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The ImageHeavy weightSTEEL manufacturers in North Asiaand South Asia are burning theirfurnaces double-time to raise outputs– all for China, whose massive$586-billion stimulus package fuelledthe growth of its manufacturingsector. The world’s most populousnation is hungry for steel, owingto massive infrastructure projectsand increasing demand from carmanufacturers.Not that it is slow in steel production,as China is already the world’s biggeststeel manufacturer; it’s just that itsgrowing appetite for steel is difficultto contain, with the current demandof 470 million tonnes set to increaseas the stimulus package kicks in. Lastyear, China produced more steel thanthe combined outputs of the nextfour largest-producing countries – US,Russia, India and Japan.With its expanding trade muscleand growing economy, China isshowing the world its economic might.Growth in China may be showingthe way to global economic recovery,sparking confidence in the logisticsindustry, particularly the shippingsector. Global bulk freight rates haveincreased while ship owners havebegun receiving new deliveries andpaying for their new vessels.October 2009 The supply chain and logistics link 3

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Contents44Vol I, No 8 | october 200903 THE IMAGEHeavy weight06 THE NEWSROOM• Dear Reader• Our Cover07 NOTES & QUOTES• Buy the Book: Nerve of steel• Quotes: On Dubai Custom’s Mirsal 2,China’s dependence upon exports to theUS, the new system of international cooperationand ship financing08 INSIDE SCLG• Dubai Customs vows info campaign onMirsal 2• SCLG membership14 NEWS & VIEWSUAE to invest up to $8bn for countrywiderailway network; Logistics giants helpdisaster-stricken countries; Emirates,Etihad vow cuts in harmful emissions;Airbus hails strong Mideast on aircraftpurchases; Mideast good for aircraftfinancing; Momentum completes thirddepot in Sharjah; SAS Scandinavian picksDubai for regional hub; Al Tayer brings inCrate & Barrel; EPS offers personalisedservice to pharma sector; Pirate attacksin Africa seen to escalate20 ROUNDUPDP World not involved in talks to sellstake; MHI wants expansion of Jap’sbusinesses in ME; Gulftainer sponsorsPort Club; Exterran boosts presenceat DAFZ; EDC, Intertek facilitate exportrequirements21 OVERSEAS• FedEx raises shipping rates; Damcounveils new Asia-Baltic LCL service;CEVA wins Baker Hughes contract;Krones awards Panalipina distributioncontact; Daikin, Dentressangle in 3-yr8UK warehousing deal; Port of Rotterdam’sEuromax terminal added to Kombiverkehrnetwork; Canada’s Magna Intl wants toappease VW on Opel• British firm eyes more investment inIndian ports• Airlines call on govts to do their share inclimate-change issues• UK freight group calls on politicians tohelp rebuild economy• Delamode expands logistics operationsin Romania• American Airlines sells air miles toCitigroup28 THE INDUSTRYVulnerable ventures: SMEs are exposed tovarious risks in supplychain32 FUND FOLIO• Balancing act: Global trade balance keyto economic recovery• G-20 morphs into global economic coordinator38 FOCUS• Glowing furnace: China’s growth pulls thesteel industry fromslump• Bracing for demand: Egypt’s steelindustry stumbles, UAEexpands capacity14 5944 COVER STORY• Fit to survive: Mideast’s offshore supportvessel market may have the best outlook• Shape up: Ship owners need to unite onclimate change50 THE GULF / MENA Region• Leading the pack: A strong recovery isseen for the UAE by early-2010• Looking up: Turkey may expect betterthings from yearend56 OPINIONSupply chain metrics: A strategicperspective58 FACES & PHASES• Al-Futtaim is top Hino distributor• Perfumes y Diseno sets up shop at DAFZ• Integra wins exporter award from DubaiChamber• Barloworld Logistics boosts Europeanpresence• Dubai World appoints Bin Thaniah,Mariam Sharaf• Arabtec’s Kamal talks about beinghumane at Capital Club61 CALENDARReed Exhibitions launches SITL Dubai• SCLG-endorsed events62 SIDE VIEWLearning mediationOctober 2009 The supply chain and logistics link 5

The NewsroomThe official publication ofthe Supply Chain and Logistics GroupPublisherDominic De SousaTHE MOUNTING pressure on Middle East shipowners to join the international climate-changedebate on how to curb carbon emissions and thegrowing optimism in the region on the resurgenceof the shipping industry are among the issuesbeing tackled by the The Link in its October issue.Being one of the environmentally sound meansof transportation, the role of shipping in helpingprotect the environment took centre stage at arecent international conference in Dubai.Increased shipbuilding and car sales and massivespending on infrastructure, meanwhile, havepropelled demand for steel in the Gulf, with theG-20 pushes for international co-operationUAE seeing to triple steel production over the nextfive years. Contrast this with Egypt, whose weakdemand and growing inventories have forced manyof its factories to close shop. This is discussed in the “Focus” section, led by a story on NorthAsia, where China’s economic growth fuelled by the $586-billion stimulus package pulled thesteel industry from slump.In the “Industry” section, the managing director of Dublin-based Alba Logistics writes aboutthe many risks in supply chain being faced by the small- and medium-sized enterprises. Thisset of challenges, says Patrick Daly, comes with the “relative weakness” that these vulnerableventures occupy within supply chains. SMEs are suppliers to giant companies, such as retailchains, which also become their competitors.The “Calendar” section lists the International Week of Transport & Logistics, or SITL Dubai, forits main event. Slated on November 3-5 at the Dubai International Convention & ExhibitionCentre, SITL Dubai will gather local, regional and international logistics providers and freightcompanies, including DP World and TNT, to showcase their products and services during theinaugural event.The magazine’s financial section, “Fund Folio”, argues that global trade balance is the keyto economic recovery. Citing a report from Standard Chartered Bank, it says the MiddleEast must use the current infra boom to empower its citizens to spend more – which willcontinue the growth of its local economy. You may also enjoy the stories in the magazine’sother departments like the personality-oriented “Faces & Phases”, “The Gulf” and “MENARegion”, “The Image”, “Opinion”, “Side View” and “News & Views”.All the best,Managing Director& Associate PublisherFrédéric Pailléfred@cpi-industry.comEditorial Director& Associate PublisherB Surendarsurendar@cpi-industry.comEditorJose Francojose@cpi-industry.comCommercial DirectorNaz Hassannaz@cpidubai.comDesignRey Delanterey@cpidubai.comJulia Gubanovajulia@cpi-industry.comHead of Digital ServicesNadeem Hoodnadeem@cpidubai.comWebmasterTroy Maagma | troy@cpidubai.comDatabase/Subscriptions ManagerPurwanti Srirejekipurwanti@cpi-industry.comADVERTISING ENQUIRIESNaz Hassan +971 50 9964945naz@cpidubai.comPublished byHead OfficePO Box 13700Dubai, UAETel: +971 4 375-6830Fax: +971 4 434-1906www.cpi-industry.comPrinted byExcel Printing PressOur coverLOCAL, regional andinternational shipowners are optimisticon the resurgence ofthe shipping industryin the Middle East,following a decline inbusinessCopyright © 2009 CPI IndustryAll rights reservedWhile the publishers have madeevery effort to ensure the accuracyof all information in this magazine,they will not be held responsiblefor any errors therein.6The supply chain and logistics link October 2009

Notes & Quotesbuy the bookNerve of steelNOW you have the chanceto know the myriad twistsand turns of the battlebetween the self-made Indianindustrialist, Lakshmi Mittal,and Guy Dolle, chairman andCEO of Luxembourg-basedArcelor, over Mittal Steel’sbid to buy Arcelor. Cold steel:Lakshmi Mittal and the multibillion-dollarbattle for aglobal empire, written by TimBouquet and Byron Ousey,gives the reader an account ofthe takeover in the style of athriller.Mittal, the world’s eighthrichest person and thewealthiest in the UK witha personal wealth of $19.3billion, went head-to-headwith Dolle in an epic corporatebattle, in 2006, for worlddomination over the steelindustry. Now chairman andCEO of ArcelorMittal, the newcompany after the merger,Mittal won the battle with hischarming persuasion againstEurope’s establishment, whichclosed ranks to derail theKolkata-born raider.The five-month hostiletakeover by Mittal Steel,the world’s largest steelmanufacturer and founded byMittal, and the world’s largeststeel producer by turnover,Arcelor, involved billions ofdollars of finance and businessand political manoeuvringsand questions of patriotism,among other things. Interestedparties in Arcelor, a pan-European company, includethe governments of Spain,Luxembourg and Belgium.Published in April, the368-page paperback offers aninsider’s account of a numberof people making millions,and with each camp in thebattle trying to drag otherglobal steel companies intothe fray, thinking they couldbecome allies. At the end ofthe day, reason and businessinterests prevail. The LondonbasedThe Economist putsit succinctly: “As this bookshows, money and businesslogic prevailed in the end overpolitics and protection.”Asia cannot boom if the West isnot booming. China is still heavilydependent upon exports to theUS. If the US is in trouble – aswe think it is – then this will limitChina’s potential. And in turn, it puts renewedpressure on China and other emerging economiesto switch to domestically driven growth. – StandardChartered Bank, in a report titled “Global Imbalances”The old system of international economicco-operation is over. The new system, as oftoday, has begun. – British Prime Minister GordonBrown, speaking at the closing ceremonies of the G-20Summit, in Pittsburgh, last month, where developedcountries and emerging economies constitutedthemselves as the global economic policy co-ordinators toensure economic recovery“(T)he region was the onlypart of the world to seepassenger traffic growth duringthe current downturn. This isclearly a positive sign at a timewhen the industry is generallycontracting. – John Matthews,managing director for the Middle East and Africa at BoeingCapital Corporation, speaking during Boeing’s fifth annualFinanciers and Investors Conference, in Dubai, this monthMost of our clients are longtermtenants and, recently,we have seen an increase inthe number of internationalcompanies increasing theiroffice space in anticipationof a rebound after a severeglobal economic downturn. – Ibrahim Ahli, directorof marketing at the Dubai Airport Free Zone, as Perfumes yDiseno, a European perfume and cosmetics company, setup shop at DAFZAdvice is very difficult to give – who am I to giveit? But if I was to comment from my personalexperience, it would be: I think you need to beas humane as possible. I always feel that if Idon’t give, I’m not doing anything. The mostsatisfying thing in my daily life is helpingpeople – not just financially, but in their career.– Riad Kamal, CEO of Arabtec Holding,when asked what advice he could giveto business professionals to becomemore successful, in a forum organisedby Capital ClubOctober 2009 The supply chain and logistics link 7

Inside SCLGAl Tamimi speaking before SCLG membersDubai Customs vows infocampaign on Mirsal 2Omar Al QarawiDUBAI Customs officials have vowed toconduct another session to train supplychain and logistics professionals on theuse of Mirsal 2, an e-clearance system itdeveloped which saves time and moneyfor both government and clients.Abdulla Al Tamimi, a senior officerfor client relations development atDubai Customs, announced this ina recent networking session withmembers of the Supply Chain andLogistics Group (SCLG).“We’re preparing a re-trainingsession for logistics companies,” he said.“I don’t think human error will be highin Mirsal 2 because [most users] havealready used Mirsal 1 before.”He was also reacting to concernsput across by logistics professionalson the efficiency of the system, and tothe complaints and queries that DubaiCustoms has received online.Complaints concerning the servicesof Dubai Customs will be acted uponin seven working days, he said, whilethose that need the attention of othergovernment agencies will be forwardedto the offices concerned.Omar Al Qarawi, an officer forclient relations development at DubaiCustoms, said his office’s client servicecharter is available in many otherlanguages to suit client needs.Mirsal 2, which in April DubaiCustoms said was being used for 25%of customs services, reduces the timeneeded for each transaction to aboutfive minutes. Before December 2007,customers had to wait for 48 hours forcustoms clearance.The Mirsal e-clearance system hasbeen one of various projects beingpushed and adopted by the Dubaigovernment for an easier movementof cargoes, and to attract moreinvestments.8The supply chain and logistics link October 2009

Inside SCLGSCLG realignsleadership effortsThe Supply Chain and Logistics Group (SCLG) has realigned itsleadership efforts, in order to attain its goals better and serve itsmembers more efficiently.Working closely with the Dubai Chamber of Commerce andIndustry, the group’s roster of members has been growing, withnew companies, individuals and students coming from variousparts of the world.A non-profit organisation, SCLG is proud to be able to helpconnect Dubai to the world by working towards the furtherdevelopment of the supply-chain and logistics industry.SCLG membershipCorporate MembershipMembership with the Supply Chainand Logistics Group (SCLG) is opento all organisations. Corporatemembers may nominate four to sixmembers, depending on the categoryof membership – basic, privileged orpremier – they opt for. All nominatedmembers shall be allowed to vote atthe Annual General Meeting (AGM)and at any Extraordinary GeneralMeetings. The Board of Directors(BoD) and Executive Committee (EC)members shall decide the annualfees for membership.Individual MembershipThis is open to any individual fromany part of the world. The annualsubscription shall be set from timeto-timeas deemed necessary by theBoD and EC members.Student MembershipOnly full-time students can be SCLGmembers, but this membershipdoes not convey voting rights to theindividual. The annual fee shall beset from time-to-time as deemednecessary by the BoD and ECmembers.Global thought andIndustry leadersShashi ShekharEmirates SkyCargoMishal Hamed KanooKanoo GroupMohammed SharafDP WorldFadi GhandourAramexMichael ProffittSaadi Al RaisRHS LogisticsClifford CuttelleSanjay NaikEmirates GroupDavid WildHamdi OsmanFedExJinendra SanchetiTNT ExpressEssa Al SalehAgility10The supply chain and logistics link October 2009

Orderyour copy of theClimate ControlGuide & Directory2010 now!Free todecision makers,$30 otherwiseLooking for HVACR/District cooling suppliers?The reference of the HVACR industry in the Middle EastUS$30For more details, contact Tel: +971 4 3756833 • Fax: +971 4 4341906Mobile: +971 50 7147204 www.cpi-industry.comwww.thegreenhouse.aewww.ccube.org

Inside SCLGWhy be an SCLG MemberA membership allows accessto educational training,seminars and networkingevenings at concessional andrebated rates. It also providesrebates on subscriptionof membership to SCLG’sinternational partners. Amembership card will soon beissued to members allowingthem to receive discountoffers from leading retailersand service providers.There is also a certificatethat distinguishes a memberas a professionally focusedindividual or enterprisecommitted to the causeof the supply chain andlogistics industry.For more details, pleasevisit our website on www.sclgme.org. If you wish tovolunteer to help us fostera better supply chain andlogistics community, pleasecontact Kanchan Vora onadmin@sclgme.org.The SCLG Middle East isa non-profit organisationworking under the umbrellaof the Dubai Chamber ofCommerce and Industryto promote the causeof the supply chain andlogistics industry. It bringsopportunities for personaland professional developmentthrough networkingprospects among likemindedprofessionals andcorporations on a global basis.The SCLG was foundedwith the help of seniormanagement professionalsrepresenting a wide spectrumof industries in the supplychain. It strives to bring thebest in education, seminarsand interaction throughpartnerships and allianceswith a variety of similarbodies across the globe.The group’s officialmagazine, The Supply Chainand Logistics Link, addressesthe needs of the supplychain professionals in theMiddle East. It presentsRegionalDevelopmentCommitteeDr Kanak MadrechaDubai WorldDr Ernst SchmiedEast Europe CIS, RussiaDr Dermot CareyUK & IrelandUsha Kaul SarafUniversity of DubaiRavi KashyapSteinweg SharafMark MillarAsia PacificDirk Van DoornDHLJohnson SoansExtron ElectronicsJassim SaifEmirates SkyCargoPradeep MelakandyPan-Pacific LogisticsDave TootillSouthern AfricaDanie VermeulenAustralia and New Zealandnews, views, developmentsand information drawn fromindustry experts. The firstof its kind in the region,The Link aspires to be abenchmark for the industrycommunity, offering valuableinsights and information tothe target market.The magazine’s articlesand news features coverinnovative supply chainpractices, emergingtechnologies, e-commerceBoard ofDirectorsand market information fromindustry leaders.SCLG’S MissionThe group aims to providean accessible and dynamicnetworking environment thatfacilitates the achievementsof its members in acommunity that encouragesprofessional developmentand diversity in thelogistics and supply chainmanagement.Tayssir AwadaFedExRoy A PattersonUTiGeoff WheatleySSI Schaefer(Middle East)Dr Satish MaparaGlobeApex ManagementConsultantsMadhav KurupHellmann WorldwideLogisticsArup GuptaSharaf LogisticsNigel MooreLogistics RecruitmentSanjay BaburCosmos InsuranceConsultativeCommitteeDr Dermot CareyUK & IrelandReinhard WindDr Cedwyn FernandesUniversity ofMiddlesexMichael StockdaleSCLG’S ObjectivesTo promote the cause of thesupply chain and logisticsindustry and raise thestandards of all industries onend-to-end supply chainTo protect the interests ofmember organisations andsupport government bodiesin the formulation of policyframeworks for logisticsorganisationsTo encourage the freeexchange of knowledge12The supply chain and logistics link October 2009

