While Dubai’s reputation as an important maritime trade and air transport centre is already well established, the emirate is also rapidly emerging as a leader in transport and logistics innovation. Dubai’s transport and logistics sector experienced strong growth in 2019, continuing to underpin the emirate’s wider economy. Much of the current investment activity in the sector is being injected into transport infrastructure projects for Dubai Expo 2020, which is expected to attract over 25m visitors. However, the local government is also considering the long term, and there is a strong pipeline of transport infrastructure projects planned under the Traffic and Transportation Plan 2030 (Transport Plan 2030), the emirate’s overarching long-term transport development programme, to expand roads, airport capacity and public transport routes. Dubai is establishing itself as a leader for pioneering transport innovation, as well as looking ahead to future transport challenges, with automated automotive solutions set to be rolled out in 2020.
Structure & Oversight
A number of nationaland emirate-level entities are involved the planning and implementation of development plans for Dubai’s transport and logistics sector. The emirate’s land transport is overseen by the Roads and Transport Authority (RTA), which was formed by royal decree in 2005 and has an overarching mandate to oversee Dubai’s taxis, buses, roads, parking, rail, automobile registration and licensing, and engineering works related to all types of land transport facilities. The authority is also responsible for maintaining traffic safety throughout Dubai and ensuring that it is well connected to its neighbouring emirates.
Other bodies currently involved in regulating the sector include the Dubai Maritime City Authority and the federal-level UAE General Civil Aviation Authority, among others. Additionally, key drivers of ongoing development and regulatory updates throughout the sector include major government-owned entities such as port operator DP World, Emirates Airlines and Dubai Airports, the organisation in control of operations at Dubai International Airport (DXB) and Dubai World Central (DWC).
Economic Impact
The transport and logistics sector sits alongside construction and hospitality as one of the main drivers of economic growth. According to the most recent estimates from Dubai’s largest bank, Emirates NBD, GDP is expected to grow by 3% in 2019 and 3.7% in 2020, largely underpinned by business, construction and real estate services, hotels and restaurants, and transport and logistics.
The transport and storage sector’s overall contribution to GDP at constant prices was $48.8bn, 12.3% of the total in 2018, making it the second-largest contributor. This marked a 2.1% increase, up from $47.7bn and 12.2% in 2017. Furthermore, in 2018 transport and storage was one of the top-performing economic sectors, accounting for 13% of total GDP growth. Expansion in the transport sector was aided by a slight increase in passenger traffic to DXB, which recorded some 89m passengers in 2018.
Apart from investment related to Expo 2020, Dubai’s broadening trade networks are expected to be a boon to the transport and logistics sector. The emirate is well established as a major regional and worldwide centre for exports, imports and trans-shipment, particularly of non-hydrocarbons goods. In the first quarter of 2019 Dubai recorded approximately Dh339bn ($92.3bn) in non-oil foreign trade, a 7% yearon-year increase from Dh316bn ($86bn) over the same period in 2018. Exports continued to register high growth, rising by 30% y-o-y to Dh42bn ($11.4bn), while re-exports grew by 7% y-o-y to Dh106bn ($28.9bn) and imports rose by 4% y-o-y to reach Dh190bn ($51.7bn). Air and sea trade accounted for 85% of the total, with both witnessing double-digit increases. Air trade was up by around 11% to reach Dh158bn ($43bn) and sea trade increased by 10% to reach Dh129bn ($35.1bn).
Investment
Transport Plan 2030 and the Smart Dubai innovation initiative are driving investment in the transport sector. The combined value of projects under these initiatives, including rail networks, marine ventures and aviation plans, is approximately $32bn, which creates a strong pipeline for contractors, in particular for logistics operators.
“Thanks to the increased momentum of Expo 2020 preparations, the logistics sector in the UAE – which, according to the 2019 Agility Emerging Markets Logistics Index, ranks first in the region and third globally – is witnessing a business boom,” Rodney Viegas, CEO of Dubai-based logistics company Abdul Muhsen Shipping, told a regional industry outlet in April 2019. “Other sectors have been observing slow growth,” he said. While much focus is being placed on preparations for Expo 2020, the roadmap for investment beyond this event is significant. RTA is planning to complete two other metro projects by 2025, adding 24 km of track and 12 new stations. It is also looking to expand the bus network from approximately 3800 km to 9006 km by 2030, and add over 4596 km of new roadway. A number of mega-projects are also well under way, with contracts worth $1.2bn signed in the first half of 2019. These include the 1200-km Etihad Rail contract, which will link the UAE to Saudi Arabia and Oman.
Road & Rail
With the opening of Jebel Ali Port in 1979, the emirate made its first major investments in road projects to support the port’s growing reputation as a gateway to the Arabian Peninsula. The emirate’s rail segment was formed in the mid-1990s when Dubai’s Ports, Customs and Free Zone Corporation commissioned a feasibility study on the potential for rail links within the region.
