materials, and as a result, mariners responsible for manoeuvring large ships in harbour areas are provided with ways of reducing fuel consumption and consequently CO2 and dust emissions in sensitive environments. Two of the port’s 11 ships are fitted with sensors for measuring total energy consumption during a given ship handling operation. Trainees are challenged to carry out the operation in question with a target level of consumption that is fixed in advance by the Centre’s instructors, who have them18 | Logistics News ME | February 2017
selves already faced the same challenge. The result is a significant reduction in atmospheric emissions. Energy consumption is measured in kWh, which is the product of power (kW) and time (hours), hence this measurement does not depend on the ship’s speed. In a statement, the Port clarifies: “We do
realise that fuel consumption during manoeuvring is not the largest part of a ship’s consumption for its whole trip, but it is a sensitive part as far as air pollution is concerned, especially in ports located near large cities.” Elsewhere, hybrid sustainable power is being used in super-yachts such as Ocean Su-
Protective coatings can reduce friction and increase fuel efficiency by up to 8%
An offshore supply vessel, similar to Viking Lady
premacy – likely to be one of the ten fastest super-yachts on the planet. Despite its speed, while at a cruising speed of 14kt it will have a carbon footprint of zero. Powered by a nine megawatt solar hybrid propulsion system, the yacht will use a combination of sustainable power sources to achieve its world-best eco-friendly and eco-
nomic propulsion levels, including solar and wind energy, biomass diesel and wave strengths. Designed by Sauter Carbon Offset Design (SCOD), Ocean Supremacy was unveiled in March 2012 and the hybrid green power will purportedly cut CO2 emissions by 4,000t, while the yacht will be able to generate and
supply about 200MWh of electricity when plugged into the onshore power grid. LNG-powered Offshore supply vessel, Viking Lady, owned by Eidesvik Offshore, was the first merchant vessel to use a fuel cell as part of its propulsion system and has already operated using a 330kW maritime fuel cell power pack for more than 18,500 hours since 2009. LNG has been referred to as “the future of the shipping industry”, reducing air pollution from ships. The Norwegian built Viking Lady was so successful in reducing emissions and fuel consumption it was exhibited in Denmark before being chartered to French oil company Total. Currently one of the world’s most environmentally-friendly ships – as easy as that may be to achieve – it is the result of a series of joint R&D projects aimed at generating sustainable energy for marine and offshore use. In 2011, the project was broadened to incorporate integrated batteries and the result is the first large-scale fuel cell to ever be installed in a merchant vessel...a 500kWh demonstration battery pack capable of producing five megawatts over short periods of time. There are smaller measures mariners can take in order to retrofit or handle ships for greater efficiency. Sulphur scrubber systems allow operators to work around the restrictions of shipping and still reduce sulphur emissions from the exhaust. An exhaust gas scrubber system is installed wherein the sulphur is washed out from the exhaust gas of the engine resulting in reduction of SOx up to 98 % along with other harmful particles. Additionally, an optimised cooling water system of pipes, coolers and pumps can result in decreased resistance to the flow. This will lead to savings of up to 20% of electric power of the ship and fuel consumption up to 1.5 %. Even repainting the full can have an effect. Applying the correct paint to the correct hull area can reduce the frictional resistance of the ship resulting in three to 8% of fuel savings. The application of protective coating of anti-fouling paints results in a smooth hull devoid of any marine fouling, which decreases the frictional resistance caused by the water flow. The anti-fouling paints decrease the load on the engine and increase fuel efficiency. Finally, in using waste heat trapped from exhaust gasses it is possible generate steam and heat the cargo and accommodation areas, drastically reducing fuel by up to 14% by some estimates. Logistics News ME | February 2017 | 19
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• Driving safety and purchasing confidence (with manufacturer’s warranty) • High reliability and accuracy of fit • Extensive range Indeed, each MAN vehicle is an intelligent investment which always benefits customers in the long term. However, it is still possible to increase the value retention and efficiency of this investment once again. Thanks to the comprehensive MAN genuine parts and service, downtime can be significantly reduced and uptime will be increased.
Logistics News ME | February 2017 | 21
T ran s p o rt
As global freight rates dropped, the Middle East not only saw growth but welcomed the operations of new carriers to a burgeoning sector. Logistics News ME examines how the seemingly impossible was achieved
ollowing a slowdown in global consumption and manufacturing, freight and air cargo volumes have suffered over recent years. The downward trend began in 2008 and was followed with a mix of marginally positive or stagnant volumes through 2011 and 2012. While there was some growth by mid-2013 with a 2014 high of 4.8% growth, it wasnâ€™t until last year that things began to turn around. 22 | Logistics News ME | February 2017
According to Boeing, The negative year-onyear comparisons occurred across all regions with the exception of the Middle East. Of the major markets that together comprise more than 80% of total trade, Europe was down 2%, North America by 3.2% and Asia-Pacific by 1.5%. Some weakness is comparative but Latin American and African markets also fell, by 6.4% and 6% respectively. The Middle East region posted 5.4% growth.
Middle East air export flow to the Asia Pacific region for example, is very small, but grew at 5.7% per year over the past decade. Overall air cargo between the Middle East and Europe is forecast to grow at an average annual rate of 3.9% between 2015 and 2035. The Middle East market accounts for 5.5% of African air cargo, estimated at 99,400 tonnes due to its position as a distribution hub. While there are three major cargo centres
driving this growth, Doha, Abu Dhabi and Dubai – Sharjah remains the third largest Middle East airfreight hub – it is Dubai that is driving the growth with the largest air cargo centre in the region and one of the largest re-export hubs in the world. Both Doha and Abu Dhabi are engaged in projects to expand capacity, but only Dubai is building the world’s largest cargo hub. The $32bn Dubai South is a mega-project like no other – an “aerotropolis” in fact. At 140km2 it is a multi-phase development of six clustered zones: Dubai Logistics City (DLC), Commercial City, Residential City, Aviation City and the Golf City. Referred to by some as the world’s first fully integrated multi-modal logistics hub, it is built around Al Maktoum International: soon to become the world’s largest airport, with capacity for more than 160 million passengers per year and 12 million tonnes of freight. With cargo operations now in their seventh year, more than 19 scheduled and charter passenger carriers operate there, plus the freighter operations of six more major carriers, including Cathay Pacific Cargo, China Airlines Cargo, Etihad Cargo, Kalitta Air, Qatar Airways Cargo and Turkish Airlines Cargo. The aerotropolis is served by a 12km “logistics corridor” linking Jebel Ali Port and DXB, as well as other emirates and Saudi Arabia, further afield. While global freight volumes plunged, Dubai South witnessed a 40% growth in trade volumes since 2009. Granted some of that increase is relative and attributable to the natural growth spurt of a new global hub, the figures are still impressive. DWC’s cargo handle reached 760,000 tonnes between 2013 and 2014, and rose again in 2015 to reach 888,000 tonnes. Yet factoring this against the contribution made when DXB’s freighter operations were re-located to Dubai South, it transpires that with both airports in operation, 900,000 tonnes more cargo was handled than ever before. The major players The introduction of cargo operations by the UAE’s indigenous carriers Emirates, Etihad and flydubai, has created a win-win situation, contributing towards ambitious targets as outlined in national development plans. Emirates made headlines last year by launching “the longest non-stop flight in the world”, from Dubai to Panama City in 17 hours and 35 minutes using a Boeing 777200LR long range aircraft capable of carrying up to 15 tonnes of cargo. It was an opportunity made possible by the
Customer loyalty plays a big part in the success of Etihad Cargo operations worldwide” plunging oil price, and further expansions – albeit of lesser scale – followed, the most recent a new daily service to Fort Lauderdale, Florida, its 13th US destination. Adding to the services on offer, in possibly the most extreme example of “following partner demand”, in November 2016, Emirates SkyWheels was launched, providing customers with a complete transportation solution for vehicles such as classic, luxury and sports cars, across its network. The carrier is also pioneering cold-chain transportation, a vital component of, F&B, pharmaceutical and healthcare supply chains in the region, at its new cargo terminal at SkyCentral at Al Maktoum International. Emirates Skycargo carried 2.5 million tonnes of freight in 2015-16, an increase of 6% on the
volumes transported in the previous year. In Abu Dhabi, Etihad Cargo is recognised as the fifth largest cargo operator in the world through its partnerships with Jet Airways Cargo, airberlin Cargo, Air Serbia, Alitalia and Air Seychelles Cargo. Generating $1bn in revenues it accounted for 88% of cargo imports, exports and transfers at Abu Dhabi International Airport in 2015, a year in which it carried 592,090 tonnes of freight and mail, up 4% on 2014. October 2016 was its busiest month ever uplifting 53,785 tonnes of cargo and surpassing its previous best, achieved in November 2014, by 501 tonnes. David Kerr, SVP of Etihad Cargo, says: “Customer loyalty plays a big part in the success of Etihad Cargo operations worldwide. We’re delighted to have the ongoing support and commitment of our partners who have contributed to the record levels of uplift during October.” Etihad Cargo currently operates a freighter fleet of four Boeing 777F, three Boeing 747s, and four Airbus A330s. An additional Boeing 777 freighter is due to arrive this month with a further Airbus A330 freighter scheduled to arrive in 2017. Etihad CEO James Hogan, addressing the World Cargo Alliance (WCA) Conference in March 2016, attributed the company’s strength to its agility and ability to meet partner demand, for example through the increased connections in Europe, subsequently announced in Q4. Diversifying from its budget passenger model, flydubai launched its cargo operations in 2012 and goods transported include general Logistics News ME | February 2017 | 23
T ran s p o rt
cargo, perishable items, textiles, electronics, courier, mail, and pharmaceuticals. At the time of launch, CEO Ghaith Al Ghaith said: “We set up our cargo division with the aim of making the transport of goods simple, accessible and affordable. Through these interline agreements we have opened new routes and thus new avenues for trade. We are now able to deliver goods from Sudan to Sydney and also provide Nepal’s handicraft industry with access to consumers in the US, Europe and Australia.” It was also the first cargo operator to offer direct links between Dubai and Bucharest, Romania, as well as Dubai and Skopje, Macedonia. The carrier has since forged connections with 48 new destinations, which did not previously have direct air links to Dubai. flydubai Cargo in 2015 increased the tonnage carried by 28.4% from the previous year and provides cargo services to more than 85 destinations across its network. Interline agreements with other carriers provide access to more than 200 destinations around the world. A particularly strong bond is enjoyed with India, which in 2013 became the top trading partner of Dubai receiving 10% of tangible exports and with a trade volume of $37bn. The contributing factors The Middle East wasn’t alone in the cargo volume increase it has witnessed in recent years. Also in the face of global stagnation, Schiphol Airport in Amsterdam saw a 2.5% rise in 2015, largely due to specialist shipments and e-commerce. But e-commerce in the UAE is not yet strong enough to drive the results seen to date. That will change as connectivity and spending continue to increase. Globally, Boeing says e-commerce is projected to more than double over the next five years, growing in market value from $1.7 trillion to $3.6 trillion by 2020. This in turn is driving the expansion of UPS, DHL and Fedex, all of which have expanded fleets and operations. While the steep growth trajectories and choice of local carriers and hubs are good news for locally-based logistics companies, it is even better news for the manufacturers delivering the aircraft. Overall cargo volumes are expected to return to “trend growth” by 2018 according to figures from Boeing. Long term, over the next 20 years world air cargo traffic will grow 4.2% per year; air freight, including express traffic, will average 4.3% annual growth, measured in Revenue Tonne Kilometre (RTK); airmail traffic will grow more slowly, averaging 1.7% annual growth through 2035. Overall, world air cargo traffic will increase from 223 billion RTKs in 2015 to 509 billion RTKs in 2035. With air cargo traffic more than dou24 | Logistics News ME | February 2017
bling, the world freighter fleet will grow by more than 70%, from the current 1,770 airplanes to 3,010 airplanes by the end of the forecast period. In the UAE the integration of numerous economic pillars to all transport modes in the logistics industry guarantees some levels of protection from the world’s economic storms. The likelihood of those pillars transpiring to be
paper, as happened with the real estate industry, seems more and more impossible with every additional tonne of cargo passing through the country. The future depends on a small number of very important factors: continuing to innovate on the blank canvas that is Dubai South, fostering and retaining a diversified range of manufacturing facilities in DLC and embracing competition in the market.
