ValuStrat industry practice groups are led by professionals that offer in-depth knowledge and experience across a range of sectors.
Valuation of the new 50-storey high prime mixed-use / residential tower in London
Market Valuation for Management Decisions
Valuation assessment of earth-moving equipment used in gold mining pit located in Tanzania for management’s internal decision-making purpose
Hospitality Market Research
Market research for 3, 4 & 5-star hotels and serviced apartments in Makkah as part of a larger advisory assignment relating to the hospitality sector in Makkah
Market analysis, growth strategy and development of ideas for diversification and additional attractions to generate higher revenues
While industries undergo transformation and increased complexity, each ValuStrat practice offer a very successful track record in specific areas of expertise. We bring cohesion to every aspect of our business through our culture of information sharing, collaboration, strategic alliances, combined with innovative thinking, and processes and technologies that enhance our performance, and deliverables.
In this era of globalisation, we have seen a growing trend in the blending of sector expertise, driven partly by the increasing participation of emerging market. Whether it is financial services with mobile technology, consumer goods with social media or automotive with clean energy, ValuStrat has the multi-disciplinary understanding to draw upon each other’s expertise to secure the right outcome for each client.
How We Can Help
ValuStrat team of specialized experts service the construction and building material industry to provide invaluable detailed understanding of the industry. Our professional expertise and technical know-how to tackle even the most complex valuation and strategy assignments differentiates ValuStrat from the rest.
The construction and building materials sector is one of region’s biggest industries. The sector is very important for the UAE economy and particularly to Dubai. The sector in the UAE employs more than 500 thousand people, of which Dubai contributes with around 30 per cent.
The construction and building materials industry is large, complex and diverse and covers a wide range of business interests and activities, united by their common usage and development of land. It is comprised of clients including house-builders and commercial property developers who determine what should be built and where; designers who decide on the detail of what should be built; materials and components suppliers who extract and/or manufacture materials and components and contractors who carry out the building.
‘Building Green’ is a global trend which is quickly becoming an industrial norm in the GCC. According to a recent research report from Navigant Research, the worldwide market for green construction materials will grow from $116 billion in 2013 to greater than $254 billion in 2020. The benefits of green building – energy savings and techniques have become more accepted, where more and more construction projects across the region and globally want a green building certification and this has created a new demand for traditional materials and methods to reduce the impact on the environment.
Another growth area is concrete production from recycled materials, such as ash from power furnaces. Wood from proven, sustainable forests is another area that is set to boom, as are water-efficient plumbing fixtures and energy-efficient lighting fixtures, both of which were expected to see double-digit growth every year to 2013, according to a green building materials report by market analysts the Freedonia Group.
The construction sector in the GCC is poised for a rebound, with $286 billion (Dh1 trillion) in projects set to be awarded between 2012 and 2016, according to a new research report.
Quality education plays a key role in the economic development of any nation. This fact is clearly evidenced from past experiences of countries/regions such as Singapore, Ireland, Korea, and the European Union during the last five decades. The GCC member nations have also identified sound educational systems as being the cornerstone of economic progress and taken several initiatives aimed at improving the quality and quantity of education over the last two decades. As a result of the governments’ thrust, the region has witnessed a marked improvement in the quality of education. For example, Saudi Arabia in 2004 set forth a ten-year strategy focused on economic development and improving the quality of human capital. Likewise, the UAE released a draft document listing comprehensive reforms in the education sector in 2007. As a part of education sector reforms, the GCC region witnessed an increase in public expenditure on the sector. Government spending on education, as a percentage of total government expenditure, across the Middle East and North Africa (MENA) region increased from 12.7% in 1985 to 19.3% in 2008. In the UAE, this percentage increased significantly from 10.4% in 1985 to 27.2% in 2008; while it increased from 10.1% to 19.3% in Saudi Arabia during the same period.
