London, 7 May 2009 – The transport and logistics sector in the Middle East region is showing substantial growth rates and yielding attractive operating margins, according to a new report by Booz & Company. While the current economic crisis has certainly had an impact on the industry in the region, the market is stable and the outlook promising. The question now is how to master the challenges ahead and benefit from long-term growth prospects.
The Middle East’s transport and logistics market has witnessed double-digit growth in recent years and will have a total value of US$27 billion by 2012. GCC countries had a market size estimated at approximately $18 billion in 2008.
Logistics represents around 2.3% of GDP of the GCC countries, which is still low. “Our estimate is that the market in the region will continue to grow annually by approximately 10% until 2012,” said Fadi Majdalani, a partner at Booz & Company. “Transportation is likely to grow by 7%, > slightly surpassing overall GDP growth. But logistics services are expected to show substantially higher annual growth rates of 10% or more.”
The report, Not too Late: Finding Opportunities in Middle East Logistics, details how logistics players must have a strategy that allows them to dominate their chosen market segment. As the sector is extremely fragmented it offers opportunities for consolidation and market dominance for those logistic providers who adopt an appropriate strategy. “Those aspiring to master the increasingly competitive landscape need to act swiftly and strategically to offer comprehensive solutions and warehousing services, create a strong and extended geographic reach, and focus on well-defined customer segments,” explained Dr. Ulrich Koegler, a principal at Booz & Company.
Successful companies will be those that choose one of three primary strategies:
- Express / road network operator. For the foreseeable future, road-based transport will remain the dominant mode of transportation and logistics activity will rely on efficient road transport systems.
- Contract logistics provider. High quality transport and freight forwarding, along with warehousing services will be required.
- Integrated logistics service provider. Becoming a integrated logistics provider simultaneously builds on strong asset capabilities, such as a road network and a comprehensive warehousing system.