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VIP Interv i e w
Delivering a helping hand
UPS President for the Indian Subcontinent, Middle East and Africa, Jean-Francois Condamine, tells Logistics News ME how a bicycle messenger venture grew into a multinational logistics firm and why charity begins at work
n the third quarter of 2016, UPS announced international operating profit increased 14% to $576 million, marking the seventh consecutive quarter of double-digit growth for international business. The results weren’t an isolated achievement – 2016 was a strong year for UPS operations across the Indian Subcontinent, Middle East and Asia (ISMEA), with capacity continuing to increase and growth modernising the networking; through September 2016 volume grew by 40%. ISMEA represents more than 70 high growth markets and is a significant component of UPS’s transformation growth strategy. JeanFrançois Condamine was appointed to the newly created position of regional president in September 2013 to oversee market opportunities in the Middle East, Africa and India. He says: “In today’s fast-paced global economy, logistics is about more than the simple movement of goods from one place to another. This industry is about being flexible in the face of complexity and keeping up with, and even ahead of, evolving client needs. UPS is on the front lines of these changes, and we drove advancement in the industry through several deals,” he continues. The most recent of those is UPS’s order of 14 new Boeing 747-8 cargo jets to meet increased demand for the company’s air shipping services. The aircraft will be delivered between this year and 2020, adding to the existing international operating fleet of more than 500 aircraft. “Votes of confidence on growth prospects like this speak volumes in our industry,” Condamine adds. “During 2016, the UPS Express™ shipping portfolio went under significant expansion to offer customers the most international guaranteed time-of-day delivery options that include routine customs clearance. For our customers’ most time sensitive shipments, early morning
26 | Logistics News ME | February 2017
delivery is now available with UPS Worldwide Express Plus a service that was expanded across key Middle East territories in 2016 to cover the United Arab Emirates, Saudi Arabia, Bahrain, Kuwait, South Africa and India. “These initiatives help UPS continue building an immense yet nimble integrated operational network that drive results for our customers who choose UPS,” says Condamine. What many don’t realise is that the network was built by hand. While globally the firm
moves in excess of 18.3 million packages a day, it was founded in 1907 by Jim Casey who borrowed $100 from a friend to start the American Messenger Company in Seattle, Washington. Condamine’s chapter in the company’s history began in October 1990 when he was appointed centre manager in Rennes, France, to restructure the recent French acquisition of Prost Transportation and develop the core business of Small Packages. The Prost acquisition expanded UPS’s operations in France by
1,350 vehicles, 61 offices and 2,000 employees. In 1992 he was promoted to hub manager in Chilly-Mazarin, UPS’s main ground hub in France, where he implemented the first automated hub for UPS worldwide. The new facility required the management team to restructure the operations and convince their customers to change their supply chain model. In 1996, he participated in the launch of the Pan European network with the implementation in France of a feeder transportation plan improving the efficiency of UPS European ground transport before moving on to be country manager of Belgium, Luxembourg, and then France from 2002 to 2007. On a global scale, probably the most significant period of transformation for UPS occurred from 1999 when it became a publicly traded company and began to significantly expand the scope of its capabilities – primarily through the acquisition of more than 40 companies, including industry leaders in trucking and air freight, retail shipping and business services, customs brokerage, finance and international trade services. As a result, while UPS’s relationships with customers have deepened to include much more than basic transportation services, there is a strong ethic throughout every layer of management, which is driven to support other small and medium sized enterprises (SMEs). Condamine explains: “Small and medium businesses are a source for growth that is not to be underestimated in the region. A recent report by Dubai SME says Small and Medium Enterprises are the ‘engine’ for economic growth and vital contributors to the country’s GDP. “We couldn’t agree more. That’s why UPS will continue to contribute to the national economy by supporting the SMEs in developing their businesses. We have the expertise, with 109 years of experience and access to more than 220 countries and territories, to tailor the right solutions for small businesses. “The SME spirit is still part of our DNA. Small businesses represent the future and we are in the business of helping them grow and scale their operations to meet their customer needs.” Mapping the road SMEs are only one factor that will shape the course of 2017. Quoting a report by Boston Consulting Group (BCG), Condamine identifies six megatrends that will impact the regional logistics industry: the rapid development of emerging markets; urbanisation; sustainability; infrastructure congestion and scarcity; e-commerce; and digitisation. Each
Quick look: UPS Indian Subcontinent, Middle East, Africa • 74 countries and territories • 238 ISMEA small package facilities • 67 freight forwarding facilities • More than 60 field stocking solutions • More than 300 ISMEA operating facilities, including more than 108,000m² warehouse space • Over 4,650 employees across the region. With a further 444,000 Worldwide (362,000 US; 82,000 international) • Over 1,900 vehicles in the ISMEA delivery fleet
brings its own challenges, with BCG concluding that the most attractive transport and logistics segments are logistics advisors, CEP (courier, express, and parcels) delivery, hinterland terminals, and, to a lesser extent, rail transport (outside of Europe). Other segments do not earn the cost of capital, according to the group’s data and the segments facing the most intense challenges in terms of both growth and ROA include sea and air transport and postal delivery. It isn’t a perfect storm combination. Says Condamine: “The Middle East region is a global hub for logistics, and while broader macroeconomic factors may potentially soften demand in some areas, we are bullish on the region and see plenty of opportunity for economic growth. UPS works hard everyday to meet the needs of customers in the e-commerce retail, high-tech, industrial manufacturing, automotive and healthcare industries.” The firm is also finding opportunities in the upcoming Expo 2020, Qatar 2022 FIFA World Cup and National Logistics Development Plans, which Condamine believes will continue to drive the logistics sector.
