Outlook and Growth Opportunities in the UAE Logistics Industry
Despite uncertain global economic conditions and low oil prices, government investment plans and infrastructure development initiatives are expected to support economic growth in the UAE. Integration of logistics functions and harmonization of the GCC customs regulations will lead to a synchronized, coordinated, and interconnected regional logistics network. UAE ports have emerged as important transhipment points in the Europe-Asia trade lane and multi-modal logistics hubs to cater to the needs of increasing trade within the region. Investment-related to EXPO 2020 is likely to be one of the key drivers for logistics industry growth between 2016 and 2018.
The United Arab Emirates (UAE) logistics industry is undergoing structural changes due to economic diversification plans, harmonization of regional trade and customs regulations, expansion and modernization of logistics infrastructure. Despite lower oil prices, economic growth is expected to be driven by non-oil economic sectors, construction activities relating to capacity expansion and modernization of logistics related infrastructure. As a member of the Gulf Cooperation Council (GCC), UAE is expected to benefit from trade policy developments and formation of regional transportation corridors in the GCC region.
GCC logistics infrastructure is increasingly becoming important as the region has emerged as an important transhipment point for Europe-Asia trade and also as a multimodal logistics hub to cater to the needs of increasing trade within the region. GCC level economic and logistics services integration is expected to derive creation of integrated multi-modal transport system and strengthening of multi modal transportation corridors in the region. The logistics infrastructure developments and Integration of the Transportation & Logistics service in the GCC provide opportunities to the local logistics service providers in the UAE.
Some of the key trends identified in the UAE logistics industry are:
Economic diversification, growing domestic demand, and development of export oriented industrial centres and free zones are likely to support both transhipment and regional trade growth
Transportation infrastructure development and new technology solutions are likely to strengthen the infrastructure required for the multi-modal transportation system
Airport expansion and the GCC rail network will strengthen alternate mode for freight and cargo transportation
The integration of logistics functions, harmonization of the GCC customs regulations will lead to synchronized, co-ordinated, and interconnected regional logistics network
Lifting of Iran sanctions will increase trade activities in the region and likely to support demand for logistics services outsourcing growth
Transportation & Logistics segment accounted for around $29.08 billion in UAE’s GDP for 2015. Services sector will be the growth engine for the UAE economy. Dubai leads the Logistics industry in the UAE with around 45.0 per cent share in 2015 followed by Abu Dhabi. The logistics industry constitutes more than 14.0 per cent of Dubai’s GDP, the highest amongst all emirates. The strategic geographical position of Dubai and improved infrastructure facilitate a substantial share of international shipments directed to the UAE. Capacity expansion and infrastructure investment are expected to strengthen the competitiveness of Logistics Service Providers (LSPs), UAE logistics industry is expected to grow by 4.0 per cent in 2016.
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