Today, Dubai has an extensive road and rail network connecting the emirate’s residential areas, ports, industrial sites and airports. The metro opened in 2009 and has 75 km of tracks, a figure set to increase by 15 km as part of ongoing infrastructure upgrades for Expo 2020. In 2018 over 600,000 people used the Dubai Metro, the most popular mode of transport in the city, with 36% of commuters. When complete, the Dh15bn ($4.1bn) metro extension, known as Route 2020, and the Expo Station will have the capacity for an additional 522,000 passengers per day.
Road expansions are also under way, and a series of flyovers, ramps and widened roads are currently under construction as part of a Dh630m ($171.5m) upgrade designed to improve access to Expo 2020. One key project is the construction of a six-lane bridge spanning 800 metres, which will allow smooth traffic flow to and from the Expo site.
Air
Since DXB opened in 1960, the emirate’s air traffic has increased exponentially. By 2000 DXB had an annual capacity of 23m passengers, a figure which rose sharply to 60m in 2008 following the inauguration of Terminal 3, then the largest airport passenger terminal in the world. In 2018 DXB saw just over 89m passenger arrivals, a number that is expected to increase to approximately 90m by the end of 2019. Flights totalled 408,251, down slightly from 409,493 in 2017. Additional passenger capacity has come on-line since DWC’s inauguration in 2013, and when major expansion of the airport is completed it is expected to see closer to 130m passengers per year. Design and timing for the second phase of the project is under review to ensure adequate capacity to accommodate long-term growth. This number is set to reach over 260m upon completion of future expansion stages.
The original estimated cost of the second phase was $36bn, but a number of delays have hampered progress. Currently, DWC receives a small fraction of Dubai’s international passenger arrivals. In 2018 the airport welcomed just over 900,000 passengers and hosted 10 passenger carriers, averaging 21 weekly flights to more than seven international destinations. DWC’s share of cargo traffic is more significant, however, and the airport, which is surrounded by a growing logistics cluster of warehouses and offices, was originally opened in 2010 to serve as a cargo centre for freighter flights. “DWC is developing into a significant cargo operations centre and is already in the top 20 for international freight volumes,” Lorne Riley, director of communications at Dubai Airports, told OBG. In 2018 DWC handled over 987,000 tonnes of cargo, compared to 2.6m at DXB. When long-term expansion plans are completed, DWC will reportedly be able to handle around 16m tonnes of cargo a year.
Ports
Dubai has long been a centre of maritime trade in the region and a key destination for vessels from around the world. In recent years, government investment in port infrastructure has continued to drive growth in both trade and logistics in the emirate. There are three seaports in the emirate, of which Jebel Ali is the largest. The port, owned and operated by DP World, is the world’s largest man-made harbour and the largest container port between Rotterdam and Singapore. Spread over 134 sq km of land and equipped with 67 berths, the port handles 11,000 vessels a year — around 30 a day — with a capacity of 19.3m twenty-foot equivalent units, making it the 10th-largest port in the world. “Regional competition for warehousing rivalling Jebel Ali exists across the GCC,” Geoff Walsh, country manager of DHL, told OBG. “However, Dubai remains highly competitive because it has invested heavily in warehouse automation and blockchain solutions for cargo,” he said. In addition to being one of the largest, Jebel Ali is also one of the most efficient ports, with an average of 131 moves per vessel hour, placing it ahead of more than 700 other global ports. While Jebel Ali experienced consistent growth in container throughput from 2006 to 2015, the UAE’s economic slowdown and global trade tensions between China and the US have negatively impacted cargo volumes over recent years. According to DP World’s latest available data, shipping container volumes at Jebel Ali and Mina Rashid, another of Dubai’s major ports, fell by 4.6% in the fourth quarter of 2018 compared to the same period in 2017.
“In the UAE, the softer volumes were due to the loss of low-margin throughput, where we remain focused on high-margin cargo and maintaining profitability,” Sultan Ahmed bin Sulayem, chairman and CEO of DP World, told local media. DP World is turning to further investment in innovation to ensure profitability in 2020, which expected to be a challenging year. The company has teamed up with German engineering firm SMS Group to develop a smart shipping container storage system that will be finished in time for Expo 2020. The system will store containers up to 11 storeys high, reducing surface area by a third and eliminating inefficient reshuffling through an automated system that has direct access to each container. Touted as faster, cheaper and safer than traditional methods of moving and storing containers, this innovative container storage system is expected to reduce the total cost of ownership by as much as 20%.
Urban Transportation
Cars remain the preferred mode of transportation in Dubai; however, the government has vastly improved the emirate’s public transport system over the past decade. Dubai’s vehicle density is one of the highest globally, exceeding that of some of the largest mega-cities. Average car ownership is 540 vehicles per 1000 people, ahead of cities like New York (305), London (213), Singapore (101) and Hong Kong (63). With no sign of slowing and an average annual increase of 8.2%, the numbers of cars in the emirate is expected to exceed 2m by 2020, up from 740,000 in 2006.