He says: “We’re in a great space and UPS is well-positioned to enable and capture the opportunities presented. Our services and integrated network allow shippers to simplify their supply chains by using fewer carriers, and to adapt their transportation requirements and expenditures as their businesses evolve. “Across our service portfolio, we also provide control and visibility of customers’ inventories and supply chains via our UPS technology platform. The information flow from UPS technology drives improvements for our customers, as well as for UPS, in reliability, flexibility, productivity and efficiency.” Helping hand It isn’t just SMEs benefitting from UPS’s support. Through the UPS Foundation, established by Casey himself in 1951, the company’s 220 country network it utilised to provide aid, funds and “in-kind assistance”. UPS also partners with many humanitarian relief agencies, including: American Red Cross, Aidmatrix Foundation, CARE, Salvation Army, UNOCHA, UNICEF, UNHCR, Good360, NVOAD, MedShare, WHO, Save the Children and the World Food Programme. The Logistics Emergency Teams (LETs), a cross-company partnership dependent on employee volunteers with warehousing, transport, and logistics expertise, can be deployed within 48 hours of a humanitarian crisis. In 2015 the company “invested nearly 2.3 million volunteer hours and more than $110 million dollars into our global communities”. In January 2015, The UPS Foundation announced it would donate over $10 million to non-profit, non-governmental and United Nations agencies organisations over the course of the year, for the purpose of increasing community safety around the world. And in March 2016 it was announced a combination of grants and in-kind services for similar efforts would go to more than 30 NGOs, non-profit organisations and United Nations (UN) agencies for a total of $14 million; a 40% increase in the worldwide humanitarian programme. Condamine takes a personal interest in UPS’s humanitarian programmes, and speaks with pride about the achievements of the ISMEA region. “From Syria to Nepal to Rwanda, some of the world’s greatest challenges today revolve around logistics. Humanitarian aid and relief efforts require the collaboration of many entities, across sectors and geographies.” “You can see this with our relief efforts sent from the UAE to Nepal and Haiti, where we worked with partner organisations to provide relief supplies and logistics support after the Logistics News ME | February 2017 | 27
VIP Interv i e w
In numbers GLOBAL VOLUME & REVENUE 2015 REVENUE
$58.4bn 2015 DELIVERY VOLUME
packages and documents DAILY DELIVERY VOLUME
18.3mn packages and documents
DAILY INTERNATIONAL VOLUME
packages and documents
devastating earthquake and hurricane. We are constantly looking for innovative ways to enhance humanitarian logistics to help save lives,” says Condamine who goes on to detail partnerships with Dubai Government – to convene dialogue around pandemic preparedness – as well as with Zipline and Gavi, transforming the delivery of critical life-saving medicines and supplies to remote areas in Rwanda. He adds: “The core mission of UPS Foundation is to help build stronger and more resilient communities and UPS invests in the Middle East from infrastructure to technology to human capital to make a measureable impact for those in need.” 2017 and beyond For the present time, Condamine is tasked with complex duty of navigating a business landscape in a state of constant flux. At the mercy of a record number of unprecedented global events, businesses – especially those dependent on the free and easy movement of goods – are feeling the pinch. Add to that the rapid introduction of next 28 | Logistics News ME | February 2017
generation technology and the heavy investments required to keep up with the efficiency savings made by competitors and it’s clear that a high level of agility and strength would be required from any leader. Condamine says: “The logistics landscape is constantly changing. UPS is exploring using cutting-edge technologies such as drones and autonomous vehicles, and using alternative fuels to move goods faster, safer and greener. At UPS, we look for sustainable and innovative ways to offer end-to-end solutions and deliver the last mile.” Growth and expansion of the network, of course remains a vital focus and the fleet of 7478s on order will enable UPS to begin what Condamine describes as “a cascade of aircraft route reassignments that will add significant air capacity to the company’s busiest lanes, thereby optimising the global air network capacity well beyond the impact of adding new cargo jets”. There is also the option to order a further 14 jets, as and when required. China’s (re)development of the Silk Road Belt could also play a part in decision making and Condamine is acutely aware of the benefits such a throughway could bring, citing the advantageous position of the regional network. “The UAE is poised to take advantage of economic activity among the world’s fastest
growing and developing economies as part of the ‘South-South’ trade trajectory. UPS is committed to remaining a key driver in the UAE’s expanding logistics sector, and has plans of expansion both regionally and globally. “Trade links this region to Asia, Africa and Europe. Trade requires great logistics support and we aim to do the best to meet our customers’ needs on a daily basis. In one world, the customer is the focus. And we have an amazing network to meet their needs,” be continues. Of course the focus on people will also remain strong as expansions continue across new and existing territories. The exact number of new employees required to meet the targets is yet to be announced but, as Condamine concludes, it will be this link that holds the chain together. “Part of keeping that network running is making sure that our service meets - and beats - the competition. We can’t do that without our human network, and without local partnerships. It’s in our DNA to grow our resources and capabilities, to connect a global community through an intelligent logistics network. “We continue to push the boundaries of the package delivery service by building innovative and customised solutions. We want our customers to focus on growing their business and leave the logistics to us.”
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30 | Logistics News ME | February 2017
Cove r Story
The Gulf is one of the fastest growing pharmaceutical markets in the world and recent economic policies have detailed an upwards trajectory for the sector. Add to this the Dubai Industrial Strategy, and the country could be in for a very healthy future. Logistics News ME reports
he volume of the global pharmaceutical market has more than doubled in the past ten years. By the end of 2016, sales volume reached nearly €942 billion, with a projected annual growth rate of 9.2% by 2020. Research published by Alpen Capital claims increased affordability of treatment, lifestyle-related diseases and increasing insurance penetration are projected to increase the size of the GCC healthcare market to $69.4bn by 2018, a CAGR of 12% from the $39.4bn seen in 2013. The GCC pharmaceutical markets are growing at faster rates than in Western Europe or North America. At the Global Manufacturing and Industrialisation Summit (GMIS) in Q4 last year, the UAE Government debuted its ambitions for the country to become a regional hub for global pharmaceuticals manufacturing, with innovation driving performance in the sector. His Excellency Dr Amin Al Amiri, Assistant Undersecretary for Public Health Policy and Licensing at the Ministry of Health and Prevention, stated at the announcement: “As part of our broad health and economic agenda, the Ministry of Health and Prevention is committed to creating an enabling environment for continued investment by pharmaceutical companies to manufacture vaccines, treatments and medical devices.” Led by His Excellency, the number of pharmaceutical facilities is expected to more than double, rising from 16 to 34 over the next five years. A successful execution would continue the positive trend witnessed in recent years, over which the UAE’s pharmaceutical and medical equipment manufacturers have seen their own demand leading to an output of 1,100 different pharmaceutical products. In 2015, 47 global pharmaceutical companies established a commercial presence in the
country to serve the wider MENA region. The Ministry of Health and Prevention has supported the establishment of five new partnerships between global pharmaceutical companies and local manufacturers to produce 53 new pharmaceutical products. Official figures state 18 manufacturers have received their initial approvals to date. The plan is certainly off to a strong start. The strategy aims to develop and implement long-term industrial policies to enhance the competitiveness and sustainability of the industrial sector in Dubai and across its freezones. It identifies target industrial sectors and focuses on strengthening industrial integration – connecting the target sector with educational and research institutions to stimulate innovation and creativity with a view to developing strategic industries. In addition, the Dubai Industrial Strategy aims to create an attractive environment for these strategic industries. Announced in June last year, it is based on five key objectives that will serve as the foundation for Dubai’s industrial future. The strategy aims to increase the total output and value-addition of the manufacturing sector; enhance the depth of knowledge and innovation; make Dubai a preferred manufacturing platform for global businesses; promote environmentally-friendly and energy-efficient manufacturing and make Dubai a centre for the global Islamic products market. The Industrial Strategy covers six priority subsectors: aerospace, maritime, aluminium and fabricated metals, food and beverages, machinery and equipment pharmaceuticals and medical equipment. It’s one solution to a huge problem. According to a statement detailing the plans, low local and regional production capacities mean GCC countries currently import 80% of their pharmaceutical requirements. Logistics News ME | February 2017 | 31
C ov e r Sto ry
An official statement outlines: “The first phase will focus on manufacturing cosmeceuticals (cosmetics that are claimed to have medicinal properties) to benefit from the growth of this niche market – particularly given the increasing demand for halal cosmeceuticals. The initial focus on this sector will help increase investments in R&D, infrastructure and building capacity and help step-up to the next phase of manufacturing pharmaceuticals that requires advanced technology, skilled human capital and strong R&D capabilities.” Walking the Walk Stating the ambitions is one thing, executing them is another. In its Global Healthcare Logistics report, Logistics Executive says: “Opportunity and frustration perhaps best describe the status of the global healthcare industry. Opportunities exist in new markets and new products however, frustrations have developed as a result of increasing government regulations and rising costs” So, what can be done? Speaking from the United Kingdom, global medical supplies wholesaler and distributor, Philip Chapper & Company Limited, specialises in sourcing difficult to find medicine and medical equipment, routinely working against the clock to provide live saving products, across 50 countries. CEO Jonathan Chapper, says: “The things that we have seen work well in international markets are a greater harmonisation of rules; professional and responsive customs staff to ensure there are no delays with imports and exports; and minimal paperwork and bureaucracy to streamline processes. It is also essential, in a region with regular public holidays and the associated reduction in working hours, that customs and manufacturing activities are not impacted. “One challenge we face dealing with so many countries is that the regulations regarding good distribution practice (GDP) and temperature shipping, differ subtly from country to country. The implications of not meeting the regulations can be that a shipment has to be written off and products destroyed because of technical infringements of the rules. This can result in patients not getting the medications they require when they are needed,” he adds. Kuehne + Nagel is one of the firms expanding its activities in the GCC with the industryspecific solution KN PharmaChain dedicated to the storage and multimodal transport of temperature controlled pharmaceutical products. 32 | Logistics News ME | February 2017
