Just over three decades ago in 1979, construction wrapped up on what was at that point an unprecedented project in the Middle East. About 40 km south of Dubai’s historical centre – in what had been a vacant sandy lot – construction teams were working to dredge what would become Jebel Ali Port. Now complete, it has become the largest man-made port in the world.

At the intersection of Africa, Asia and Europe, Jebel Ali certainly made business sense. But the project represented far more than a business endeavour. For Dubai’s leadership, it was part of a larger strategy to stimulate economic growth that moved beyond hydrocarbons. Recognising the emirate’s potential as a logistics centre, they invested cash on hand from oil and gas discoveries to safeguard long-term economic prosperity. Continued funding for port infrastructure, coupled with that for land and air infrastructure, have supported growth. These investments have allowed Dubai to build itself into a regional centre for logistics over time. Logistics, along with manufacturing and financial services, now makes up 40% of Dubai’s GDP.

Indicators show that Dubai’s transformation into a trade centre is progressing, with trade having seen significant growth in the past five years. Between 2006 and 2011, total direct foreign trade more than doubled, increasing from Dh316.4bn ($86.12bn) to Dh700.4bn ($190.6bn), according to data from the Dubai Statistics Centre. Although trade dipped by 20% between 2008 and 2009 due to the global financial crisis, it immediately bounced back. Strong growth in 2010 and 2011 has lifted trade numbers nearly 15% above their pre-downturn peak, a comeback largely supported by close connections with Asian supply lines. Developing Asia saw a growth rate of 7.8% in 2011, while the US and EU saw rates of 1.7% and 1.4%, respectively, according to the IMF’s “World Economic Outlook”. Maintaining close ties with high-growth areas could help keep logistics business strong in Dubai even during slower periods.

RULES & REGS: Although often overlooked, ever-evolving Customs rules have played an important role in attracting foreign trade to the emirate’s ports. Dubai Customs traces its history back to an ancient government tradition of Al furdha, a tax levied on all imported goods. As Dubai grew and modernised, so too did its Customs regulations. In April 2001 the government unified the Dubai Customs, Dubai Ports and Free Zone Authorities, creating the Ports, Customs and Free Zone Corporation (Dubai Customs). The corporation now tries to facilitate trade with minimal intrusion.

Integral to these efforts are ongoing improvements to Customs regulations. In early February 2011 Dubai Customs announced it would begin accepting duty-free temporary imports using the international ATA Carnet document. The system, which was started in 1963, allows the duty-free and tax-free import of items as long as they are re-exported within 12 months.

SPREAD THE NETWORK: The network of participating states has spread to 71 countries and territories. Merchandise covered includes commercial samples, professional equipment, and goods for fairs and exhibitions. The idea is to allow businesses to attend conferences, fairs and exhibitions without having to pay duties on materials they bring along. To increase adoption of the system, Dubai Customs has been continuing its work to inform businesses about the ATA Carnet. Progress has been made on streamlining the issuance of the document. ATA Carnet could do much to save money, reduce paperwork for Customs officials, and offer a boost to Dubai’s growing meetings, incentives, conferences and exhibitions (MICE) sector.

These and other Customs improvements in Dubai have not gone unnoticed by international stakeholders. The emirate’s Customs performance helped the UAE as a whole earn third place in the World Economic Forum’s “2012 Global Competitiveness Report”. The publication highlights the UAE’s ongoing Customs improvements in non-oil foreign trade – 80% of which is handled in Dubai. Because such a large proportion of cargo is processed through Dubai, more efficient Customs in the emirate can mean smoother trade for the whole UAE.

BIG DEALS: Even as trade volume in Dubai trebles, indicators show there could be a dearth of logistics investments in coming years. Foreign direct investment (FDI) in logistics peaked in 2008, but dipped in 2009 following the global economic downturn, according to data from FDI Dubai, a government agency.

After 2009 economies in Dubai and the greater UAE bounced back. At first logistics investments were proportional to rising GDP. That situation changed, however, between 2010 and 2011. At that time, logistics investments began to dip. Current indicators – a growing GDP, but tapering investments in logistics – hint that logistics services demand could start to outstrip supply in coming years, David Harris, FDI Dubai’s director of logistics investment support, told OBG.

To ensure adequate capacity in the future, there are a number of major projects under way. Among these is Dubai Logistics City (DLC), a component of the larger Dubai World Central (DWC) master plan. DWC, run by government-backed Dubai Aviation City Corporation, is an intermodal logistics project centred at DWC’s airport. Although still in initial stages, the project is set to include an aviation district, logistics district and residential district, creating a self-contained logistics hub.