Board ofInternationalAdvisorsDr Dermot CareyIrelandDr Ernst SchmiedEast Europe CIS, RussiaAbre PienaarSouth AfricaKhalid BichouMoroccoMark MillarAsia PacificPaul LimSingaporeAlan WallerUKTim SensenigUSADr Craig VoortmanSouth AfricaTom FreeseUSAProf Donald ThamCanadaVineet AgarwalIndiaMahendra AgarwalSingaporeDr Harry AngelopulosGreeceGerald MukyengaUgandaAndrew SalibaMaltaDominique DeFrobervilleMauritiusDr Ganesh NatrajanIndiaDr Jörg RissiekGermanyEdward SweeneyIrelandIgro HribarSloveniaExecutiveCommitteeMembersSoma SekharSCLG PresidentTrackITMelvin VergheseTransworld GroupJohn HalpinBrian ForbesDHL ExpressMohsen Al AwadhiDubai Logistics CitySebastian ThomasAndreas DurXvise LogisticsFerenc KovácsHungaryDmitriy BulaenkoUkraineStephen CrossATMSHemant BarkePrudence InsuranceBrokersNaveen Arunand skills relating to supplychain and logistics among itsmembersTo provide members theopportunity to networkamong one another and tohelp facilitate an efficientcommercial environmentTo undertake studies andgather information, statisticaldata and official documentsrelevant to the industryTo establish and maintaingood relations with similarinternational organisationsand other professional groups,and to provide members theopportunity to network withlike-minded organisationsTo conduct training courses,seminars, conferences andstudies relating to logistics andsupply chain and to establisha library and research centreto expand the knowledge baseinformation on the industryTo promote the cause ofeducation in supply chainand logistics among theUAE nationals, therebycontributing to build a cadreof professionals and highlyskilledcitizens to take upcurrent and future challengesin the industry.October 2009 The supply chain and logistics link 13

News & ViewsUAE to invest up to $8bn incountrywide railway networkTHE UAE will invest between $6.81billion and $8.2 billion (Dh25-30bn)for a 1,100-kilometre countrywidenetwork of railways over a period offive to seven years, with emphasison freight services and the linkingof the country with its neighboursin the Gulf.“These are preliminaryestimates,” said Hussain JasemAl Nowais, the newly appointedchairman of Etihad (Union) RailwaysCompany. Quoted in a Gulf Newsarticle, he added: “The first tenderswill be floated by the first quarterof 2010.”He stressed that the railwayline will connect Al Ghweifat, onthe border with Saudi Arabia, toFujairah and another from AbuDhabi to Al Ain – all the way to theborder with Oman.“There will be increasedeconomic co-operation which willhelp our industries,” he said. “Wenow need to build the organisation,recruit experts with proven trackrecords, and also train our youngnationals for this strategic andimportant project.”The UAE government madea decision in July to establisha railway company with acapitalisation of $272.4 million.Under a federal decree, the Etihad(Union) Railways Company willown, lease, rent, buy and sell trainsof various types, and will also beresponsible for their maintenance.Decree No 75 of 2009 created theboard of directors of the companywhich will serve for a three-yearterm and is renewable. MohammadMattar Al Tayer will be deputychairman of the board while themembers include Mohammad SaeedAl Danhani, Falah Mohammad AlAhbabi, Dr Abdullah Bel Haif AlNuaimi, Dr Nasser Saif Al Mansouri,Abdullah Mohammad Al Zari,Mohammad Hareb Sultan Al Yousufand Jamal Majid bin Theniyah.An aerial view of DubaiLogistics giants help disaster-stricken countriesTHREE of the biggest names in globallogistics volunteered to help save livesin disaster-stricken areas in SoutheastAsia by joining international efforts toexpedite food supplies to the PhilippinesThe UN Headquarters, in New York Cityand Indonesia.Agility, TNT and UPS collaborated withthe UN World Food Programme (WFP),which has provided assistance to aboutone million people affected by floodsin the Philippines and to the victims ofearthquake in Padang, Indonesia.“By helping WFP ensure food suppliesreach people affected by these naturaldisasters as quickly as possible, thesecompanies are playing a lead role inhelping save lives,” said Peter French,deputy regional director for Asia at WFP.“The expertise and resources they areproviding come at a critical time and areinvaluable.”The three logistics firms are partof the initiative called the LogisticsEmergency Teams (LETs), whichcapitalises on the companies’ ongoingoperations nearest to the sites wherehumanitarian response is needed.“The LETs initiative is an importantcomponent of our overall emergencyresponse strategy, and its generouscontribution to these two naturaldisasters has been a significant boost toour response,” French said.WFP said its response to the victims’needs has been quicker and moreeffective, owing to the firms’ localresources, such warehouse managementand transport capabilities.“The three companies involved in thisinitiative are proving that the privatesector really can make a significantcontribution during a crisis,” Frenchstressed. “It’s heartening to see them soreadily involved and compassionate intheir response.”WFP is UN’s lead agency for logisticsco-ordination for all humanitarianagencies, such as interfacing withgovernments and military forces tomaximise distribution of aid and servicesin disaster-stricken areas worldwide.14The supply chain and logistics link October 2009

Emirates, Etihad vow cuts in harmful emissionsAWARE that investing in ecofriendlyaircraft fleets is a goodway to save the environment forfuture generation, Emirates Airlineand Etihad Airways are supportingcalls by an international aviationorganisation for a significant cut incarbon dioxide emissions.“We recognise the contributionof the aviation industry to globalgreenhouse gas emissions, and arecommitted to being part of theindustry solution,” said an EmiratesAirline spokesperson.The International AirTransport Association (IATA) hasproposed to the UN SecretaryGeneral’s Summit on ClimateChange, in New York City, intime for the December climatechangetalks, in Copenhagen,that the global aviation industrycut carbon dioxide emissions bysignificant levels.“Our targets are tough,” saidGiovanni Bisignani, IATA’s directorgeneraland CEO. “Air transport isthe first industry to commit tocarbon-neutral growth at the globallevel. And we have done it with anaggressive timeline of 2020.”But he stressed that the worldleaders must retain a globalsectoral approach to reducingaviation emissions under theleadership of the International CivilAviation Organisation, workingin co-operation with the sectorthrough IATA.It said the industry will make a1.5% average annual improvementin fuel efficiency per year up to2020, strive to stabilise emissionswith carbon-neutral growth from2020 and impose a 50% cut inemissions by 2050 compared withthe 2005 levels.“[W]e are committed toimproving our own emissionsthrough a combination ofinitiatives, including fuel efficiencymeasures and the adoption of newtechnologies, such as bio-fuels,”said an Etihad spokesperson. “Weare supportive of market-basedmechanisms, such as emissionstrading, as long as they aredeveloped in such a way as to beglobally applied, sector specific andcreate no competitive distortion.”The global air transport spearheads commitment to carbonneutralgrowthAirbus hails strong Mideast on aircraft purchasesFOR the European aircraftmanufacturing giant Airbus,strong economies in the MiddleEast are equivalent to less ordercancellations and strongerfinance facilities, even duringthis global economic downturn.“We expect to finish theyear hopefully above 50,” saidHabib Fekih, president ofAirbus Middle East, in a GulfNews article.Airbus has around 27 firmcommitments for this year, andAirbus says 30% of orders for A380 comes from the Middle Eastletters of intent that shouldtake sales to at least 40. Lastyear, it sold 230 commercialjets in the Middle East.“If by the end of this yearwe achieve what we haveplanned, I think we will bemore than happy because thesituation was so difficult – thebanks were really in trouble,”he said.But the airline industryin the Middle East hasenjoyed good backing for newpurchases, owing to its successshown through passengertrafficgrowth.“The airlines in the regionare bankable,” Fekih said.“They are trusted by thefinancial system. Banks canbet on them, can take the riskto finance them, and this isvery good for business.”He cited, for instance, theSharjah-based budget carrierAir Arabia, which, he said, has“become the reference. Andeverybody is now running tofinance Air Arabia.”The Middle East accountsfor almost a third of theAirbus’ global order book.While the region representsonly up to five per centof Airbus’ world fleet, itrepresents 30% of the aircraftmanufacturer’s overall sales.“You can see the importanceof this market in our business,”Fekih stressed, adding that30% of orders for A380 comesfrom the Middle East. He saidAirbus gets almost 65% ofthe Middle East market forcommercial jet.October 2009 The supply chain and logistics link 15

News & ViewsMideast good for aircraft financingA BOEING official has toldbankers in the Middle Eastof good opportunities in theregion for investors interestedin aircraft financing, as itstressed that global resourceswould be adequate to support2009 deliveries.John Matthews, managingdirector for the Middle Eastand Africa at Boeing CapitalCorporation, noted that theair travel market in theregion is stronger comparedwith that of any other regionacross the globe.“(T)he region was theonly part of the world to seepassenger traffic growth duringthe current downturn,” he toldBoeing’s fifth annual Financiersand Investors Conference, heldin Dubai this month. “This isclearly a positive sign at a timewhen the industry is generallycontracting.”Matthews said marketconditions have remainedmanageable, as the predictedfinancing gap of tens ofbillions of dollars, to be filledby manufacturers, did notmaterialise.Boeing said it would needto provide only $1 billion incustomer financing this year,and it currently expects to bebelow that figure.“There are greatopportunities available forpeople with capital who arewilling to invest,” he said.“Financiers willing to takeadvantage of the short-termmarket dislocations, with aview toward creating a longtermaircraft portfolio, shouldfind themselves generouslyrewarded, as aircraft remain agreat asset.”The US aircraftmanufacturer’s 2009 outlookvalued the Middle East marketat $300 billion for 1,710commercial jets over the next20 years.Airlines in the Middle East,meanwhile, have benefitedfrom the export creditresources of the Export-Import(Ex-Im) Bank in the US. Thebank has financed significantamount of US exports tothe Middle East and Africa,including many Boeingdeliveries.“We are pleased to seethe continued growth inthese regions, and happy toassist Boeing in its effortsto expand the markets foraircraft financing,” saidRobert Morin, vice-presidentof Transportation Division atEx-Im Bank.Boeing Capital, the customerfinancing unit of Boeing,promotes the Middle East asan increasingly importantsource for aircraft financing,through its annual financiers’conference and ongoingregional financiers’ roundtablemeetings.Matthews said that aircraftare ideal for Shariah-compliantfinancing, as this investmenthas to be asset-based. He addedthat the company is lookinginto whether aircraft financingcan be included in the sukuk(Islamic bond) market.Boeing Capital createsfinancing solutions forcustomers purchasing thecompany’s commercialairplane and defence products.Managing a $6.3-billionportfolio of about 330 aircraft,it works closely with thirdpartyfinancing resourcesthat provide almost all of thefinancing needed by Boeingcustomers.Momentum completes third depot in SharjahMOMENTUM Logistics, a subsidiary ofinternational port management company,Gulftainer, has completed building its newWorkers repairing a containerJohn Matthewscontainer wash-and-repair depot in Sharjah,bringing to three the number of its fullyequippedfacilities in that UAE emirate.The new facility at the Sharjah InlandContainer Depot (SICD) offers a full-rangeof services, including container inspections,CSC plate renewals, structural repairs of alltypes of containers and a full set of servicesfor reefer containers.“This … will enable us to continue tooffer the highest quality of service toour customers, as we strive to take thestandard of service and communication tothe highest possible levels,” said MatthewDerrick, general manager of Momentum.He stressed that Momentum, a thirdpartylogistics provider, is “delighted” tohave launched the new facility, to join itstwo operating depots at the KhorfakkanContainer Terminal and at Port Khalid.The container repair division ofMomentum operates a 24-hours-a-day,seven-days-a-week repair service for steel,aluminium, open-top containers, flatracks and reefers transiting Sharjah andKhorfakkan terminals and, now, SICD. Itcombines competitive rates with rapidturnaround time.Other services include refurbishment,steam cleaning, washing and pre-tripinspections of reefer. The division alsomaintains and re-supplies ships’ reefer kits.16The supply chain and logistics link October 2009

SAS Scandinavian picksDubai as regional hubSAS Scandinavian Airlines will use Dubaias its regional hub as part of expansion inthe Middle East and South Asia, said thecompany’s newly appointed manager forthe UAE, Albert Henschel.“Dubai is a good and increasingmarket, and the region is becoming moreand more important for us,” he said ina Gulf News article. “I arrived here withmy eyes wide open. This is a tremendousplace, and I am convinced that thiscountry (UAE) will continue to grow.”The combined international airlineof Denmark, Sweden and Norway, SASScandinavian will increase the number ofits current Dubai flights, which are threetimes a week from its main European hubin Copenhagen during the northern wintermonths from October to March.Henschel said the airline is keen tostretch the flight timetable into summer thesummer months, as he noted the presenceof a big Nordic business community inDubai. The airline also is eyeing individualleisure travellers and tourist groups, andwill co-operate with Dnata’s travel bookingservice for this endeavour.“Scandinavian businesses are wellAn aerial view of Dubai showing the Sheikh Zayed Road and the Internet Cityrepresented here,” he stressed. Popularbrands like Ericsson, Volvo and Ikea haveoperations here.The airline has no major competitorfor flights between Dubai and theAl Tayer brings in Crate & BarrelAL Tayer Group will opentwo Crate & Barrel stores inDubai early next year, the firstoutlets of the popular namefor home furnishing outsideNorth America. The franchiseAt the Dubai Creek: The emirate presents growth opportunity forpopular international brandsoutlets will be located at theMall of the Emirates and atCity Centre Mirdif.“Dubai representsan excellent growthopportunity and launchingpad to extend our brandinternationally,” said BarbaraTurf, chief executive of Crate& Barrel. “It is a robustretail market with manysimilarities to the US retail[environment] – state-of-theartshopping malls, highprofileglobal brands and adiverse and sophisticatedcustomer base.”Analysts say the creditcrisis makes many people stayat home, and spend on newScandinavian cities. The Nordic travellersuse stopover flights of Lufthansa, whichflies to 14 destinations in the Middle East,via Frankfurt, or KLM via Amsterdam toreach their home countries.furniture and appliances onmoney saved from lower rents.“We are pleased to bringthe Crate & Barrel franchise tothe region, and are confidentthat the brand’s uniqueproduct-mix, coupled withour regional retail expertise,will create a successful valueproposition for customers,”said Khalid Al Tayer, chiefoperating officer of Al TayerGroup.Founded in 1962, Crate& Barrel now operates 177stores across North America.It is known for its exclusivefurniture and innovativekitchenware and tabletops andhome accessories.October 2009 The supply chain and logistics link 17