A spokesperson for the company says: “The GCC is a group of very ambitious countries with fast-developing logistics sectors. Pharma and healthcare logistics in the GCC strongly adapted and improved their quality standards based on the latest World Health Organisation requirements. The extreme long lasting summer season requires a solid infrastructure to manage pharmaceutical commodity with the highest levels of care to maintain temperature and quality requirements. Continuous investments into seaports, airports and road network with harmonised and digitalised customs data
exchange among all GCC member countries is key to become a leading pharmaceutical distribution hub. The firm recently opened a pharma and healthcare warehouse in Dubai; its first distribution hub and contract logistics warehouse within the GCC region. All Kuehne + Nagel subcontractors have to pass a structured audit evaluation with pre-defined quality, safety and operations requirements. “In order to reduce the risk of temperature excursions, in particular cross-dock and temporary storage facilities must fulfil the highest
The things that we have seen work well in international markets are a greater harmonisation of rules; professional and responsive customs staff to ensure there are no delays with imports and exports; and minimal paperwork and bureaucracy to streamline processes.” standards. Due to the seasonal weather conditions, moving pharma and healthcare commodities within the GCC always bears a higher risk than in regions with a more moderate climate. The implementation of harmonised electronic information exchange connecting origin and destination country will simplify the transit and cut lead times significantly.” Links in the chain That isn’t the end of the challenges. In its 2016 report, Blooming and Booming: The Pharmaceutical Market in the Gulf
Region, CAMELOT Management Consultants concluded that local governments, pharma manufacturers and logistics service providers “have no alternative but to make decisive changes to their supply chains if they want to capitalise on the significant market opportunities.” The six GCC states plus Iran, are importers of patented pharmaceutical products, with overall imports contributing around 70 to 85% of total consumption. However, certain markets in the Middle East (e.g. Jordan, Egypt, and Saudi Arabia) have a generic
drugs manufacturing market, which is continually growing along with the changing demographics in the region. Writing for Logistics News ME, Melanie Lenhardt, senior consultant, and Mohammed Dayazada, head of performance excellence competence centre at the firm, say: “The local pharmaceutical industry is at a crossroads: limited workforce resources, changing regulations, and limited research and innovative products capabilities are just a few issues the industry is battling in the Gulf Countries. Consequently, governments, manufacturers and LSPs have no Logistics News ME | February 2017 | 33
C ov e r Sto ry
Iran is one of the last untapped pharmaceutical markets in the region. The Iranian market provides pharmaceutical manufacturers and logistics service providers numerous economic benefits and profitable opportunities.” alternative but to make decisive changes to their supply chains if they want to successfully overcome these challenges and capitalise on the significant manufacturing and distribution opportunities of this rapidly growing market.” “How?” remains a million dollar question. Attracting FDI is one way and transforming the region into a manufacturing base with world-class capabilities and attractive benefits for national and international companies, has brought technological know-how, expertise and resources, to other markets. Drawing on the example of Saudi Arabia, 12 major, well-established companies operate out of pharmaceutical clusters in Riyadh, Al Qassim and Jeddah – together supplying less 34 | Logistics News ME | February 2017
than a third of the local market. In addition, four major global players including Pfizer and Sanofi have recently completed the construction of production plants within King Abdullah Economic City (KAEC), making it one of the most attractive pharmaceutical clusters for new investors in the region. Far from competition, there is plenty of room in the burgeoning market for multiple players – especially considering Saudi health regulations forbid the import of drugs from countries other than the Country of Origin. The UAE has a strong, pro-business reputation on its side, and a track-record for generating vast amounts of FDI. Seen as a mature market for distribution due to the established government initiatives such as free trade zones focusing on logistics, healthcare and manufacturing, the UAE also offers an abundance of facilities for storage and distribution, with regulations focusing on quality, safety and security. All key concerns for pharmaceutical companies. Lenhardt and Dayazada add: “To capitalise on the economic advantages, the planned pharmaceutical initiatives require a local qualified workforce across different levels, which is currently lacking in the GCC. Several initiatives to reduce this cap and to increase the skill set availability in the pharmaceutical supply chain are taking place, yet at a slow rate.” Against the clock Speed is of the essence when it comes to medical equipment and supplies. Philip Chapper specialises in delivering bespoke, niche and otherwise hard-to-source equipment and medicine and local regulations preventing the delivery of such supplies not only undermines the business model, but places patient lives in danger. In Oman the firm supplied oncology products for a single patient. Chapper recalls: “Within 96 hours of receiving the request the product was being administered to the patient in the hospital in Oman. We sourced the difficult to find product, collected it from our supplier, arranged transport to Oman. This all happened over our weekend and over their weekend.” In order to respond to such demand with agility and east, the firm is also spearheading solutions to the most commonly encountered problems. Chapper continues: “We have evolved and
adapted our practices for the shipments of temperature controlled pharmaceuticals. Initially this focused on cool chain items – in the last few years we have seen a greater focus on temperate items – and we have had to embrace new packing technology whether by using passive or active shippers. “Temperature loggers are used for most shipments so we can accurately record the exact temperature of the shipment throughout its journey to ensure that it stays within the acceptable range.” With such reference points, the urgent nature of the pharmaceutical industry could well be the most challenging factor to meet. Another key challenge will be regional competition. With Saudi Arabia a significant yet self-contained market, the largest regional player that could disrupt things for the UAE is Iran. The world 17th largest economy as of last year, a free-to-trade Iran could drastically shake up the local market; not to mention existing plans for who will lead its growth. Last year, the Iranian government announced a new project with the aim to attract FDI and highlight the attractiveness of the market: the development of an Industrial Pharmaceutical City on 176 hectares of land only 65km away from Tehran providing benefits including tax exemptions and export facilitation. “Iran is one of the last untapped pharmaceutical markets in the region. The Iranian market provides pharmaceutical manufacturers and logistics service providers numerous economic benefits and profitable opportunities,” says Lenhardt. On the other hand, restrictions on bank payment methods in particular resulted in a shortage of imported drugs and medical equipment. This did lead to the fact, that the existing pharmaceutical companies are out-of-date with less than 5% of the manufacturing plants complying with international standards. The UAE, and Dubai in particular, have enjoyed a strong start to the long term strategy, but, as Lenhardt observes, it remains at a crossroads. To make progress, there must be a steep, up-hill climb towards stringent yet non-restrictive regulations, free movement of goods and a recognition of the vital role customs will play in the plans. At the end of the day, if goods cannot enter and leave the country as required, the ambitions will never be achieved.
Weâ€™ll pick up your Logistics operations The Rais Hassan Saadi (RHS) Group have been at the very front of the emergence of Dubai as a Shipping and Logistics hub since they started operations in 1910. Now over 100 years later, the company has evolved into the regional powerhouse it is today with diverse interests across the region. RHS Logistics, the 3PL and supply chain systems integrator, operates from the Middle East, but with a truly global vision. Utilising the latest of technologies, and with a wealth of experience on diversified product handling, in high quality, sophisticated environments, it has cemented its status as an innovative market leader within the Logistics industry. With cutting edge facilities in Dubai World Central, Jebel Ali Free Zone, Dubai Airport free Zone adjacent to the Sea and Air ports, housing a total of 100,000 pallet locations, RHS have and will continue to invest in first class infrastructure, ensuring they remain leaders in their field.
How can RHS Logistics help your Logistics business? Call us on (971-4) 8810007, (971-4) 8082300 or visit rhslogistics.com
RHS Logistics represents the 3PL division of the RHS Group of companies operating out of Dubai, U.A.E.
RHS Logistics Established 1910
Case St udy
Breaking the mould
It has been called the project that could make or break Elon Musk, but to many the development of Teslaâ€™s Gigafactories marks something much bigger: a new era for manufacturing
Did yo u know ?
Th Giga e Tesla facto ry ha large s th s any s t footprint e tructu of re world in the
n the Nevada desert lies Tahoe Reno Industrial Centre. A largely unassuming 107,000 acre park encompassing 30,000 acres of industrial complex with pre-approval to develop industry and manufacturing plants. Located nine miles east of Reno, the site is served by rail lines and five generating power plants with more than 900 megawatts of electrical power available to all park users. But one park client will have no need to borrow power, as this unassuming industrial estate in Nevada 36 | Logistics News ME | February 2017
is home to the Tesla Gigafactory. Named after its projected annual output (that is 35 gigawatt-hours [GWh]), the 3,200 acre Gigafactory is a plant that Tesla founder Elon Musk is hoping will revolutionise the future of manufacturing and logistics, as well as sustainable energy. A significant upgrade on the 5.3 million square feet of manufacturing and office space the company occupies in Fremont, California, which currently has an output of 100,000 vehicles annually.
The Gigafactory is budgeted at $5bn and Panasonic is known to have made an investment of $2bn but other investors have yet to be named. Panasonic will to work on its battery cells in one part of the factory until Tesla is ready to run the full operation, but has no brand presence on site. It is expected the plant will be running at full capacity by 2020. The details of what will happen inside the plant have yet to be released. What is known is the efficiencies that could be created by hyper-scale manufacturing.
In numbers Budget:
3,200 acres 5.8mn sq ft of operational space upon
completion in 2020. Currently the Gigafactory is two years ahead of schedule
of battery power to be provided by 2018 - that is more than the combined global production of batteries in 2014. Production could increase to 150GWh
jobs expected to be created in the surrounding area
The principle is to create an economy of scale in order to drive down cost; not only through manufacturing but through repair and reconditioning processes also. One significant way is to cut transport time from factories making vital components on different continents. One plant, all parts; a production line so huge it requires a building with the largest footprint of any structure in the world. Without shipping materials across the Pacific Ocean and by running on its own solar
power, it will be 100% sustainable and manufacturing vital parts for 500,000 electric cars a year – Tesla’s projected output for it’s own electric car – as well as other products. If Tesla didn’t create the Gigafactory to manufacture its own batteries for the projected demand, the demand would require today’s entire worldwide production of lithium ion batteries. By making battery cells here, Musk hopes he will be able to innovate faster and drive down the per kilowatt hour (kWh) cost of Tesla’s battery pack by more than 30%.
