Helen Gaskell investigates the opportunities and weaknesses in Bahrains logistics sector
With its strategic location in the GCC, Bahrain is often considered as the gateway to the GCC region with easy access to the UAE, Saudi Arabia, Kuwait and Qatar. According to statistics from the Central Informatics Organization (CIO), the logistics sector contributed 7% to the Bahrains real Gross Domestic Product (GDP) in 2014 and in May this year the Kingdoms Economic Development Board (EDB) identified logistics as one of the five core sectors where it expects both growth and investments.
Speaking as the guest of honour at the second quarterly Falak Power Lunch 2016, EDB chief executive Khalid Al Rumaihi said that for any development to achieve success, infrastructure is not always an issue but logistics holds the key.
The Bahrain Logistics Board, for example, has been set up to reduce waiting time at the causeway through quicker processes. The causeway sees an ongoing traffic of both goods and people, and if these processes can be tackled smoothly and effectively it will have positive impact on business.
Having already attracted a number of leading international companies to establish headquarters in Bahrain including DHL, Aramex, KWE and Agility, Bahrain has access to the neighbouring GCC economies as well as ranking 18th freest economy in the world, and first in the MENA region, therefore often being described as somewhere easy to do business.
The website Heritage.org states: Despite the challenging external and internal environments, Bahrain has maintained economic resilience and continues to be a regional leader in economic freedom. It remains a financial hub for dynamic economic activity, with high levels of trade and investment bolstered by a competitive and efficient regulatory environment.
In terms of infrastructure projects and roads, EDB reports that in recent years, Bahrain has witnessed the development and implementation of a number of large-scale projects, and has pledged $694 million in ongoing investment to such projects, which included the reconstruction of the Sitra crossing which was completed in 2011, and the Shaikh Khalifa Bin Salman Highway, adjacent to Mina Salman intersection project.
In August 2014, the Minister of Works, H.E. Engineer Essam bin Abdullah Khalaf, announced the Ministrys plans to study the construction of a fourth causeway to link Muharraq and Manama.
Vivek Nambiar, SVP Agility Saudi Arabia, Bahrain and Oman comments: Bahrain is extremely business friendly and its strategic location to the biggest consumer market of the GCC (Saudi Arabia) and proximity to the rest of the gulf, augurs well to be as ideal of a logistics hub in the Gulf as any. Agility is committed to this market and our growing presence with our established clientele here is proof to the viability of Bahrain as a logistics gateway to the GCC and region.
The infrastructure in Bahrain is as good if not better than any other GCC state. The government has an open ear to the business community and is extremely committed to ensuring a high standard of infrastructure.
There are a number of significant infrastructure facilities in the Kingdom, including the $360m Khalifa Bin Salman Port, offering services to shipping lines, freight-forwarders and beneficial cargo owners which facilitates growth for the local economy and enhances supply chains for the Northern Gulf. It is only 13km from Bahrain International Airport and is linked to Saudi Arabia by the King Fahd Causeway and Feeder vessels.
Bahrain also has its International Airport (BIA) which hosts 27 commercial airlines and 11 cargo airlines, and provides sophisticated facilities for logistics operators and according to the EDB, 322,734 tonnes of cargo can be carried a year and considerable expansion is in progress.
Salman Industrial City includes several key infrastructure projects in the Hidd area such as the Bahrain International Investment Park (BIIP), Bahrain Investment Wharf, and the Hidd industrial Zone. BIIP is host to a number of international companies, including Mondelez International, MTQ Corporation, Abahsain Fiberglass, RMA Middle East, BASF, JBF and Siemens.
And finally, Bahrain Logistics Zone (BLZ), the Middle Easts first multi-model logistics hub to focus on re-export and value-adding logistics and the only dedicated Customs Bonded Area focused on value-added logistics in Bahrain. The Bahrain Logistics Zone has gained the attention of international logistics players and signed various leasing contracts. It was chosen by Almoayed Wilhelmsen, Aramex, Cargo Partners, Bandar Al-Khaleej-Bitu-Mena, and also Schmidt Middle East Logistics, who in December 2014 announced that building had begun on a $30 million dry bulk logistics hub in Bahrain. The facility will ultimately store around 30,000 metric tonnes of materials.
