DHL Express, the world's leading international express service provider, fortifies its leadership across the Middle East and North Africa (MENA) amid renewed industry optimism on the region's economic developments. Nour Suliman, CEO, DHL Express Middle East and North Africa, demonstrated positive attitude supported by massive investment figures that DHL have in the recent past and what the company has in the pipeline. In an interview, he said that "since 2014 we have committed over $170 million on infrastructure projects across multiple markets in the region and over 50% of this budget (approximately $95 million) is being invested in Saudi Arabia. Last year we opened a $20 million access point at the King Khalid International Airport in Riyadh and are now working on an access point in Jeddah which will come live in the fourth quarter of 2016. This will complete our plan to expand our business in Saudi Arabia that will directly affect many regions and countries around the world." He further said DHL will continue to invest heavily in Saudi and across the region to help our customers gain faster, easier access to essential global trade centers and high-yield markets around the world such as China, India and Africa, which are re-shaping the GCC's trade and commerce profile. He added that on a regional scale, DHL just opened a new $1.04 million, 1,300sq.m facility in Alexandria that acts as a new office, a service point and warehousing space capable to handle over 2,500 shipments per hour, and in November, it will inaugurate our new, revamped $17 million, 7,180sq.m DHL hub at Dubai International Airport that will offer holistic air and landside distribution services, onsite import and export support and be able to process over 120,000 shipments per day. Excerpts of the interview follow: DHL's new gateway in Jeddah is planned for Q4 of 2016. This will be DHL's 3rd new facility in Saudi in a span of two years. Tell us more about this facility, i.e., handling capacity, location, footprint, investment etc. We will be located at Jeddah's King Abdulla International Airport on a 15,000sq.m land area. At an investment size of US$24.7 Million, the Jeddah facility will function as a consolidated operation with warehousing services, airside and landside access and on-site customs clearance and bond hold area. Once fully operational we will be able to process over 100,000 shipments per day, increasing our overall capacity in the Kingdom by a further 50%. State-of-the-art ICT equipment has been installed throughout the facility to ensure speed, efficiency and security across all areas of operation. Your expansions in Saudi are over 50% of the allocated $170 million infrastructure investment budget for the region. Why is Saudi so important for DHL? We are expanding in Saudi Arabia because our clients tell us that it is strategically important for them. Saudi Arabia remains the region's economic powerhouse, and with recent announcements of its ambitious economic vision 2030, there is no denying we will see the country fortify its stance as a regional and global player. The impact of Saudi's transformation plan will be huge, and in terms of logistics it will open the doors to tremendous opportunities. We plan to be at the center of that growth to drive the industry forward and support the country's development plan and trade links. Where do you see the future of logistics in a region like the Middle East, and Saudi in specific, considering the volatile economic and political climate? How is the logistics market evolving? The Middle East, and more specifically the GCC has become extremely important for redistribution and logistics with countries such as Saudi Arabia, the UAE, and Qatar taking prime spots in the top 40 rankings from over 140 countries worldwide. The MENA is blessed with a geographical advantage. It is a vital entry and distribution point for freight movement between East and West, especially now with trade patterns shifting from traditional developed economies to emerging Middle East and Asian economies. New trade corridors between Asia, Africa and Europe are redefining global supply chains and boosting the region's importance as a strategic gateway and this is being facilitated by the region's enhanced connectivity, infrastructure, world-class logistics facilities, free trade zones and large-scale sea and port expansions. Despite fiscal concerns and volatility, the region will see its position strengthen as a major trading and transshipment center in the global arena. Saudi Arabia will persist with its regional dominance and presents a very attractive proposition for foreign investors, especially now following announcement of its new 2030 sustainable growth plan. The country holds vast hydrocarbon reserves, has a fast-expanding population, a US$1 trillion construction sector and a long-term strategy for industrial development and diversification. The Kingdom is also the largest transportation and logistics market in the MENA. The region may be facing some challenges but nevertheless it will remain resilient on its path to logistics growth. What trends do you foresee shaping the logistics industry in the next decade? E-commerce will definitely intensify its influence over the supply chain sector in the face of an expanding retail industry and growing regional population which is outpacing global averages. The falling oil prices are prompting more efforts towards diversification, intra-regional trade is on the rise and the new shape of globalization is fueling new trade corridors, channeling capital streams between the Middle East and high-growth African and Asian countries. And of course the GCC railroad will be a game-changer and will impact the current players in the logistics market, especially with regards to land transportation. Tell us about DHL's financial performance in the region. In 2015 the MENA region made up around 2.4% of DHL's total revenues and recorded an increase in MEA of 12.4% to 1,034 million euros from 924 million euros in 2014. What volume of shipments is processed by DHL in Saudi? What is the split between road and air? DHL handles approximately 900,000 international shipments a month in Saudi alone and over 26 million shipments a year across the region. We have seen our growth in Saudi range from 8-20% over the last five years. Road accounts for approximately 7 – 8% of