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Virtual Freight and Logistics Corridor (VFLC) – Logistics Simplified – Part 2

Blog, Global Trade, ONESOURCE February 5, 2016

MENA Transportation and Logistics Industry

The Middle East and North Africa (MENA) is strategically located in the middle of the Far East and Europe.  MENA is at the center of international trade and commerce between the East and West. The entire region is positioned as a hub for international trade as well as transport and logistics companies. Global companies that are considering exports to the MENA region view Dubai as their primary entry point to the market. Dubai possesses well-established and modern facilities; free trade zones; and a local marine terminal operation considered one of the largest in the world.  Most companies find the region offers quite a few benefits for their operations.

In reviewing information on the region, the stats from 2013 represent a current view of 2.7% of the region’s GDP as being attributed to the transportation and logistics industry.  This data point represents approximately USD 66 billion in revenue for the MENA region. The share is very low when compared to other regions across the world, though it is expected to increase because of numerous growth enablers, such as a fast growing consumer segment, robust trade activity, and a fast growing non-oil economy.  These activities are backed by government investments, proving to make the area appealing to investors.[1]

Supporting Points

According to the Agility’s Emerging Market Logistics Index 2014 report, Saudi Arabia is one of the most attractive targets for logistics investments also noting it is the easiest market to operate within the MENA region. Saudi Arabia’s competitors include China, Brazil, Turkey, Malaysia and Chile. Other MENA countries, particularly those in the Gulf Cooperation Council (GCC), such as the UAE, Qatar, Oman, Kuwait and Bahrain, are also emerging as potential investment destinations[2].

President of National Association of Freight and Logistics (NAFL)-Dubai, Mr. Issa Baluch states, “Dubai has undergone tremendous growth over the years. Today, it enjoys its favorable place as a significant player in international trading and transport logistics. This growth is a result of the Dubai government’s strategy in developing sectors that have been the key contributors to economic growth, including transport and logistics, as detailed in the Dubai Strategic Plan (DSP) 2015.”

The Virtual Corridor

Dubai Customs and The Department of Economic Development in Dubai have unveiled a ‘Virtual Corridor’ to enhance the overall trade sector and facilitate goods movements.[3]

The corridor is in line with the directives of HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai. The directives are designed to “foster innovation in public service delivery to go beyond the limited notion of customer satisfaction and aim for efficiency and customer contentment”.   The Virtual Freight and Logistics Corridor is a result of an integrated study of current situation and needs of the freight and logistics sector.

It is an automated customs procedure designed to facilitate goods transport,  under a Cargo Transport Request between two Dubai Customs centers and only by Dubai roads connecting the center of entry (access from the outer world) to the center of exit (destination in Dubai)[4].

This corridor is a virtual freight and logistic passage that connects seaports, airports and free zones in Dubai on a single customs platform.  The intent is to enable a streamlined customs clearance saving time and costs.[5]

Cargo is expected to be moved in under four hours, without the need for a client to submit a cash bond or bank guarantee. Dubai Customs will grant clients virtual financial guarantee for each consignment to be transferred among customs centers in Dubai.

Virtual Corridor Major Benefits

Among its main benefits, the Virtual Corridor helps expedite the process of moving cargo from one customs center to another inside Dubai. Participants in the Virtual Corridor can avail themselves of a virtual financial guarantee granted by Dubai Customs, making the process much more cost efficient.  In addition, customs processes are now made simpler and more streamlined with automated cargo transport requests.

The pilot phase of the project, which involved 16 leading handlers and freight companies, was well received by all participants. A total of 10,024 transactions were processed during August 2014 through March 2015.[6]

Multimodal Transportation and Logistics

According to Sami Al Qamzi, Director General of DED, Dubai’s multimodal transportation and logistics cluster comprises two main economic sectors – transports, storage and communication and secondly wholesale, retail trade and repairing services. Together these economic activities account for over 40% of Dubai’s GDP and over 30% of the total employment.[7]

Since the implementation of the pilot phase of this initiative in September 2014, more than 12,000 transfers of cargo weighting 64,000 tons have been made while more than Dh120 million saved by reducing the burden of deposit related financial issues, according to Dubai customs

Air freight loaded at Dubai International Airport grew by 26 per cent and air freight discharged increased 31 per cent between 2009 and 2014. Meanwhile, the total number of vessels calling at Dubai Ports grew by 48 per cent compared to five years ago. Jebel Ali Port witnessed 45 per cent rise in containers loaded and 41 per cent in containers discharged during the same period.[8]

Conclusion

The globalization of production into other markets for sourcing as well as intermediate and final production has placed increasing demands on intermodal transport to an extent never experienced before. The future competitive edge of countries may well hinge on the global supply chain and their supporting modal and intermodal capabilities.  Dubai is a significant player in international trade and logistics due to the Dubai government’s strategy in the Dubai Strategic Plan.

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Sources

[1] http://almasahcapital.com/

[2] http://www.agility.com/EN/About-Us/Documents/Agility%20Emerging%20Markets%20Logistics%20Index%202014.pdf

[3] http://gulfnews.com/business/sectors/shipping/dubai-introduces-virtual-freight-and-logistic-corridor-1.1503778

[4] http://www.gulftoday.ae/portal/c5821a90-a331-4146-ab96-1ebd812e7bb2.aspx

[5] http://www.dubaicustoms.gov.ae/en/NewsCenter/Pages/NewsDetail.aspx?NewsID=630

[6] http://issuu.com/logisticsnewsme/docs/lnme_june15

[7] http://m.dubaiprnetwork.com/pr.asp?pr=98620

[8] http://www.mcl.ae/dubai-introduces-virtual-freight-and-logistic-corridor/