By Nadia Saleem, Staff Reporter www.gulfnews.com
Dubai: Cargo and courier businesses are showing double-digit growth despite challenges in some markets.
One of the world’s largest logistics companies, Germany-based DHL has over 15 competence centres for the industry around the world. DHL recently invested about $15 million (Dh55.09 million) in these facilities in India and Singapore.
With a global market share in ocean freight and air freight of 9 to 13 per cent, the company recently launched services out of Dubai World Central-Al Maktoum International Airport with its first cargo charter flight of Danzas AEI Emirates. Hermann Ude, chief executive of DHL Global Forwarding, Freight speaks to Gulf News about the logistics industry requirements and the role the UAE is playing via its geographic location and economic advancements.
GULF NEWS: Cargo movement and trade is a major indicator of economic activity. In relevance to that, what is the market condition and what are your expectations for next year?
Hermann Ude: This year has seen a very strong recovery overall, in the market but also in our business globally. You see a strong development of Asian exports but also from Europe into Asia. Africa has become a strong player again after a difficult 2009 and that is still continuing. But for 2011, we are a bit more cautious but still optimistic. I think a lot of the trade that was replenishment of warehouses will not be there, it will not be a catch-up year like 2010 was. If you look more specifically into lanes, and trade is always between places, then we are still more optimistic about trade between Asia, Middle East and Africa.
Middle East will be a strong, turntable between the three continents of Asia and Africa and Europe. Asia has put a lot of pressure on exporting more into Middle East and Africa. So that’s one way. The other way is that Asia needs more perishable products and other products from Africa and Middle East in order to create a better trade balance.
The turntable situation [of the UAE] will stay important.
What has been the impact of recovery on trade volumes and where would be the upcoming demand?
Globally, the market says air freight has improved arou nd 28 per cent and we have been a bit ahead against 2009. The ocean freight market has come up by around 16 per cent and we also grew faster than that.
In Asia, the biggest recovery we had was exports from China because it was so much down in the first quarter of last year. That has been the fastest growing market.
The second fastest has been Europe into Asia, lot of cars and manufacturing goods because Asia had a lot more private consumption than it has ever had. The background of that is the growing middle class in Asia that was never there. [By definition — the people with more than $5,000 income a year] When you have that kind of income, you start to buy investment goods. So you don’t go to a bar to watch TV, you buy your own TV.
You may buy finance and life science products, so you start to buy health care for your family. The middle class population is said to have grown from less than 40 million to more than 300 million and is expected to be around 400 million in 2015. That means there is more spending power and consumption in Asia than in Europe. So that has been a big driver of growth of European exports into Asia.
In what industries do you expect to see an increased demand for logistics in the coming years?
We are a very broad based company but we focus on some industries, and one of the key industries where we see growth is Life Science (LS). We have a conference here with almost 200 of the top supply chain directors of life science companies globally. We are discussing with them trends and we deliberately do that here because we believe there is a strong role that UAE can play in the life science industry as a turntable or a hub between the three continents [of Asia, Europe and Africa]. Traditionally, LS were products that were produced in North America or Europe for the rest of the world, and then Japan for the rest of the world. And that is changing. You have a lot of Indian companies that have a very strong LS footprint. And also the traditional LS companies move very fast into the new markets. That’s why the UAE as a turntable can play a very important role for them.
How is the progress of the UAE in keeping up with the latest requirement of the logistics industry?
We’ve seen the new airport opening, and also the growth of the local airlines and success of the DP World port operator, these indicate that a lot of important trends are set here in the Middle East and by these companies that are very successful. That goes beyond whether the local real estate market is up or down. This fundamental role has not changed in any way through this financial crisis.
Do you see any underserved markets in the Middle East that you would be looking to tap into?
There is of course a big need for rebuilding and investment in Iraq and Iran. Those are markets that can easily be served out of the UAE and there is a lot of private consumption. There is public investment in the oil and energy sector. Also in Iran, the oil and energy needs substantial investment and we are expecting that it is going to be a good market in the upcoming years.
How would you deal with sanctions placed on Iran as you consider the market?
That’s what we have to keep in mind. We as a company have pretty clear rules for every territory. We always respect UN sanctions, but not sanctions of individual countries. Because you have to cut the line somewhere, and there is always somebody who would cut somebody under some sanctions. The situation is such in Iran that they would need and want to import more goods and I think they will make compromises as they are needed. For Iraq, with the end of the war, it is important for the economy to recover and they need investment in the oil area.
In some ways, prosperity has always been a way to get out of civil war situations. Some countries have succeeded with that so maybe that’s a little hope for Iraq as well.
What are the challenges that need to be addressed for industry specific development within the UAE?
In the UAE you look at two things; UAE as a turntable and hub situation and you look at the market itself. While I believe there is a pretty aggressive and ambitious agenda on the turntable situation, which is good and driven by local companies like DP World, or like Etihad and Emirates airlines, I think there is still a lot that can be improved on the logistics in the UAE itself. There are some areas that value can be created.
Also within the LS sector, with the growth of the UAE, there is an opportunity that has really set up a world class LS logistics structure in the country; there are opportunities such as city logistics. On average in a city environment, the load factor of tucks or vehicles is not beyond 40 per cent, so you could reduce the number of trucks that actually have to be on the road significantly if you just structure the delivery into the city area differently than it is currently done.
Some company trucks coming into the city are half empty and delivering one or two items. You could consolidate that and take traffic out of the city.
As there is a lot of new development on the way, there is an opportunity to improve the logistics setup for these places. It’s difficult to change it in developed cities like in Europe, but here there are opportunities for some world-class logistics concepts.
We have actually started talking on these two years ago for this year and maybe we can realise some of these projects.
It’s the governments as well that have to look into it. Not just build new roads when traffic increases but create distribution hubs out of the city. The government can license some companies. We are in discussions with them and hopefully that will be something innovative.
Any expansion plans for DHL in the region?
We have a prefect footprint from our point of view, in air freight and ocean freight. We have ME road network, we have a very large warehousing footprint, here in the UAE. We have to work on quality and on specific features for specific industries.
What is DHL’s capacity situation? Would more be required in the local market soon, especially with the launch of the new Dubai World Central-Al Maktoum International airport?
There is no need, I think we have enough capacity, one of our challenges is to get qualified people, to get them to a level to serve a global hub, but from a capacity point of view, we are pretty good.