Upheaval weighs on freighters
The Arab Spring has wreaked havoc with transport companies in the UAE this year.
Many businesses are reporting drops in orders by 50 per cent, while others have raised concerns about the uncertainty of Qatar's status as the host of the 2022 Fifa World Cup as well as the need to regulate rogue companies.
"It was like a dream as the unrest moved from one country to another," said Mohammed Al Khouli, the general manager of Heavy Load Freight Services in Dubai, which specialises in transporting oilfield equipment and chemicals throughout the region to energy firms.
"We were overwhelmed, and seven months down the road, we now admit this [recovery] could take a while," he said, pointing out that the challenges are so great Heavy Load Freight Services in Dubai, a niche company employing 20 staff, may be forced to cut jobs.
With an estimated 5,000 companies in Dubai, the transport and logistics industry is the backbone of the UAE economy, driving the country's export and re-export machine with shipments throughout the Middle East, Africa and the subcontinent.
But now the sector is going through a tough time again three years after the global downturn of 2008 forced companies to cut costs to stay in business.
Chanaka Malalasekera, the senior vice president of Hawk Freight Services, also in Dubai, admitted he was worried about the slow pace of growth following the Arab Spring.
"Dubai is the regional distribution hub and when things like this happen, it would take a long time to recover, even if the respective problems in these countries are sorted out," he said.
One bright spot was Qatar's successful bid to stage the World Cup. But that decision recently came under scrutiny when Mohamed bin Hammam, the former head of the Asian Federation and an elder statesman of Qatar football, was banned for life after becoming embroiled in a bribery scandal during his bid to become the president of Fifa.
Mr bin Hammam has denied the charges.
Before the controversy, haulage companies were cashing in as the country embarked on huge infrastructure projects. Much of this extra demand was being routed through UAE ports and transport networks, according to Peter Mathew, the managing director of Fleet Line Shipping Services in Dubai.
The heavy activity in Qatar is being matched by a surge in demand for cargo into Iraq and the former CIS countries in central Asia. But, at the same time, infrastructure projects in Abu Dhabi have slowed this year.
In addition, the situation in Qatar is variable, said Mr Al Khouli.
As well as clearing up any uncertainty about the World Cup, freight companies would also like regulations to be eased to cement the country's position as one of the most advanced transport networks in the Middle East.
"While the UAE is in the forefront of innovation in the logistics industry, there is still much that can be accomplished by making the systems a little less rigid," Mr Malalasekera said.
"We have seen many new systems come into force during the last few years, but these still need fine-tuning in order to make the process more user friendly and less time-consuming.
"The Dubai trade system which processes imports and exports can take up to two days for passing one bill of entry," he added. "This kind of delay will make clients lose their competitive edge and also make this technological advancement less prudent."
Mr Malalasekera urged authorities to root out rogue companies that give the industry a bad name.
"We are seeing too many small players without any qualifications or a proper understanding of the business entering the market," he said.
"Although they may make a small profit at the end of the day, due to their lack of professionalism they tend to give a wrong impression about the whole industry to various overseas entities, thereby taking away much needed goodwill."
Another key move to improve the industry would be to tighten up regulation for insurance coverage on bills of lading issued by all freight forwarders, according to Mr Mathew.
"Currently, many freight forwarders are issuing documents without having proper liability coverage," he said. "Trade licence-issuing authorities need to make sure that all freight forwarders have the adequate liability coverage before they issue or renew the licence."
Despite the challenges, many companies are optimistic about the long-term future.
"Although this year started with a lot of hope, it has not turned out as expected," Mr Malalasekera said.
"However, we are now again seeing some improvement in the numbers. If this trend continues without any further disturbances, we might be able to end the year on a positive note."
Published: August 3, 2011 04:00 AM