As a result, Dubai’s motorists are spending more and more time in traffic. International transport consultancy Inrix ranked the emirate the most congested city in the Middle East on their Global Traffic Scorecard, with motorists brought to a halt for an average of 80 hours in 2018. In addition, parking availability has not kept pace with the rising number of cars on the roads, with just 166,000 total parking spaces across the emirate, according to the RTA. Further compounding the vehicle density problem in Dubai, the RTA estimates that approximately 450,000 vehicles enter the emirate daily from neighbouring emirates. Therefore, despite Dh90bn ($24.5bn) in investment put into road expansion programmes from 2007 to 2017, which resulted in road network length increasing from 8715 km in 2006 to 13,594 km in 2016, traffic congestion remains a concern.
To combat this, the government has introduced various urban public transport alternatives. In addition to the metro, RTA’s integrated transport network includes a bus fleet of 2085 vehicles, a 14.5-km tram line, taxis and marine transport modes such as ferries. Public transport user numbers show strong annual growth, with daily ridership up by 50,000 from 2017 to reach 1.6m in 2018. Dubai Metro accounts for the majority of users of shared public transport, at 36%, followed by taxis (30%) and buses (29%). Under Transport Plan 2030, the RTA is aiming for 20% of journeys in Dubai to be undertaken via public transport by 2020, increasing to 26% by 2030. Through major investment in the metro and bus networks, the government looks well on its way to reaching this ambitious target, with the percentage of commuters using public transport expanding from 6% in 2006 to 16% in 2016.
Innovation
With an eye on the emirate’s burgeoning population, which is set to increase from 3.3m in 2018 to 5.2m by 2030, the government is looking to automation to ensure the long-term sustainability of the urban transport system. Under the Dubai Autonomous Transportation Strategy 2030, launched in 2018, the government aims to transform 25% of total transportation to autonomous mode by 2030. This change involves 5m daily trips, as well as saving an estimated Dh22bn ($6bn) in annual costs, positioning Dubai as a global leader in integrated and automated transport. In order to achieve this, the government is actively seeking companies and researchers to test and develop the latest advances in automated transport. Automated vehicle development and testing is an area in which Dubai is taking a lead role regionally. The emirate released a guidebook on automated vehicles in 2018, the first of its kind, and has entered partnerships with private players, including universities and ride-hailing companies like Careem, which will introduce a number of innovative measures. Some of the new initiatives include the development of futuristic driverless electric passenger pods and electric taxi drones which reportedly could be rolled out commercially as early as 2023 or 2024.
The government also aims to take the lead in the area of service digitalisation, largely through its transport arm. Emirates Transport, a government-owned transport services company which offers a number of services including logistics, vehicle rentals, driver training, vehicle maintenance and school transport, among others, has been rapidly digitalising its businesses. “The expectations of customer experience, safety, convenience and timeliness are constantly evolving and always need to be worked on and improved,” Michael Stockdale, consultant at government-owned transport services company Emirates Transport, told OBG. Emirates Transport recently introduced real-time apps that allow parents to track the buses that their children take to and from school. “Through the technology that we have been introducing, the parents are able to see where their children are at all times throughout their journey,” he said.
Smart technology is being integrated into transport networks to increase productivity and reduce costs. Conscious of capacity constraints and the limitations of expanding its runways, Dubai Airports is using technology and processes to increase efficiency and add capacity at DXB. “We have limited ability to build any other major infrastructure at DXB,” Riley told OBG. “It is a full airport, and in a practical sense, we cannot really build any further capacity, so we must look to increase it through process and technology,” he said.
In late 2018 Dubai Airports opened a new airport operations control centre, the largest of its kind globally, which will focus on harnessing data from DXB’s approximately 15bn data points to gain better operational awareness. Other measures implemented at DXB include the opening of over 70 smart gates, allowing passengers to pass through immigration in seconds, as well as larger baggage-sorting systems.
Outlook
In the short to medium term, ongoing government investment ahead of Expo 2020 is expected to drive growth in the transport and logistics sector until at least 2023. According to Emirates NBD, with thousands of contracts awarded to local and foreign logistics, cargo processing and transport companies, Dubai’s transport and logistics sector is forecast to grow by 5.5% in 2019 and 6% in 2020.
Plans are already established for the long-term development of the transport and logistics sector upon the conclusion of Expo 2020. Major government investments in public transport, including in the metro, buses and Etihad Rail are expected to meet the challenges posed by an increasing population and congestion concerns. In 2019 Dubai’s government and publicly owned transport companies established themselves as global pioneers, and leveraging new technologies will be key to ensuring sustainability.
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