Monday, August 6, 2012

Middle East Invests in Logistics Infrastructure as Freight Tonnages Rise

Commercial Battle of Sheik versus Sultan in a Modern Day Quest for Primacy
Shipping News Feature

MIDDLE EAST – Whilst much of the world peers anxiously out from beneath clouds of economic gloom the Middle East continues to modernise and nowhere more than the Kingdom of Saudi Arabia which is set to spend a reported $60 billion on infrastructure improvements including freight and passenger development. Much of the funding here and elsewhere is being raised using the Islamic bonds or Sukuk’s which encourage private investment throughout the region whilst conforming to religious protocols. The fight to be atop the logistics tree is a fierce one and large sums have been, and are being spent, to secure the title.

This latest push for dominance by Saudi Arabia in the field of international carriage comes at a time when there are internal rumblings of dissent and heightened tensions with neighbouring Iran, many pundits say the two are linked, and the Kingdom is desirous of presenting a settled face to the world. The nation’s flag air carrier was rebranded in May as Saudia, partly in celebration of joining Sky Team, whilst some see it as an attempt to match the brand quality enjoyed by other regional carriers notably Abu Dhabi’s Etihad (and its Cargo division also newly rebranded from ‘Crystal Cargo’ ) and Dubai based Emirates (and its Skycargo division).

Despite running substantially more aircraft than most of its rivals and even achieving 26% growth in tonnage in the first half of this year to 250,000+ tonnes, Saudia’s reputation couldn’t overhaul that of Etihad, itself voted world’s best airline for three consecutive years. What is more striking is that Emirates increased tonnages by 11.8% last year to 1.8 million tonnes and ordered 193 new aircraft at a cost of $13.4 billion whilst also operating dnata, the fourth largest combined air services provider in the world which itself handled 1.5 million tonnes, much of it for its sibling partner, as cargo tonnages at Dubai World Central airport shot up consistently over the past year in every quarterly period between 150 and almost 400% and claims to be aiming for 4 million tonnes+ annually.

To upgrade air services in Saudi Arabia there is a large airport extension scheme under way for Jeddah whilst passenger traffic via Riyadh is set to triple and there are plans for other, new, airports on the cards. The development of Jeddah means the best coverage for the Kingdom’s western regions whilst neighbouring Oman seems more concerned in turning itself into a net exporter by purchasing new build bulk carrier tonnage and expanding its seaports.

The Sultanate is investing heavily to transfer cargo operations from the Port of Muscat to new facilities at Sohar whilst developing new cargo handling terminal facilities and a liquid jetty at Salalah, close to the Yemeni border. Oman has long felt that with an ever precarious political situation in the Strait of Hormuz it is perfectly placed to offer safer, deep water facilities just outside the areas of likely conflict.

Other countries in the region, such as Qatar, can also boast growth at a time when financial and political uncertainty still hold fears for all concerned but, with so many options open, investment in the Middle East will always seemingly be there for the most hardy, or perhaps foolhardy, freight and logistics stakeholders.