Qatar Diplomatic Crisis and Its Impact on Tokyo Freight Services W.L.L.

Transcription

1 Volume 119 No , ISSN: (on-line version) url: ijpam.eu Qatar Diplomatic Crisis and Its Impact on Tokyo Freight Services W.L.L. 1 Athira Suresh, 2 M.S. Parvathy, 3 A. Arya and 4 J.S. Venugopal 1 Department of Commerce and Management, Amrita School of Arts and Sciences, Amrita Vishwa Vidyapeetham, Amritapuri. athira.harisri@gmail.com 2 Department of Commerce and Management, Amrita School of Arts and Sciences, Amrita Vishwa Vidyapeetham, Amritapuri. parvathysreepadam15@gmail.com 3 Department of Commerce and Management, Amrita School of Arts and Sciences, Amrita Vishwa Vidyapeetham, Amritapuri. aryapillai3013@gmail.com 4 Department of Commerce and Management, Amrita School of Arts and Sciences, Amrita Vishwa Vidyapeetham, Amritapuri. venugopaljs@am.amrita.edu Abstract A complete change in the political scenario of the state of Qatar came up when certain major GCC countries including Saudi Arabia, UAE (United Arab Emirates), Egypt and Bahrain announced the withdrawal of its diplomatic ties with Qatar over the allegation that Qatar was sponsoring terrorism and further imposed immediate bans on their ports for accepting Qatari flagged vessels. As a result, the logistics companies were forced to vary their trade patterns to facilitate trade in and out of Qatar. This research examines the impact of these geographical barriers on the functioning of a freight shipment company, based in the state of Qatar, through an analytical study of the major challenges, solutions and recovery 2595

2 undergone by them. The findings also show the growth perspective of the company with respect to its import, export, clearance and transportations, which indicates the sustaining capacity of the company against its dynamic business scenario. Key Words: Freight shipment, political scenario, lease container loading, clearance. 2596

3 1. Introduction Today s business environment is tremendously aggressive. Even the best laid plans by the logistics and shipping company can be severely affectedby unforeseen external factors out of which political conditions are a major contributor. Some of these political factors include the protectionism and taxation policy which involves the restriction of trade between countries by imposing tax on imported products. Wars and conflicts among countries can also have severe impact on international freight shipment which could interrupt trade deals with global partners. Chances of bottlenecks in ports, trade union activism, corruption, civil and other disturbances in different countries can be clubbed as the political factors which can hinder the efficient functioning of international freight business. (MAI BPO) An increase in the demand for goods and services ultimately increased the world s dependency on efficient and effective movement of freight. Freight shipment involves transportation of commodities and merchandise goods and cargo. The global economy provides opportunity for new businessmen to enter into international market. Freight shipment is most widely used method of international transportation forboth business and personal use. Freight shipments are mainly conducted in four ways: Road freight, sea freight, air freight, rail freight. Road freight is the most common method of transporting in which small and medium size goods are to be carried within the one country. In some cases, the roadways help to transport the commodities within two countries. Road transport is not suitable for heavy size goods. The single customs document provides a seamless movement of goods even across various states and countries. Ocean freight is mostly accepted and economically viable mode of transport. It is an economical option for business for transporting their goods overseas. Ocean freight is less expensive than any other mode of transport.this shipment can afford any size of freight. It used quite extensively for the carriage of bulk commodities and is highly attracted by international business. The down side of the shipment is that it may take longer time period for transportation. Air freight helps in transporting the goods quickly and is a critical mode of transport. It provides markets and supply chain that demand speed. Air freight has provided many benefits to the multinational companies for transporting the carriages on time. This freight is mostly useful for perishable goods such as foods and pharmaceuticals for shorter transit time. But the air freight is the most expensive form of shipment. Rail freight is a convenient way to transport larger goods. 2597

