Qatar’s new port to change the dynamic of logistics sector
With the country’s new port slated to open next year, Qatar’s logistics sector is expected to receive a major boost – something that will also improve the availability of raw material, goods and products as well as help to accelerate economic growth. By Aparna Shivpuri.
When Qatar built Ras Laffan port in 1996 the state probably did not anticipate having to build an even bigger one close to a decade later. This is just one sign of Qatar’s rapidly growing economy and its increased requirements for goods, products and raw materials that have matched the country’s unprecedented increase in population and infrastructure demand.
With Qatar getting closer to achieving its two major milestones – the 2022 World Cup and the National Vision 2030 (QNV 2030) – in less than 15 years from now, the country’s infrastructure and logistical demand will reach its pinnacle soon. The most critical element that could possibly prevent Qatar from reaching these milestones is the country’s infrastructure – most specifically, its ports – if they are not developed in a timely manner. But in all probability that may not be the case, considering the fact that Qatar is developing its infrastructure quite rapidly, and its new port project, Hamad Port, is expected to complete its first phase as early as 2016.
Talking about the impact that the new port will make, Ranjeev Menon, group CEO, Gulf Warehousing Company, says, “Hamad Port welcomed its second commercial vessel on August 13, steering towards an early operation by the end of 2015. By end of Phase I, the new port will have a capacity of 2 million 20-foot equivalent units (TEUs) a year and 2 million tonnes of general cargo by the end of 2016.” When the project is completed, he adds, the port’s capacity will be more than 12 million TEUs a year.
Located south of Doha, the QAR27 billion ambitious megaproject will include a new port and Qatar Economic Zone 3 as well as a new base for the Qatar Emiri Naval Forces. The project will span over an area of 26.5 km square (km2) and the port’s basin will be 3.8 km in length, 700 metres wide and 17 metres deep. With seven major contractors involved, the project is witnessing massive progress, involving a workforce of over 9000 with 2000 pieces of equipment. In total, 70 million cubic metres (m3) of granular material will be excavated; enough to fill 25,000 Olympic-sized swimming pools.
To be developed in phases, the port will feature three multipurpose container terminals with a capacity to store over one million tonnes of bulk grain cargo, 500,000 vehicles and 37,000 livestock per year. The first container terminal will bring two million TEU capacity on line when it opens in December 2016 and will provide a supply chain system along with the free zone.
This will promote trade as exports and imports can come in directly, therefore saving time and money. One must also not forget that, Hamad Port will increase the number of vessels coming through Qatar from 2016, which means more traffic, and which will lead to more trade, more repair work and greater potential for infrastructure growth. Therefore the development of this port goes beyond the mere purpose of meeting the immediate infrastructure need for the 2022 World Cup and is part of a much bigger plan. The increased capacity and world-class facilities of the new port will act as a catalyst for economic growth, promote economic diversification and create a more sustainable economic base, all in line with the QNV 2030, which has sustainable development at its core, thus making the country more resilient against changes in the global economic environment.
It also provides support to the Ras Laffan Port, whose success has enabled the state to export its gas resources to the world. The new port will also create job opportunities, as well as contract and management opportunities for businesses.
Qatar has been witnessing a spike in its non-oil sector activities, which reflects the government’s strategy to diversify the economy. The backbone of all these sectors is the logistics sector and major development projects have brought with them the need to enhance capacity building in this sector in line with the country’s growing population and economy. Qatar has been working towards restructuring customs procedures in order to meet international standards, and as a result, the sector has witnessed improvement in cost and time efficiency.
These developments in the port sector are part of a bigger strategy to meet the QNV 2030. The ports are also being developed as integrated logistics hubs inclusive of their own free zones.
The 6.3 km2 logistics and industrial free zone, which will provide 1500 plots of land in South Wakra, Birkat Al Awamer and Aba Saleel, aims to make the country a regional hub for investment and logistics.