Speaking about the Bahrain Logistics Zone H.E. Kamal Bin Ahmed Mohammed, Minister of Transportation and Telecommunications, Kingdom of Bahrain says: Significant improvements in customs procedures are on the way.
The fact that the average number of trucks waiting to cross the border to Saudi Arabia at any given time has already decreased considerably is a visible result of these measures. Furthermore, restrictions on foreign ownership have been substantially reduced or completely abolished for various sectors. We have decided on a review of the airport master plan to ensure it corresponds to freight companies needs. Agreements have also been reached with regard to the development of Khalifa bin Salman Port, including dredging measures required to attract vessels and to fully capture the ports potential.
The primary objective is to establish Bahrain as the distribution hub in the Gulf region. This requires attractive connections for all modes of transport. Improving feeder services and connecting Bahrain to the planned GCC railway will be milestones towards that objective. Taken together, we create the right environment for high value logistics beyond mere transport, such as warehousing and value added services.
With much focus on expansion and positive developments, what could go wrong? According to Nambiar from Agility, talent is a challenge in the region.
The lack of a sufficient local talent pool and interest from the younger generation to pursue a career in logistics and transportation remains a key concern. While we are compliant with the Nationalisation goals, this remains a challenge to sustain given the above scenario. The other key challenge for the industry in Bahrain in general is the turnaround times on the causeway which is the arterial link for goods in or out of the island. In recent months through collaborative efforts with the EDB and Customs authorities, we have assisted in influencing change and improvement of process for the better of the community.
Heritage.org shares a similar view, stating on the site: The kingdoms challenging transition to greater openness, diversification, and modernisation continues. Firmly institutionalising the rule of law by ensuring judicial independence and transparency will be critical to stamping out lingering corruption and safeguarding stability. Youth unemployment remains a major long-term economic challenge.
Dr. John Webb, Head of School, School of Logistics and Maritime Studies, Bahrain Polytechnic is trying to tackle this issue, he says: A Curriculum Advisory Committee (CAC) has been set up to consult with the local transport and logistics industry to ensure that the qualifications being delivered are relevant to employers in Bahrain. The use of case-studies contextualized to the region provides a strong research underpinning to the program. School staff regularly invites professionals to the Polytechnic as guest-lecturers to expose students to professional life. Before graduation, all students are required to complete a 10 week industry placement.
In the past four years two of our students have won international awards through the Chartered Institute of Logistics and Transport for the quality of their student placements and projects.
BMI Research, a Fitch Group company that analyses and forecast different countries, industries and financial markets believes however, that the major risk to the countrys supply chains is its reliance on one area. The Bahrain Logistics Risks Report it says: This is an issue in the transport sector, with the country reliant on road networks to meet its logistics demand, and in the utilities sector, with Bahrains power sector dominated by one fuel: gas. The heavy dependence on one mode of transport or one fuel type heightens risk, as should this area be disrupted operations would be negatively impacted as there are no diversification options.
The report continues to say that while the utilities sector is well developed, and the countrys oil and gas wealth decreasing the cost of both power and fuel, Bahrain has one of the most well-developed telecommunications sectors and highest water consumptions in the region. However, risks exist in this regard too: Bahrains electricity sector is over-reliant on one source, creating vulnerability to energy shortages in the future. A move to decrease fuel subsidies is another risk to the countrys supply chain; thus, a move would increase the cost of transport and specifically hit the countrys road haulage operators, which its logistics sector is so reliant on.
Plans to develop a railway network in the kingdom are in the pipeline, but it was recently announced that the detailed studies of Bahrain railway network wont be finalised until in the first quarter of 2017 meaning that investors in Bahrain must remain reliant on the countrys road network to meet their logistics needs for now.
Nambiar adds: We remain optimistic on our outlook and continue to invest in developing our capacity and capabilities. Though the market overall has been sluggish, we have clarity on where and how we compete and we are supported by the range of services that has allowed us to continue growing. Bahrain is very business friendly and continues to attract business and industry houses, and remains as attractive as possible in the Arabian Gulf.