The Gigafactory will also be powered by renewable energy sources, with the goal of achieving net zero energy. And here is where it gets interesting. Despite its humongous size, this Gigafactory will not be enough to meet global demand for everything Musk has on his list. In his vision of the future, there is one in America, Europe, India and China, according to an interview he gave in July 2016, when the first facility was 14% completed. Watch this (enormous) space. Logistics News ME | February 2017 | 37
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Now in the second year of its most recent five-year development plan, Oman is looking to channel investment into ports and digital infrastructure across the Sultanate. Logistics News ME reports
man’s logistics industry has experienced strong performance, with both official economic figures, and first person reports from the country’s largest players, all laying the foundations for a positive growth trajectory in the year ahead. Transport and logistics (T&L) is firmly in focus under the Sultanate of Oman Logistics Strategy (SOLS) 2040; outlining plans to double employment in logistics to reach 80,000 by 2020, with GDP contributions of $7.8bn. The authorities know such levels of success will require investment. Despite the sustained low oil price, the Sultanate’s economy grew by 2.3% in 2016, yet the strong start is set against a backdrop of fiscal measures, introduced by the government to reduce state spending due to sustained low oil prices. There is an expected decrease of OMR110 million in oil revenues this year, though additional funds of OMR70m are expected from gas and OMR94 million is expected to be generated by taxes and fees. Under current plans, by 2040 Oman’s economy will be driven by T&L over oil and gas. In its most recent state budget analysis, Ernst and Young confirms Oman’s economy will become “more dependent on the non-oil sector, notably in manufacturing, transport, logistics and tourism, as oil output stabilises and then falls”. Spending cuts are expected in health, education and defence. According to Frost and Sullivan, the logistics industry in Oman remains on track to experience CAGR of 6.9% between 2015 and 2020. The key drivers for economic growth are infrastructure investments associated with national logistics development plans; economic diversification efforts; and trade with the GCC, Asia and Sub-Saharan African countries. Oman’s National Rail Network is likely to increase capacity and the Logistics Strategy 2020 aims to provide the infrastructure required for the development of major hubs for handling international cargo. There are also a number of sector-specific economic drivers, such as the renewed focus on the fishing industry, with plans for the number of ports to rise from 20 to 30 by 2020;
40 | Logistics News ME | February 2017
plans have already been formalised for eight new fishing harbours and ports. The Sultanate’s fish catch, including production through aquaculture, is expected to touch 500,000 tonnes per annum by 2020, from 270,000 tonnes of fish in 2015, requiring a sharp increase in the role of the logistics sector in delivering product. DHL Express country manager Ali Thabet told Times of Oman: “Oman has witnessed an unprecedented boom in infrastructure over the past couple of years, whereby the government has invested heavily in the country’s transport infrastructure, such as roads, airports and ports. These investments are crucial to enhance Oman’s connectivity to facilitate international trade movement across the region and attract foreign investment to the country. This way, Oman would become more appealing for new businesses and thus further boost the economy.”
DHL Express has experienced “good double-digit growth” over recent years, with indicators of similar performance in 2017, which Thabet attributes to government initiatives to diversify Oman’s economy. Strength is also evident in other economic areas. For example, SOHAR has brought more than 1,000% growth to the region in recent years as well as skilled job opportunities. SOHAR has also outlined plans to nurture the burgeoning SME sector in the Sultanate through a portfolio of business events, as well as critical operational support on site. Privatisation drive The big news out of Oman last year was the formation Oman Global Logistics Group (OGLG) – a state run firm tasked with driving economic plans, specifically the Oman National Logistic Strategy. Formed in June 2016, OGLG now owns the government’s
stake in companies currently owning and operating seaports, free zones, and transportation, logistics and related support services providers. The holding company has already purchased the state-owned Oman Shipping Company and its ship management and chartering subsidiaries, to run as a private business. Other public sector companies incorporated include National Ferries Company, which owns and operates the nation’s high-speed ferry-based coastal transportation service, and Oman National Transport Company (Mwasalat), the newly revamped public transportation services operator of the Sultanate. “The creation of OGLG should help improve collaboration and coordination in the sector and boost synergies between stakeholders. This move will help further establish Oman as a serious logistics hub in the region and will boost our competitive edge,” Reggy
Vermeulen, CEO of the Port of Duqm, told Oxford Business Group. OGLG plans to raise the Sultanate’s GDP to OMR14 billion by 2040 from a little over OMR1.5 billion currently, increasing the number of Omanis employed in the sector from the current 35,000 figure. The plan is for Oman to secure a place in the top 10 World Bank Logistics Performance Index, where last year Oman ranked 48, up 10 places compared to 2015. Press reports in the first weeks of 2017 indicate a second such company is to be formed to handle Oman’s civil aviation sector, holding government stakes in Oman Air, Oman Airport Management Company and National Aviation Company. In a conference held on 19 January 2017, Oman Air outlined how government support has already been scaled back from over OMR100 million to just OMR20 million in 2016. The carrier increased its contribution to Oman’s GDP by 6% last year to OMR415mn and this is projected to grow further to OMR900mn in 2017. Oman Air CEO Paul Gregorowitsch, said in a statement: “Our objectives remain the same, where our financial performance needs to be improved further. These objectives have been facilitating Oman Air’s tremendous growth, making money, increasing our market share as airline of first choice and ultimately running a safe airline. To think that this has all been achieved in the context of an increasingly volatile marketplace and decreasing government support is a good achievement.” The roadmap for an official aviation investment board is yet to be detailed, but following the initial success of its counterpart OGLG, its existence makes fiscal sense for a country whose finances have been continually rocked over recent years. Going online Another significant component of Oman’s ramped up activity, is the country’s digital infrastructure. With communications vital to the growth of business, Oman is developing smart capabilities in several urban centres across the country.
Port Infrastructure Investments Sohar Port and Free Zone • 2040 masterplan under final review in Q4, 2016 • $26bn invested in 2,000 hectare port area over ten years. • 1.5m twenty-foot equivalent units (TEUs) capacity, increasing to 5m TEUs by 2020 following the completion of a new container terminal. • 95% of the free zone already developed or leased to investors. • 50% expansion of industrial area planned for future Port of Salalah • Investment of “several hundred million dollars” expected • Three new container berths, new government berths and a dedicated cruise terminal, among other projects to be confirmed Port of Duqm • Contracts awarded for construction of terminal infrastructure for the port’s 2.2km commercial quay, completed in 2012. • $277.8m contract awarded to Serka Taahhut Insaat, the construction unit of Turkish firm Abdali Holding, for the construction of a pair of container terminals, which will have a combined 3.5m-TEU capacity upon completion in mid-2019. Logistics News ME | February 2017 | 41
C o u n try f o c us
Waheed Al Hamaid, the newly appointed country sales lead for Cisco Middle East in Oman, says: “This is a dynamic time in Oman where we are experiencing fast-paced changes and evolving trends across government and multiple industries. As an Omani, I take great pride when I look at what the Sultanate has achieved so far. Now is the time for Oman to enter the next phase of its economic strategy by harnessing the power of digitisation.” Under the eOman strategy – being implemented by Information Technology Authority (ITA) – a six-pillar strategy has been formed covering ICT development, social and human capital development and national infrastructure development, among others. Initiated in 2009, it is the main framework for Oman’s digital transformation, including ICT industry and infrastructure development, creation of better public services and development of human capital. It has even drawn the attention of the United Nations Public Service Programme. Hamaid adds: “Technological change has made massive improvements in the delivery of public services and Oman is one of the countries aspiring to embrace the move toward urban automation and transforming into smart government. Success requires a strong publicprivate partnership approach, beyond the silos of existing city infrastructure providers, and this is the basis upon which we are collaborating with the government. Asset-bundling and new partnership models will enable the creation of a connected public infrastructure that delivers value to both city administrators and citizens, enhancing the livability of a city.” Along with the necessary infrastructure the sultanate is constructing the communications channels, networks and portals to ensure smooth flow of information among entities. Hamaid continues: “As we move into an era of complete digitisation, where technology begins to connect everything from people, processes and data to things, Oman will need to rethink how it approaches its infrastructure on a grand scale. There is tremendous potential in the country to build effective, competitive and sustainable enterprises through digitisation, which will transform citizen services, health, education and safety and security, while improving citizens’ experience and productivity. This will require fostering an innovation, talent and entrepreneurship ecosystem that shift the economy towards greater private sector participation and a more market-based approach.” 42 | Logistics News ME | February 2017
sign and construction, backed up by rigorous quality control and insurance policies. This comprehensive service package goes way beyond regular industry standards. Put simply noone else does what we do.” “Our target markets are broad including warehouses, manufacturing sites, exhibition halls, cold stores, distribution centres for the likes of supermarkets, as well as structural raft foundations,” Menary adds.
Increased demand Many private companies are already beneficiaries of Oman’s ambitious fiscal plans. DHL Express is planning to establish a state-of-the-art airside and ground operations facility at the new Muscat airport, similar to facilities the global logistics giant recently inaugurated in Saudi Arabia, Egypt and the UAE. Thabet says: “This new facility will play an instrumental role in enhancing our capabilities and ensure we remain the undisputed market leader through improving productivity and driving efficiencies for our customers. “Our investment in Oman is a sign of our commitment to help further develop the logistics industry in the country, and reaffirms our support towards the Oman government and its 2040 logistics strategy,” he continues. Over in the warehousing sector, flooring specialist Twintec saw a 40% surge in sales in 2016. Now in its sixth year of operation in the Sultanate, the firm secured orders to design and construct 195,900 square metres of large panel ‘jointless’ steel-fibre reinforced concrete (SFRC) floor slabs to date in the Sultanate last year compared to 138,874 square metres of the same product in 2015. Tom Menary, who leads Twintec’s operations in Oman, says: “Twintec is experiencing strong growth in Oman and the broader Middle East because our offering is entirely unique to the market. We take total responsibility. This includes world-class design, research and technology built up over many years, along with highly skilled engineers and workers carrying out de-
Completing the jigsaw The final piece of the jigsaw is probably one of the most vital – rail. Despite news last year that delays could force the launch of operations back to 2020, discussions are ongoing between Public Authority for Mining (PAM) and Oman Rail for a connection between Duqm Port and overseas markets for the transportation of minerals. Speaking at the Oman Minerals and Mining Exhibition and Conference, PAM CEO Hilal Al Busaidi, was quoted as saying: “We are right now discussing (on building) a section of railway line from Al Shuwaymiya and Manji to the Duqm area. “We have a well-established infrastructure in terms of ports and roads, but some of the minerals are located in areas where there is a need for logistics support. Rail is one way of transporting these minerals to the ports from where these can be exported.” Currently such connections are wholly dependent on the road network, which navigates difficult mountainous terrain. According to official information from Oman Rail, the estimated total length of the network is 2,135km, divided into several segments linking Oman’s borders with the UAE to Muscat, and to the southern parts of the country - Port of Al Duqm, the Port of Salalah and the Yemen border. The $11bn, four-phase network, appears to have hit trouble in the planning phase, as confirmed by Oman Rail’s chief commercial officer John Lesniewski in an interview last year. With more than 100 million tonnes of freight on the move, creating a plan B is not an option. Nabil Al Bimani, executive director, Logistics Strategy, told Times of Oman: “Oman’s geography is considered one of the best locations for trade. We have three of the best ports in the world and we have a history of trading. So, making Oman the logistics hub will be beneficial to us and our investors as we would be able to connect the Middle East with the Far East.”