4 Longer journeys tend to be a less expensive by rail. The global movement of goods through the ocean, roadways and airways constitute to be the major elements in freight transport system. The Qatar diplomatic crisis began in June 2017, when several GCC countries including Saudi Arabia, United Arab Emirates, Bahrain and Egypt abruptly withdrew their diplomatic ties with Qatar. Qatar, a sovereign country located in western Asia, with its sole land border with Saudi Arabia and Persian Gulf. The major modes of shipment adopted by the country are through marine and air, with its major transshipment ports located in Dubai (Jebel Ali). A complete change in this scenario came up from 5 th June 2017 when certain major GCC countries including Saudi Arabia, UAE (United Arab Emirates), Egypt and Bahrain announced the withdrawal of its diplomatic ties with Qatar over the allegation that Qatar was sponsoring terrorism. A variety of actions were taken notifying the Saudi and UAE ports and shipping agents to reject the receipts of Qatari vessels or shipments. Tokyo Freight Services W.L.L., commenced in 1992 is one of the leading freight forwarding and shipping agents in the Middle East and Far East. The diplomatic crisis had severe influence on the functioning of the company. The border of Saudi and Qatar (AbuSamra Border) is automatically closed, which leads some trucks which carries loaded cargo is not allowed to enter from Saudi to Doha or Doha to Saudi which leads to closure of Tokyo freights office in Abu samra Saudi border and around twenty five clearing agents were removed on that area and total shipment by road terminated. Tokyo Freight is handling custom clearance of FCL/cargo all over the world which is through transshipment port via Dubai. After the blockade all the services has been closed via sea. For the first three months the clearing job is very less as no volume of containers arriving or leaving from Doha port. The number of containers came less average to 600 to 800 containers and the number of exports containers came less to 20 to 35 containers. As the company was handling LCL cargo to all over the world through Dubai port, which was stopped after the blockade. The volume of the containers arriving to Doha port has become less. The agents from Dubai have totally stopped their import services. The number of containers become less average of 17 containers or 669cbm per month. The total cargo terminated during this time. 2. Literature Review a)the survey conducted by Vilnius Gediminas Technical university regarding the logistical situations in Lithuania in (2007 and 2016) discovered that the most relevant problems in logistics were in relation to its cost policies logistics competency personnel development requirements and other changes during 10yrs. 2598

5 The positive trends of logistics transportation was also identified during the survey. b)kalgora,.b and Christian,TM(2016)The financial and economic crisis, its impacts on shipment industry states the overnight suppression in the growth of containership market due to the well-known global and financial crisis of c)hyun Jung NAM, Yo Han AN(2017)mentions in the article the default risk suffered by the shipping and logistics industry of Korea since the Global financial crisis in 2008.It was identified that the industry s financial performance was worse than other industries d)cullinane and Wang(2007)evaluated the economic reforms in China since the introduction of the open door policy focusing on the seaport policy and government reforms. It was also identified that the Chinese national reforms and transfer of government powers had severe impact on governance of sea port. e)devlin and Yee (2005) show the studies structuring the quality and efficiency of logistics on the proper functioning of international service trade. f) J.Allen, M Browne, T. Cherrett (2012), Investigating relationship between road freight transport, facility location, logistic management and urban reform, identified the influence of geographical, spatial and land use factor on urban freight activities g) Johan Woxencies (2012), Directness as a key performance indicator for freight transport chain, studied the effects and causes of freight transport detours which included physical, political, commercial, operational and non- planned cause of detours h) Hong and Ng (2010), commented on the navigation around piracy prone water such as Gulf of Aden as the major example for detour through banned links due to the absence of political control. Research Gap: Apart from the past literature review, this work further identifies that the political conditions often shape the external environment which also have severe impacts on the function of freight shipments of a company. 3. Methodology The research study was conducted with primary and secondary data. Information regarding the measures adopted by the company was obtained through telephonic interview method while the analytical data was clubbed from the company reports. 2599

6 4. Analysis and Interpretations 1. Imports LCL (Lease Container Loading) MONTHS CONTAINERS VOLUME January February March April May June July August September October November December TOTAL FCL (Full Container Loading) MONTHS CONTAINERS VOLUME (cbm) January February March April May June July August September October November December TOTAL

7 Clearance report MONT TOTAL H SUBMITTED DECLARATIO N TOTAL NUMBER OF CONTAINER S LCL & VEHIC LES Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec TOTA L TOTAL NUMBER OF VEHICLES CLEARED & TRANSPOR TED The above given table shows that the container imports with regards to the LCL and FCL had a drastic fall in June 2017 compared to the previous year. The clearance report showcases the overall decline in the total number of containers. However subsequent months showed an increased in the volume and number of containers. 2. Profits and losses MONTHS RIYALS (in million) January 0.6 February 0.4 March 0.7 April 0.5 May 0.3 June -0.8(loss) July -0.3(loss) August 2.15 September 2.32 October 2.16 November 2.69 December 3.28 TOTAL