The education sector in the GCC is poised for robust growth in the future on the back of increasing population, rising private sector participation, and increased willingness of parents to ensure high-quality education for their children. Earnest intention of the governments to improve the coverage and quality of education in their respective countries through various reform measures also bodes well for the sector.
In particular, prospects appear bright for operators and investors in the private school segment across the region. Growth in the Saudi Arabian private school market is expected to be fueled by recent regulatory developments. Moreover, superior quality of education provided by private schools in the GCC is stimulating migration of students from public schools to the private counterparts. The private higher education segment, which is relatively under-developed, is also likely to grow in the future as new private and foreign universities set up operations in the region.
The entertainment industry is growing exponentially. The world is becoming increasingly industrialized, and recreation-seekers on the whole have greater amounts of both time and disposable income to spend on entertainment. The vast entertainment industry encompasses around 18 unique sectors and within each sector, there are numerous further sub-sectors providing countless entertainment products, worth over USD 1.7 trillion in 2015 and is set to rise to USD 2.14 trillion by 2020. Quite simply, the accumulated worth of all the sub-sectors of the entertainment industry makes it one of the largest industries in the world, even without considering the multiplier effect that it is accountable for. Further, the number of sectors in the entertainment industry will increase even more in future years, as tastes change, technology advances and products diversify, producing new specializations in each sub-sector.
The GCC states have been reaping the fruits of a regional diversification movement in which non-oil growth industries such as property and construction enjoyed a meteoric rise. Fuelled further by rocketing oil prices, the GCC emerged as the Middle East and North Africa (Mena) region’s fastest-growing economic bloc. The Gulf’s banking sector played a huge part in facilitating the surge and handling the region’s teeming wealth.
Although the early phases of the downturn slowed economic activity, overall the crisis has had a minimal effect on the region’s finances. Banks still continue to benefit from the Gulf’s economic resilience. Islamic banks have grown in recent years to become a prominent source of financial intermediation in the Gulf countries, controlling on average 24 percent of the region’s banking system assets. The GCC region has witnessed in recent years rapid credit growth to the private sector.
Over the period 2003–08, Qatar and the U.A.E. experienced significant private sector credit growth at around 45 and 35 percent, respectively in view of this growth, the ratio of private sector credit to GDP compares favorably to other emerging countries. When measured in relation to non-oil GDP, credit to the private sector in the GCC registers the highest rates among emerging countries.
The current foreseeable challenge that lies on the horizon for nations around the world is limited arable land and acute water shortage, which restricts agricultural production globally and also in the GCC. Amid rising population and insufficient domestic food production, GCC countries rely heavily on imports; in 2010, food imports in the GCC region accounted for more than 70% of its total food requirement. With limited food production capabilities, GCC governments are increasingly focusing on developing long-term relations with food producing nations globally. In addition, governments are investing significantly on developing the food processing sector in the region. GCC is gradually emerging as a major food processing and re-export destination. Among GCC countries, the UAE leads the food processing sector due to its strategic location and strong logistics. This backdrop makes the growth and outlook of the food sector a very important issue for the GCC countries.
The total population of the GCC region expanded at an annual average rate of 3.6% year on-year compared to the global average of 1.1% during the period 2000–2010.. Due to the population growth, increase in foreign tourists and per capita income, food consumption will reach 49.1 million metric tonnes (MT) by 2017, growing at a CAGR of 3.1% over the period 2012-2017. To meet this increasing demand for food arising out of the growing consumption is both a challenge for the GCC governments and an opportunity for private sector players to expand within the GCC markets.
The food sector in the GCC from the perspective of listed food companies is highly consolidated with the three leading companies Almarai, Savola and Kuwait Food Company (Americana), contributing over three-quarters of total revenue of listed food companies. At an average P/E of about 25.0x, GCC companies are at a premium to the US peers (22.1x) and the Asia-Pacific market average (12.8x). On EV/EBITDA metrics, too, GCC companies trade at a premium to the US peers (10.8x) and Asia-Pacific average (12.6x).
