Camelot Management Consultants

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1 Dubai, April 16 th, 2015 Camelot Management Consultants GCC/KSA: Diversification Creating Opportunities Marcus Meissner Value Chain Excellence. Strategy to Results.

2 Global trends and logistics developments GCC focused The Euro-centered routes have shifted and the Middle East has become the global hub with more than 2.25 billion people within a 4-6 day sailing distance Historical trade routes and hubs Future trade patterns Implications on the global logistics industry Emerging economies as the cornerstone of future growth By 2020, world trade in goods will amount to USD35 trillion, two and a half times its value in At the same time, world trade in services will double to around USD6 trillion China s exports to Europe, at over USD1 trillion will be almost twice as large as U.S. exports to Europe Europe s exports to Africa and the Middle East will be around 50% larger than its exports to the US Trade will also be increasingly focused around Asia, the Middle East and Africa, suggesting that the key geographical location for companies will change 15 of top 20 trade lanes will have origin or destination in China re-export hubs in the Middle East will gain from this development! Source: Emirates Airline, Camelot analysis Slide 2

3 Investments and economy news The logistics sector in the GCC is facing several challenges but also new opportunities Article from CMA CGM sending new largest ever ship to Middle East One of the largest container vessels calling in the Middle East CMA CGM Kerguelen will export consumer products luxury products, as well as industrial products (industry automotive, electronics, aeronautics, etc.) to Middle East and Asian markets Article from UAE economy to grow despite low oil prices Foreign capital jumps 25% to $13 bn in 2014 Article from GCC chemicals production rises by 4.5% The second highest growth region in the world largely attributed to a surge in plastic production, which grew by 6 per cent in 2014, nearly twice the worldwide average The GCC s chemical production was bolstered by significant expansion in polymer facilities in the UAE Article from Uncertainty surrounds 2018 GCC rail deadline The UAE made similar achievements in FDI, ranking first among Arab countries and 22nd globally in the Global Investment Index for 2015 Foreign direct investment has immediate benefits such as providing capital for enterprises, increase of government revenues, etc. Slide 3 Camelot 2015 DHL Conference GCC/KSA: Diversification creating opportunities Individual national rail networks might be delayed a bit Abdullah Bel Haif Al Nuaimi, who opened Middle East Rail on Tuesday, said that the GCC network might not be completed until 2020 Plans to connect the GCC rail with Yemen through Saudi Arabia and Oman have been put on hold

4 Economy Statistics Economy statistics of the GCC Location Criteria for Comparison UAE Oman Kuwait Bahrain KSA Qatar Population 9,4 mio 3,6 mio 3.4 mio 1.3 mio 27,4 mio 2.17 mio Size 83,600 km² 309,501 km² 17,820 km² km² 2.1mio km² 11,571 km² FDI (inflow) (mio $) 10,487 1,625 1, ,297 (-840) GDP(real growth rate) 4% 5,8% 2.3% 4.4% 3.6% 5.50% GDP (per capital) $43,049 $21,929 $52,197 $24,689 $25,961 $93,714 Inflation rate 2.7% 5.4% 5.8% 1.5% -1.9% 0.5% Literacy 90% 86,9% 94% 94.6% 87.2% 94.7% Unemployment rate 4,2% 15,0% 2.7% 3.7% 5,7% 0.3% Global ranking for ease of doing business FDI (inflows) The Foreign Direct Investment (FDI) inflow of UAE and KSA are the highest, which is mainly due to their diversification plans to survive the aftermath of the oil era. Benefits of FDI are not solely capital returns, it provides the economy with several other benefits such as new technology, new methods, new jobs, etc. which are integral factors that an economy needs to have a developed society. Source Trading Economy, World Bank, CIA Fact Book 2014 Slide 4

5 Logistics Performance Index Logistics Performance Index for KSA and UAE Logistics Performance Index Rank Score Rank Score Rank Score Saudi Arabia Overall Customs Infrastructure International Shipments Logistics quality & competence Tracking & Tracing Timeliness UAE 2014 UAE 2012 Rank Score Rank Score ,5 4 3,5 3 2,5 2 1,5 1 0,5 0 Slide 5 Saudi Arabia Overall Logistics Performance Index Score ( ) Customs Infrastructure International Shipments Logistics quality & competence Series2 UAE Series Series Series Source : Logistics Performance Index, World Bank, 2014, 2012, 2010 Tracking & Tracing Timeliness KSA and UAE LPI scores were impacted compared to 2012 Both KSA and UAE are facing competition from other ports internationally KSA is in major need to improve its LPI to mainly improve logistical procedures within the country Supply chain and logistics is a factor not to be ignored in order to survive and thrive Score: 0 5 ( low high)

