Middle East transport sector to undergo major changes
The Middle East’s transportation industry including the $10 billion (Dh36. 8 billion) logistics and express mail market is set for more competition, consolidation and privatisation in the coming five years, a study from The National Investor (TNI) said.
“Following the worldwide convergence towards ‘one stop shop’ supply chain and logistics management solutions, we believe the transportation industry in the Middle East is on the verge of revolutionary developments such as consolidation and privatisation,” said the comprehensive research report obtained by Gulf News. The report comes in the wake of the ongoing initial public offering (IPO) of Arab International Logistics Company that plans to acquire Aramex International.
The Middle East logistics market is valued at more than $10 billion with the GCC market accounting for about 10 per cent of this. The UAE accounts for roughly 35 per cent of the GCC but Saudi Arabia leads with a 55 per cent share.
The express mail portion in the Middle East is estimated at $300 million.
“The regional economy is driving growth in the express sector averaging 17 per cent a year for the past five years to 2003. The growth is forecast to stabilise at about 13 per cent per year for the next five years to create a $600 million market in express mail,” said the report.
TNI expects competition to intensify but privatisation and consolidation will characterise the sector in the next five years.
“We believe more intra-regional consolidation horizontal and vertical to take place among Arab and Middle Eastern transportation players, particularly between airliners, freight forwarders and stand alone warehousing providers. ”
Equally, the growing foreign competition will force the course of privatisation and the development of new activities.
“What is holding back the price war in the region is the quasi-monopoly that many national carriers enjoy in their home markets,” the report said, citing the case of Trans Mediterranean Airways (TMA) decision to launch freight forwarding and charter services.
Thus, transportation companies in the different sectors of the industry will require more capital for organic and external growth.
Touching on the global transportation industry, the report said the global acceptance of the free market economy is leading privatisation, reduced government intervention and rapid growth.
Moreover, shippers are focusing on logistics as a powerful competitive tool while carriers are losing government support.
“Increased transparency and cheaper exchange of information are pressurising forwarders to provide more value-added services at lower costs. ”
The global air freight sector saw dramatic growth since the early 80s. World air freight tonnage increased an average of six per cent annually from 22. 5 million metric tonnes (mmt) in 1995 to 30. 12 mmt in 2000 and an estimated 38 mmt in 2004.
“Mature markets by definition grow more slowly than emerging ones, which is why we expect the fastest growth to occur outside the US. In particular, the Middle East is poised for growth as a leading area of rapid industrial development in the coming years. ”