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44 | Logistics News ME | January 2016
Commodities gain as Trump’s star fades Ole Hansen, head of commodity strategy at Danish firm Saxo Bank writes about market volatility and the winners and losers to date under the new US President
s the inauguration day of January 20 drew closer the market began to re-assess its initial thoughts about Trump’s impact on different markets and sectors. His last press conference before the inauguration was vintage Trump as he continued to spend more time provoking his critics and the media than showing a path to the future. This increases the belief that his tenure is likely to be experimental and at times chaotic, two things that undoubtedly are going to provide plenty of market volatility over the coming months. The Dollar sold off while bonds rallied with US 10-year real yields – a key gold driver – dropped to a two-month low. While bonds are reassessing the impact of a Trump presidency his increasingly protectionist tone has supported worries about the growth and inflation implications of his tenure. A weaker Dollar has generally helped support commodities at the beginning of 2017 but as the performance below shows we are seeing the outlook for some sectors, not least precious metals, being reassessed. Two weeks into the new year we find that supply concerns amid strong demand have given soft commodities a very impressive start to the year. These concerns have especially been boosting coffee and sugar while cocoa has begun to see some buying interest after dropping to a near three-year low. The grain sector rallied this week following the monthly US government report on world supply and demand. In it they lowered planted acreage for winter wheat in the US to the lowest since 1909 as farmers respond to weak economic conditions following another year of oversupply and weak price action. Soybeans also rallied as the report lowered yields and stockpiles. Total supplies of the three major crops, however, rose by more than 10% to a record. So news about reduced planting is required
to support prices while we wait to find out what weather conditions lie in store for the coming planting season. Industrial metals received a boost from a weaker Dollar and surging Chinese producer prices which is increasing the prospect of China exporting inflation. Copper led the charge with supply concerns from Indonesia (export restrictions), and Chile (strike action), taking the price to a one-month high. A near record long fund position, however, is likely to act as a drag with the metal having rallied by 20% since early November. Gold’s recovery from its December low continues with the Trump factor increasingly providing support given the uncertainty about what lies in store. The short on substance and generally farcical pre-inauguration press conference helped gold and silver to rally further. The rally was being supported by a weaker Dollar and a bond rally which took US 10-year real yields – a key gold driver – down to a two-month low. Hedge funds already began scaling back gold longs last July and following November 8 this traffic turned into a rout. During the week ending January 3 bullish bets had seen an 88% reduction from the peak while gross shorts had risen by 150% during the past eight weeks. Investors using exchange-traded products to gain exposure tend to react much more slowly than hedge funds. While only beginning to scale back exposure following November 8, some three months later than hedge funds, we are yet to see any pickup in demand. Gold is currently challenging $1,205/oz which is the 38.2% retracement of the Trump dump. Gaining a foothold above this level is likely to force a buying response from funds not positioned for this changing outlook. Especially from those holding short positions, most of which will now be under water. Crude oil was trading lower in the days before the inauguration following a two-day rally driven by optimism about production cuts. The
news Saudi Arabia is cutting output cheered the bulls currently defending a record long position. With overall compliance expected to be around 60-80% and with Libya’s production rising, someone has got to cut by more and that is what Saudi Arabia has pledged. Libya, which is exempt from cutting, has seen its oil production rise rapidly since August. Last week production exceeded 700,000 b/d compared with just 260,000 b/d during August. The rise results from the recent reopening of oil production and export facilities in the eastern part of the troubled country. Overall the market is settling into range while we wait for confirmation about the cutting process. A clear overview is unlikely to emerge until Opec release its Monthly Oil Market Report for January on February 13. At that point we should get a full picture of what Opec said it had been pumping compared with third-party estimates. In the meantime global oil flow trackers using anything from modern satellite technology to an old-fashioned network of sources on the ground will be our best source of information with regard to compliance. During the week ending January 3 only some light changes were made in the speculative positioning held by hedge funds. The combined net long stood at 790 million barrels with the gross long staying above 900 million barrels. It was, however, the first time in nine weeks that the gross short in WTI crude oil rose, albeit only by 7.6 million barrels. In the short term we maintain our view that the market will be rangebound but with the risk skewed to the downside due to the threat of long liquidation. The ranges are $51 to $55 in WTI crude oil and $53.50 to $58 in Brent crude oil. Considering the ongoing efforts to rebalance the market we do not see the risk of a major correction as has been seen several times in recent years when speculators got too carried away in either direction. Logistics News ME | February 2017 | 45
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The insider view: Challenges in the year ahead In the second of a two-part series, SOHAR Port and freezone CEO Mark Geilenkirchen tackles the challenges ahead in 2017
46 | Logistics News ME | February 2017
SHORTAGE OF SKILLED LABOUR The success of the transportation and logistics industry depends significantly on the quality and quantity of the people involved in operating the value chain. Despite strong infrastructure expansion and growth in the logistics market, there is still a lack of skilled labour to support the logistics sector in the GCC. Numerous jobs in the logistics industry, such as those in procurement, sourcing, material handling and transportation, demand different categories of labour for the various roles. The GCC has been heavily reliant on expats for both skilled and unskilled labour, due to shortages in the local human capital market. Therefore, logistics companies are compelled to hire skilled expats who demand higher salaries, leading to cost escalations. FRAGMENTED MARKET Being in the early stages of growth, the GCC logistics industry is highly fragmented, with thousands of players either already operating or planning to enter the market. Because of this fragmentation, companies are hesitant to invest in technology because their volatile workloads cannot harness the same cost benefits as larger-scale operations. In addition, high attrition rates, the poor quality of trade and transport related infrastructure, and inadequate indigenous logistics services also pose big challenges. However, the GCC transport and logistics industry is witnessing consolidation through significant M&A activity, with Aramex (UAE), Agility Public Warehousing Company (Kuwait), and DP World (UAE) being the most active acquirers. LOW-DENSITY ROAD NETWORKS Road density is a measure that calculates the ratio of the length of a country’s total road network to its land area. It helps in comparing a country’s road infrastructure with other countries. As the most developed nations in the GCC, the UAE and Saudi Arabia still lag behind other countries as their road density is below 20 kilometres per 100 square kilometres. Road density in developed and developing countries such as Germany (180 kilometres), UK (172 kilometres), India (143 kilometres), Japan (90 kilometres) and US (67 kilometres) are much higher. On the other hand, smaller states like Bahrain, Kuwait and Qatar have above-average road densities compared with global benchmarks. Poor road network density escalates the cost of transportation, both in terms of money as well as time, thereby causing difficulties in the integration of various regions within the GCC economy.
Increased competition has necessitated outsourcing to help companies maintain their position in the market. 4PL is the next step in the evolution of the logistics industry, as more customers require partners to share risks and gains.” FUNDING CHALLENGES The GCC’s substantial dependency on the oil trade has led it to face numerous challenges brought about by the oil price decline. Due to sluggish demand in China, political upsets in Iraq and Libya, and shale gas discoveries in the US, oil prices halved from $110 per barrel in 2014, to around $55 per barrel in 2015. In Bahrain, foreign investors are no longer willing to buy into stalled infrastructure projects worth $795 million, due to low returns on account of falling oil prices. However, Saudi Arabia, the UAE and Qatar are better shielded from the effects of falling oil prices due to larger and more mature domestic banking systems, better access to international markets and larger sovereign wealth funds.