News & ViewsEPS offers personalised service to pharma sectorEHRHARDT + Partners Solutions(EPS) has begun offeringindividual logistics consultingand warehouse planning forthe pharmaceutical industry inthe Middle East.The growing demandfor individual logistics andwarehouse solutions withinthe pharmaceutical industry isbeing analysed by an EPS team,which will soon publish itsfindings.Besides relevant marketdata, the study will showmethods and techniqueson how to improve theoverview of each product in awarehouse. EPS said this wouldend the “era” of medicinesexpiring even before theirdistribution.Another area beingconsidered by the EPSteam is how to implementtechnological advances into ahuge market having outdatedsystems and old practices.“That is a big challenge,but I believe we can do it,”said Ramon Thoms, regionalmanager of EPS, referringmainly to family-ownedbusinesses. “We can help themin keeping their knowledgegained through the years, andassimilate it with existing andfuture technologies.”He said EPS wants to changethe logistics model scenarioin the Middle East, in order tocapture financial assumptionsfor its pharmaceuticalcustomers. An important stepin warehouse planning, hestressed, is to decide on thezones into which a warehouseshould be divided. Consider,for instance, the zones fordifferent product groups andtemperature regions, amongother things.The pharma industry in the Middle East has a growing demand forcustomised warehousing solutionsAs a logistics solutionsspecialist, EPS providescustomised warehousedesign and planning;consultancy knowledge basedon the subject of hardwareand software, warehouseequipment, material flow andprocess design and warehouserestructuring.It also offers an accountableIT and warehouse technicalintegration and detailedlocation analysis, in order todetermine and select optimalwarehouse sites.Pirate attacks in Africa seen to escalatePIRATE attacks on the eastcoast of Africa are seen toescalate following the endof southwestern monsoons,which occurred from Junethrough September.The warning was issuedby an international shippingexpert to vessel operators,who had in the past sufferedsignificant losses due to therash of piracy off the coast ofSomalia.“When weather conditionsimprove, we expect anincrease in activity overand above what we havewitnessed in the recentpast,” said William Tobin,an underwriter at theShipowners’ Protection Ltd, aLondon-based not-for-profitmutual organisation.Tobin, who spoke at MiddleEast Workboats exhibitionand conference early thismonth, stressed that thelawlessness in Somalia, acountry located in the Hornof Africa, is deteriorating.“The first priority ofinsurers is always thesafety of the crew,” he said.“The vessel and any onboard, whilst of economicimportance, will take secondpriority but, usually, releasenegotiations combine bothcrew and the vessel and itscargo.”He added that ship ownersmust have adequate marineinsurance cover, particularlyon hull and machinery,war and protection andindemnity.The demand for insurancecovering kidnap-for-ransomhas risen dramatically, hesaid. He explained that coveris generally bought on avoyage basis, with a singlesum insured and a fixed infull premium. Insurers workwith “response consultants”,he stressed, who in turn willwork with the ship owner innegotiating with the pirates.“The use of private armedguards is also a contentiousissue, and we have seen thedemand for private securityincrease significantly thisyear, particularly for vesselstransiting the Gulf of Aden,”he said. There is also anincrease of pirate activity onthe Gulf of Guinea.The traditional areas forpiracy like the Straits ofMalacca between Malaysiaand Indonesia, as pointed outby regional security experts,remain active but not as badas those on the east and westcoasts of Africa.Somali pirates have carriedout more than 130 timesattacks this year, seizing 28ships, although more than30 naval vessels from 16countries operate off theSomali coast to deter piracy.This made the cost ofkidnap and ransom insurancefor the Gulf of Aden to risetenfold since the start of lastyear, said Seatrade, a Londonbasedshipping organisationspecialising in publication,events and managementtraining.The area is a chokepointfor the 25,000 ships that carry20% of global trade throughthe Suez Canal every year.18The supply chain and logistics link October 2009

www.ccube.orgwww.thegreenhouse.aeA fresh approach to analysingthe industrial sector in the Middle EastTel: +971 4 3756830 • Fax: +971 4 4341906www.cpi-industry.com

WANTING to facilitateexport requirementsbetter, the Dubai ExportDevelopment Corporation(EDC) has signed a dealwith Intertek Group (Dubai),a provider of productcertification, inspection andlaboratory testing servicesto firms in the UAE. “Weare delighted to be workingclosely with EDC to provideits members with the servicesthey require to enter foreignmarkets and assist them ingrowing their internationaltrade,” said David Gregory,vice-president of Intertek’sOverseasFROM January 4, FedEx willincrease shipping rates forits FedEx Express unit byan average of 5.9% for USdomestic and US exportservices. The increase will bepartially offset by adjustingthe fuel price at which thefuel surcharge begins, amove that can reduce fuelsurcharge by two percentagepoints. The company alsowill announce later this yearthe increase for rates andsurcharges for FedEx Groundand FedEx SmartPost.“FedEx puts the needsof its customers as toppriority as a provider ofmarket-leading expressshipping services,” said TMichael Glenn, executivevice-president of MarketDevelopment and CorporateCommunications at FedEx.“This pricing adjustmentwill enable FedEx to makekey investments, so we cancontinue to provide excellentcustomer service.”government services.Many countries haveissued mandatory legislationfor goods being imported,and Intertek is approved toissue export and productcertification to companiesexporting to varios countries.Intertek has a network ofover 1,000 laboratories andoffices, and over 24,000people in more than 100countries. It has issued morethan one million certificatesand test reports tocompanies wishing to exporttheir products to variouscountries.Engr Saed Al Al Awadi, CEO of EDC, and David Gregorycustomers to source directlyfrom any point in Asia tothe Baltics via Damco’s hubin Tanjung Pelepas, Malaysia.Companies sourcing inAsia and importing toEaster Europe used to do itthrough Gothenburg and StPetersburg.Damco’s network alsocovers Latvia, Lithuania,Belorussia, and Kaliningrad.Apart from the mega hubin Tanjung Pelepas, Damco’scustomers can sourcefrom multiple origins andconsolidate at Damco’s megahubsin Tanjung Pelepas,Kaohsiung, Jebel Ali, Panama,Singapore, Rotterdam andHong Kong.KRONES, a specialistbottling equipmentmanufacturer, hasawarded Panalpina thedistribution of spare partsfrom Europe into theAsia Pacific and GreaterChina area, resultingin several thousand airfreight shipments peryear. The project furtherincludes the constructionof a distribution warehousein Bangkok, Thailand.Krones plans, develops andmanufactures machinesand complete lines forthe fields of processtechnology, bottling,canning, packaging, andintralogistics. As Kronesmachines are tailor-madefor their customers, therange of spare parts isenormous, which results inhighly challenging supplychains.“We chose Panalpinaprimarily for theirexcellent uplift capabilities,professionalism, but also fortheir personal and honestapproach,” said ChristineRaab, head of logistics atKrones AG. “Furthermoretheir ability to identify waysand methods which willcreate value for our supplychain were convincing forKrones.”DAMCO has launched a newless-than-container-load(LCL) service from Asia tothe Baltic countries withweekly arrivals. This allowsSunset at the Baltic Sea: Damco’s new LCL service allows customers tosource goods directly from Asia to the BalticsVELOCITY ExpressCorporation, US-basedprovider of time-definiteregional delivery solutions,has reached an agreementwith a subsidiary of privateOctober 2009 The supply chain and logistics link 21

News & ViewsEmployees in a CEVA warehouseinvestment firm, ComVestInvestment Partners III.Under the agreement,ComVest will begin a processto become the company’snew majority owner andsignificantly deleveragethe company through anexchange of debt for equityin Velocity.Vincent A Wasik, Velocity’schairman and CEO, said: “Webelieve that this transactionwill reduce the burdenof our legacy liabilitiesby eliminating over $100million of debt and createa financially stronger, wellcapitalisedcompany. With astronger financial position,we will continue to be ableto pursue large businessdevelopment opportunities,and increase our investmentin technology and services tobenefit our customers.”CEVA Logistics has wona new contract with BakerHughes, a global oilfieldservice company, covering themanagement of all inboundand outbound freightlogistics within Australasia.Baker Hughes has operationsin over 90 countries andprovides advanced productsand services to helpcustomers drill, evaluate andproduce oil and gas wells.Under the contract, CEVAwill be responsible for themanagement of all customsclearance, de-stuffingof containers and looseproduct deliveries to BakerHughes’ operations. Thiswill be achieved throughCEVA’s network of multiuserwarehouse facilities inAustralia (Melbourne, Adelaide,Darwin and Brisbane) and alsoNew Zealand.DAIKIN UK has signeda further three-yearUK warehousing anddistribution contract withNorbert DentressangleUK. In addition to theoriginal Daikin UKoperation, Dentressanglehas entered into a newcontract with DaikinEurope. Based in Ostend,Belgium, Daikin Europeis the European sales andmanufacturing headquartersof Daikin Industries, whichmanufactures and suppliescommercial and industrialair-conditioning products.People sitting by the sea in Ostend, Belgium, where Daikin Europe is based22The supply chain and logistics link October 2009

Originally appointedby Daikin UK in 2005,Dentressangle provides 65,000square feet of storage spacewithin its shared-user facilityin Medway, Kent. Containerisedproduct is received fromDaikin’s manufacturingfacilities in Belgium, CzechRepublic and the Far East andis unloaded and palletised byDentressangle. The company isalso responsible for managingthe delivery of aftermarketparts to both engineers andcustomers, primarily throughparcel carrier.risen at the port. The totalnumber of 20-foot equivalentunits (TEUs) imported andexported through the Port ofLos Angeles in August was612,581 compared with the576,203 TEUs in July. In June,total container volume at theport was 551,679 TEUs.through with an investmentin Opel. Magna co-CEODonald Walker also told amedia briefing in Tokyo hewas unaware of any talksbetween the company andChina’s Geely Group over apartnership on Opel.In September, Generalforward with plans tobreak up their commercialdistribution contracts. Thewarning comes amid therecent announcement fromBP that it intends to put allits in-house contracts outto the market for tendering.Moreover, Unite is concernedKOMBIVERKEHR, the Germanintermodal operator, hasadded the Port of Rotterdam’sEuromax terminal to itsintermodal network, inaddition to the RSC andMaasvlakte terminals. Theintegration of a new wagongroup into the existingshuttle trains runningbetween Duisburg andRotterdam will allow freightforwarders and transportcompanies to ship theircontainers to and from thispart of the ports directly andwithout any further loops.Kombiverkehr also saidcustomers can take advantageof almost all European trainservices run by Kombiverkehrfrom Duisburg, thanks to thegateway connections. Shipsof the Cosco, K-Line, YangMing and Hanjin Shippinglines put in at the Euromaxterminal. To allow it toserve the Euromax terminaleffectively, Kombiverkehr saidit is combining its two trainsshuttling daily betweenDuisburg and Rotterdam.THE TOTAL number ofcontainers shipped throughthe Port of Los Angeles inAugust increased by sixper cent, compared to July,the second consecutivemonth that volumes haveDonald WalkerAugust container volumes,which reflect a muted peakshipping season, are theport’s highest this calendaryear. By comparison, August2008 container volume was19% higher, mostly due to a2008 peak shipping seasonthat came prior to theeconomic meltdown that hitin September 2008. Total TEUvolume for the year to dayis 4,374,818, or 18.3% lowerthan a year ago.CANADIAN auto supplierMagna International said itplans to hold talks to appeaseVolkswagen, which hasthreatened to pull businessfrom Magna if it goesMotors agreed to sellcontrol of Opel to a groupled by Magna. Under thedeal, Magna and Russianpartner, Sberbank, willeach take a 27.5% stakewhile GM will retain 35%.Magna has started totalk with its customers toassure them it would keepits parts and finished carbusinesses separate after thetransaction, preventing thetechnology of its car-markingcustomers from beingtransferred to Opel.UNITE, the UK’s biggestunion, has warned ofindustrial action if retailersand oil companies pressthat BP’s move to endnational negotiations willbe soon followed by anotherfuel major, Esso, and withnews emerging that retailerSainsbury’s also intends tosplit its national contractand, instead, use a number ofsuppliers.There is increasingconcern among the unionthat there is a deliberatestrategy to end the directemployment of tankerdrivers across the sector, withthe aim of ending nationalbargaining on pay, terms andconditions. Unite believesthat this will lead to a ‘raceto-the-bottom’in pay andpensions provision across thepetroleum sector.October 2009 The supply chain and logistics link 23

News & ViewsBritish firm eyes moreinvestment in Indian portsNOTING that India’s freighttraffic exceeds capacity,3i Group, a London-basedprivate-equity investorhas expressed interests inmaking a third investment ina port in the world’s secondmostpopulous nation.“India is amazingly shorton port capacity,” said AnilAhuja, managing directorof 3i India and co-headof 3i Asia, both underthe 3i Group, which has a$1.2-billion infrastructurefund for India. He did notidentify the potential targets.Speaking to Bloomberg,he stressed: “The growth isquite steady and is almostpredictable. We’ve done twoports, and our experience inboth has been very good.”Freight traffic in Indiacould almost double to onebillion tonnes by March2012. The country’s PlanningCommission said about 95%of its global trade is routedby sea, and its ports require$20 billion in investmentsover the next five years.India, the third-biggesteconomy in Asia, also plansto spend $500 billion by2012 to build roads, portsand power supply.3i has placed acombined $211 millionin Krishnapatnam PortCompany, on India’s eastcoast, and in Mundra Port& Special Economic Zone,in the west, to tap capacity.It invested $50 millionin Mundra before it soldits shares to the public inNovember 2007.Bloomberg said Mundra,the biggest non-state-runcargo terminal in India,posted a revenue growth of46% in the year to March 31and a profit margin of 36%.“The potential of hugereturns is what is attractinginvestments in the portand infrastructure sector,”said DH Pai Panandiker,president of New Delhi-basedeconomic policy group, RPGFoundation. “Investors arelooking for opportunities thatUK freight group calls on politiciansto help rebuild economyAN OFFICIAL of a leadingtransport group in the UKhas called on politicians tohelp rebuild the economyand meet Britain’s climatechangeambitions byworking for investmentsin infrastructure, such asBritain needs a more efficient transport networkbuilding a more efficienttransport network.“Having a transportnetwork that’s fit for purposeis not an optional extra forany country looking to havea successful economy,” saidJames Hookham, directorSunset over Mumbai: India’s ports require $20 billion over the next fiveyearsof policy at the FreightTransport Association (FTA).Nothing that every industryrelies on transport, he saidcongestion impedes Britain’sability to compete andincreases carbon emissions.He added that FTA totake a more intelligentapproach to the issue bymaking full use of theexisting infrastructureand encouraging greaterinterchange between thedifferent modes.He also stressed thatmoving goods between roadand rail or rail and sea canbe challenging and costly, yetthese are areas where, withthe right political backingwill gain from the expectedturnaround in the tradenext year with the globaleconomic recovery.”The Indian PortsAssociation said India has 12major ports, which handled530.4 million tonnes in theyear ended March 31, or twoper cent higher from a yearearlier.and investment, Britain’strading position could bemuch improved.“We support the callsfrom politicians to put morefreight on rail, not least tofree up road capacity forthose businesses that haveno choice but to use them,”Hookham said.But he stressed thatpoliticians seem lessenthusiastic in supportingthe building of more railinterchanges or bringing downaccess charges that wouldboost rail access for freight.He remarked, “Britain’seconomic future needs themto put their might wheretheir mouths are.”24The supply chain and logistics link October 2009

