From war-torn to oil-rich: Middle East and North Africa is a region of logistics contradictions
LONDON, March 17, 2014 /PRNewswire/ --
It is all too obvious to state that Middle East and North Africa is one of the most difficult regions to assess in terms of logistics investment and services. Huge differences exist between rapidly growing markets serving a global customer base on the one-hand and countries torn apart by war on the other. Generalisations are impossible.
Ti's latest report, Middle East and North Africa Transport and Logistics 2014, offers detailed analysis of this region and the countries with often conflicting economies within it. The report's author, Thomas Cullen, has developed a unique framework for analysis which divides the region into three diverse categories:
'Growth-zone' - Comparative political and economic stability, low-medium GDP per head, and young or growing population giving potential for growth through outsourced industrial operations. This includes countries such as Jordan and Morocco.
'Money-zone' - Smaller populations with high revenue streams but low capital assets outside oil and gas. This includes countries such as Qatar, UAE, Saudi Arabia and others in the Gulf.
'War-zone' - A level of political instability inhibits economic growth through social unrest, wars, corruption or mismanagement. This includes Libya, Syria, Iran and Iraq.
This framework allows the risks and opportunities for investors in transportation and logistics to be methodically reviewed and assessed.
The report's author Thomas Cullen commented, 'From Dubai to Beirut, Saudi Arabia to Tunisia, Syria to Oman the Middle East and North Africa is dynamic but very volatile. The bad news often obscures the good but the opportunities for logistics providers in the region are even greater than its difficulties.'
Global hubs: the Middle East as a global logistics pivot
From one perspective the region is hugely exciting in its potential for logistics growth. Dubai in particular has been spectacularly successful in its ability to restructure the global airfreight market around key hubs in the region. The Gulf in general is now a key player in air transport due to the smaller states investing so heavily in new aircraft and airports. To a lesser extent this is true about sea freight as well. The port of Jebel Ali in Dubai is obviously successful as a trans-shipment port but there have also sprung up a string of other, sizeable ports in the region that are not only attempting to grab part of the strong demand for hubs on the China-Europe route, but also traffic around the Indian Ocean and beyond.
Yet sea freight - and above all container freight - is being used in a revolutionary way beyond just transhipment. A number of developments in both North Africa and Saudi Arabia have attempted to grasp the opportunity that a container port offers to gain entry to global supply chains. The 'Tangiers Med' development in Morocco facilitates the establishment of a large car assembly facility, able to both import components and export finished vehicles quickly and cheaply. Saudi Arabia is trying to build large developments on both the Red Sea and Gulf coasts that will utilise the country's gas resources to develop energy intensive business such as down-stream chemical and plastics production or aluminium fabrication for automotive assembly.
Road freight and logistics opportunities to catch up
Yet the reliance on ports also indicates that the region is lagging in terms of other aspects of logistics. North Africa has a road network of variable quality with the region also suffering from inadequate rail freight, despite the potential new projects on the Arabian peninsula. The result of this is the poor development of logistics services such as contract logistics. Again the situation varies greatly between Dubai and other economies; the provision of logistics for consumer goods, for example in key markets such as Egypt, is meagre. Logistics property is rarely of size and capability required to support contemporary best practice whilst the road freight sector is also insufficiently developed.
This suggests major opportunities. Transport Intelligence's analysis implies a growth for contract logistics across the region of in excess of 7% in 2014 but this disguises major qualitative changes in the market. The demand for production-orientated logistics is likely to grow at an enormous rate, if for no other reason than present demand is low. Similarly the latent demand for logistics in the retail sector is substantial, with market dysfunction retarding growth. Better roads and a recognition by governments of the importance of logistics suggests that markets may open up to the possibility of a much deeper presence by global LSPs as well as the more sophisticated local players.
What cannot be ignored is that oil and gas still dominates many of these economies. The direct impact of these resources has an enormous effect on the region's logistics markets. The infrastructure is vast, as is the markets for services such as shipping. It also has the indirect effect of driving demand for air services in many locations; it is also the force behind the development of the growth of the chemical sector in these economies. The effect is to skew logistics provision towards heavy industrial, capital intensive operations.
War: Is this an impenetrable barrier to growth?
The other major characteristic of the Middle East and North Africa is its political instability which many investors will see as an impenetrable barrier to growth. Syria is tearing itself apart with the risk of embroiling its neighbours; Iraq appears to be falling back into anarchy and the security situation in the Arab Spring countries is bleak.
The instability conceals substantial opportunities. For example Iraq retains a thriving oil logistics sector in the north of the country where there is still some semblance of stability; Egypt has a vibrant middle class and Syria/Lebanon were once thriving logistics hubs in their own right. Iran is another case of an economy desperate for logistics investment and services but which remains incapable of accessing them for political reasons. And it is not just war that is a problem. Many of the region's largest economies are struggling to emerge from dysfunctional economies characterised by corruption, weak institutions and barriers to entry which make logistics markets less than rational. Whether Egypt, Saudi Arabia, Algeria or Morocco will grasp their potential as economies is shaped by these political questions.
About the Middle East and North Africa Transport and Logistics Report
Ti's latest report, Middle East and North Africa Transport and Logistics 2014, contains analysis of each individual country within the region plus regional logistics market sizings, 39 logistics provider profiles as well as exploration and insight into the infrastructure of the region and vertical sectors present such as the oil and gas, LNG, automotive, FMCG and others.
This report, available at a cost of £1295.00 can be purchased by contacting Leon Morris, E: firstname.lastname@example.org or call +44 (0) 7903 548 579
About Transport Intelligence
Transport Intelligence (Ti) is one of the world's leading providers of expert research and analysis dedicated to the global logistics industry. Utilising the expertise of professionals with many years' experience in the mail, express and logistics industry, Transport Intelligence has developed a range of market leading web-based products, reports, profiles and services used by all the world's leading logistics suppliers, consultancies and banks as well as many users of logistics services.
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SOURCE Transport Intelligence