6 GCC development The main GCC investments are focused on transportation which are focused to improve trade among the GCC states and foster growth UAE EXPO 2020 that is to be held in the UAE has increased market confidence and FDI inclined Contracts worth $20bn to be awarded in the UAE in the transport sector Major other investments in real estate, education, health, etc. are undergoing Qatar Qatar hosting the world cup in 2022 requires huge investments in terms of infrastructure, which in return in boosting the economy at a high pace The countries FDI is in the negatives due to the high in country investments Contracts worth $35.8bn to be awarded in Qatar in the transport sector Slide 6

7 The new role of the industrial cities in KSA Illustrative The Industrial Strategy of Saudi Arabia The industrial cities play a leading major role in the competitiveness, connectivity and collaboration in KSA and GCC Industrial Strategy Business and Investment Environment To promote industrial contribution to the GDP to 20% by 2020 Effective Governance Industrial Complexes Competitiveness New Industry Verticals Strategy Key Drivers support the 3 C s Small and Medium Sized Enterprises Connectivity Infrastructure Implementation of NIS Collaboration Human Resources and Industrial Skills Slide 7

8 The new role of the industrial cities in KSA Illustrative Industrial City (IC) development in Saudi Arabia is a success story: Within 40 years the IC became the backbone of the successful growth in KSA 1975 Industrial cities: 2+ Population in Mio: / 2001 Industrial cities: 12+ Population in Mio: Industrial cities: 20+ Population in Mio: Industrial cities: 40+ Population in Mio: 29+ Lead the 3 C s - Competitiveness - Connectivity - Collaboration of KSA Competitiveness 3 C s Slide 8 Camelot 2015 DHL Conference GCC/KSA: Diversification creating opportunities

9 The new role of the industrial cities in KSA Illustrative Logistics services have to be build up following a bottom up development on the basis of logistics infrastructure Strategic Supply Chain Services Supply & Demand Planning SC consulting services Integration services Network Design Strategic Sourcing & Procurement Inventory Optimization Material & Production Planning 4PL/ LLP Services Managing other providers & services Logistics Management Services Logistics Contract/ Partner Management Purchase Order Management Transportation Management Customer Order Management Logistics Core Services Freight Forwarding (Air & Ocean) Road Transport Networks Warehouse services (shared) 3PL Services Managing capacity Logistics Execution Rail Trucks Shipping Lines Airlines (Planes) Warehouse 2PL/ Carriers Managing equipment Infrastructure Terminals Rail network Hubs Road network Seaport Airport Infrastructure providers Managing infrastructure Slide 9

10 Changing logistics services in GCC Illustrative The new role of the industrial cities in KSA: Current Logistics infrastructure situation in GCC industrial cities and free zones Global/ Regional Level Stage 4: Attracting global Logistics Service Providers to invest and offer services in GCC/ME ~ under way Issue: No logistics services alternatives are in place Zoll Dou ane Country Level Stage 3: Definition of country wide/ inter-industry cities logistics strategy, definition of Free Trade Zones/ Areas ~ under way Issue: Overall strategy not available, some projects ongoing (rail, dry port) Industry City Level Zoll Douan e Stage 2: New Planned Industry Cities Central Logistics areas, access to infrastructure (e.g. Rail) each city by itself ~ under construction Issue: How to plan in detail, how to attract Logistics Provider investors Plant Level Stage 1: Existing Industry Cities all logistics done individually by industrial tenants Available Issue: No synergies between tenants, no USP for new investors Slide 10 Camelot 2015 DHL Conference GCC/KSA: Diversification creating opportunities

11 GCC Sea and Airports hubs Illustrative The Middle East s Multimodal Mega Hubs Kuwait Mubarak Al Kabeer cap. 2.5m TEU (2017) Kuwait Int. 0.4m t (2015) Bahrain Khalifa bin Salman Port cap. 2.5m TEU Bahrain Int. 2m t Doha, Qatar Port cap. 6m TEU (2030) Doha Int. 0.7m t Egypt Port Said cap. 5.4m TEU Cairo Int. 1m t Sharjah, UAE Port cap. 7.5m TEU Sharjah Int. 0.7m t King Abdullah Economic City, KSA Port cap. 20m TEU (2018) Jeddah, KSA Port cap. 6.5m TEU Jeddah Int. 0.45m t The Middle East is developing into the world s logistics and transport hub Existing mega hub Planned mega hub Seconday air and sea hubs Source: Camelot Knowledge Data Base Abu Dhabi, UAE Khalifa Port cap. 15m TEU (2030) Abu Dhabi (AUH) 2.5m t Dubai, UAE Jebel Ali cap. 19m TEU Dubai (DXB) 2.5m t Al Maktoum (DWC) 1.4m Sohar, Oman Port cap m TEU (CC) FC: 5m TEU Sohar (OOSH) just opened Salalah, Oman Port cap. - 5m TEU (CC) 8m TEU (FC) Note: Figure shown are projected capacity CC Current Capacity, FC Future Capacity Slide 11 Camelot 2015 DHL Conference GCC/KSA: Diversification creating opportunities