Delamode expands logisticsoperations in RomaniaLOGISTICS and supply-chain operatorDelamode has expanded its logisticsoperations in Romania by extendingwarehouse facilities in Europolis Park,west of Bucharest.Delamode opened operationsthere in July for a major internationalretail chain in a 10,800-square-metrewarehouse, and has now extendedthis facility to 23,000 square metres,with storage capacity for over 32,000pallets.This development comes soon afterthe opening of a new 20,000-squaremetrewarehouse in Bacia for anothermajor retailer, Carrefour Romania,which commenced operationsin August. This facility handlestemperature-controlled and dry-foodmerchandise for stores in the westand centre of Romania.Delamode Romania now haslong-term contracts with five majorinternational retail chains coveringmulti-modal import containertransportation, inbound supplierconsolidation, storage, nationaldistribution and value-added servicesfor non-food, fast-moving consumergoods, temperature-controlledproducts across five temperaturebands and do-it-yourself products.The company also manageslogistics operations for a majorautomotive manufacturer in Romania,a contract that has now been runningsuccessfully for six years.“Our business focuses on providinghigh standard professional supplychainservices to a sector that hasbeen growing rapidly over recentyears,” said Delamode Romania CEODavid Goldsborough, who is confidentof further growth for the business,despite the general economicslowdown.“Despite the fact that manyretailers may now be slowing downor cancelling their plans for openingnew stores, we are able to deliversignificant value by providing themwith the possibility of finding furtherefficiencies and cost-savings withintheir business,” he stressed.He also said that all the retailershis company works with still have arelatively large amount of deliveriesdirectly to individual stores by theirsuppliers.The infrastructure and expertisethat Delamode provides enableretailers to centralise more ofdeliveries through the company’sfacilities, thus increasing theirAmerican Airlines sells air miles to CitigroupAMERICAN Airlines had sold forward itsair miles, a new loan facility and a saleand-leasebackcommitment to Citigroup,turning into $1 billion liquidity the1988 idea dreamt up by Sir Keith Millsin 1988.This, according to a Financial Times(FT) report, which noted on September22 that stock of American Airlinesrose by as much as 25% at one point.It added that investors can perhaps beforgiven their overreaction, consideringthat the airline turned a net profit onlytwice this decade.Miles programmes are so profitablethat airlines do not reveal theunderlying numbers, the FT report said.Qantas, for example, considered a partflotation of its frequent flyer businessin the dark months of last year. Eventhough markets have brightened, thatidea is now “indefinitely off”.American Airlines sold its air milesfor $1 billion, together with a newloan facility and a $1.6-billion saleand-leasebackcommitment. A sale andleaseback allows a company to raisemoney from the sale of assets, whichit continues to use. Part of the moneyraised is used to return capital toshareholders.High fuel costs and the recessionhave forced airlines everywhere to lookto their loyalty schemes as a potentialA view over Dambovita River, in Bucharest: Romaniaoffers good opportunity to logistics providerspurchasing power and reducing costs instores. This, in turn, enables them to lowerprices to the end consumer.source of funds. The high margins comefrom selling seats at or near their fullprice when they should go for next tonothing.Airlines yield-manage their jets,adjusting prices to meet demand, the FTsaid. This is the reason why it is hard toredeem miles on popular routes.With miles, airlines can sell emptyseats to their corporate loyalty partnersfor a higher price compared than whenprices are lowered until the last emptyseat is sold. As a seat is a sunk costonce the airline takes off, it technicallymakes sense to charge just one dollar ifit is still empty before the gangway iswithdrawn.October 2009 The supply chain and logistics link 25

News & ViewsAirlines call on govts to do theirshare in climate-change issuesTHE GLOBAL aviation industrycalls on governments to dotheir share in climate-changeissues, as it strives for a 1.5%average annual improvementin fuel efficiency per year upto 2020, stabilised emissionswith carbon-neutral growthfrom 2020 and a 50% cutin emissions by 2050 from2005.These are the proposalsfrom the industry presentedby the International AirTransport Association (IATA)to the UN Secretary General’sSummit on Climate Change,in New York City, in time forthe climate-change talks, inCopenhagen, in December.“Our targets are tough,”said Giovanni Bisignani,IATA’s director-general andCEO. “Air transport is thefirst industry to commit tocarbon-neutral growth atthe global level. And we havedone it with an aggressivetimeline of 2020.”He stressed that IATA’sfour-pillar strategy oftechnology investment,efficient infrastructure,effective operations andpositive economic measureswill make its vision a reality,and is already showingresults.The aviation sectoris united in calling onGiovanni BisignaniThe aviation industry imposes ‘tough targets’ on eco-friendly practicesworld leaders to retain aglobal sectoral approach toreducing aviation emissionsunder the leadership of theInternational Civil AviationOrganisation (ICAO), workingin co-operation with thesector through IATA.“Climate change is a globalproblem,” said GiovanniBisignani, IATA’s directorgeneral and CEO. “Aviationis a global industry. Andwe need a global approachfor this industrial sector ifwe are to deal with climatechange effectively.”Bisignani said thatmechanisms designed forground-based polluters willnot work effectively foraviation, which can emitcarbon dioxide across bordersand over the high-seas evenon a single flight.“Already, unco-ordinatednational and regionalschemes are creating apatchwork of punitive taxesthat fill government coffers,but do little or nothing tomanage aviation’s emissionseffectively,” he added.The Kyoto Protocol, hestressed, directed states toaddress aviation throughICAO. “Its global standardsand co-operation withindustry have made airtransport the safest formof travel,” Bisignani said. “Aglobal sectoral approach foraviation can leverage thissame leadership to deliverresults for aviation and theenvironment.”He said aviation’semissions are expected tofall seven per cent in 2009– five per cent of which as aresult of the recession andtwo per cent directly relatedto the strategy.“IATA’s ‘Green Teams’ havesaved 34 million tonnesof carbon dioxide throughoperational efficiencies since2005,” he stressed. “Our workon improving infrastructure,including shortening airroutes, has saved a similaramount of carbon dioxidesince 2004.”But he stressed thatIATA’s success dependsupon governments doingtheir share, such asimplementing more effectiveair-traffic management. Theintroduction of NextGen airtrafficmanagement in theUS and the Single EuropeanSky in Europe, for instance,has the potential to save 41million tonnnes of carbondioxide annually.Bisignani remarked,“Governments must alsocreate the legal and fiscalframework to support thedevelopment of sustainablebiofuels for aviation.”26The supply chain and logistics link October 2009

Gitex 2008Oracle to shine at GitexBESIDES organising the networkingsession with Dubai Customs thismonth (see the preceding story), theSupply Chain and Logistics Group(SCLG) has also been busy preparingsupport activities for Gitex TechnologyWeek, wherein some of its members,especially Oracle, are taking part. MajorIT companies and local governmentorganisations are playing a biggerrole in this year’s 29th edition ofGitex, on October 18-22, at theDubai International Convention andExhibition Centre.Oracle, which has an integratedsolution that powers information-drivensupply chains, has promised live demosof its latest products during the event,and to have specialists at its ‘OracleWorld’ stand offering free consultancysessions. It plans to have 144 coretechnology and application sessions,with an aim to address questions onkey technologies, applications, solutionareas and future trends in IT. One of itsmost eagerly awaited products-launchis that of Fusion Middleware 11g, whichenhances IT efficiency.Oracle is putting up live demos for its latest products at Gitex 2009“We are delighted to participateagain in Gitex Technology Week,” saidHusam Dajani, senior vice-presidentof Oracle Middle East & Africa. “Thisis an excellent opportunity to showour commitment to the region andour market leadership. “This year,we will launch various cutting-edgeproducts into the region exclusivelyat Gitex.”October 2009 The supply chain and logistics link 27

The Industry{ Enterprises }VulnerableventuresSMEs are exposed to variousrisks in supply chainBy PATRICK DALYMANY issues are common to businesses of allsizes in the supply chain. For instance, allbusinesses need to ensure that productionand delivery of goods is efficient andenvironmentally sound. Additionally, allcompanies should continuously improve product, service andprocess design, and increase their ability to meet evolvingcustomer requirements. All businesses face similar challengesin relation to how they deal with multiple customersand suppliers, how they interact with the legislative andregulatory environment and how they manage the internaldynamics of departmental and individual communicationsand change.SME LIABILITYNonetheless, small- and medium-sized enterprises (SMEs)– that is, businesses with less than 500 employees – doface a special set of challenges by virtue of the position ofrelative weakness they occupy within supply chains. Thisvulnerability comes about by dint of the fact that SMEsfind themselves as suppliers to dominant lead companies,such as large retail chains and original equipmentmanufacturers (OEMs), or that they are in competitionwith such lead companies.Consequently, an issue of premier importance to SMEs isthe management of the relationships that they maintainwith these customers. These relationships are pivotal to theability of SMEs to maintain their supplier status. Althoughit is true that SMEs do share this supply chain vulnerability,the sector itself is diverse. SMEs provide a wide range ofproducts and services at many different points withinsupply chains or networks.To maintain their positions, SMEs must pay constantattention to their costs, responsiveness, quality andreliability. Let’s have a look at a selection of real-life< Businesses must ensure the efficient delivery of goodsOctober 2009 The supply chain and logistics link 29

The IndustrySMEs must pay constant attention to their core operationssupply chain issues being facedby some typical SMEs operationsat different points in various consumerproducts supply chains:SME 1: Media Products Retailer on MainStreetIt ensures consistency of standardsacross its own supplier base in termsof advanced shipping notices (ASNs),delivery documentation, barcodes andpackaging.The IPOs (individual parts ordering)data are collected at point of sale, butnot integrated into the warehouseorder picking systems or to the supplierre-ordering systems. Suppliers have novisibility of the IPOS data.SME 2: Logistics Service Provider toConsumer Products ManufacturerThe SMEs manufacturing customershave become very sophisticated inthe application of the concepts andpractices of lean production. Thesecustomers expect the logistics serviceprovider (LSP) to apply these tools andtechniques in their own business tointegrate ever more seamlessly with therequirements of the production plants.The LSP faces a challenge to articulatethe value of the services that itprovides, and develop a pricing modelthat supports this value proposition.An inability to do this runs the riskof customers appropriating the lion’sshare of the gains derived from theimprovements.SME 3: Speciality Food ManufacturerSupplying Multiple RetailersThere is constant erosion of marginsdue to high levels of competition inthe retail food market, and constantpressure from the large multipleretailers for cost down, as consumerspending goes through a period ofcontraction in the ongoing recession.After a long period of ad hoc growth,the company faces the challenge togenerate internally innovative changesin processes and ways of working todrive cost out, and to compensate forthe downward pressure on margins.CORE COMPETENCIESThere is an ever-increasing tendencyfor lead organisations, such a OEMsand large multiple retailers to focus oncore competencies internally, and todevelop external networks to providesupport activities and functions. Thispresents a golden opportunity for SMEsthat are aware of the trend, can identifythe opportunities, develop the requisitecapabilities and proactively put forwardcredible value propositions that formpart of these support networks.In some cases, lead companies areprepared to work with, support andeven invest in the development of thoseSMEs that demonstrate a disposition30The supply chain and logistics link October 2009

and willingness to upgrade theircapabilities. However, it is not a matterof just responding to the lead companyexigency in the short term, and thenhoping to be left to get on with thebusiness thereafter. Rather, SMEs mustcontinuously identify and develop newopportunities and improvements usingtheir own initiative.Taking this proactive approach todevelop independent capability willcontribute to insulating SMEs to adegree from having the benefits ofimprovements rapidly appropriatedby the lead players. SME owners andmanagers can present themselvesto their lead company customers aspeople with independent, high valueknowledge, skills and capabilities.ORGANISATIONAL CHALLENGESSMEs do, of course, still face a numberof organisational factors – someinternal and some external – that willconstitute serious challenges in thisendeavour. Some of the common intraorganisationalfactors that can makeit difficult for the type of companyto apply the approaches describedabove include a tendency among SMEstowards inward focus and complacency,and the old we-have-always-done-thingsthis-waymantra.Further areas of difficulty are ageneral lack of awareness of businesstrends – often the result of chronicfire-fighting which tends to tie downand exhaust managers and workersalike, leaving little time or energy forprofessional development and strategicthinking. Another common trait amongSMEs is a fear and insecurity in relationto formal expertise and technical knowhowthat can feed the self-fulfillingbelief that this type of stuff is notpractical in the real world.On the external front, some ofthe organisational challenges thatcan come into play are the ability tocommunicate effectively to negotiate,collaborate and challenge lead companymanagers. Many SMEs are familyowned,entrepreneurial businessesin which the owner-managers do nothave a great deal of technical trainingand education. This can put them at adisadvantage when interacting with thehighly technically trained managers atmany of the lead companies.Some large retailers and OEMs, inEntrepreneurs may enrich their business know-how through informal interaction with like-mindedindividualsresponse to the business pressures thatthey themselves are facing, have adopteda manner of interacting with supplier-SMEs that is often, rightly or wrongly,understood or interpreted as aggressiveand exploitative. This sometimes has theeffect of producing a resentful complianceon the part of the SME, accepting lowermargins as the trade-off for retainingthe business but often missing theopportunity to engage fully with the leadplayer to learn, develop and improve.INFORMAL NETWORKSOvercoming these types of limitationsrequires an opening up of the mind,and putting aside the time to takestock of what is happening in the widerbusiness world. SME entrepreneurscan usefully begin their journey togreater awareness through moreinformal interaction with like-mindedindividuals. These could be fromsimilar business backgrounds that havealready made positive progress, andwho can offer advice and references toappropriate sources of trusted expertiseand resource.There are many industry andofficial forums that can act as acatalyst for these exchanges, suchas trade organisations, professionalinstitutes, chambers of commerceand business circles, as well as thestate and regionally funded businesssupport services. In the current businessenvironment, anecdotal evidence wouldseem to indicate that may SMEs arereaching out more and more to look forinteraction and guidance.This is a product of the fact that thebusiness downturn has led to peoplehaving more time on their hands tothink about their business and considerthe future. This, in turn, is leading to agrowing realisation that things will bevery different in the supply chains ofthe future. Many SMEs now understandthat new approaches and creative waysof creating value for their customerswill have to be found to ensure successand survival.October 2009 The supply chain and logistics link 31

Fund Folio{ Trade }BalancingactGlobal trade balance key toeconomic recoveryCORRECTING global imbalances holds the key to solvingthe financial crisis, with the Middle East needing towean itself from an oil-dependent economy and toutilise the current infrastructure boom in empoweringits citizens to spend more and, thus, continue thegrowth of its local economy.So says the Standard Chartered Bank (SCB), in a report titled“Global imbalances”. It points out the West’s credit-propelled growth,Asia’s export-driven economy dependent on Western markets, theMiddle East’s current account surpluses and the East’s funnelingof its savings to the West as having combined to trigger the globaleconomic crisis.SCB says in the report, dated September 15, that ballooningtrade deficits in the West sent out loud warnings which the worldfailed to heed, making way for the unbalanced world economyto eventually come tumbling down. The US, Britain and someEuropean countries depended on credit to finance their lifestylesand accelerate their economic growth, adds Gerard Lyons, chiefeconomist and group head of Global Research, and the countryrisk economist in Global Research, Natalie Lechmanova, author ofthe report.PRUDENT SPENDERSChina and the Middle East, on the other hand, were more prudentspenders and they invested their savings in Western economies,which are the major market for their exports. When Westerndemand crashed because of the credit crunch, down went Chinaand the Middle East with the West.From 1992 to 2008, Asia and the Middle East posted highcurrent account balances of more than five per cent and< Ar Riyadh at sunset, in Saudi Arabia: The Middle East was a moreprudent spenderOctober 2009 The supply chain and logistics link 33

