UPWARDS & OUTWARDS
Comprising 6.4% of GDP, the transport sector is an indispensable cog in the local economy, and as business incentives grow, logistics, aviation services, and the quality of staff have come into focus.
With access to the Arabian Gulf and the Indian Ocean, as well as a direct link to Dubai, Sharjah looks set to be the next big transport and logistics market in the GCC. In coming years, the value of the local transportation sector is forecast to increase by the billions. According to Shurooq, Sharjah's investment authority, the value of transportation activity in the Emirate could reach AED1.82 billion in 2015 and AED2.06 billion in 2016. As the sector continues to attract global attention and more SMEs choose to operate out of Sharjah, transportation may be valued at up to AED3.43 billion by 2020.
Taking advantage of its prime geographic location—nestled between the other Emirates of Dubai, Ras Al Khaimah, Ajman, Umm Al Quwain, and Abu Dhabi—Sharjah has already developed world-class road infrastructure for logistics on land. However, its three deepwater ports and international airport handle the majority of cargo to and from the Emirate, making it a key hub for transport links from Africa, Europe, and Asia to the Middle East.
As part of a wider economic diversification program, the government is also incentivizing investors to participate in the transportation sector by reducing operating costs with free zones and a transparent legal system. Combined with a less saturated market and overall faster shipping times, it comes as no surprise that Sharjah-based companies are contributing more than 9% of the UAE's foreign trade.
Just 15km away from Dubai International Airport, and closer in distance and time than Al Maktoum, Sharjah International Airport is transforming itself into an optimal choice for SMEs operating in both the cargo and passenger transport segments. The airport is home to locally kept aircraft, a convenient stopover for refueling or FBO services, and a stepping stone for business and leisure travelers continuing on to Dubai.
In recent years, passenger and cargo numbers have shown favorable growth. In 2015, over 10 million passengers passed through the airport, representing a 5.5% increase from 2014. In YoY terms, there was a 12% increase in passenger traffic in 1Q2016, with even higher growth predicted for the end of the year. Meanwhile, air freight demand was projected to reach AED1.28 billion from 2012 to 2016. “Sharjah International Airport is expanding and growing; there are many attractive areas for foreign investment in general aviation, aircraft maintenance services, aircraft hangars, and other aviation activities," HE Ali Salim Al Midfa, Chairman of Sharjah International Airport, told TBY.
The airport is known for its efficient procedures, excellent services and facilities, and its strategic location, but the potential for growth as aviation companies tap into new segments of the air transportation market is what makes it an increasingly attractive base for SMEs. The support of the Department of Civil Aviation and the Sharjah Airport Authority has also helped attract investors that can not only benefit from the opportunities of working at an up-and-coming aviation center, but also contribute positively to Sharjah itself. Gama Aviation, an FBO provider operating in four locations worldwide, has capitalized on the opportunity. “It is a win-win situation," Martin Ringrose, Managing Director of Gama Aviation Middle East, told TBY. “We have taken [the airport] from a position where there was no business aviation here, to becoming a thriving business hub… also bringing new business to the other suppliers here."
A smaller scale of operations means a friendly, welcoming atmosphere for new companies and SMEs, many of which have found Sharjah an ideal place to conduct customized business in niche segments. “Though volumes of our operation are smaller, we are focusing on providing personalized service and tailored solutions to our customers and that is how we gain their loyalty," Saleh Al Aroud, Chairman of Rus Aviation, told TBY. Medium-sized companies like Rus Aviation have taken advantage of the potential in Sharjah by having full control of cargo handling from acceptance until departure. Having grown in parallel with the airport, Rus Aviation also enjoys the support of the Sharjah Airport Authority, and serves all the national carriers, including Etihad, Air Arabia, and Emirates. Now the company is looking to expand beyond the borders of the UAE, having signed an agreement with Etihad Rail and plans to expand its volume to the wider GCC.
Another key element destined to boost success in the air transportation segment has been the creation of a free zone within the airport. Setting up in the Sharjah International Airport Free Zone (SAIF ZONE) means less costs, efficient and straightforward customs processing, and accessibility to local government offices, maritime cargo connections, and the airport itself. Established in 1995, SAIF ZONE has a 24-hour licensing service, allowing businesses to be up and running quickly, and giving Sharjah a leading edge in the region. “We like the competitive advantage of being in Sharjah," Dr. Pirouz Hamidian-Rad, Chairman and CEO of Emir Aviation Services International FZC, told TBY. “[We] will continue to develop here with support from a conducive development strategy for the aviation sector." Over 5,500 companies are already based in SAIF ZONE, including global manufacturing, media, trading, and IT firms.
While plans for an integrated GCC railway is still in the works, land transportation to and from Sharjah still depends on road infrastructure, supported by three main deepwater ports: Port Khalid, Khor Fakkan, and Hamriyah Port. All three are managed by government-sanctioned Gulftainer, the largest port operator in the Middle East. As cargo increases faster than the ports can keep up, and expansion is limited by geography, the main challenge for Gulftainer in Sharjah is to increase the efficiency of its operations and make better use of the space available. “There are still big margins to improve productivity," Flemming Dalgaard, CEO of Gulftainer, told TBY, adding, “We have been using our existing space more efficiently. You can grow without expanding physically, and that is what we have been doing."
Port Khalid is located in Sharjah's city center, a mainstay of the Emirate's maritime and commercial industry for thousands of years. Since then, the port has become the first in the region to establish a container terminal, a Ro-Ro terminal, and a free trade terminal. Its other main features include a cold store with 5,000 tons of public capacity and 3,500 tons of private capacity, as well as six 4,600-sqm warehouses and five 7,200-sqm warehouses. Meanwhile, Khor Fakkan is located outside of the Strait of Hormuz and along the main east-west shipping route, and is the region's only natural deepwater port. It boasts the capacity to handle up to 5,000,000 TEUs per year. A few kilometers away lies Hamriyah Port, which exports petrochemicals and general cargo from its two container terminals, of 14m berth.
To maintain these three ports, Gulftainer places a focus on staying up to date with the latest equipment, technology, and workflow concepts. It also remains independent from financing institutions and larger shipping lines in order to be able to provide exactly what customers need. “We will tailor our products and services to meet those needs and deliver the best possible service, because we do not need to align those interests with the interests of other stakeholders. We are able to focus entirely on the customer," Dalgaard emphasized.
Recognizing that the UAE is a gateway for transhipment from East Africa, India, and beyond, Gulftainer sees Sharjah—with its free zones, transparency, world-class infrastructure, and quality control—as the ideal place for logistics SMEs to set up, benefitting from the overflow in other parts of the GCC. In response, Gulftainer has invested heavily in the Emirate, setting up its subsidiaries Momentum Logistics and Avalon Logistics to cover warehousing, trucking, custom clearance, and container repair. In total, Gulftainer provides 3,500 jobs.
The nascent transportation sector in Sharjah has led many operators to launch sophisticated human resources development programs, designed to further enhance the services that the Emirate can provide. Both Gulftainer and Rus Aviation highlighted the need for highly qualified and expertly trained staff during interviews. “We are now putting together a plan to invest more in our human resources; it is important to continuously train in the airline industry and we have trained a lot of our personnel," Rus Aviation Chairman Al Aroud told TBY. Gulftainer, too, sees an increase in capacity as one of the key building blocks for the future of transportation in Sharjah. In an interview with TBY, Gulftainer's Dalgaard explained, “We want to grow and expand, but our priority is to give the best possible customer service, and you need the best people to do so."