With a positive investment environment and key growth drivers of strong GDP growth and increasing per capita income, increasing GCC population and potential increase in per capita consumption in the region, the food industry is all set for expansion, growth and new opportunities.
An overview of the market
GCC economies with their high per capita income and growing population have seen a steady improvement in healthcare parameters like infant mortality and life expectancy over the years. However, lifestyle-related diseases such as diabetes and obesity have increased in tandem with growing per capita income and a sedentary lifestyle. According to a 2018 GCC Healthcare Industry Report, the current healthcare expenditure in the GCC is projected to reach USD 104.6 billion in 2022 from an estimated USD 76.1 billion in 2017, implying a CAGR of 6.6%.
Between 2017 and 2022, current healthcare expenditure on outpatient services is predicted to grow at an annualized average rate of 7.4% to USD 32.0 billion, faster than an anticipated CAGR of 6.9% on inpatient services to USD 45.4 billion. The inpatient market will remain the largest segment with a contribution of 43.4% in 2022. In view of the anticipated rise in the number of patients, the GCC may require a collective bed capacity of 118,295 by 2022, indicating a demand for 12,358 new beds. This demand is being mitigated by the 700 healthcare projects worth USD 60.9 billion under various stages of development.
GCC governments pay on average for 70% of all healthcare bills. Funding this healthcare bill is increasingly challenging in the current environment of lower oil prices and reduced government budgets. The private sector participation has increased and is also playing an important part in the development of the healthcare industry, encouraged by mandatory health insurance and other reforms. Private players are now being incentivised through Public-Private Partnerships (PPP) to invest and manage operations, while the public sector becomes the regulator.
All GCC governments are planning a larger role for their private healthcare sector in the future and expect that to improve medical service and reduce costs. The transition is slow, however, and requires a massive shift in the overall healthcare system. Some good steps already taken in parts of the GCC should be replicated across the council. The UAE and KSA lead in mandating all private-sector employers to provide private health insurance. This supports the development of private insurance and providers, as well as a progressive transition toward a private healthcare system.
The demand for healthcare in the region will grow due to a rapidly growing population, rising income levels, increased insurance penetration and an increased prevalence of lifestyle-related diseases. The sector offers attractive investment opportunities as reforms gather pace and the market opens up further.
ValuStrat’s Industrial Consulting department is very actively involved in providing various consulting services to clients dealing in purchase or leasing of heavy equipment, especially valuation, appraisals and brokerage of used equipment in the global secondary markets.
The heavy equipment business in the Middle East has emerged as a recognizable industry only in the past 20 years and most certainly during the UAE construction boom after 2000. Contractors began to realize the advantages related to purchasing and/or borrowing equipment for medium/long-term uses and rental companies started to increase their range of product to supply all types of industries.
Earth moving equipment includes a wide range of machinery such as:
- Piling Rigs
- Tower Cranes
- Mobile Cranes
- Wheel Loaders
- Tractor Heads
- Motor Graders
- Air Compressors
Some of the large rest equipment manufacturers include Caterpillar, Japan’s Komatsu , CNH Global (created in 1999 through the merger of New Holland N.V. and Case Corporation. CNH today comprises three construction equipment brands: Case Construction Equipment; New Holland Construction; and Kobelco), Terex Corp (diversified global manufacturer operating in four business segments: Aerial Work Platforms, Construction, Cranes, and Materials Processing), JCB (USA)) and a few others. All these brands are represented and/or imported in the Middle East.
The two basic segments of the market for which contracting and leasing companies provide heavy equipment’s are public and private:
Private heavy construction activities include commercial and industrial projects that are completed with the intent of generating a profit for the owner of the project. Examples of private heavy construction projects include residential and office buildings, manufacturing facilities, hotels and other commercial buildings, golf courses, oil wells, private utilities, hospitals, etc.
Public heavy construction activities for which equipment are used are completed with public/government money, and not necessarily with the intent of generating a profit. Examples of such projects include schools, highways, water works, public utility plants, dams, railroads, canals, prisons, hazardous waste site clean-ups, landfills, etc.