Fund FolioMiddle East, too, the legacy of the previous boom-bust in oil pricurrent account balance. Chart 1 illustrates the current account balance as a percentage of GDP for the different regionsperformance from the mid-1980s to mid-1990s – triggered a mof the world from 1992-2008. It shows that in recent years Asia and the Middle East had very large surplus savings, whilereversed. Finally, limited opportunity to invest money in thethe US ran a large deficit. Chart 2 shows the accumulated build-up of surplus savings / deficits between 2002 and 2008reason. So a multitude of reasons. The result was excess savin dollar terms. Asia (66% of which was China) saved the most, USD 2trn over the seven years. Together, Asia and thethe West, particularly in the US.Middle East exported around USD 3.3trn of surplus savings, while the US borrowed a staggering USD 3.9trn. Europe, inaggregate, did not borrow significant amounts, though some countries such as the UK and Spain borrowed withChart 1: Current account balanceCabandon. Several countries in Central and Eastern Europe also ran epic, double-digit current account deficits, financingas % of GDPUtheir asset and consumption bubbles.25Why did the East save and the West spend? This is in part cultural, and in part reflects local economic realities; for20instance, a need to provide health and education services. Then there is perhaps a greater desire for precautionarysavings due to a more unpredictable economic environment in many emerging 15 economies. The desire to save acrossAsia, it could be argued, has been driven by the private sector. Then, 10 as a result of the 1997-98 Asian crisis, it alsobecame a by-product of official policy. In Asia, following the 1997-98 crisis, when sudden foreign capital flight sent the5countries into a tailspin, there was an incentive to build capital buffers to prevent a similar meltdown in the future. In theMiddle East, too, the legacy of the previous boom-bust in oil prices – which 0 contributed to a decade of sluggish economicperformance from the mid-1980s to mid-1990s – triggered a motivation -5 to save for the day when the climb in oil pricesreversed. Finally, limited opportunity to invest money in the less-mature domestic financial markets was yet another-10reason. So a multitude of reasons. The result was excess savings in the East that were then spent financing deficits inthe West, particularly in the US.Chart 1: Current account balanceas % of GDP1992199419961998LATAM Africa EUChart 2: Accumulated surplus savings, 2002-08Current account balance (as % of GDP)USD bnSources: IMF, SCB Global Research2000200220042006US Asia ME2008Sources: IMF, SCB Global Research2520151050-5-10199219941996199820002002200420062008US Asia MELATAM Africa EU3,000However, there were differences in savings propensities amshows that 2,000 not all countries were savers. China has the world’s1,00007-1,000All rights reserved. Standard Chartered Bank 2009-2,000-3,000-4,000-5,000AsiaMECISEuro areaLATAMAfricaCEEUSAccumulated surplus savings, 2002-2008(USD bn)Sources: IMF, SCB Global ResearchSources: IMF, SCB Global ResearchThe Washington Monument at night: The US depended on credit to finance its lifestyleSources: IMF, SCB Global ResearchHowever, there were differences in savings propensities among the countries in Asia and the Middle East. Table 2economies have to work hand-in-handshows that not all countries were savers. China has the world’s largest to savings reach account, this economic having equilibriumaccumulated USD 1.4trnalmost 20%, respectively, as apercentage of GDP while theUS had a large deficit of -5% currentprices slumped. Thus, the UAE’s excesssavings for 2002 to 2008 was $153 7billion, Kuwait’s was $237 billion whilebecause the continued growth of each isdependent upon the growth of the other.“Asia cannot boom if the West is notaccount balance as a All percentage rights reserved. of Standard Saudi Chartered Arabia’s Bank excess 2009 savings was higher booming,” the SCB www.standardchartered.comreport says. “ChinaGDP. From 2002 to 2008, Asia registeredthe highest accumulated savings of$2 trillion (Dh7.35 trn) two-thirds ofwhich came from China. On the otherhand, the US registered an accumulateddeficit of almost $4 trillion.Asia and the Middle East combinedto export $3.3 trillion of surplus savingswhile the West, particularly the US,borrowed more than that amount from2002 to 2008.The Middle East, wary of thefluctuations in oil prices whichdampened its economic growth fromthe mid-1980s to the mid-1990s, wasmotivated to save for the time when oilthan the UAE’s and Kuwait’s combined at$517 billion.Since accumulated savings had tobe invested, Asian and Middle Easterncapital flowed to the West, mostly to theUS which is the world’s largest and mostliquid capital market. The availabilityof ready credit at low rates fuelled theconsumption and housing bubble. Twothirdsof Asian exports are destinedfor the West. When the Western bubbleburst, the financial crisis spread fromWest to East.For the world economy to recover,trade between East and West has tobe balanced. Advanced and developingis still heavily dependent upon exportsto the US. If the US is in trouble – as wethink it is – then this will limit China’spotential. And in turn, it puts renewedpressure on China and other emergingeconomies to switch to domesticallydriven growth.”CAPITAL FLOWThe global recession suppresses theWest’s growth as emerging economiescontinue to expand. Asia has becomethe market for almost half of GCCexports while China has surpassed theUS as Brazil’s biggest trading partner.The strengthening of the emerging34The supply chain and logistics link October 2009

tion 2:bal imbalances in detail (cont)Chart 3: Currency reserves accumulation4.54.0economies will reverse the flow ofcapital from East to West, and will3.5EM reserves exceed richfurther boost the East’s consumptionworld’s for the first timecapacity.3.0Consumer-driven growth should also2.5be the goal for the UAE as it diversifies2.01.51.0its oil-dependent economy. Governmentfinancedinfrastructure projects aimedat developing sustainable incomesources other than oil ensure greater0.5circulation of money in the country.0.0Even the banking sector pitches in asthe National Bank of Abu Dhabi (NBAD),in partnership with Germany’s DVBAdv anced economiesEmerging economiesBank, creates an investment fund forCurrency reserves accumulationthe commercial aviation sector. NBADSources: IMF, SCB Global ResearchSources: IMF, SCB Global Research aims to raise $1 billion to financethe purchase of aircraft and engineswhich it will then lease to selectedl flowscommercial airlines.umulated savings had to be invested. Chart 4 shows how capital flowed from emerging economies to theTheUS,bank is confident it can raiseo to the UK and (some countries in) the Euro area. What is staggering is the pace of increase of these the capital amount, considering that theer the last seven years.UAE is one of the richest countries interms of the number of millionaireChart 4: Net global capital flows from East to Westhouseholds. According to the latestGlobal Wealth report by Boston1,000Consulting Group, the UAE, togetherwith Switzerland, leads the global800 Inflowswealth ranking with 6.1% of its600households with assets worth at least400$1 million, excluding their primary200residences and consumables.0-200-400One year after the financial meltdown,the UAE economy remains strong, andits fund managers and analysts much-600Outflowswiser for the experience. “I think people-800really learnt how interconnected and-1,000global financial markets really are,”US UK Euro area EMsstated Mashreq Capital Chief ExecutiveAbdul Kadir Hussain. “What startedout as a specialised mortgage crisisin the US mushroomed to globalSources: IMF, SCB Global Research proportions due to the leverage in andthe interconnectivity of the financialmarkets.”was able to finance its current account and fiscal deficits with ease because it has the world’s largest and mostTariq Qaqish, fund manager of Al Malpital markets. This privilege encouraged its recklessness. Between 2000 and 2007, investment as a percentage Capital, stressed, “All previous analysisin the US remained at 19%, while the gross savings rate fell from 18% to 14% (Chart 5). Net personal on savings low correlation of equity marketss a percentage of disposable income, turned negative. During this time, it was not uncommon to hear across it argued the world failed. I was one of thepeople who believed that our regionis more resilient to what is happeningto the international world due to low9foreign ownership. Nevertheless, I didnot expect the strength of the crash.”“I always believed that the UAE, as awhole, will come out of this crisis,” saidMohammed Ali Yassin, Shua’a Securitieschief executive. “They have done itSunset at Huangpu River, Shanghai: China has surpassed the US as Brazil’s biggest trading partnerbefore and, under its wise leadership,they were able to do it again.”Net global capital flows USD bnForeign reserves (USD trn)199919992000200020012001200220022003200320042004200520052006200620072007October 2009 The supply chain and logistics link 35

Fund FolioG-20 morphs into global economic co-ordinatorLEADERS of the Group of20 nations constitutedthemselves as the globaleconomic policy co-ordinatorsto ensure that the worldeconomy keeps on track on the roadto recovery, and to adopt measuresto prevent a repeat of the financialmeltdown. “The old system ofinternational economic co-operation isover,” declared British Prime MinisterGordon Brown during the closing of thePittsburgh summit last month. “Thenew system, as of today, has begun.”The move supplanted the dominanceof the G-8, a smaller group of thewealthiest countries in the worldwhich shaped global economic policiesfor more than three decades. The G-20includes not only developed countriesbut emerging economies like China,Brazil and India, which have gainedprominence for their more active rolein world trade.The group also recognised the risinginfluence of emerging economies,particularly China, in global economicaffairs. It agreed to give China at leastfive percentage points of the quotaswhich determine voting shares andaccess to International Monetary Fundloans and allocated another threepercentage points of World Bankshares to other emerging nations.Realizing the depth and breadth ofthe world economy’s interconnectivity,the G-20 vowed to closely co-ordinateglobal economic policy to redresstrade imbalances, curb financialexcesses, regulate bank capitalisationand risk-taking, and open up eachcountry’s economic policy to peerreview with the help of the IMF.opposed by the US. The US move forstronger bank capital requirementswas adopted but the quality andquantity of capital was left fordiscussion in later meetings.Each country is encouraged tocraft objectives to address tradeimbalance and have these policiesopen for review by other nations andthe IMF, but there are no sanctionsagainst nations that fail to change andimprove their economic policies.While US President Barack Obamasucceeded in convincing Europeand China to refrain from pursuingpolicies that fuel global imbalance,China also called on all nations “tooppose and reject protectionism in allforms”, an undisguised jab at the USfor imposing stiff tariffs on Chinesetyre imports.German Chancellor Angela Merkelacknowledged the need for rebalancingthe global economy, but she stressedthe more urgent need for marketregulation, an issue on which theUS exhibits ambivalent sentiments.She remarked, “The world’s leadingcountries are making progress onfinancial reform, and should not shyaway from measures that might proveunpopular with the banking industrywhere the economic crisis began.”While conceding that the worstof the crisis might be over, theleaders stressed the importance ofmaintaining the stimulus programmesto support economic activity untilrecovery clearly has taken hold.The G-20 called on the World Bankto review its capital needs as well asthose of other regional developmentbanks by the first half of 2010. Itasked the World Bank to work withdonor agencies to create a multi-lateraltrust fund to increase agriculturalinvestment in poor countries. TheWorld Bank and other regionaldevelopment banks have increasedtheir lending to poor countries sincelast year to help these countriesweather the crisis.“The foundation of an economicrebound is not yet solid, with manyuncertainties remaining,” statedChinese President Hu Jintao. “A fulleconomic recovery will take a slowand tortuous process.”ECONOMIC ORDERThe general principles of the newglobal economic order may havebeen agreed upon, but the concretedetails and time table have yet to beworked out. For instance, the issue onplacing a specific cap on bank bonusesto restrain reckless risk-taking isbeing strongly pushed by France butThe G-20 nations do not want a repeat of the global financial meltdown36The supply chain and logistics link October 2009

AdvertisementHexomatrixx focuses onoperational excellence…Providing a reliable and sustainable supply chainand logistics solutions to the Petroleum andpetrochemical industries require understandingand experience of the long term nature of thebusiness. It requires a consistent and systematicbusiness model, with long standing business strategies.The success of such an organisation is not only withinthe functionality and quality of innovation, but mostimportantly within the accumulated knowledge and skill inprofessionalism. “Hexomatrixx remains uniquely positionedto take on the key challenges facing the downstream supplychain industry today,” says Raghu Menon, managing directorand chief operating officer of Hexomatrixx and MPCL Ventureoperations in the Middle East.Down Stream Supply chain ManagementHexomatrixx Supply Chain Solutions have developed customermanagement, distribution, order-to-cash, purchase-to-paysupplier management service models to support the supplychains from the point of order entryto cash receipt with optimalefficiency. Hexomatrixxextends its service capabilitiesto both B2B and B2Corganisations in all supplychain transactions relatedto petroleum and otherdownstream operations, bothonshore and offshore.Supply RelationshipManagement - SRMThe Hexomatrixx SRM is aunique system designed togive the business a competitiveedge and meet the organisationssupply chain needs to save time,cut costs and get the real benefitsfrom the long establishedindustry knowledge andexperience.IntegratedManagementSystemHexomatrixxhas developedan integratedmanagementsystem (IMS)that meetsthe Operational & Control Integration Management Systemstandards. Hexomatrixx IMS Systems are certified by theGerman TUV Nord to fulfil the requirements ofISO 9001-2008 compliant quality assurance systemISO 14001 – an International standard for environmentalmanagement systemsOHSAS 18001 - an international standard forOccupational Health and Safety Management Systemdesigned to establish an OH&S ManagementIndustrial & Marine distributionAs part of strengthening the retail supply chain networkHexomatrixx and its venture partner, Matrix Petrochemicaland Lubricants (MPCL), offers industrial/marine distributionand product life-cycle support to its global multinationalclients from its Middle East offices.Infrastructure & StorageHexomatrixx’s ventures expand the downstream warehousingand third-party logistics capabilities in the Middle East.Modern logistics centres and EHS-approved state-of-the-artwarehousesPurpose-built DC to suit the specific requirements of eachbrandsLocated in a free-trade zone environment to support crossborderbusinessIn-house 24/7 Customer & Supply management facilitiesTerminal ManagementBulk liquid storageIL BlendingQuality ControlInspectionSpreading its network through strategic alliances,Hexomatrixx has established a strong presence inIndia, offering trading and distribution services to thedownstream sector.Hexomatrixx – MPCL VentureTel: +971 6 5548433Fax : +971 6 5548435, +971 50 6300549P.O.Box 70194,Buhairah Corniche, SharjahUnited Arab EmiratesEmail: supplychain@hexomatrixx.comWeb: www.hexomatrixx.comOctober 2009 The supply chain and logistics link 37

Focus{ North Asia }GlowingfurnaceChina’s growth pulls thesteel industry from slumpUNDETERRED by a slump in exports, China’s economicgrowth is expected to strengthen for the rest of theyear. Lu Zhengwei, an economist at the IndustrialBank Company, in Shanghai, believes that Chinawill improve on its 7.9% second-quarter growth tonine per cent for the last quarter of the year. Most remarkable isthe growth in China’s manufacturing sector which, fuelled by the$586-billion stimulus package and record-setting growth in loans,expanded at the fastest pace in 17 months to September.August’s industrial output posted the highest increase in a year.Passenger car sales in September were 80% more from a year ago,with SAIC Motor Corporation, China’s largest carmaker, registeringa 90% sales growth for the same period. The phenomenal growthin the country’s vehicle market is spurred by government subsidiesand tax cuts. Consequently, China accelerated its steel productioncapacity to keep up with growing demand from car manufacturersand, to a greater extent, from the massive infrastructure andconstruction projects under Premier Wen Jiabao’s stimulus package.GROWING DEMANDChina, the world’s largest steel manufacturer, produced more steellast year than the combined outputs of the next four largestproducing countries, namely the US, Russia, India and Japan. Itsaverage annual production is 600 million tonnes, almost all ofwhich are used domestically. Li Yizhong, China’s industry minister,pegs demand at 470 million tonnes. As the stimulus package kicksin, that figure is expected to rise.A company which provides commodity market research to thegovernment estimates that domestic demand will be above 600million tonnes in the next couple of years. China Commercial< A crane at a shipyard: Increased shipbuilding helps propel demand forsteel; (inset) A shipyard workerOctober 2009 The supply chain and logistics link 39