The logistics park will include refrigerated facilities for frozen and dry stores, showrooms, commercial offices and labour camps; workshops for the maintenance and storage of cars; assembly and processing workshops for light industry; service centres and warehousing. According to Nael Attiyat, country manager, DHL Express Qatar, “The planned industrial and logistics centre will help boost the country’s business community – spurring more commerce and investments which will need strong logistical support. It will open up more growth opportunities for all logistics firms.”
Hamad Port will be next to this industrial zone and will play a crucial role in promoting maritime trade and easing the congestion/backlog of ships (which sometimes have to wait up to a month at the harbour) with services such as the smart gate.
There is no denying that Qatar is witnessing a significant growth in the import of raw materials and goods, and a technologically-advanced and strategically located port will become a vital part of the country’s logistics sector.
However, the country is already making some early strides. In fact, the transport sector grew by 19.2 percent in January-June 2015 against 4.6 percent in the corresponding period of 2014. According to Srinath Manda, programme manager, Transportation and Logistics Practice, Frost and Sullivan, Qatar accounts for approximately a 15 percent share within total reported logistics market of the Gulf Cooperation Council (GCC) countries, the third largest share after the Kingdom of Saudi Arabia and the United Arab Emirates. The country’s reported logistics market value was estimated at about USD7.5 billion (QAR27 billion) in 2014.
Comparing Qatar to other GCC countries, Srinath says, “Within the entire GCC, Qatar has been the fastest growing economy over the past five years. Also, at an overall level there has been a significant improvement within Qatar’s logistics sector over the past few years.” He adds that Qatar obtained the highest rise in the World Bank’s Logistics Performance Index, rising from 46 in 2007 to 29 in 2014. “This could be attributed to the large scale development of logistics infrastructure projects being pursued by the country across all segments such as
seaports, airports, free zones, roadways and railways.”
Qatar has also been making headway in the air cargo industry and has been aggressively pursuing serving new routes for cargo. Qatar Airways Cargo already serves to more than 40 freighter destinations worldwide via its Doha hub. In August 2015, the carrier added Djibouti to its freight locations, making it the seventh destination in Africa. Qatar has been consciously investing in modern, state-of-the-art cargo infrastructure as it realises the need to position itself as a major international commercial gateway. Cargo movements also increased by 13 percent with 114,445,235 more cargo movements in 2014 compared to the previous year, due to Hamad International Airport.
The slow growth of third party logistics (3PL) has also been a cause of concern. According to Paul Virgo, vice president for Logistics at Milaha Maritime and Logistics, Qatar’s 3PL sector is still in an early development stage. “There are only a few companies offering services that add value to customers’ supply chains, hence the reliance on internal logistics capabilities rather than outsourcing to 3PL,” he says, adding that the dynamic is changing now, albeit slowly, with the emergence of better quality services and availability of storage facilities to service providers.
The government has been doing its bit towards promoting public-private partnership (PPP) in the logistics sector in order to fill the gap between supply and demand for storage services and secure logistics for effective private sector including small and medium enterprises (SMEs) at competitive prices.
Virgo says, “The sector outlook in the short term looks very good. We are currently experiencing substantial growth and this is forecast to continue for the foreseeable future. The Qatari government has recognised the need for additional logistics facilities and awarded land options for service providers to exploit. As long as the country continues to grow, the logistics sector will continue to grow with it.”
The road ahead
However, all these developments aside, Qatar continues to face some challenges in the logistics sector. Attiyat says, “The limited capacity of gateways into the country is creating bottlenecks in the supply chain, while the rapid population growth and urban congestion restrict the movement of people and services. The government has already begun addressing these issues through increased infrastructure investments and stronger public-private engagement.” Echoing the sentiment, Srinath says that while there have been bottlenecks in terms of limited infrastructure and sea ports, the opening of Hamad Port will make a huge difference to Qatar’s trade scene.
On paper, Qatar has got the right plans for growing its logistics sector through free zones, logistics hub and a mega port. All these are needed for the diversification of the economy, promotion of trade and meeting the needs of a growing economy. How Qatar will deliver on these fundamentals is a wait-and-watch game. It is widely recognised that availability of sufficient materials and labour, and the logistics of getting them to the right place at the right time is likely to be a significant challenge in Qatar.