In addition to favorable economic environment in GCC, the heavy equipment industry was helped by the UAE’s construction boom in the period 2000-2008. While the amount of heavy equipment available in the country increased during this period, a majority of contractors continued to purchase their machinery and lessors thus enjoyed only a minor share of the entire equipment market. However, rents for construction equipment fell by about 30% in early 2009 due to slowdown in construction activities and tight liquidity. This situation created an oversupply of equipment in the UAE market. The situation is however improving now with a revival of the market in UAE and Saudi Arabia.
The GCC region has witnessed a spate of economic changes over the past decade. Governments across the world’s largest oil exporting region are focusing on non-oil sectors such as travel & tourism, hospitality, healthcare, education, industrial manufacturing, investments and construction to reduce reliance on their oil reserves. This has led to an aggressive investment in physical infrastructure and technology across the region. We believe that multiple factors such as the increased thrust to develop the travel & tourism sector through infrastructure development, increased bids to host global events (including sports), and government support to the private sector would continue to facilitate growth in the hospitality industry. To benefit from the impending rise in demand, domestic and foreign hotel operators are investing heavily to expand capacity. Currently, the GCC’s hotel development pipeline comprises 78,915 rooms, against a current inventory position of 377,036 rooms.
Since the lull in 2009, international tourist arrivals to the GCC region has risen consistently, benefiting from a steady recovery in the region’s economy and increased tourism promotional activities. Tourist arrivals surged significantly to 37.3 million in 2011 compared to 29.5 million in 2009. While occupancy rates have increased across the GCC region, the global economic downturn as well as the socio-political unrest in select countries of the Middle East region has dented the GCC hospitality sector’s performance on Average Daily Rate (ADR) and Revenue per available room (RevPAR). The GCC region has generally benefited from relatively strong tourist arrivals.
The outlook for the GCC region’s travel & tourism industry is positive. Hotel room supply is expected to grow in tandem with the imminent rise in demand. This along with a steady rise in occupancy and ADRs would fuel the growth in hotel room revenues. Tourist arrivals from Asian countries would be relatively higher as they continue to witness stronger growth in income levels, and facilitated further by the proliferation of budget airlines.
The utilities and infrastructure industry today is in great need of support in areas of Investment and Business Strategy, Risk Management, Cost Reduction, Organizational Restructuring and Human Capital development. With our expertise and knowledge, ValuStrat team of consultants can guide organizations through their transformation with a structured and customized change management process that assist in meeting the business challenges ahead.
Economic infrastructure is the core internal facility of a country that makes business activity possible, such as communication, transportation, distribution, finance and energy supply. These assets are fundamental to society and economic growth. Due to the long-term, inherently safe, typically large-scale and stable income streams that they offer, it perhaps comes as no surprise that it is a rapidly-growing investment class. The second biggest sector in GCC holding the largest opportunity for the next 15 years is the infrastructure industry having USD 804.97 worth of ongoing projects. Saudi Arabia is seeing an increased demand driver for improvement of transportation and infrastructure projects with the ambitious growth plans and government investment into social infrastructure such as hospitals and schools. Most of the GCC governments are planning large scale infrastructure development and expansion scheme spanning a number of years. At the heart of the enormous regional infrastructure development are rail projects valued at US$106 billion, while marine infrastructure projects are also flourishing with over US$60 billion worth of maritime projects across the GCC, and the UAE and Saudi Arabia leading the way.
With the successful FIFA 2022 World Cup bid, Qatar has shot to prominence in the GCC infrastructure map, and is set to grow it share by allocating 37 percent of its budget towards major capital projects, the bulk of which is for infrastructure projects.
With increased prospects of economic growth, the infrastructure industry is set to grow with increased investment opportunities.