FocusA construction site in Wuxi, Jiangsu province: China accelerates its steel production to keep up with demand from manufacturersDistribution and ProductivityPromotion Center senioreconomist Chen Kexin stated that Chinawill consume 600 million tonnes ofsteel next year.Beijing’s thrust to build up to 20 supercities, which can accommodate more than10 million people each, will propel steelconsumption in China upwards for manyyears. The country primarily produceslow-end steel products, and excessproduction is exported. However, Chinastill can’t make enough top-end steelproducts; it has to import what it lacks.Chinese exports surpassed importsby 52 million tonnes in 2007, butthe country became a net crudesteelimporter in March, owing tothe stimulus spending which drovedomestic demand even as the countrysuffered a slump in exports. For the firstseven months of 2009 alone, Chineseimports reached 9.88 million tonnes,Chen says. Next year, the country mayneed to import as much as 18 millionmetric tonnes.Apparent global demand, whichexcludes steel inventories, is expectedto fall by nine per cent this year.If Chinese demand is taken out ofthis equation, the demand drop willbe a whooping 24%, the World SteelAssociation revealed. With Chinain the market for steel imports,consumption may rise 9.2% to 1.2billion tonnes by 2010.China’s increasing demand is injectingfresh blood to the moribund steelindustry, which has seen global outputfall more than 20% in the first half of2009, owing to declining prices andrising production costs. The effects ofChina’s steel demand reverberates acrossAsia, not only among steelmakers,but among manufacturers of miningequipment, as well.Ship owners have started accepting deliveries of and remitting payments for their vesselsRAISED OUTPUTSouth Korea’s Pohang Iron and SteelCompany (Posco), India’s Tata Steel andits largest state-owned steel group, SteelAuthority of India (SAIL), are firing uptheir furnaces double-time and raisingtheir output to supply China’s demandfor the metal. Other mining companiesare re-opening posthaste productionplants in Indonesia, Chile, Australia andother parts of the globe to cash in onthe anticipated bonanza.As part of the ripple effect of thisChinese economic tsunami, mining40The supply chain and logistics link October 2009

equipment manufacturers are beingrevitalised with the reactivation ofpreviously closed mines. Tokyo-basedKomatsu, the second-largest maker ofmining trucks and excavators in theworld after the US-based CaterpillarIncorporated, recently bagged itsbiggest mining contract for 2009.Kazuhiko Iwata, Komatsu’s miningdivision president, recently announcedthat the company won an orderfor mining equipment worth $224million, in Indonesia. This order forabout 300 dump trucks, excavatorsand bulldozers is on top of a previousorder for 60 machines valued at$201.8 million, in Chile.Going with the flow, China’slocal truckmaker Anhui JianghuaiAutomobile Company is seeking aventure with Caterpillar and NavistarInternational Corporation to tap thedemand in the world’s fastest-growingvehicle market.The global market for miningequipment in 2010 is expected tosurpass this year’s 4,000 units whiledemand for 2011 or 2012 may exceedthe peak recorded in 2008. “China willdrag demand higher for resources, as itseeks to maintain its economic growth,”Iwata said.Even steel output in Japan issomehow buoyed by China’s growth.For the sixth straight month in August,Japanese industrial output grew asdomestic stimulus spending boostedsteel and automobile production. Steelgrew 8.4% compared to July whilethe automobile sector posted a moremodest increase of 2.2%. Manufacturersbelieve that the Japanese economyis picking up and they plan furtherproduction increases in the comingmonths. Norio Miyagawa, an economistat Shinko Research Institute, remarked,“I think Japan’s output growth will besafe throughout the year.”As Chinese steel demand goes up, sodo the demand for mining equipmentand the demand for scrap steel. Scrapsteel is a vital raw material for electricarcfurnaces used in foundries forproducing cast iron products. Pricesof scrap steel jumped almost 20% to$370.24 per tonne in Japan last July,compelling manufacturers using scrapsteel as a raw material to pass on theincrease to their customers.Japan’s largest maker of constructionThe old and the new districts in Seoul: South Korea fires up its furnaces to help supply China’sdemand for steelgirders, Tokyo Steel ManufacturingCompany, held off any price increasein its products for 15 months, but the20% hike in scrap metal prices forcedthe company to raise H-beam prices inSeptember.INCREASED CONFIDENCEStrong recovery in the Chinese economyis interpreted as indicative of a globaleconomic recovery, thereby sparkingconfidence in the logistics industry.Nowhere is this more apparent than inthe shipping industry as bulk freight ratestripled this year while weekly containerrates increased in June for the first timein more than one year, according to HoweRobinson Container Index.After a long period of deliverypostponements and payment delays,ship owners have started acceptingdeliveries of and remitting paymentsfor their vessels. The increase in partialpayments for vessels ordered was ahuge boon to shipbuilders, as they lookforward to a profit growth for the thirdquarter compared to a profit decline inthe second quarter of this year.South Korea’s Hyundai HeavyIndustries Company, the largestshipbuilder in the world, and two of itsclosest rivals, compatriot companiesDaewoo Shipbuilding & MarineEngineering Company and SamsungHeavy industries Company, are expectedSkyscrapers at night, in Kobe: Steel output inJapan is somehow buoyed by China’s growthto post a combined profit jump of 21%to $780 million for the third quartercompared to $644 million in theprevious quarter.This encouraging developmentprompted Cho In Carp, analyst at GoodMorning Shinhan Securities Company,in Seoul, to remark, “The dark shadowsthat hovered over the ship industryhave started to clear up. Ship financingappears to be recovering.”China is proving to be the driver ofeconomic growth, primarily withinAsia and, increasingly, in the rest of theworld. A hefty stimulus package allowsthe country to prevail over the globalrecession, and still post healthy growth.As the rest of the world struggle to getout of the slump, all eyes turn on Chinato lead the way.October 2009 The supply chain and logistics link 41

FocusBracing for demandEgypt’s steel industry stumbles, UAE expands capacityTHE STEEL industry in Egypt istrying to regain its footing inthe face of stiff competitionfrom imports and a slack indomestic demand while steel productioncapacity in the UAE is expected to triplein the next five years.Weak demand and overflowinginventories forced 18 out of the 22steel factories in Egypt to close shopfor a three-week period starting lateSeptember. Only Ezz Steel, the country’slargest producer, Beshai Steel, NationalSteel Company and three othersteelmakers still continue with theiroperations. National Steel Companyreported a third quarter inventory of200,000 tonnes.Most companies claim that therespite is for the annual repair andmaintenance of the mills when majorityof employees, except those directlyinvolved in the repair and maintenance,are given paid leave until the annual“factory tune-up” is over.El-Marakbi, chairman of El-Marakbi SteelCompany, is more candid as he explainedthat his company had to halt operationswhen inventories started piling up.“This is a catastrophe” El-Marakbi said.Reportedly, Marakbi Steel had beenoperating at the minimum capacitysince June until the shutdown. Whileit still had to pay workers half of theirsalaries, it had been unable to find amarket for its production.In the same report which cameout late June, Mohammed Hanafi,General Director of the Chamber ofMetallurgical Industries admitted thatmost factories had been operating atminimum capacity due to rebar lowprices and the sharp decline in sales.Ezz Steel’s net profit for the first halfof this year plummeted 90% to only$18.2 million (AED76 million) from$182.6 million (AED760.7 million) forthe same period last year. The companyadmitted that 2009 will be a tough yearfor steel producers but it expressedoptimism that the company canLow prices of rebar have forced factories in Egypt to operate at minimum capacity;(Opposite page) In Dubai: Steel production in the UAE is seen to triple in the next five yearsweather the industry downturn.In fact, Ezz announced last Augustthat it plans to pour in close to $475million (AED1.7 billion) for a new billetproduction line and a direct reducediron (DRI) plant in Suez. Kamel Galal, itsinvestor relations head, disclosed thatEzz Steel will add a new billet productionline to its existing flat steel plant andwill build a new DRI facility with anannual capacity of 1.8 million tons.In the GCC region where the economy ismore dynamic, the United Arab Emiratesis looking at tripling its steel productioncapacity in the next four to five yearsas it strives to become the largest steelmanufacturer in the MENA area.The UAE’s Emirates Steel Industriesrecently signed a $474 million (AED1.7billion) contract with Italy’s DanieliCorporation for the construction of aone million ton capacity heavy sectionrolling mill to produce heavy channels,angles, section beams, columns andsheet piles.The project, constituting Phase II B ofthe $2.45 billion (AED9 billion) overallexpansion plan started three years ago,will augment the company’s currentannual capacity of two million tons.The first of its kind in the GCC, it isexpected to come online by 2011.Emirates Steel targets a 6.5 milliontons annual production capacity by2013-2014 thru acquisitions andexpansions. Hussein Al Nowais,Emirates Steel chairman, recentlydisclosed in Abu Dhabi that thecompany wholly acquired a Middle Eaststeel manufacturing company but hedeclined to reveal details of the deal.GCC annual demand for heavysections is currently at 1.5million tons.It is projected to double by 2015. UAEleads in per-capita steel consumptionat 2,348 Kg which is very much higherthan not only the GCC average of 645Kg but also the world average of 240 Kg.Stressed Al Nowais, “The growingnumber of projects in the GCCworking on developing infrastructure,industrial plants, power transmissiontowers, bridges, sea ports and high risetowers all require the new products wewill be able to supply in large numbersonce the expansion is complete,’ AlNowais added.Emirates Steel intends to expand its35% market share in the UAE, companyvice-president Ahmad Salem Al Dhaherisaid in an industry event in Dubai.It is also exploring the possibility ofexporting rebars to Iraq and othercountries in the region. Presently,Emirates Steel exports 10% of itsproduction to Jordan and Saudi Arabia.42The supply chain and logistics link October 2009

Cover Story{ Shipping }Fit tosurviveMideast’s offshoresupport vessel marketmay have the bestoutlookIT will be interesting to see how the Darwinianphilosophy would shape the global shippingindustry in the coming months, with Europeananalysts saying that 2010 could be morechallenging than a favourable 2009 while Asianshippers are more upbeat about its future. One thingis sure, though: the fittest will survive. “The majorityof Middle East companies will see a satisfactory 2009,but 2010 is far more uncertain,” stressed the managingdirector and global head of offshore at DVB Bank, GeirSjurseth. “The well-established players that survive willhave a fantastic future.”Over in North Asia, experts are looking forwardto brighter months, buoyed by projected growth inthe Chinese economy. Beijing’s $586-billion stimuluspackage has increased spending on infrastructure,thereby pulling up the other sectors, such as the steeland logistics industries. Already, furnaces in Japan andSouth Korea are working double-time to help supplyChina’s growing demand for steel. This has prompteda South Korean analyst to quip that ship financingappears to be recovering, as profits of global steelmanufacturers are seen to jump. The thinking here isthat growth in China is indicative of growth outside ofit, especially in Asia and, eventually, in other parts ofthe world.Other analysts, however, are not convinced of Chinabeing the driver of global economic growth. Since Chinais heavily dependent on exports to the US, accordingto a Standard Chartered Bank (SCB) report, Asia cannotrecover if the West remains in a bind. “If the US is introuble – as we think it is – then this will limit China’spotential,” according to the September 15 report, titled“Global imbalances”. “And in turn, it puts renewedpressure on China and other emerging economiesto switch to domestically driven growth.”< Players and professionals in the shipping industry areconfident of seeing better months aheadOctober 2009 The supply chain and logistics link 45

Cover StoryA band of bagpipers welcoming participants,exhibitors and visitors to the workboatsexhibitionUAE Justice Minister Dr Hadaf Al Dhaher shaking the hand of an exhibitorNoting that there are many“strong companies” in the MiddleEast, Sjurseth said these firms will cutcosts and set aside capital for the longerterm. “When the dust finally settles,the outlook is favourable but, beforethat, we will likely see defaults andconsolidation among highly leveraged,recent entrants in the market,” hestressed at the sidelines of the MiddleEast Workboats conference, held earlythis month in Abu Dhabi. He stressedthat record shipping will hit the banksby the end of the year and into 2010.Banks are likely to remain underwaterfor another two to three years, despitea bounce in stock markets and signs ofeconomic recovery.and supply vessels, owing to oil andgas companies that cut back on theirexploration and production plans andspending. A number of companies havelikewise cancelled speculative buildingprogrammes by yards. “The Middle Eastis seeing lengthening negotiations andpressure on charter rates,” Sjurseth said.“In addition, more yards in China andIndia are building offshore vessels astheir way out of crisis – and providingtough competition.”There are now more opportunitiesfor non-bank investors, however, asbanks have put a rein on loans andcredits, said Sjurseth, who likewiseplayed a major role in the debate on thechallenges facing the global maritimefinancing, at the Middle East Money &Ships conference held in Dubai, alsoearly this month. He stressed that theseinvestors can get equity returns withdownside protection. It’s about timeinvestors changed their mindset, awayfrom the desire for a 25% return oninvestment with 75% leverage.Maritime companies have alsoexpressed optimism on the regionalsupport vessel market in the MiddleEast, owing to continuing offshoreBEST OUTLOOKThe Middle East’s offshore supportvessel market may have the bestoutlook among all shipping sectors, asit has been the least hit by the globalcredit crisis, said Sjurseth, whoseemployer, the Germany-headquarteredDVB Bank, has a $22-billion shippingloan book and more than 500 clientsactive in the transport sector worldwide.The sector suffers from valuationdistress and financing shortage, though,affecting new entrants through yarddelays, cost overruns, undervaluedvolatile assets and tight credit facilities.The overseas offshore support vesselmarket, on the other hand, has witnessedhas witnessed delays in tenders for rigsGeir Sjurseth46The supply chain and logistics link October 2009

projects and crude oil prices that havestabilised. “The increased developmentin offshore activities in Abu Dhabi willkeep us busy for some time…” saidDarwish Al Qubaisi, general managerof Esnaad, which has fleet of 32 vessels,during the Middle East Workboats eventat the Abu Dhabi National ExhibitionCentre (ADNEC). “I am upbeat about thefuture of offshore vessels in this part ofthe world due to mega offshore projectsand the stabilising crude oil prices.”At the same event, which dedicatedone session on climate change (seesidebar after this story), Lamnalcoannounced the signing of a 10-yearcontract with Caspian PipelineConsortium, an oil pipeline runningfrom Tengiz field, in WesternKazakhstan, to the Novorossiysk-2Marine Terminal on Russia’s Black Seacoast. A Sharjah-based internationalmarine services provider, Lamnalco saidthe contract involves the deployment of15 offshore support vessels.WORKBOATS EXPONow on its second celebration, theMiddle East Workboats exhibition andconference grew 70% from its inauguralevent, said its London-based organiser,Seatrade. The third edition will be onSeptember 26-28, 2011. Workboatsinclude tugs, ferries, supply vessels;police, fire, patrol, pilot, rescue and oilspillboats and dredgers, barges andfloating cranes. Seatrade said there aremore than 2,000 workboats docked orbeing repaired in the Middle East.About 170 exhibitors from 25countries gathered in Abu Dhabi at thestart of the event on October 5, whichwas officially opened by Dr Hadaf AlDhaher, UAE Minister of Justice. Thebiggest delegation came from China.“We are exploring the internationalmarket, and this region is very strongin the offshore supply support sector,”said Ma Guohua, vice-mayor of themunicipality of Zhoushan.Captain James McHardy, former CEOof the Society of International GasTanker and Terminal Gas Operators,said the workboats sector is undergoinga crucial phase. “This year’s eventbrings together the principal areas ofchallenge and concern in our industryand, at the same time, reflects on allaspects both good and bad in thepresent financial climate,” he added in aThe crewboat Topaz Fujairah was moored at the Capital Marina opposite ADNEC during theMiddle East Workboats exhibitionChristopher Haymanwelcome message.The chairman of Seatrade, ChristopherHayman, remarked, “The offshoremarine support industry is upbeatabout the future in this region andthere can be no more powerful signof the continuing development ofthe sector than the participation inthis show of so many regional andinternational players.”MONEY AND SHIPSAt the Middle East Money & Shipsconference, in Dubai, ship owners,shipping professionals and governmentofficials reiterated, on October 7, howthe region’s maritime industry is ridingthe financial crisis. “I am confident thatrecovery is on the way, and we are muchbetter off than were at the beginning ofthis year,” said Mohammed Al Muallem,senior vice-president and managingdirector of DP World-UAE Region, in akeynote address.There are signs of economic recoverynot only in the Gulf but in some partsof the world as well, stressed Sheikh Daijbin Salman Al Khalifa, Undersecretaryof the Ministry of Finance for PortAffairs and chairman of the GeneralOrganisation of Sea Ports, in Bahrain.While the value of orders for new shipsfrom companies in the Middle East fellby19% last year, he expressed confidencethat high-quality services and a healthycompetition among regional portswill bring about the resurgence in theregion’s shipping industry.Ahmed Al Falahi, CEO of GulfEnergy Maritime, the region’s largestindependent commercial product tankeroperator, cut a pessimistic view on theshipping industry which, he said, maybe among the hardest hit sectors andcould be the last to come out of theeconomic downturn. He also stressedthat most banks are overstretched,and would not be able to take care ofthe $400-500 billion needed for shipfinancing between 2010 and 2012.“Banks will definitely think twicebefore they lend that amount as freelyas they did until 2008,” he said. “Istrongly believe, however, that oncethe global economy stabilises, this willgive enough comfort for creditors tocautiously start lending again.”October 2009 The supply chain and logistics link 47

