2.3 MILLION SQFT OFFICE SPACE

Dubai 2020 | TRANSPORT | VIP INTERVIEW

TBY talks to Mohsen Ahmad, CEO of Logistics District – Dubai South, on the Dubai Paperless Strategy, foreign investors, and improving services in the facility.

How has Dubai led by example on the global stage in terms of logistics?

Dubai has led by example with regards to logistics on the global stage due to several factors. The most prominent include the Emirate's strategic location and the contributions of DP World and Emirates Airlines – both key market players based in Dubai that connect Asia and Europe through a broad scope of operations. As the logistics sector has developed and expanded in the last two decades, DP World and Emirates Airlines have used more routes over longer distances and invested heavily in technology and human capital; contributing significantly to the competitive and sustainable logistics sector we now have. As the market has transformed, shipment sizes have decreased while shipments themselves have become more frequent; emphasizing the flexibility of the logistics sector to promptly respond to changing markets demands while continuing to deliver world-class services. Furthermore, Dubai has established itself as a world leader in logistics through the continuous successful construction of world-class infrastructure such as seaports and airports. Looking ahead to the future, the main challenge for the logistics sector will inevitably be soft infrastructure and we are already seeing significant changes in terms of laws and regulations throughout the UAE. Dubai will, however, still present many opportunities for employees, organizations and investors alike; with several exciting new initiatives and expanding trade and diplomatic relations with Africa set to contribute greatly to regional growth. The scope of markets that Dubai serves as a hub continues to expand, particularly in terms of connectivity, and the Emirate is aiming to secure more opportunities as part of the Silk Road, in line with the determination to achieve growth instilled in our society through the vision of the wise leadership. Additionally, the adoption of e-commerce and our partnership with Amazon will present even more opportunities within the logistics sector.

How is Dubai South's Logistics District pioneering technologies and digitalization?

Digitalization is among our top priorities as the Emirate transitions to paperless operations as part of the Dubai Paperless Strategy, in line with the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, to transform Dubai into a fully-fledged smart city. We are upgrading our entire IT system with our own ERP software so Dubai South has integrated applications to manage the business and automate all functions related to technology, services and human resources; and we are coordinating with our partners to share data and streamline processes when we complete the transition.

How is e-commerce changing demand and shifting strategic priorities for Logistics District?

e-Commerce is changing demand and shifting strategic priorities for Dubai South's Logistics District through EZ Dubai – a unique project launched by HH Sheikh Mohammed that has facilitated a whole zone dedicated to electronic commercial transactions on the internet. We have created a positive environment through this platform where less well-known entities and entrepreneurs have access to e-markets such as Amazon. e-Commerce also comprises many multi-channel retail organizations, a prominent example being Marks and Spencer, who still do retail but also have online operations; and includes several elements ranging from large fulfilment centers to last-mile deliveries. Consumers no longer have to go to a mall to pick things up because the industry has become digital and, although 30%of goods are returned on average, the advantage and demand of faster inventories have shifted our strategic priorities.

What developments are happening within transport in Dubai South and how is Logistics District capitalizing on those advancements?

We recently launched a program dedicated to technology and sustainability within logistics and supply chains, in partnership with the University of South Wales. This also promises to be an important initiative as mobility and sustainability are two key themes of the upcoming Expo 2020. Logistics contributes 14% of global CO2 emissions and we need to explore different avenues that will allow us to address the challenges we are facing. We have begun implementing several initiatives in relation to sustainability and there are many more still to come in the years ahead. We are in the process of automating all our processes, despite its many challenges, and we have hired a company to take all our plastic bottles and make them in threads that can then be made into t-shirts for export. Our clients are also adopting similar trends to achieve sustainability and Aramex has launched 10 electric vehicles that are charged directly from solar panels and capable of making 200km delivery runs after a one-hour charge. These vehicles do not require fuel and Aramex aims to have sustainable transportation for all their delivery goods by 2021.

How does Logistics District plan on leveraging the exposure expected from Expo 2020?

Expo 2020 is part of the entire community and many activities associated with the event will contribute to the overall theme of Dubai South. The project was initially called Exhibition City, and this progressed into the bid for Expo when the government brought in Dubai World Trade Center. Winning the Expo bid changed the dynamic as road networks and transport linkages had to be reworked. Looking ahead, the potential extension of Dubai Metro to our office location could provide tangible benefits for us because of the exposure of Expo 2020.

What is your vision and what are the strategic priorities for Logistics District moving forward?