We focus on providing cost effective shipping research and techno commercial feasibility studies for Greenfield projects, market analysis and business diversification and expansion projects in various marine sectors like Ports & harbours, cruise terminal and marinas, marine logistics studies, market demand studies, shipbuilding yards and repair yards, financial analysis of project viability, business planning and company structuring.
With an age old history as a maritime hub, the GCC countries have long been sea faring countries. The marine industry has been an essential part of their economy, livelihood and culture for years. Strategically placed as the connectivity point of the East and the West for marine trade routes, the maritime industry has always been an important player in the economies of the GCC. The global financial meltdown and ensuing euro zone debt crisis has triggered a shift in trade towards the east with emerging giants like China and India alone expected to account for almost one-fifth of international trade flows by 2020. This changing trade focus has manifested in the form of more shipping and container traffic to these countries through the region, with regional firms reporting an outstanding result of 16.8 per cent growth for Jan 2012, compare to the same month in 2011.
The maritime industry expects greater growth with the opening up of new markets for exports within MENA and Sub – Saharan Africa. Total exports to these regions are forecasted to grow more rapidly than export to the US, Europe, Japan and the rest of the Americas.
GCC countries which have netted US$ 608 billion oil income in 2011 as against US$ 465 billion in 2010 are spending nearly US$15 billion on the expansion of their ports within the next five years to meet growing business. Many of the 35 major ports in the GCC are undergoing expansion in order to handle bigger trade volumes on the back of their ideal location between Asia and the Far East on one hand and the West, Central Europe, and Africa. They include the US$ 10 billion Khalifa port in Abu Dhabi, phase one of US$ 7 billion Doha port, US$ 215 million Al Ruwais Port, Kuwait’s US$ 410 million Bubiyan port project and Oman’s Duqm port, US$ 500 million expansion of Salalah port and US$ 110 million expansion of Fujairah oil terminal.
Besides large volumes of oil exports from GCC, which sit on the world’s largest hydrocarbon resources have ensured more tanker movement through ports in all the member countries. These huge development and increase in oil shipments will attract more traffic to regional ports and improve their international standing as a maritime hub.
Oil & Gas
At ValuStrat, we provide Oil and Gas consulting services to our clientele in this industry by assisting with the following:
- Cost structure improvement through operating, overhead cost reduction initiatives, maintenance and operating cost improvements, procurement improvements and sourcing strategies
- Revenue enhancement through growth strategy, product line strategy, marketing strategy, pricing and cost to serve, and sales and channel management.
- Productivity improvements including asset and portfolio management, operational efficiency improvements, capital productivity and supply chain strategy.
- Development and application of new business models and network optimization.
- Whole company turnaround and restructuring, including bankruptcy management, interim roles, stakeholder management, liquidity management, business plan review and development and litigation support.
- Cash flow management including inventory and service level improvements while optimizing working capital.
- Mergers and acquisitions support including partnership and alliances development, due diligence, pre-merger planning and post merger integration.
- Specialty services including post crisis management and support.
Today, most of the proven oil & gas of the Middle East and North Africa is located within the countries of the Gulf Region – comprised of the Gulf Cooperation Council (GCC) countries, Iran, and Iraq. The Gulf region countries collectively possess some 54% and 40% respectively, of the world’s conventional oil and gas proved reserves, and large additional amounts of unproved and undiscovered reserves.
In 2010, the Gulf Region produce over 25.2 million barrels of oil per day, and 44.6 billion cubic feet of natural gas per day, accounting for over 30% of the world’s oil production, 15% of gas production, and 32% of Liquefied Natural Gas (LNG) exports.
According to International Energy Outlook projections, world energy consumption is projected to increase by over 50% by 2030 from 2008 figures, an average increase of 1.6% p.a. Fossil fuels (oil, gas and coal) will continue to supply much of the energy used worldwide. Global demand for liquid fuels is expected to grow by only 1.0% p.a. across this period, and the total share will decline from 34% (in 2008) to 29% (in 2035). In order to meet the world’s growing energy demand, the Gulf region’s share of world oil production will increase above 30% with the return of Iraq to full production in the coming years.
