LTD Management
Logistics & Supply Chain Management Consulting Global Solutions That Work

LOGISTICS INFRASTRUCTURE IN THE GULF COOPERATION COUNCIL - ASSET RICH AND CARGO POOR?

Much has been built and expanded, is being built and will be built throughout the region. Ports. Roads and causeways. Railroads. Airports. Each of these impacts the flow of products.

From a logistics and supply chain management view, three things that stand out about all the projects -

As a result of the centricity and lack of integration, there are investment gaps, such as with roads and railways, and investment redundancies, such as with regard to ports, with the logistics infrastructure from a GCC perspective. They can be viewed collectively as over-engineered and under-customered.

Logistics as Economic Driver. Logistics can be and has been an economic cluster to drive growth. Despite their geographical size, Singapore, The Netherlands and Hong Kong are significant examples of logistics economic successes. They have proven what logistics (and maritime) can mean to a country.

There are benefits with being the logistics and maritime center. Four key ones are:

  1. Economic growth. It would be in the important private sector.
  2. Employment creation. The potential is there for 100,000+ jobs for GCC citizens. These would be at all levels.
  3. Economic diversification. This expands opportunities in the non-oil economy.
  4. Attracting outside / direct foreign investment.

In addition, other key value drivers of the logistics focus and what it generates are:

Clusters are viewed as key for improving the economic performance of regions. They orient economic development toward groups of companies for common issues, such as training. Clusters build on the unique strengths of an area rather than trying to copy other areas. They enable a region to have different sets of economic development opportunities.

Logistics is a critical element of any cluster activity, with its combined physical goods, information, finance, and documents flows and activities. It is both a supporting and necessary element in all development. Given a multiple set of economic clusters, logistics is an economic activity and skill-set stimulant in its own right. As has been proven, logistics can be the driver to create economic clusters, growth and jobs.

Competitiveness. There is not a united effort to establish a logistics center in and for the GCC that is supported with infrastructure linking all the countries. Countries compete in varying ways within the GCC and the region with regards to logistics and trade. They each compete for essentially the same business. How they are viewed can be seen from three indexes that evaluate countries of the world.

1) Logistics Performance Index (LPI). The World Bank has developed a benchmarking tool for international logistics. The Index for 2012 ranks and compares 155 countries. Singapore had the #1 ranking with a 4.13 score, followed by Hong Kong at 4.12.

The World Bank surveys global freight forwarders and express carriers as to the logistics "friendliness" of countries in which the firms operate and with which they trade. Scores reflect quantitative and qualitative measures.

Scoring is based on six criteria---customs, infrastructure, international shipments, logistics competence, tracing and tracking, and timeliness.

Scores for Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates reflect the assessments for the six categories, and are--

For comparison, #1 Singapore had scores of 4.10, 4.15, 3.99, 4.07, 4.07, and 4.39.

2) Enabling Trade Index (ETI). The World Economic Forum (WEF) issued its ETI report for 2012, titled, "Reducing Supply Chain Barriers". Per the WEF, ETI measures the extent to which individual economies have developed institutions, policies, and services facilitating the free flow of goods over borders and to destination. The structure of the Index reflects the main enablers of trade, breaking them into four overall issue areas that are captured in sub indexes-market access, border administration, transport and communications infrastructure, and business environment.

The survey recognizes rise of international supply chains and the effect on trade. 132 countries are ranked. Singapore is ranked #1, followed by Hong Kong. Singapore's score is 6.14.

3) Global Competitiveness Index. The WEF assessed the competitive landscape of 144 economies, providing insight into the drivers of their productivity and prosperity. Switzerland is ranked #1, followed by Singapore. Switzerland had a score of 5.72.

Needed-Focus. The indices are about more than infrastructure and assets. They reflect what is required to be a logistics / supply chain leader in the global economy. That is what the GCC should do-improve scores and focus on becoming a leader. Implicit to that is who will be the logistics center and leader in the GCC.

This requires a focus on what should be done-