Struggling revenues from nonhydrocarbon sector The non-oil sector in the GCC is still in its nascent stage of development and the region’s diversification efforts have not yet begun to yield economic dividends that could adequately fund logistics projects. Experts have forecast that in 2016, growth in the non-oil sectors will be the lowest since the 1990s, at only 2.9%. This not-so-positive outlook stems from the fact that the non-oil sector’s fortunes remain aligned with growth in oil prices, which are displaying a falling trend. LOW PRIVATE PARTICIPATION World Bank data on public-private partnerships (PPPs) during the period 1990-2014 indicates that the GCC has among the lowest number of PPP projects, compared to other regions of the world. This is due to factors such as volatile oil prices, the availability of sufficient fiscal headroom to fund infrastructure projects from hydrocarbon sales, and sovereign debt issues. The public sector therefore still dominates the GCC transport and logistics industry. PPPs in transport in the MENA region have been very low. The PPP investment as a percentage of GDP stood at 4% in MENA, lower than that in other regions such as Latin America, the Caribbean, and South Asia, where PPP investment as a percentage of GDP was around 15%. OPERATIONAL GAPS Several operational factors are hindering efficient logistics flow within the GCC. These include inefficient clearance processing leading to problems with customs and other government bodies; high, non tariff-related trading costs; the inability to track and trace consignments; and the delayed delivery of consignments. On average, logistics players in the GCC spend 30 to 45 working days each year on resolving clearance and regulatory issues, compared to a global average of around 15 days. In Saudi Arabia, for instance, mandatory lab tests are imposed on many commodities that enter the Kingdom. This leads to a 14-day holdup on shipments until fully tested and cleared, leading to extra inventory buildup and cost escalations. Agility, in its Emerging Markets Logistics Index for 2014, highlighted government related issues and regulatory complications in the MENA region as key supply-chain risks. Furthermore, the institutes in charge of transport and logistics in the GCC have weak policy formulation and management capacities, mainly due to the lack of coordination between them. Logistics News ME | February 2017 | 47
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Trends to watch
Contract Logistics The dominance of integrated service providers is a major trend in the GCC market, with the sector slated to expand by 33% in the MENA region by 2017. By outsourcing the logistics part of their operations to 3PL or 4PL providers, companies can focus on improving their core competencies while saving time and money. Moreover, increased competition has necessitated outsourcing to help companies maintain their position in the market. 4PL is the next step in the evolution of the logistics industry, as more customers require partners to share risks and gains. IoT & Smart Logistics The Internet of Things (IoT) is rapidly gaining ground in the logistics sector in the GCC, with companies implementing enhanced connectivity technologies to increase efficiency in port and road logistics. IoT offers traders a mobile, round-the-clock application platform that gives them real-time information from any geographical location. This in turn leads to better traffic management in and around port areas, and reduced waiting times at the docks. As an example of a successful IoT implementation in Dubai, part of a “Smart Port” initiative, active RFID (radio-frequency identification) tags have been issued to trucks transporting cargo to and from Jebel Ali terminal. The UAE and Qatar will also invest significantly in the development of IoT, with the GCC’s cloud market set to grow from $118.5 million in 2014, to $668.5 million by 2020.
Autonomous Vehicles Autonomous vehicles are capable of sensing their environment on the basis of global positioning systems (GPS), radar, sensors and software, and navigate without human input. The technology of autonomous trucks holds great promise in the GCC as it can infuse a lot of efficiency in the road freight industry by reducing a large number of lowvalue expat jobs and creating high-value digital technology jobs for GCC nationals. Most of the freight in the GCC moves by truck, with more than one million trucks currently in operation, and this number has been growing at 5% to 9% year-on-year since 2012. Experts believe that this trend would change the face of the GCC logistics industry, providing great cost savings and technological advantages to trucking companies in the region. Development of Rail Network The Gulf region’s railway landscape is set to transform due to the vast number of projects in planning and already underway. The need to balance out excessive dependence on roadways, save on fuel costs, and lower environmental impact has necessitated huge investment towards the development of railways in the GCC region. Over $200 billion have been earmarked for investment in constructing thousands of kilometres of new railway lines across the GCC. Saudi Arabian Railways is building a massive rail network of 5,000 kilometres to strengthen its existing road connectivity.
Public-Private Partnership Projects (1990–2014) 15%
East Asia and Pacific
48 | Logistics News ME | February 2017
Europe and Central Asia
Middle East and North Africa
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Deliberate Informed Practice Is talent the product of nature or nurture? Prakash PK Menon explores the concept of deliberate practice
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ll along, we’ve been programmed and taught by our parents or teachers that geniuses are born, and as we were growing up, everybody has been telling us that some people are very talented and that their talent is innate. Thus, we were sitting in the class, wondering: “How come some students are so gifted and we are the unlucky ones?” But the fact is that geniuses are not born, they are made. There are many books, reports and researches on this topic, not to mention the millions of online articles. If you take any of the great athletes, from Serena and Venus Williams, Usain Bolt or even chess grandmasters, they’ve all gone to prove that talent has to do with the surrounding environment and how conducive it is to learning and that you don’t ever stop learning – this is what we call deliberate practice. If you spend an hour a day everyday researching and studying about a particular topic of your passion, 365 days for the next 3 to 4 years, it is guaranteed that you will become a national expert on that topic. Remember this: one hour everyday is all that it takes. This is what Malcolm Gladwell’s famous line about 10,000 hours of deliberate practice is all about. When people fail, they usually give up after their first failure or maximum second failure. But if you persevere long enough, and if you pursue that goal of yours and keep practicing and making sure you continue focusing on that, you will become a national expert in that area. One of my favourite examples is about the Olympic athlete, Michael Phelps, who went on and won eight medals in just one Olympic event. But pay attention: at three o’clock in the morning, he’s already at the pool! This is what discipline means – he goes and practices, then he goes and takes some rest and then he goes practicing again. The key point here is: if you really want to achieve mastery and
become a genius, you can. Everyone can become a genius. For instance, if you really want to master the retail industry – or any of its individual components - you can. You just need to invest yourself in it. 95% of the world’s population doesn’t. Why? Because, they all have the instant coffee syndrome. They want overnight success. They want to wake up the next morning and say: “Yup, we’ve now become geniuses.” It is an incredible thought but that is exactly what it is – a mere thought! The deal is to ensure that we are able to not just start, but sustain our efforts. But there is one critical thing that all of us need to keep in mind – motivation. You see, the chances of you achieving your goals are directly dependent on your motivation, drive and commitment. Ideally, you should not even be looking to depend on anyone to get motivated. May be those one out of 20 times, but definitely no more. As long as you keep pushing yourself every single day, every single time – which is deliberate practice - you can achieve mastery. This is what happens with athletes, Olympic wrestlers, and almost all professional players - they keep practicing 14 hours a day every day until they achieve mastery. Preparation and training for the Olympics is not like waking up one morning and saying: “I’m ready to go.” They prepare for it for four years, way before the event even starts. So, the actual Olympic event is nothing, really. It is that journey of four years, the discipline they’ve gone through that counts. That is mastery. Therefore, to the phrase deliberate practice, I would add a word and say: deliberate informed practice, because you are not just working out by yourself, you’re taking advice from others, particularly from your coaches and mentors, on how you can improve your capabilities and capacity. And that practice, every single day of your life… is the real
Therefore, to the phrase deliberate practice, I would add a word and say: deliberate informed practice, because you are not just working out by yourself, you’re taking advice from others” Logistics News ME | February 2017 | 51
Int e rv iew
Five minutes with Logistics News ME catches up with Softdator MD Edvardas Gindrenas
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Softdator Solutions invests % of profit into R&D – what kind of R&D projects is the company involved in at present? During the last six months, R&D budget has been increased up to 25-30 percent. The majority of our R&D recourses were directed to our newly built specialized asset tracking platform for ship, vessel or container tracking in offshore zones. Secondly, mobile application solutions. More of our clients prefers our software via mobile applications (iGeoTrack available on App Store and Google Play). Another area that is being continually improved is fuel monitoring, for heavy vehicles and site construction site operations. How long have Softdator Solutions been investing in R&D and custom development? Forming our business strategy, we clearly stated to be the innovatively crafted workshop rather than the large retail store that you could find so many in UAE. On our visits to the client, we try to understand the vision of the operations in 5 years from now. That makes customers interested in SOFTDATOR SOLUTIONS. MENA is the emerging market, private companies, and governmental units are very open and co-operative for innovations, and you can meet most of the entrepreneurs here in Dubai during various exhibitions and conferences. We consider it very significant R&D input. What kind of solutions – and in what areas – do clients demand and how does the R&D department respond to these needs? The focus is the more cost efficient and more intelligent solutions that would require a lot less time for report analysis. That is in first demand today as many companies are cutting any additional cost due to low oil prices. Before launching any new project or upgrade, our IT team must test it not twice but five times to make sure that utilization will require as low recourses as possible while benefit must be very high. What would you consider to be one of the most significant achievements in this field? (Please detail project or provide supporting press information) I would specify three projects; The first is a solar panel empowered vehicles monitoring system. Our client The Sustainable City Dubai (initiated by H.H. Sheikh Mohammed Bin Rashid Al Maktoum) requested to devel-
Edvardas Gindrenas Managing Director, Softdator Solutions
op the particular module to monitor the battery level of buggies as continuous driving on low battery level decreases its lifetime. This wasn’t largest fleet project but we foresee the development to be prospect in future. Another solution was developed for regions well known transportation company Mubarak and Sons General Land Transport. The client requested to prepare special delivery report that could increase the operations by the third was delivered successfully. And finally, fuel monitoring solutions; using the existing system we see our clients saving 10 – 25 percent on monthly fuel bills in very different ways with. If we look at the fuel budget of the average company that would make form ten thousand to millions of dollars per month. To this extent even one percent plays a high role, not to mention twenty-five. We keep investing and brainstorming towards fuel solutions. You mentioned MENA. How do you execute the projects outside the UAE? How is it different in terms of client expectations and requirements? Indeed, around 20% of our customers and projects are outside UAE. Mostly KSA, Qatar, and Oman, therefore, we work on business ventures in Iraq, Jordan, Sudan, etc. Thanks to well-developed communication infrastructure today it is not necessary to follow the project in Sudan or Al Basra from UAE office. Therefore, we send our staff and project managers to other countries especially in the beginning of the project that benefits both
client and our professionals to extend the professional horizon. Understanding of telematics and its role is operations in UAE and rest of MENA is still visible. Here, companies are very challenging regardless of the fleet size, operational volume while outside only larger companies try to get out of the box. We encourage small ones that no company is born to be big it’s strict planning, monitoring and intelligent decisions made it big. In business, it’s a very proud feeling to see your client growing with your contribution. Why is it important for a company to develop its solutions to today’s business challenges? The biggest challenge is the precise cost planning. When I compare us to similar companies outsourcing the entire solution I can see, financially they have more flexible. That is not unique to our industry I talk to other manufacturers, and they quote the same. However, the largest benefits are stability and ability. Manufacturers considered being more stable by the nature of the management. We don’t have reckless growth and unexpected downfalls because most of our profit are reinvest back which keeps money inside the company. The important factor is that our clients are large and more loyal to us, the customer loss rate is bellow 5% yearly, and most of the losses related to the internal financial meltdown that has little relation to our services. I believe every business or entrepreneur must create something new to society if it aims to have a long path. Logistics News ME | February 2017 | 53
Sup p lie r N e ws Ramco Systems wins Transworld Group contract
Kassbohrer delivers customised coil transporter Kässbohrer has delivered a unique coil transporter, K.SCC X+, to Netherlands-based transportation company RM Transport. Demanding a chassis which is extremely strong and robust, RM Transport selected the models for features such as sliding roof, K-Fix system, enhances safety during operation and increased comfort. Supplier through local dealer, Van Tilburg-Bastianen in Netherlands, added the final extra visual details on the chassis, such as additional marker lights and painting of the rims.