our total shipments and the rest is done via our air network which has expanded to also include Asian lanes. Which country in the region accounts for the bulk of DHL's shipments? What percentage of total regional shipments is KSA responsible for? Saudi Arabia is the biggest importer and accounts for around 30% of total shipments. The UAE is the largest exporter Where does the region stand in DHL's global ranking? And Saudi in specific? MENA is placed 4th on DHL's global market ranking and Saudi Arabia is 2nd in the region. What will be the impact of the GCC rail project on DHL's operations? What challenges/opportunities do you anticipate for Saudi and the GCC? Rail will have a major impact on the logistics puzzle in the Middle East. The GCC-wide rail network will be a game changer and a catalyst for growth. DHL Express naturally relies on airfreight connections for its business model, which places expediency over cost, but the GCC rail network will open up new economic horizons for trade and commerce when it finally comes to life. The integration of a unified rail network will require time especially seeing how the countries of the GCC are all at very different stages of development; there are also key issues to be worked out for seamless operation such as the regulations for cross-border trade by rail among other things. When all this is finished then it will compete very heavily with road and will act as a catalyst to improve the road haulage in that way. Your thoughts on the region's growth potential in e-commerce logistics - opportunities and challenges you face as a service provider. E-commerce is sweeping over the retail industry globally, it is one of the fastest growing sectors at 35-40% in many parts of the world such as USA and Asia, and a key growth driver of regional logistics. Although the MENA accounts for only a fraction of the estimated $1.5 trillion global e-commerce market, and only makes up 10-15% of DHL's business, it cannot be ignored. The GCC e-commerce market has grown by nearly five-fold over the past five years due to a fast-expanding population, changing buyer behavior, high spending power and increased government efforts to improve the e-commerce ecosystem. Industry predictions estimate the e-commerce sector in the region to grow by 40% in 2020. One of the most obvious challenges is disruptions in road connectivity due to the geopolitical volatility, which affects timely deliveries, especially with intra-regional transactions. Also the limited number of e-commerce players restricts the industry's potential. Online consumers in this part of the world are skeptical about online transactions and still prefer ‘cash-on-delivery' which is not efficient. And ‘last mile' delivery still leaves a lot to be desired. How mature is this business vertical in KSA? Saudi is leading in terms of e-commerce attractiveness and has a well-established ICT system in place. Revenues from e-commerce are expected to grow by 10-12% annually and although the UAE still accounts for the highest e-commerce sales and internet penetration, Saudi's vast population, high disposable incomes, burgeoning retail market, and government drive for diversification, is pushing the value of B2C e-Commerce transactions in the country to double by 2020. There is a predominant young population, over 50% below the age of 30, prompting a generation that is more tech-savvy and can readily adopt the digital revolution. Moreover, banks are making it easier for Saudis to adopt the e-commerce movement by launching Sharia-compliant credit cards which are likely to drive the growth of online transactions further. What's DHL's opinion on what infrastructural and procedural changes logistics companies need to make to support the region's e-commerce boom. The surge in e-commerce activity has led to a parallel evolution in the logistics processes to accommodate this new business model. Logistics companies are having to adopt smarter, more advanced means to support e-commerce demand. We have to tackle e-commerce as a separate sector all-together, it is much more than just delivering a product to the client, it's about customer satisfaction at every step of the process and living up to a promise. Personalized track-and-trace systems, competitive pricing structures, efficient last-mile delivery methods and smarter warehousing and inventory management are just some of the ‘must-dos' for logistics players to ensure a more customer-centric approach. Integrated technology across all aspects of the e-commerce operation is paramount. The challenge is also to encourage more domestic E-commerce growth. Is the recent deregulation of fuel prices a concern for DHL and logistics players in general? How is the company coping with the associated surge in costs? Fuel prices are a constant concern, especially with several hundred trucks and vans on the road every day, collecting and delivering door-to-door. The increase in fuel prices across the GCC states obviously has had an impact on our costs so we are finding ways to be more efficient and re-engineer the way we operate to get maximum value for our money. We load aircraft and trucks more efficiently; we reduce the number of loads by improving the density. We don't reduce the schedules though, that's fundamental. Tell us about DHL's aviation arm and any recent developments. Globally, DHL is one of the largest air carriers with a fleet of more than 250 aircraft serving around 500 airports worldwide. Our regional aviation headquarters are based in Bahrain with 11 aircraft and operate over 150 weekly flights across MENA. We are upgrading our fleet and have moved away from the older 727s to 757s. Recently we added two new Boeing 767s which are quicker, more fuel efficient and get us into more locations. We increased frequencies to KSA by adding 3 more rotations, bringing DHL's total weekly flights into the Kingdom to 13. We also increased flights from Morocco to Paris, UAE to Bahrain and added new connections from Tangiers to Europe, Algeria to Marseille and Cairo, Amman and Beirut to the airports served by DHL in the region. We also expanded to include Asian lanes and drive in more traffic to and from the region. We are always analyzing our air capabilities to find new ways to get into different markets faster, taking a more direct approach instead of going through tertiary points. — SG