DWC should help facilitate the transfer of goods between transport modes as cheaply and quickly as possible. To that end, DLC’s plan includes a dedicated trade corridor connecting Jebel Ali Port, Jebel Ali Free Zone and DWC within a Customs-bonded area. When finished, the project is set to give businesses access to over 6400 companies in the free zone.

Cargo throughput has seen significant growth at DWC, which opened in June 2010. The airport processed 89,729 tonnes of cargo in its first calendar year, and processed 164,757 tonnes of freight over the course of the first nine months of 2012.

FOREIGN INTEREST: There has been significant interest in the DWC master plan. Dubai-based Mohebi Logistics announced a Dh350m ($95.27m) investment for a new headquarters and logistics centre in DLC.

The company’s CEO signed a lease for a nearly 140,000-sq-metre plot there in February 2012. In addition to local players, multinationals such as Aramex, Kuehne + Nagel, Panalpina, INL, RSA and Hellmann- Calipar are already operating out of DWC.

In June 2012 Switzerland-based food processing firm Nestlé announced plans to begin building a Dh500m ($136.1m) manufacturing facility there for producing nutrition, culinary and coffee products. The 175, 000-sq-metre facility is expected to generate 800 jobs for the emirate’s economy. Nestlé’s aim in creating the centre is to increase its presence not only in the UAE but also across Middle East markets.

Yves Manghardt, the chairman and CEO of Nestlé Middle East, told OBG that, “We will continue to invest in projects that enable us to better serve consumers in the region, while also leveraging the strategic advantages of DWC and the UAE in general as a distribution and manufacturing base.”

As for the logistics and parcel delivery segment, Dubai has seen strong growth in recent years. The UAE is one of the fastest-growing markets for major operators like Deutsche Post’s DHL Express, which recorded a 10.3% year-on-year increase in its global revenues from $7.7bn to $8bn in the first half of 2012.

The UAE’s business-to-consumer (B2C) market has been increasingly important. A combination of factors has facilitated growth, including technological developments and growing online retail activity.

For Amman-based Aramex, which also has a major presence in the UAE, B2C has enabled its rapid expansion. “What Aramex did very well is they saw the B2C revolution, probably a lot quicker than everyone else,” Ken Allen, DHL Express’s global chief executive, told The National in August 2012. “They found a way to do it in the Middle East, which is not very easy.” ANYONE HOME?: One tricky aspect of B2C in Dubai has been making home deliveries, since the UAE does not currently use a uniform street address system. Logistics companies often make up for the lack of direct delivery with a strong physical presence in the form of branch offices that are easily accessible for customers.

Emirates Post, the UAE government postal agency, has been finding ways to overcome these challenges. Like other operators, the company offers its services a through network of branches across the UAE.

In February 2012, Emirates Post Group Holding, the parent company of Emirates Post, acquired the remaining 40% share of Wall Street Exchange, a currency exchange and money transfer company with offices in the UAE, the UK and Hong Kong. The postal operator had previously bought a 60% majority stake in Wall Street in October 2005.

With the latest acquisition, Emirates Post is set to expand the breadth of its services in Dubai and elsewhere. In addition to using its branches, the postal agency announced in late 2011 the roll-out of its personal post office box services. The programme allows customers to receive mail directly to their homes.

A RISING TIDE: In the wake of the global economic downturn, Dubai’s logistics sector has grown into a key driver in diversification efforts. By creating the world’s largest man-made harbour and two major airports, Dubai has also helped inspire a flurry of logistics investments elsewhere. Abu Dhabi is building up its Khalifa Port and associated industrial zone, Kizad, while Qatar is making progress on its New Doha Port Project. These projects, however, are not scheduled to reach their full capacities for a number of years.

In the meantime, Dubai’s Jebel Ali is set to remain the region’s logistics powerhouse. As new ports come online, they will likely help ease pressure from projected demand increases. “Growth in Abu Dhabi is complementing Dubai’s,” Harris told OBG. “Ten years from now, when Khalifa [Port] is up and running, it is going to offer capacity relief for Dubai. It is also going to boost business for Dubai at DWC, which is two miles away.”

Indeed, regional logistics investments could have positive effects on Dubai’s transport sector by increasing overall cargo volumes, boosting business for the emirate’s airports and building up the overall GCC’s attractiveness as a premier destination for logistics business.