Global demand for natural gas has risen at a rate even greater than that of crude oil, experiencing an average increase in demand of 2.7% per year over the 1973 – 2013 period compared to 0.9% for crude oil over the same period. Natural gas consumption worldwide is forecasted to continue increasing at an average rate of 1.6% annually upto 2035, as compared with a continuing 1.0% per year for liquid fuels.
The expansion of the gas industry in the Gulf region itself will continue to be immense, due to the rapidly growing power requirement for the GCC population and increasing substitution of gas as a primary fuel for power generation around the world due to lower cost of natural gas on an equivalent basis, efficiency considerations and environmental considerations.
Strong crude prices over many years have played a significant role in boosting the economic growth of GCC nations, and even now, oil is still the major contributor to the GCC economies. However, there has been a gradual shift in focus away from a reliance on the hydrocarbon sector and towards diversification. This shift has given a significant boost to various sectors, with the most important being the real estate and construction sectors.
The UAE real estate market is one of the most significant in the region. After the significant slowdown of 2008, increased property prices and rents, and rental yields higher than most global markets have brought investors back to the markets. In general, the real estate market for the country has been quite buoyant and was further boosted by UAE winning the Expo 2020 bid.
Retail & FMCG
The GCC’s retail industry grew at a brisk pace of over 20% annually during 2004-2008. Thereafter, the rate of expansion slowed down considerably in 2009 due to the global financial crisis and UAE’s debt concerns, only to recover partially in 2010. Healthy growth returned in 2011 as regional governments’ spending supplemented the fundamental factors supporting retail sector’s progress such as increasing purchasing power, growing expatriate population, changing lifestyle and an expanding tourism & hospitality industry. At the regional level, penetration of modern retail concepts is still lower, especially in smaller cities, thus leaving room for further growth. However, the eagerness of retailers to open new stores is limited by concerns that supply may outpace demand in the forthcoming years. In order to achieve a sustainable profit growth, retailers will have to constantly look for ways to innovate and efficiently manage their businesses. The GCC’s retail sector is maturing gradually under a wave of consolidation as numerous regional and international retailers compete for market share. The industry is likely to continue to expand at a healthy and sustainable rate in the future.
Retail industry has thrived in the GCC region over the last several years largely due to increasing purchasing power, growing expatriate population, changing lifestyle and an expanding tourism & hospitality industry. Implementation of governments’ progressive policy agenda and increasing private sector contribution to the overall economic growth has made the Gulf one of the widely pursued retail destinations in the world. The industry grew in 2011 despite political uncertainty in some countries within the region and a global economic deceleration, reaching a market size of US$ 186.7 billion. Its fundamental structure remained broadly unchanged, with the region’s two largest economies, Saudi Arabia and the UAE, primarily fuelling the sector’s growth.
Robust spending power supported by sustainably high oil prices makes the local population partly insensitive to prices, a strong positive for retailers in the country. While Qatar is one of the wealthiest countries globally, GDP per capita (PPP) of the UAE and Kuwait is comparable to that of major developed economies and significantly higher than personal income levels in the leading emerging markets.
Whilst rising prosperity and an expanding consumer base continued to be the backbone of the retail market in 2011, increased government spending also supported private consumption. The region’s retail sector has been displaying strong resilience in the face of global economic uncertainties and varied domestic issues, thereby attracting new investments.
Completed GLA in shopping centers increased over 10% y-o-y to 11.4 million sq m in 2011, with nearly 80% of this area located in the UAE and Saudi Arabia. Despite easing to certain extent, regional imbalance with respect to retail development still prevails in the GCC. Until recently, development of modern retail infrastructure was principally concentrated within the major commercial cities like Dubai and Jeddah. This resulted in other key cities like Abu Dhabi, Doha, Makkah, and Medina experiencing a shortfall in retail space. However, with a surge in development of retail space in the relatively under-developed regions, this imbalance is likely to correct over time.