8 The company witnessed a loss of nearly 1.1 million losses during the months of June and July as an impact of the diplomatic crisis. The efficient functioning of the company against the drastic changes however enabled it to overcome its loss and to earn a profit of 14 million by the end of the year. 3. Exports and expenditures The container shipment via land and sea were severely affected. The company s office in Saudi borders (Abu Sambra) was closed as a result of which the total shipment by road was terminated. As an impact of the crisis the overall exports of containers per month was decreased to containers. The usual company expenditure amounted to approximately 3.4 million. However with an increase in the employment and further developmental activities of the company, they expect a 4-10% increase in the expenditure by Findings With the political affairs contributing to be major portions of the business environment and as its impact have drastic influence on the company s functioning, following measures were undertaken by the company to withstand the dynamic scenario andto regain its supply chain to Qatar and delayed shipments: Started new office in Oman Sohar port to move the consignments held at the Jebalali port, Dubai. Due to this, the consignments from the Jebalali port moved to Sohar port and from Oman they were transmitted to New Doha port. Closure of land borders led to an increase in the quantity of shipments coming via sea and air. More employees were allocated to these departments. Brought more trailers for faster transportation of cargoes and freights to customers and to the company s warehouse. Reemployment of employees in land freight departments to the clearance department. Recovery and Growth: From July 2017 onwards the volume of clearance via sea increased. The number of clearance agents increased and the employees from the land freight section were assisting the sea fright section. Import of The number of containers increased from 1700 to Some emergency steps also taken which includes the use of other trans-shipment ports such as Slalah port in Oman and Nhava Sheeva Port in India. The company also started direct import of goods from Turkey, Iran and India. The number of containers for export also increased up to containers. Sea cargo increased as a result of decline in land freight transportation. There was also an increase in the number of container from 29 to 48 containers or 1500 to 2500 cbm. The company started accepting direct 2602

9 import from ports of Oman, India and Colombo port in Sri Lanka and direct cargo all over the world such as China and Spain. There was also a visible increase in the clearance of the containments via air. The air cargo increased to 160% as compared to June 2016 due to the imposing of direct cargo from all over the world to Doha. 6. Conclusion Even though the company had to face severe challenges as an impact of the diplomatic crisis, timely and rightful decisions and measures supported them to withstand these hindrances in the organizational operations. A post and pre analysis of the company shows a visible growth which assisted them to become the number 1 LCL consolidators in Qatar. Several opportunities were identified by the company over the challenges. The closure of the land borders provided an opportunity for other countries including India, Pakistan, china, Sri Lanka, Bangladesh, whose nationals populates the gulf labor force. The idea of restructuring its trade relations by diversifying the source of commodities and creating alternative port alliances benefited these countries to improve their shipment lines with the country by providing for the country s requirements in order to sustain its needs. The company also focused on increasing their exports in order to promote domestic production. The company efficiently adapted to its dynamic business environment with a positive approach to the challenges and coordinated service of its employees. With help of the timely strategic decisions taken by the company management, the company managed to boost its profit by utilizing all resources and boosting market situations and thus brought the company to the apex position. References [1] BazarasDarins, RamunasPatsaitis. (2017).Logistics Situations in Lithuania Changes during 10 years. Procedia Engineering. [2] NAM Jung Hyun, Yo Han AN. (2017).Default Risk and Firm Value of Shipping & Logistics Firms in Korea. The Asian Journal of Shipping and Logistics. [3] B Kalgora. Christian, T.M. (2016). The Financial and Economic crisis, its impacts on the shipping Industry, Lessons to Learn: The container ships Market Analysis. Open Journal Of Social Sciences. [4] Cullians, Wang. (2007).Port goverance in China. Research in Transportation Economic. [5] Allen.J,M Browne, T.Chrette. (2012).Investigating relationships between road freight transport, freight location, logistics management and urban form. Journal of Transport Geography. 2603

10 [6] J.Devlin, Yee. P. (2005).Trade logistics in developing countries: the case of the Middle East and North Africa, The World Economy. [7] Woxenius Johan. (2012).Directness as a key performance indicator for freight transport chains. Research in Transportation Economics. [8] Hong, N, &Ng. (2010).The international legal instruments in addressing piracy and maritime terrorism: a critical review. Research in transport economics. 2604

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