12 Future Sea and Dry Ports in KSA Illustrative Rail infrastructure will drive and attract more investments in the next 10 years Potential Sea & Dry ports planned until 2025 Multi Modal Terminal Dammam 2 Industrial City New Container Terminal Dammam Seaport Sea Port Expansion & Rail Terminal King Abdullah Port Multi Modal Terminal Sudair Industrial City Multi Modal Terminal Yanbu Industrial City New Dry port Under Development Under Planning New Seaport Al Lith Multi Modal Terminal Jeddah Riyadh Source: Camelot Knowledge Data Base Slide 12

13 Royal Commission for Yanbu Plans: Multi-Modal Logistics Hub Yanbu Royal Commission for Yanbu Plans: Multi-Modal Logistics Hub Yanbu Future Logistics Gateway of Saudi Arabia Yanbu with King Abdullah Port and Jeddah Islamic Port will be the integrated logistics corridor in the Western Region of KSA Target to connect with Rail within the next few years Slide 13

14 Rail, a game changer in the logistics environment MODON: Developing a network of Multimodal Logistics Terminals (MLT s) throughout Saudi Arabia with the pilot at Dammam Industrial City 2 Slide 14

15 Free Zones in KSA, a game changer in the logistics environment Status of Free Zones / Economic Zones in KSA Currently KSA doesn t have any FZ or EZ. Ministry of Commerce and Industry is leading the process to develop FZ in KSA Process to realize FZ concept in KSA MoCI submitted Free Zone study to Council of ministers Council of ministers approved the study with instructions to RCJY, MODON and ECA RCJY, MODON and ECA to submit the required incentives and location for FZ under their authority Royal Decree for Free Zones under RCJY, MODON and ECA Completed Next potential steps Source: Aawasat, Camelot Database Slide 15

16 Market Statistics The growth in the annual disposable income and number of internet users is an indicator of increase in market activity, especially Tech Companies Location UAE KSA Criteria for Comparison GDP Purchasing Power Parity (PPP) (mio $) , ,747 1,651,718 1,655,191 Consumer Expenditure (mio $) 204, , , ,818 Annual Gross Income (mio $) 310, , , ,483 Annual Disposable Income (mio $) 249, , , ,706 Internet Users ( 000) 7,364 7,606 17,096 18,429 UAE Smartphone Share 2% 2% 16% 35% 21% 24% Samsung iphones Blackberry Nokia Other Sony KSA Smartphone Share 11% 3% 19% 44% 23% Samsung iphones Blackberry Nokia Other Slide 16

17 Technology & Supply Chain Technology companies need to focus on improving their supply chain capabilities, especially if they are to compete in the region KSA consumer electronics The increase in consumer confidence & disposable income has contributed to the increase in the number of sales of consumer electronics The use of internet and social media in KSA is increasing Replacement cycles of electronics are decreasing due to the high competition Asian technology companies have impacted sales worldwide due to their low prices Marketing of retailers have increased to attract more customers Increased costs are reducing the profit margin An efficient supply chain On time delivery and low inventory levels are the key to an efficient supply chain. These two factors are to be achieved through: High visibility Low operating costs (warehousing, etc.) Efficient Inventory management Fast decision making High customer satisfaction and service Minor data errors Without an efficient supply chain, it is difficult to survive in this region Slide 17

18 Camelot Company Profile Middle East CAMELOT is an international consultancy with leading expertise in the value business strategy, process management & information management Integrated Management, Process and IT Competence Operations Management Classic Strategic strategic consultancy Consultancy CAMELOT MC Process and IT Consultancy Subcontractor Sourcing & Procurement Strategy & Operations Strategy Implementation Business Transformation & Organization Operations & Supply Chain Management Logistics & Transportation Performance and Growth Management Information Management & Systems Sales & Customer Service Strategy Process & Organization IM / Systems CAMELOT Management Consultants Founded 1996 in Germany and the United States with the integrated competences approach: Strategy to results. Today with huge expertise in chemicals, pharmaceuticals and consumer goods being our core industries Core competencies around Value Chain Consulting with 200+ consultants in Central Europe based in our offices Cologne, Mannheim, Munich, Basel and Zurich Lead consultants worked in industry management functions and stand for feasible and quality results Operations / Supply Chain Management thought and innovation partnerships with leading universities CAMELOT International Group Global coverage with international teams of 400 consultants in Europe and consultants worldwide Camelot is a well known member of the GPCA and regional HQ is in Dubai Strong local Partner: located in Riyadh Slide 18

19 Dubai, April 16 th, Value Chain Excellence. Strategy to Results.