ValuStrat has worked with many service sector firms, assisting them in accomplishing financial and managerial results aligned with their specific needs and objectives.
As a professional strategy advisory and consulting firm ourselves we understand sector specific challenges and leverage the experience along with our expertise to help identify critical business issues, suggest corresponding strategic alternative and assist in change and strategy implementation. Our spectrum of services to the sector is focused on the strategic direction, profitability, performance and financial management – conclusively the overall strategic direction that our service sector clients may seek.
Given today’s dynamic and challenging business climate, ValuStrat understands that the organizations within the Services Sector each represent a critical corporate activity serving as the driving force behind numerous businesses and corporations. In order to optimally address our Service Sector clients’ operation-specific issues and challenges, ValuStrat has designed its range of services and worked with clients to promote value addition and cost efficiencies that drive and sustain the clients strategic and bottom-line foot-print.
Our corporate activity focus entails multi-disciplinary understanding of clients providing:
- Facilities management services
- Consultancy services
- Human Capital Management
- Logistics and distribution networks
- Network management
- Marketing and sales
- Business Process Outsourcing
The significance of service sector companies can be understood by fact that the service sector dominated the UAE economy accounting for 44% of overall GDP in 2011 and has grown at 5% during 2007-11. The services sector is expected to continue its growth momentum given the GCC region’s focus on economic diversification and the strong demographic dividend in the form of a young consumer market.
According to IMF growth remained robust for the GCC member nations, supported by expansionary fiscal policies and accommodative monetary conditions. However, mindful of their heavy reliance on oil and gas sectors, all GCC states have embarked on strategies and programs designed to diversify their economies, enhance private sector activity, improve education standards and boost employment for nationals. These efforts include large public spending programs on infrastructure, education and health with supporting investments envisaged from the private sector.
According to Insead’s Innovation Ranking Report 2012 the countries of the GCC have embarked on a series of reforms and initiatives focusing on the need to cultivate human capital and to promote research and development (R&D). The UAE ranked 26th in the overall Doing Business rank for 2013, and high in the sub-categories; 5th in trade across borders and 22nd in starting a business. These areas are vital for continued-success of the UAE’s thriving services sector.
Transport & Logistics
GCC’s Logistics sector is estimated at around USD 35 billion, of which three major economies, namely Saudi Arabia, UAE and Oman account for around 85 per cent share. Oil & Gas, Infrastructure and Trading industry segments are the leading contributors for the logistics sector in the region. In the GCC, the domestic services segment (inland transportation and warehousing) of the logistics market is dominated by local players, while the international service segment (freight forwarding and international transportation by air / ocean) is dominated by multinational players such as DHL, TNT and Agility.
The industry is foreseen to witness greater growth with the government spending on infrastructure development of rail transport network (initially for public transportation and later to be used for cargo transportation too), which will soon be realized as the best mode of transport for the largely traded commodities such as chemicals, petrochemicals, etc. The focus on development of Free Trade Zones (FTZ or Free Economic Zones) by the GCC nations has been a major drive for their non-oil economic growth, which has had a profound impact on the logistics sector. This has resulted in a significant proliferation of multinational organizations setting up their continent level distribution centres (for air and sea modes) in the GCC nations, with a positive impact on the logistics services market. Further development of domestic manufacturing industries, spearheaded by Saudi Arabia is likely to impact and drive the logistics sector and development of cargo specific sea ports (spearheaded by the UAE and Jebel Ali port) has resulted in making GCC the logistics hub for Europe – Asia trade activities.
The logistics sector in the GCC is on a definite growth trajectory and is witnessing all the right mega trends that are likely to enhance the region’s prominence as a logistics hub. While development of exclusive cargo ports and FTZs is enhancing the region’s potential for international trade related logistics, development of rail transport mode for cargo and promotion of domestic manufacturing activities would result in growth of the integrated supply chain services business.