Our efforts will be aimed towards technology and sustainability moving forward. There will be much less demand for labor as the UAE moves closer to automation in terms of warehousing and robotics. China has already made the transition, with their operations expanding all around the world to countries such as Vietnam, Africa and Mexico. I recently met two professors from MIT and Harvard, and we discussed why Dubai has not become automated in terms of warehousing and robotics. The main challenges are labor being cheap most warehouses still being operated by third party logistics (3PLs) companies, which are not best able to invest in robotics. As a 3PL, flexibility is important due to the frequency of contract turnovers. That being said, cargo owners should be making investments moving forward and they can start by putting in place their own facilities, embedding innovative technologies and bringing in the 3PLs to manage the facilities. The reason they have not done this to date is because the warehouse is a minor item in their P&L calculations, essentially meaning automation is not a priority. In the month and years ahead, technology, sustainability, and e-commerce will be integral as we make the transition.

How is Business Park using the synergies of Dubai South and complementing the Logistics District?

Comprising 11 buildings with a total of 2.3 million square feet of office space, the Business Park fully complements the entire 145-sqkm Dubai South project. The park is carefully designed to facilitate the growth of every business, from startups to small and medium enterprises (SMEs) to multinational corporations (MNCs). With complete turnkey business services and cost-effective office solutions, the Business Park is aligned to suit global business needs. Dubai South itself is the emerging face of Dubai. Its main components are the airport and two free zones: one for aviation and aerospace and the Logistics District. The Mohammed bin Rashid (MBR) Aerospace Hub focuses on turning the region into a hub for general aviation, both fixed-base operations and maintenance and repair. The Logistics District, on the other hand, is meant to support Dubai's focus on trade and logistics and to develop a district that will link Jebel Ali Free Zone with the airport. There are many players from different scales here, from MNCs to SMEs and start-ups. Most of them do not need to operate from a warehouse in the Logistics District or in a facility in the MBR aerospace hub. All they need is an office space. This is where we factor in as the Business Park, giving these companies space from which to operate. In the aviation sector, we cater to private charter companies. There is a big market here for new and used parts traders, drone's technology, aviation management, air cargo, as well as aircraft sales and refurbishing. The entire MENA region is accessible from Dubai within six hours. Logistics works similarly to the aviation sector. Agents in shipping industries do not always need warehouses; they can work from their offices where everything is online. The Business Park bring together all these players in several industries to create large-scale business opportunities.

What is the breakdown of investors in the Business Park?

About 25% of investors in the Business Park come from outside of the region. As part of our commitment, we help them minimize the risks and promote sustainability in their respective business activities. We cater to a range of businesses across different industries, from marketing consultancy specializing in logistics to start-ups and MNCs involved in technological innovations.

What features do you offer to facilitate activity and attract companies to Business Park?

In terms of soft features, we have worked with the government to come up with four different products and solutions to optimize growth potentials. We also consult with business councils and country delegations to support companies from their own countries. We help them establish a company as well as network with the right people and institutions once they are here. We invite investors from different parts of the world to establish a networking office here at no cost. We want people from abroad to hear about the positive experiences of investors who have entered the local market. Another feature is the dual licensing service. Many companies have two registered offices in Dubai, one within a free zone and another is a mainland office outside the free zone for all their GCC operations and sales. At Dubai South, companies can keep their two registrations but under one location which is an integrated solution through dual licensing. This is significant because dual licensing has long been demanded by free zone companies and entrepreneurs who are interested in operating multiple enterprises across the wider UAE market. Dual licensing allows businesses to explore multiple avenues at the same time, thus enabling entrepreneurs to take advantage of various benefits offered by both free zones and mainland business models, as well as save on costs and efforts as a result of tapping on this solution. There are already about 10 companies that have utilized this advantage, and their savings were about AED1 million (USD272,260) and above annually. This advantage drastically reduces the cost of facilities rental, its utilities, visa administration and licensing. Organizations consider the budget and costs implications. For example, the attractive advantage of free zone employment visa on cost (less by 35%) and term (three years instead of two) is a great pull factor. We aim to attract more companies related to aviation and logistics and provide them with quality support. Being an entrepreneurial hub, 20% of our customers in Business Park offices are upgraded customers from our business centers. Their business is growing, and they have been moving with us to bring their companies to the next level. To date, we have achieved 88% customer retention. Our rent or fees for the past four years have also remained the same and our plan is not to increase anything. Together, we are meeting our targets, and we want to continue to grow with them.