Cover StoryShapeupShip ownersneed to unite onclimate changeUNLIKE the globalaviation industry,the shipping sectorhas yet to formulateformal proposals onenvironmental protection for theUnited Nations in a run-up to theDecember summit on climate change,in Copenhagen. Action plans on how tocurb carbon emissions from shippingwill be needed by the UN ClimateChange Conference, which aims tocreate a global climate pact to succeedthe Kyoto Protocol.No wonder pressure is mountingon ship owners in the Middle East, aninternational hub for the supply-chainand logistics industry, to have theirvoices heard by joining the debate onclimate change. “Shipping is one of themost environmentally sound meansof transport with lower carbon-dioxideemissions than road or air transport,”said Christopher Hayman, chairman ofLondon-based event organiser, Seatrade.But he stressed the need for theindustry to be serious about reducingits impact on the environment,considering that shipping accounts foralmost 90% of the world’s transport.Shipping accounts for about four percent of global carbon-dioxide emissions.“Regional ship owners need to acquaintthemselves with the options beingconsidered internationally which wouldforce them to adopt measures to reducegreenhouse gas emissions,” he said.Seatrade put up a special session,titled “Thinking of the future”, on theshipping industry and climate changeduring the Middle East Money & Shipsconference, on October 7-8, in Dubai.The half-day session was organisedin conjunction with a meeting by theBaltic and International MaritimeThe shipping industry is urged to help save the environment48The supply chain and logistics link October 2009

In Copenhagen: Countries will create a global climate pact in this Danish capital by DecemberCouncil (BIMCO), an association of shipowners, managers, brokers and agents.BIMCO has an observer status with UNorganisations.Analysts say the UK-basedInternational Maritime Organisation(IMO) must co-ordinate with BIMCOon the various mechanisms thatthe shipping industry wants to betabled before the UN. This could besimilar to the aviation industry, inwhich the International Civil AviationOrganisation is working closely withthe sector through the InternationalAir Transport Association (IATA). IMOis tasked to develop and maintain acomprehensive regulatory frameworkfor the shipping industry.The proposals submitted to the UNby IATA include commitments by theaviation industry for a 1.5% averageannual improvement in fuel efficiencyper year up to 2020, to stabiliseemissions with carbon-neutral growthfrom 2020 and a to cut emissions by50% by 2050 from 2005. “Our targets aretough,” said Giovanni Bisignani, IATA’sdirector-general and CEO. “Air transportis the first industry to commit to carbonneutralgrowth at the global level.”Seatrade said Britain’s Chamber ofShipping wants to bring the industryinto the global carbon trading net,wherein a 10-20% drop in emissions islinked to a tax cut on fuel, as proposedby European Union diplomats. It citedestimates that permits for a globalshipping cap and trade system couldcost between $7.52 billion and $9billion (€5-6bn) at current carbonprices. The money to be generated fromthis could help poor countries copewith climate change.The initiative has the support ofshipping associations of Australia,Belgium, Norway and Sweden. Britain,Ireland, France, The Netherlands andmost eastern European states haveexpressed support for a 20% or more cutto shipping emissions, to be formallyproposed at the Copenhagen climatechangeconference, while seafaringnations like Malta, Cyprus and Spainwant easier reductions.October 2009 The supply chain and logistics link 49

The Gulf/MENA Region{ Economy}Leadingthe packA strong recovery is seenfor the UAE by early-2010THINGS look positively rosy in the Gulf Arabstates as infrastructure spending continuesto rise and the ability to sustain constructionprojects boosts investor confidence, especiallyin Abu Dhabi. Gulf countries are expected tospend at least $205 billion (Dh752bn) in infrastructureprojects by 2013, according to the latest estimates bythe Standard Chartered Bank.Financing for many of the large-scale projects willcontinue to be challenged by tighter global liquidityconditions. But analysts expect governments to supportmost projects with bond issues as a major source offunding for many of these undertakings. Moreover,economic analysts predict a strong recovery for the UAEand its stock markets as early as the first quarter of 2010.On the same note, Gulf banks are setting the pace fortheir counterparts by leading the pack in terms of assets,deposits, equity and profits. Combined assets in 2009 for340 UAE banks reached $1.3 trillion while lending fromtop 100 institutions accounted for $1.4 trillion.This continued economic growth and improvedstandards of living have led the Generation Y group(those born in the early 1980s and 1990s) to set theirown rules on work-life balance and employer choice.More and more Gen Y members are entering theworkplace with more information, greater technologicalskill and higher expectations of themselves, accordingto the Dubai Chamber of Commerce & Industry.These young professionals are also expectingorganisations to have a code of ethics that is actuallylived out, not just something that is publicised.At the end of the spectrum, the less fortunate getattention and focus. Take Saudi Arabia’s Social Ministry,for instance, which vows to prioritise the improvementof the lives of the three million Saudis, or 22% of thatcountry’s total population, living below the poverty line.This has sparked the interest of the media and thegeneral public on government and its efforts to combatthe problem.Dr Yousuf Al Othaimeen, an aide to King< The Dubai Metro prompts other GCC countries to planfor a pan-Gulf network to connect major cities in the regionphoto: rey delanteOctober 2009 The supply chain and logistics link 51

Yuppies expect organisations to have a code of ethics that is actually lived outAbdullah bin AbdulAziz, said his ministryvalues ideas rather thanmoney to tackle the issue.He has spoken of setting upa food bank on the lines ofsimilar initiatives in Sudanand Egypt to extend freefood to the poor. The Saudigovernment has alreadyinstituted a charity fundto address the mountingproblem, charting a nationalstrategy and aiding socialwelfare organisations.STRONG REVIVALA survey led by regionalfinancial services companyShuaa Capital shows that alarge number of institutionalinvestors out of a pool of1,500 are most likely to investin Gulf markets. Jeff Singer,Nasdaq Dubai chief executive,said there are clear signs ofimproved investor appetitefor regional equities, and UAEmarkets are outpacing otherregional markets on the roadto recovery.Survey results also showthat investor confidence inthe Gulf Co-operation Council(GCC) hit 127.3 in September,rising from an index of 126.3in August. Results also showthat 62% of respondentsindicated they are likely toinvest in Gulf markets and49% said they plan to invest inUAE markets over the next sixmonths.With such positive economicprojections, the Abu DhabiExecutive Council hasreiterated that the emiratehas kept its strong economicposition, despite the plungingoil prices in the internationalmarkets. Oil is the main sourceof the emirate’s income, andanalysts affirm that a stronghydrocarbon reserve will helpthe kingdom withstand anycrisis, such as a fall in crudeprices or a global recession.Spending by the Abu Dhabigovernment rose 12% to$11.5 billion this year, saysa report released by OxfordBusiness Group. The Groupalso favourably indicates thatthe UAE capital would be in avery strong position when theglobal market picks up, owingto the ability of its governmentto continue to fund majorinfrastructure projects andkeep its development strategy.A proper rail network will help reinforce the Gulf as a major globalenergy and trading hub52The supply chain and logistics link October 2009

The Gulf/MENA RegionASSETS, LIABILITIESArab banks are leading the race withcombined assets of $1.9 trillion for420 banking institutions, with totalshareholder’s equity rising to $164billion in 2008. Net profits for thesame period stood at $24 billion. This,according to the Union of Arab Banks(UAB), which also said the top 100lenders accounted for $1.5 trillion.In an interview with Gulf News, UABChairman Adnan Ahmad Yousuf revealedthat aggregate deposits reached $1trillion and the total loan disbursementexceeded $831 billion. “Arab banks haveadopted more prudent policies andstrategies to overcome the financialdownturn,” he said, stressing that theglobal financial crisis has not been assevere in the region as in the US.UAB statistics show the UAE has thehighest number of banks among the top100 Arab lenders, with a disbursementof $215 billion in loans. This hasrecorded profits of $5.5 billion for theArab banks last year. The UAE bankshave consolidated assets of $317 billionand deposits of $199 billion.Among the top 100 banks in theGulf, Saudi Arabia has only 11 banksin the group, but the combined assetsof these institutions have been putat about $337 billion. The top Saudibanks outrank the UAE banks in termsof assets, deposits, equity and profits.However, they had disbursed less inloans than the UAE lenders, showing aconservative lending culture among theSaudi banks.On the lending front, the UAE CentralBank confirmed that 13 local banksare exposed to the troubled Saad andAlgosaibi groups. Central Bank GovernorSultan Bin Nasser Al Suwaidi declinedto specify the total amount ownedby the Saudi family businesses to thebeleaguered banks.In the recent annual meeting of Arabcentral bankers, Suwaidi said the UAEwill soon set the minimum amountto be allotted by each bank to coverpotential losses. So far, only Abu DhabiCommercial Bank (ADCB), Mashreq andNational Bank of Abu Dhabi (NBAD) havedisclosed their exposure to Saad andAlgosaibi. ADCB is owed $609 millionwhile Mashreq pegged it at $400 million.NBAD has reported an almost negligible$11 million. The groups are said to haveborrowed as much as $30 billion frommore than 80 banks globally, according toStandard & Poor’s.RAIL TRANSPORTThe rise of infrastructuredevelopment has turned the GCC intoa 36-million thriving population withhundreds of thousands of residentscommuting to and from suburbs tothe city. As a solution to the city’smyriad traffic jams, the $7.6-billionDubai Metro was launched inSeptember.The other GCC countries arestarting to emulate this feat, devotingefforts to various rail projects with apossible pan-Gulf network to connectmajor cities of the region. A properrail network will help reinforce theregion as a major global energyand trading hub. This would alsoaccelerate cross-border travel, tradeand tourism.The GCC network will include a1,970-kilometre line connecting Qatarand its four fellow GCC countries viaa bridge. The second line, of 1,984kilometres, will connect Kuwait, SaudiArabia, the UAE and Oman. Plansinclude stretching the network upto Jordan, Syria and Turkey. The nextmove would be a more extensivesystem, providing access to Europe andAsia via Turkey.A view of Galata Tower and Golden Horn, in Istanbul: There are plans to connect the Middle East to Europe and Asia via TurkeyOctober 2009 The supply chain and logistics link 53

The city of Ankara covered with snowLooking upTurkey may expect better things from yearendWHILE trade andproduction in Turkey,which also has goodprospects for thelogistics sector, arestarting to get better, analysts say somecities in the UAE, Egypt and Moroccoare in good position to attract longterminvestors in the real-estate sector.“We believe the worst of the bad newsis out of the way in Turkey,” says aresearch note on Turkey done by AtaInvest. “Monthly trade and productiondata are beginning to turn around, andbase effects will be considerable morefavourable from 4Q.”The Ata Invest report for October,labelled Issue No 170, says the expectedtrading, from October 26, of Ran Logisticswill bring transparency to the supplychainand logistics sector, and bringout the true value of Reysas Logistics.Wanting to maximise profit and moveahead of the competition, Reysascontinues to expand its housing andrailway transportation business. “Strategicpositioning in railway transportation willprovide Reysas with a strong competitiveedge,” the report adds.It also expects a 29% growth in theEBITDA (earnings before interest, taxes,depreciation and amortisation) ofPinar Sut, Turkey’s leading dairy firm.This despite the fact that the expectedhigher prices of raw milk, owing todecreasing supply, could put a pullbackin the company’s margins. Since July,stock farmers have been sending theirmilk cows to slaughterhouse due to54The supply chain and logistics link October 2009

The Gulf/MENA Regionlow raw milk prices.Pinar Sut’s EBITDA may retreat to10.35% during the second half ofthe year from 18% between Januaryand June. “Even with this cautiousapproach, we expect a 29% growth inthe company’s EBITDA in 2009,” AtaInvest says. The company has a marketshare of 25.7%, well ahead of its nearestcompetitors – Ulker at 14.4%, Danone(7.2%) and SEK (7.1%), according to astudy conducted by AC Nielsen.The global real-estate services firm,Jones Lang LaSalle, takes note of theimprovements done for a positiveinvestment climate in a number ofmarkets across the MENA region,including meeting the requirementsfor recovery of the real-estate sector. “Asthe economic storm passes, we expectthat real-estate markets will moveinto a period of stabilisation in 2010and recovery in 2011,” it says in a sixpagenote, “Race to competitiveness:Preparing MENA markets for long-terminvestors”, for the month of September.Taking into consideration three setsof factors, Jones Lang LaSalle says AbuDhabi, Dubai, Cairo and Casablanca,Morocco’s biggest city and chief port,will attract more long-term regional andinternational investors in the next 2-3years. These criteria include having acompetitive investment environment,favourable real-estate conditions and theavailability of high-quality commercialand residential properties.Over the next 12 months, Riyadh,Jeddah, Doha and Beirut are expectedto record the strongest performingreal-estate markets. These are classifiedas Tier 2 cities by Jones Lang LaSalle,in terms of their appeal to long-terminvestors. “However, their attractivenessis constrained by relatively high currentpricing and the limited availability ofinvestable product,” it says.While Tier 1 and Tier 2 markets haveseen improvements and made progressin many sectors, it adds, the greatestchallenge remains at the real-estateindustry level. “Major changes are stillrequired in the attitude of existingowners, to position their assets tomake them more attractive to regionaland global long-term investors,” it says.“These investors have an increasedrange of quality real-estate assetsto consider across both mature andemerging economies.”Attractiveness of Selective MENA Markets for Long Term InvestmentSource: Jones Lang LaSalleThe Hassan II Mosque, in Casablanca: This Moroccan city will attract more long-term propertyinvestors in the next three yearsOctober 2009 The supply chain and logistics link 55

OpinionSupply chain metrics:A strategic perspectivePatrick DalyIMPROVED supply chainperformance achievedthrough initiatives, such ascollaborative partnershipor the introduction oflean production systems,involves fundamentalchanges in the way workis organised and how thecost, waste, efficiency andother key attributes ofthe system are viewed.Contrasting the realityof today’s increasinglycompetitive and globalisedbusiness environmentwith the traditional roleand purpose of formalmeasurement systems givesrise to a mismatch betweenthe measurement systemscommonly in use and thereality on the ground. Anexample of these systemsis management accounting,which tends to consider theproduction setting as stable.Consider the productionefficiency based on unitsper employee, which isa traditional metric thatdoesn’t fit well with thenew emerging businessdynamics. This encourageslong runs, regardlessof customer demand;rewarding production foroutput and measuringresearch and developmentmilestones reached ratherthan projects completed.Furthermore, traditionalaccounting governancesystems assume arm’slengthtransactions betweensuppliers and buyers, andcan be an obstacle to theformulation of alliances andpartnerships.This is the antithesisto the partnershipconcept as typified bycommitment, co-ordination,trust, informationand risk sharing, opencommunication and jointproblem solving, as pointedout by Par Ahlstrom andChrister Karlsson in theirarticle, Change processestowards lean production:The role of the managementaccounting system.The major consequenceof this is that traditionalmeasurement systems areill-equipped to captureand interpret the positivechanges derived from thenew and improved ways ofdoing business. The risk,therefore, is that theseimprovement initiativesmay face delays due tothe resulting confusion, orthey may lose momentumdue to a waning ofcommitment or may beabandoned altogether. Inshort, the measurementsystems commonly in usein businesses tend to act asobstacles to improvement asopposed to enablers of thechanges.In research carried out byAhlstom and Karlsson at aSwedish office equipmentmanufacturer, theyencountered an instancein which a traditionalproductivity measure –hours spent on operationscompared to standardhours – indicated lowerproductivity for the newways of working in a leanproduction implementation.This was mainly due to theintegration of indirect tasksinto the production teams’activities.However, as an illustrationof the inertia generatedby incumbent systems,this mismatch resultedin the appropriateness ofthe new strategy beingquestioned, rather thanthe appropriateness ofthe measure itself beingchallenged! It is, therefore,crucially important to alignthe measurement systemexplicitly with the selectedstrategy, in such a way thatthe measurement systemcan detect the changesproduced. This contributesto form a self-reinforcingvirtuous circle that will actas a catalyst and enabler ofthe change process itself.Acting strategically on theawareness of this distinctionin advance of makingoperational changes cangreatly enhance the speedof progress. Integratingindividual metrics intomeasures focussed onperformance output, in linewith the selected productionstrategy or with customerorder fulfilment, can bevery powerful. Examplescould include on-timedelivery, percentage defects,new product introductionon time on budget andtotal cost of ownership oracquisition.In our own professionalexperience at AlbaConsulting, we have foundthat many of the initiativesundertaken to extendlean principles to areassupporting production,like warehousing or thirdpartylogistics, are drivenby middle- and front-lineoperational managers. Often,The author is managing director ofAlba Logistics, in Dublin, Ireland.56The supply chain and logistics link October 2009

the link back to the managementaccounting and measurement systemsis simply absent. This occurs becauseawareness of the full extent andpotential of lean tends to be unevenlyspread across organisations, bothhorizontally and vertically, with thosecloser to operations at the forefrontand those in areas like procurement,accounts, IT and, most tragically,general management as being farbehind.These operational managers oftenfind themselves in a dilemma ofwhether to attempt to influence theback office to adapt their systems ofmeasurement and assessment to theproposed changes in ways of working,or to just move on with securing theoperational improvements which theyknow are there. More often than notthey opt for the latter course of action.To overcome this type of anomaly, a‘total cost of supply’ approach can betaken to identify the real costs andto consider the benefits of improvedsupply arrangements. Tools like Activity-Based Costing, Target Costing and OpenBook approaches can aid in improvingsupply chain effectiveness, accordingto an article written by AJ Berry, JCullen and W Seal. Evidently, currentmeasurement systems will not be givenup readily in response to changes in thesupply system.The simultaneous existence of oldand new systems, in other words, willbe a reality and have to be managedthrough a transition. The difficulty withthe old accounting systems is that whilethey do contain useful data, they oftenget in the way of strategic cost analysis.However, when management is aware ofthis fact and manages it intelligently,the traditional system can be used tofulfil the role of enabler of change.This is because the traditionalsystems present a comfort factorthat allows past performance to becompared with present performance.As certain thresholds are reached thatdemonstrate the positive effects of thechanges, the way can be unblocked forchanges to the management accountingsystem, as stressed by Ahlstrom andKarlsson. The management’s job, theysay, is to establish these thresholdsat levels that are easily reached so asto facilitate the desired changes andremove the road blocks.October 2009 The supply chain and logistics link 57