Barilla partners with Mayar Food for KSA distribution
ransworld Group has signed a deal with Ramco Systems to provide its HCM and payroll software to the logistics conglomerate to automate its HR hire-to-retire functionality on a single unified platform. Ramco HCM with Global Payroll will cover the entire HR processes along with core HR, recruitment, talent management, leave, time and attendance and payroll for over 1,000 employees of the company. Ritesh Ramakrishnan, executive director, Transworld Group said: “We started our journey in Mumbai as a shipping agency and today after four decades, Transworld has scaled up to become a leading diversified shipping and logistics conglomerate with a network across the world. The very nature of our logistics business keeps our workforce on the move and connected across locations. This future-ready HR tech platform and mobility features will completely automate our Global HR processes and integrate with the Business ERP systems across businesses and locations, which will positively impact the people experience, communication and workplace efficiency in the group.”
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Food manufacturer Barilla, has unveiled a new partnership with Mayar Foods as part of its regional expansion to expand distribution in Saudi Arabia. “Mayar Foods beliefs match well with the Barilla Group. Barilla’s top quality farming and production, and Mayar Food’s expertise in product distribution will allow consumers to have the best of traditional Italian cuisine across all major supermarkets in the Kingdom. We are proud to be working with Barilla to provide consumers and the trade in Saudi Arabia with the world’s best Italian pasta products,” said Ahmed Al-Muhaidib, GM, Mayar Foods. Barilla is currently working with more than 2,000 retail stores, 5,000 restaurants and five airlines, across the GCC (excluding Saudi Arabia) with majority of distribution in UAE, Qatar and Oman served by the Dubai headquarters via regional partners. Loay Elkhouly, MD, Barilla MEA, said: “We are proud to be working with Mayar Food on our expansion into Saudi Arabia and are confident in the joint success that will be brought through their expertise and vision to provide Saudi Arabia consumers with top quality food products.” The Italian family founded company will be catering to the Saudi Arabia market through a diverse range of traditional pasta products that is expected to grow 5% in the next five years.
Cisco ME names Oman country sales lead
Blackberry QNX launches autonomous drive software platform
isco Middle East has appointed Waheed Al Hamaid to the position of country sales lead for Oman. In his new role, Waheed will lead Cisco’s business in the Sultanate and work closely with the partner ecosystem to support private and public sector customers in their efforts to digitise and transform their operations to drive business outcomes. Commenting on Waheed’s appointment, Shukri Eid, MD – East Region, Cisco Middle East said: “His appreciation of the vital confluence between technology and business impact, combined with his profound appreciation for the opportunities presented by digitisation position us ideally to execute against our strategic priorities and drive continued growth.” Hamaid said: “This is a dynamic time in Oman where we are experiencing fast-paced changes and evolving trends across government and multiple industries. As an Omani, I take great pride when I look at what the Sultanate has achieved so far. Now is the time for Oman to enter the next phase of its economic strategy by harnessing the power of digitisation.” Oman’s urban centres are on the threshold of evolving into smart cities by utilising technology to create a new reality. With Cisco predicting more than 212 billion connected objects by 2020, app-centric infrastructure, sensors and mobile devices are going to be the new normal for almost every city in the world, including those in Oman. Translated in economic terms, connecting the unconnected can be as much some $19 trillion, or $4.6 trillion for the public sector, two-thirds of which can be realised by smart cities.
lackBerry Limited has announced its most advanced and secure embedded operating system for the automotive industry, QNX® Software Development Platform 7.0 (QNX® SDP 7.0). The 64-bit OS that builds on the proven reliability of QNX technology and raises the bar for security and performance in cars. At CES 2017, the technological capabilities of QNX SDP 7.0 will be demonstrated in BlackBerry QNX’s 2016 Jaguar XJ and 2017 Lincoln MKZ concept cars. “With the push toward connected and autonomous vehicles, the electronic architecture of cars is evolving - from a multitude of smaller processors each executing a dedicated function, to a set of high performance domain controllers, powered by 64-bit processors and graphical processing units,” said John Wall, SVP and head of BlackBerry QNX. “To develop these new systems, our automotive customers will need a safe and secure 64-bit OS that can run highly complex software, including neural networks and artificial intelligence algorithms. QNX SDP 7.0 is suited not only for cars, but also for almost any safety or mission-critical application that requires 64-bit performance and advanced security. This includes surgical robots, industrial controllers and high-speed trains.” Features include: microkernel architecture, file encryption, adaptive time partitioning, a high availability framework, anomaly detection, and multi-level policy-based access control. Featuring QNX Neutrino® Realtime OS and QNX Momentics® Tool Suite, the OS helps guard against system malfunctions, malware, and cyber attacks by implementing a multi-level, policy-driven security model that incorporates best-in-class security technology from BlackBerry. The OS also offers a safety pedigree proven by certification to ISO 26262 ASIL D (the highest level achievable) for automobiles and to IEC 61508 SIL 3 for industrial automation systems, and by compliance with IEC 62304 for life-critical Class III medical devices. Logistics News ME | February 2017 | 55
S u p p l ier N e w s
Dressed to impress Damel, a Portuguese textile firm has introduced a range of technical clothing to enhance safety for maritime workers. The SeaB2 clothing system with integrated inflation, promises to revolutionise the concepts of security in the context of maritime activities. SeaB2 is used as a part of regular clothing of jacket, overalls or vest, and is built on the outside of a lifejacket completely unnoticeable. “The SeaB2 inflation system is activated automatically as soon as it hits the water and it is the only system, worldwide, with a lifejacket that allows the user to swim crawl and access the nearest vessel or platform,” said Victor Paiva, manager of Damel. “We seek to combine functionality with an appealing, comfortable and practical design. The SeaB2 allows the user complete freedom of movement and can be used for sailing, fishing and other water sports, by oil and naval station workers, by the navy and even, for example, in the assembly of off-shore wind towers,” he added. The innovative character of SeaB2 has already led Damel to submit patent applications for registration of this product in the UAE, as well as in the USA and European Union. The materials used in SeaB2 have a high resistance to tearing and perforation. In addition to being waterproof and heat-insulated, these garments protect against fire and against electric arc discharge. With built-in harness and lifeline, it allows for helicopter rescues at sea. 56 | Logistics News ME | February 2017
intech startup #Pay, is to become part of PayFort, enabling merchants to send invoices via various channels, including social media, and receive money from their customers, via SADAD, credit card or bank transfer. #Pay is described as a fast and easy way for merchants to send invoices and receive money online from their customers. Merchants can serve customers invoices via different channels such as call centres, SMS or social media, such as Twitter, Instagram, Snapchat, as per customer preferences. Customers are able pay simply and easily via a unique URL and invoice payment code, using SADAD, credit cards or bank transfer. “The region’s payment industry is fast-developing and, as it moves from cash society to cashless society, there are a lot of opportunities for developers in the fintech ecosystem. PAYFORT is always on the lookout for innovation and ways to embrace new innovations that complement our services,” said Omar Soudodi, managing director of PAYFORT. “The team at #Pay has developed some great solutions to help merchants simplify customer online payments and offer customers options via social media and other online channels. We are very excited to be welcoming #Pay team into our PayFort family and look forward to working together to build products that further streamline online payments in the region.
Save t he dat e
Save the date February
Aircraft Interiors Middle East (AIME) 8 – 9 February Dubai World Trade Centre AIME is a two-day exhibition and conference providing the ideal platform for interiors suppliers, providers and buyers to network and establish new relationships in the Middle East. Co-located with MRO Middle East, AIME is a must-attend event delivering the latest innovations in aircraft interiors. AIME 2017 is held at Dubai World Trade Centre on 8-9 February 2017. As the Middle East’s only aircraft interiors event, AIME 2017 will feature over 280 exhibitors and hundreds of airline attendees from 100+ airlines from all over the world.
Middle East Electricity 14 – 16 February 2017 Hosted by the UAE Ministry of Energy, Middle East Electricity is the largest international trade event for the power industry, covering the generation, transmission and distribution of electricity, the renewable and nuclear energy sectors and the lighting industry. Each year Middle East Electricity welcomes more than 1,500 international exhibiting companies and over 21,000 senior level industry decision makers from 130 countries across world.
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Middle East Rail 7 – 8 March 2017 Dubai International Convention and Exhibition Centre, Dubai As Middle East Rail enters its 11th year, it now welcomes over 8,000 visitors and takes up over 22,500 sqm at the Dubai International Convention and Exhibition Centre in the UAE. Over 400 exhibitors will come together to meet the operational needs of regional rail operators. Highlights in 2017 will include Mobility Oriented Development Zone; Manufacturing Zone; Career Zone and the Intermodal Logistics Zone.
Telematics Conference 8 – 9 March 2017 Dubai UAE For the third time, more than 150 key stakeholders from the Middle East, Africa and countries from all over the world will gather at this telematics focused conference. The fast growing telematics industry is getting more and more interesting around the world. It is of special importance in the Middle East and Africa region. Here, we are identifying even greater market growth.
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