Keeping up with the flow: Increasing import and export activity is driving growth in logistics

Its geography lends Qatar to being a trading nation. The peninsula is located near one of the world’s busiest shipping routes, the Straits of Hormuz. In the lead up to the 2022 FIFA World Cup, boosting capacity of the transport sector has been a major priority, as demonstrated by the government’s recent budget allocations.

The state earmarked some QR40bn ($11bn) for various infrastructure projects in its 2011/12 budget and $44.5bn for public works in 2012/13. That figure includes allocations of $11bn to the New Doha International Airport, $5.5bn to the New Port Project, $1bn to a transport corridor in Doha and $20bn to roads. The government expects to spend roughly $95bn on infrastructure through 2016.

INCREASING VOLUME: Departing from Qatar’s shores are tankers carrying liquefied natural gas (LNG) and oil to virtually everywhere corner of the world. Exports increased significantly between 2009 and 2010, with total merchandised exports clocking 55.4% growth, from QR170.5bn ($46.8bn) to QR265bn ($72.8bn), according to a report by the Qatar Statistics Authority (QSA) in April 2012. The same publication indicated that re-exports, goods that were imported into Qatar and then shipped on to a final destination elsewhere, grew slightly faster than overall figures, increasing 73.8% from QR4.2bn ($1.2bn) to QR7.3bn ($2bn).

As for imports, Qatar’s ports handle virtually everything – cars, machinery, jewellery, apparel, construction materials, electrical components and much more. The value of overall imports has grown more than fourfold between 2001 and 2010, from QR13.6bn ($3.7bn) to QR57.2bn ($15.7bn), according to the QSA. Although numbers slipped from a high of QR90.7bn ($24.9bn) in 2009, recent indications are that volumes should pick up in coming years. Indeed, in 2010 vehicle imports increased 19% with the arrival of nearly 60,000 cars, construction machinery and other vehicles, according to the Qatar Ports Management Company. High margins have also attracted a number of importers to set up shop. “In terms of car values, Qatar is the most expensive in the GCC. This is down to traders in Qatar receiving higher margins,” said Osama Al Naji, the general manager of Al Sulaiman Rent-A-Car.

As freight volumes and physical infrastructure both continue to grow, the state’s logistics sector is set to be crucial for handling all of this freight and utilising new infrastructure. To facilitate smoother imports and exports, the government has been working with the private sector to improve its Customs procedures. Meanwhile, projects such as Logistics Village Qatar (LVQ) are signalling that changes are afoot in transport, as the importance of specialised supply chain management firms continues to grow. Just as seaports, airports and roads are increasing the cargo amounts they are able to handle, so too is Qatar’s logistics sector working to make sure warehousing, freight forwarding and other supply-line services keep up with expansion.

Anup Nambiar, the managing director of Paragon Shipping and Logistics, told OBG, “The export market in Qatar is growing considerably and this is evident in the significant container shortages that the country is witnessing. There is also a need to increase the number of vessels operating in the region.”

COMPETING GLOBALLY: An improving logistics environment has been making it increasingly easier to import and export goods to and from the state. In 2007 Qatar placed 55th out of 155 countries in the World Bank’s Logistics Performance Index (LPI), a ranking it maintained in the 2010 assessment. Additionally, Qatar was ranked 57th in the “trading across borders” category of the World Bank’s 2012 “Doing Business” report.

On individual indicators, Qatar consistently out performs the MENA region, and in some cases even the OECD averages. Cost to import in Qatar was $730 per container, compared to $1085 in the OECD and $1238 in the MENA region, according to the World Bank. On the LPI, which is scored from 1 (worst) to 5 (best), the state’s timeliness score saw a significant boost between 2007 and 2010, from 3.67 to 4.09. Likewise the infrastructure score saw a slight increase from 2.63 to 2.75 in the same period, an early indication of the positive returns borne out from infrastructure investments.

ONE-STOP SHOP: The government is working to continue improving Customs clearing processes. A major goal is the introduction of a single-window Customs policy. The idea is to use information technology to help provide all Customs services in a single office, resulting in faster and more efficient cargo clearance.

This plan grew from a drive to bolster the role of e-government in Qatar. In 2008 the state signed a contract with Singapore-based Crimson Logic to create a national e-government system to streamline Customs procedures. The Qatar Customs Clearance Single Window (QCCSW) project is working in cooperation with the Supreme Council of Information and Communication Technology to save time in a number of Customs processes by allowing clearance procedures to be completed virtually rather than in person. This shift could reduce clearance times from weeks to minutes, according to the UN Economic and Social Commission for Western Asia’s 2011 report, “Trade Facilitation and the Single Window”. The way in which items are separated for inspection is set to change as well. Cargo will be divided based on which government body needs to conduct inspections. This could help introduce lower waiting times, furthering the ultimate goal of cutting down inspections on imports by 5%, a target set by the country’s maritime Customs body. Initial implementation is under way. Although it could take time for Customs officials and companies to adapt to changes, the new system could help streamline trade in the long term. The breadth of the project has necessitated the participation of a series of government agencies. Collaborating with Customs officials are the Ministries of Public Health, Economy and Finance, Interior, Foreign Affairs, Defence, Environment, Business and Trade, Municipality and Urban Planning, Energy and Industry, Culture, Arts and Heritage, and Awqaf and Islamic Affairs.

LOGISTICS VILLAGE: The current overhaul of Customs procedures could do much to buoy the state’s transport sector. To ensure there is adequate storage and handling capacity for incoming shipments, private players are partnering with the government to invest in logistics and shipping infrastructure, including warehousing and special storage areas. According to Mohamed Ismail Ali Al Emadi, the chairman of Gulf Warehousing Company (GWC), “The vast majority of demand for warehousing and transport solutions comes from the private sector. This is a strong indication of the growth of the private sector in Qatar.”

LVQ, one of the sector’s largest undertakings, is set to propel growth in Qatar’s handling capacity. The project is under the administration of GWC, a shareholding company listed on the Qatar Exchange and the state’s largest integrated supply chain solutions provider.

LVQ is located 20 km south-west of central Doha. The project includes 200,000 sq metres of covered logistics space divided into two construction phases. Phase I, which constitutes about 40% of the project, cost QR500m ($137.3m) and came on-line in the first quarter of 2010. It includes 83,000 sq metres of warehouse space, 65,000 sq metres of container haulage, and 3000 sq metres of staff accommodation. Completion of the project’s second phase, which was expected in March 2012, was pushed to late spring 2012, according to GWC. Indications are that the scale of storage demand is proportional to the scale of LVQ’s facilities.

GWC has been receiving reservations for phase II of the project since its groundbreaking, and the firm anticipates occupancy levels above 70% at completion. The third phase, expected to come on-line in 2013, is set to include 450,000 sq metres of warehouses.

SPECIALISATION: As the transport and logistics sector continues to enjoy infrastructure investments and new projects, there could be more opportunities for Qatar’s third-party logistics (3PL) industry. 3PL firms can offer more efficient services as they integrate transport with warehouses, while their expertise in dealing with Customs facilitates smoother cargo clearance. As preparations ramp up to accommodate growing freight volume, shipping and logistics are set to play a crucial role in facilitating construction and economic activity.