Faces & PhasesAl-Futtaim is top Hino distributorAL-FUTTAIM Motors has been awardedfor its outstanding performance as theexclusive distributor of HINO commercialvehicles in the UAE, beating six otherdistributors in the Middle East.“We are extremely proud of this award,which acknowledges our strong teamworkacross the departments and deliveryof the best after-sales service for HINOcustomers in the Middle East,” said PaulHenning, general manager of Al-FuttaimMotors-HINO.Candidates for the award weremonitored based on reports outliningparts sales, inventory levels and servicerates on a monthly basis betweenSeptember 2008 and March 2009.This culminated at the awardingceremony during the recent HINOMiddle East Parts and Service ManagerConference, held in Sharjah. HINO saidAl-Futtaim Motors garnered a service rateof 97%, way above the regional average of90.6%.“Customers rely on our quick andefficient service tominimise disruptionsto their business, and we are prepared todo what we can to ensure their trucks runsmoothly 24/7,” said Calvyn Hamman,senior general manager for after-sales atAl-Futtaim Motors.A member of UAE-based conglomerateAl-Futtaim, Al-Futtaim Motors operatesthe Toyota, Lexus and Hino franchisesthrough a network of sales showrooms,service and parts facilities.Hamman and HenningBarloworld Logistics boosts European presenceSOUTH Africa-based logistics specialist,Barloworld Logistics, has announced anumber of high-profile appointmentsin Europe and the broadening of its UKmanagement team which, it says, representthe company’s commitment to the marketand confidence in its redeveloped softwareand new managed services.In addition, Barloworld Logistics hasmoved its UK headquarters to largerpremises in the West Midlands, from wherethe company’s logistics and software brandswill operate.In Spain, Javier Siles has beenappointed CEO to head up the Spanishoperation. And in the UK, Richard Forrest,formerly the CEO of the BarloworldOptimus business unit, has seen anexpansion in his role to become the headof UK Operations, incorporating both thelogistics and software offerings.John van Wyk, CEO at Barloworld LogisticsEurope, said that the recent changeswould help to prepare the business forthe upcoming launch of its ‘Transport as aManaged Service’ platform to the UK andother European markets.“We believe that for all businesses, inthis globalised economy in which we live, thesupply chain is a key enabler of successfulbusiness strategy,” Van Wyk said. “And thishas become even more important in thepresent economic climate, and as companiesplan for the future.”Barloworld’s business strategy isaligned with the proposition that it anlyses,innovates and implements changes to remaincompetitive.“I am confident that the appointmentin Spain will support a growing need foroutsourced services,” Van Wyck said,“and the changing roles within the UKmanagement team will support ourambitions for expansions in the UK and otherEuropean markets.”58The supply chain and logistics link October 2009

Perfumes y Diseno sets up shop at DAFZEUROPEAN cosmeticscompany Perfumes yDiseno has made an initialinvestment of $3 millionfor a distribution office atthe Dubai Airport Free Zone(DAFZ), to take care of itsMiddle East operation.Bashir Tahboub, managingdirector of PYD MiddleEast Distribution, stressedthat the cosmetics andperfumery business in thispart of the world has growntremendously over the lasttwo years.“(W)e have set up aregional office at DubaiAirport Free Zone to takeadvantage of the fantasticgrowth and opportunitiesavailable in this market,” headded.He praised DAFZ’s stateof-the-artinfrastructure,saying everything can bedone under one roof – fromtransacting business withthe immigration, customs,logistics firms, bank branchesand post office counters.“The DAFZ managementis very responsive to theneeds [of its customers], andanticipates the requirementsof tenants and eliminatesbureaucracy,” he said. “AtDAFZ, you could set up anoffice in 10 days and beginoperations immediately,provided you have thenecessary documents andother requirements.”Ibrahim Ahli, directorof marketing at DAFZ,remarked, “Most of ourclients are long-term tenantsand, recently, we have seenan increase in the numberof international companiesincreasing their officespace in anticipation of arebound after a severe globaleconomic downturn.”Established in Madrid25 years ago, Perfumes yDiseno posted a $150-millionIbrahim Ahliturnover last year. Itdistributes cosmetics andperfumes in the Middle East,the US, Central and SouthAmerica and Russia.Integra wins exporter awardfrom Dubai ChamberINTEGRA International/Banian has beenpresented the ‘SME Exporter of theQuarter’ award by the Dubai Chamberof Commerce & Industry for achievinga record export volume during the firstquarter.Dubai Chamber said it issued ninecertificates of origin, valued at $5.7Nia and Engr Hamad Buamim, director-general of Dubai Chambermillion, to Integra from January toMarch.“This award is even more valuableduring the current economic situationwitnessed around the world and in ourregion, and this is one of the proudestmoments in my 20 years of businessexperience in Dubai,” said Hassan Nia,CEO of Integra.Besides its export performance,Integra was also cited for its corporatesocial responsibility activities. Theseincluded the marketing of lead-freePanasonic Plasma TV since 2007,adherence to a strict internal paperrecyclingprogramme and taking upvarious social issues pursuant to theguidelines issued by Dubai Chamber.Dr Belaid Rettab, Dubai Chamber’sexecutive-director for EconomicResearch & Sustainable BusinessDevelopment Sector, said DubaiChamber created the award forsmall- and medium-sized enterprises(SMEs) to highlight the exportingand re-exporting achievements by itsmembers.“Dubai is established as the world’sthird-largest re-export centre, and the‘SME Exporter of the Quarter’ initiativeunderlines the contribution of SMEsto this notable accomplishment,”he stressed. “This also serves DubaiChamber’s strategic objectives ofsupporting and creating a favourablebusiness environment in the emirate.”Besides a company’s exportperformance and CSR programme, theother factors being considered for theaward are administrative managementplanning and the implementation ofsustainable growth policies.October 2009 The supply chain and logistics link 59

Faces & PhasesKamal and GuillemardArabtec’s Kamal talks about beinghumane at Capital ClubRIAD Kamal, CEO of Arabtec Holding,has urged managers and businessprofessionals to be as humaneas possible in making decisionsand dealing with colleagues andsubordinates.“Advice is very difficult to give – whoam I to give it?” he told members andguests of the Capital Club, Dubai’spremier private business grouping,as the inaugural speaker at the club’s“Under the Spotlight” series of forums,where business leaders in the regionshare insights into their success.He stressed, “But if I was to commentfrom my personal experience, it wouldbe: I think you need to be as humaneas possible. I always feel that if I don’tgive, I’m not doing anything. The mostsatisfying thing in my daily life ishelping people – not just financially, butin their career.”More than 100 club members andguests turned out to hear Kamal sharehow he overcame the challenges inbuilding his Arabtec, one of the leadingconstruction firms in the region, anddescribed his strategies for success, withinterviewer Guy Guillemard, CEO ofSignature Clubs International.“I don’t think you can plan success,”Riad said. “I only planned one per centof what we have today. I can just simplysay that we were in the right place atthe right time. The opportunities thatDubai and the [ruling] Maktoum family[of Dubai] were able to give us were themain drivers.”Listed at No 70 in the ‘2009 Power 100Ranking of the World’s Most InfluentialArabs’ by Arabian Business, Kamal hasoverseen Arabtec’s recent expansion intoSaudi Arabia.Capital Club hosts global executives,diplomats, and business gurus thoughits executive lunch and evening forums.It has attracted over 1,400 memberssince its launch in late-2006.60The supply chain and logistics link October 2009

CalendarSCLG-EndorsedEventsLiquid Terminal andTank IntegrityOctober 4-5Doha, QatarDemand-Driven Supply ChainOctober 13-14London, UKSCM Logistics WorldOctober 13-16SingaporeInternational Freight WeekOctober 18-20Abu Dhabi, UAEThe logistics and transport sector will take centre stage at SITL DubaiReed Exhibitions launchesSITL DubaiLOCAL, regional andinternational logisticsproviders and freightcompanies, including DPWorld and TNT, will beshowcasing their productsand services at a conferencein Dubai next month.This is the inauguralshow in Dubai for SITL, orthe International Week ofTransport & Logistics, slatedfor November 3-5 at the DubaiInternational Convention &Exhibition Centre.Under the patronageof Ahmed bin Saeed AlMaktoum, president of theDepartment of Civil Aviationand chairman of EmiratesGroup, the exhibition willhave side events dedicated tothe industry.The two-day GlobalShippers’ Conference,for instance, will gathershipping professionals fromEurope, the Americas andAsia to discuss variouschallenges facing the globalfreight industry.There will also be aforum on business andinvestment for exhibitors,and a programme whereinbuyers and sellers may explorebusiness opportunities. Theexhibition will also havespecific areas for certainlogistics products and serviceslike the radio frequencyidentification (RFID).“SITL Dubai 2009 willpresent an unrivalledopportunity for industryleaders to showcase theirsolutions and expertise,and provide outstandingnetworking opportunities forthose involved in the logisticsand transport sectors,” saidMohamad Bader-Eddin, showdirector at Reed ExhibitionsMiddle East.As the organiser, ReedExhibitions has also securedthe participation of theindustry’s other globalcompanies, such as Agility,Schenker, the Jebel Ali FreeZone Authority, Al Futtaimand the Port of Sohar.“The interest we havebeen witnessing frompotential exhibitors at SITLDubai is testimony to thegrowing sentiment that thefirst signs of an economicrecovery are being seen,resulting in a gradualacceleration of trade,” Bader-Eddin said.The world’s fourth-largestmarine terminal operator,Dubai-based DP World iskeen to promote Jebel Alias a logistics hub, saidthe company’s marketingexecutive at its CommercialDepartment, Zahir Asger.For its part, the Dutchlogistics firm, TNT, willhighlight its road networkduring the three-day event.“TNT operates the mostextensive road serviceacross the Middle East,” saidMark Woodcock, sales andcommercial director of TNT,in the UAE.SITL is Reed Exhibitions’most successful showworldwide, with eighttransport and logisticsexhibitions in eight countriesacross three continents.The Freight SummitOctober 27-30The Venetian Resort HotelMacaoFifth Thai Ports and ShippingOctober 29-30Imperial Queen’s Park HotelBangkok, ThailandAir Freight Middle EastNovember 1-3Airport ExpoDubai, UAESITL International Week ofTransport and LogisticsNovember 3-5Dubai, UAESupply Chain Cost ControlNovember 8-9Dubai, UAEInternational Logistics &Supply Chain ForumNovember 19-20Berlin, GermanyFifth Trans Middle EastNovember 24-25Gulf International Convention &Exhibition CentreManama, BahrainGulf TrafficDecember 6-8Dubai International Convention&Exhibition CentreDubai, UAEKuwait Logistics ConferenceDecember 7-8KuwaitCILF China InternationalLogistics and TransportationFairDecember 9-11Shenzhen, ChinaThird Annual Defence LogisticsMiddle EastJanuary 24-27, 2010Abu Dhabi, UAEOctober 2009 The supply chain and logistics link 61

Side ViewWorkshop participants learning the art of arbitrationLearning mediationDubai’s DIAC holds first-of-its-kindarbitration training in the GulfIT is regarded as having consolidated theposition of an arbitration office in Dubaias a leading dispute resolution centre inthe Gulf region. It has affirmed as wellthat the Dubai International ArbitrationCentre (DIAC) is the main launch pad forarbitrators in alternative ways of settlingdisputes among companies based oninternational standards.That’s Dr Hussam Talhuni talking,referring to the “Practical Techniquesfor Handling Commercial Arbitration”,a three-day simulated training courseorganised by DIAC, in association withthe Centre for Transnational Law, at theUniversity of Cologne-School of Law, inGermany. The course, held here towardsthe end of September, was the first-ofits-kindto be done in the region.Talhuni, the director of DIAC, sayshis office is considering organising thesame course in Arabic for the benefitof arbitrators from Arab countries. Thejust concluded course used workshopand mock exams supported by videoscreening, textbooks and summarypapers. This allowed participantsto have a “realistic picture” of howinternational arbitration is practiced,under the guidance of well-experiencedprofessional, said the Dubai Chamber ofCommerce & Industry.Professor Klaus Peter Berger, ofthe Centre for Transnational Law,and Martin Hunter, professor ofInternational Dispute Resolution atNottingham Law School and chairmanof DIAC’s board of trustees, conductedthe three-day arbitration course. Thetraining covered the various methodsof starting the arbitration proceedings,how the applications are submitted andthe analysis of disputes based on theframework of international arbitration.Composed of lawyers, governmentofficials, business executives,advanced practitioners and otherprofessionals interested to learn theintricacies of commercial arbitration,the participants had the chanceto familiarise themselves with thedifferent techniques in global disputeresolution. They took turns in assumingthe roles of arbitrators, lawyers andthe disputing parties by arguing, doingcross-examinations and making verdictson various commercial disputes.An initiative of Dubai Chamber, DIACstrives to introduce the unique aspectsof international commercial arbitrationin Dubai, and promote the latest meansof resolving trade disputes outside oflegal courts. “[This] will go a long way instimulating the business environmentin the emirate,” Dubai Chamber said.Decisions made by DIAC arbitrators arehonoured in a number of states andcountries, which are signatories to suchan agreement.62The supply chain and logistics link October 2009

www.ccube.orgCOMING SOONTO SaUDI aRaBIa!Riyadh, KSA • January 2010DISTRICT COOLINGveNTILaTIONRefRIGeRaTIONTIaCFor enquiries related toconference, contact:B SurendarEditorial Director andAssociate Publisher, CPI IndustryTel: +971 4 375 6831GSM: +971 50 509 2457E-mail: surendar@cpi-industry.comFor enquiries related to sponsorshipsand exhibiting opportunities, contact:Frédéric PailléManaging Director andAssociate Publisher, CPI IndustryTel: +971 4 375 6833GSM: +971 50 714 7204E-mail: fred@cpi-industry.comFor event related information,contact:Deep KaraniEvent Manager, CPI IndustryTel: +971 4 375 6839GSM: +971 50 8585905E-mail: deep@cpi-industry.comSAUDI ARABIAwww.thegreenhouse.ae