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Al Maktoum International milestone for global logistics chain

The inception of operations at Dubai World Central 's Al Maktoum International , the new airport of Dubai, on 27 June, might come to represent a milestone for the global logistics chain, with implications stretching far beyond the Arabian Gulf.

The process of ever closer economic integration among distant regions which is synthetically referred to as 'globalisation' is propelled by two main engines: telecommunication and logistics. The former has attracted most attention because it impacts billions of lives through cellular phones, internet and satellite TV. But the latter has been equally momentous. By virtue of an impressive drive to standardise, connect and integrate procedures and physical handling of thousands of transport operations across industries and continents, the economies of distant areas can exploit synergies unthinkable two 
decades ago.

The history of civilisation is intertwined with connectivity and developing linkages. Until the 18^th century waterways were a key factor for the location of cities and economic activities. Over the next century the development of road, and later railroad, networks harnessed large remote regions into the first wave of globalisation. In the 21^st centuries airports will be the main driver of business creation, urban growth and global economic integration. 'Aerotropolis', a neologism attributed to Prof. John D. Kasarda describes conurbations of residential and business activities sprawling around
 major airports.

At the heart of today's logistics revolution lies the integration of transport modes which has boosted economies of scale and economies of networking. The opening of Dubai World Central will bring this progression to new heights. Dubai has ridden the wave of this transmutation, becoming in a very short time one of the pivotal trading & tourism hubs in the world. Located mid-way between Asia and Europe, along the ancient Silk Road, its ports and airport are among the most active and efficient in the world. Phase 1 of DWC will comprise one runway that can accommodate the new class of jumbo aircrafts like the A380, 64 remote stands, one cargo terminal with annual capacity for 250,000 tonnes of cargo and a passenger terminal building designed to accommodate 5 million passengers. When completed, possibly around 2020 (with an investment officially expected to top $33 billion), DWC will have an annual cargo capacity of 12 million tonnes, three times that of Memphis International Airport , today's largest cargo hub, and a passenger capacity estimated between 120 million and 160 million. More importantly the new airport is linked seamlessly through a Logistics Corridor to Jebel Ali Port -- including its Free Zone -- and provides immediate access to a highway network extending from the Indian Ocean and the Arabian Gulf all the way to the Mediterranean, (and in the not so distant future to an Arabian Railroad System). Containers will be moved from ships to cargo planes in less than one hour, faster than anywhere else in the world. Actually there is no other sea-air logistic hub, with comparable performance, size and available surrounding space, nor is there planned in the 
foreseeable future.

The benefits of DWC for Dubai and the wider region will not be confined merely to its transport capabilities however impressive they might be. They will be spurred by what we call the connectivity multiplier.

Trade liberalisation and globalisation have fundamentally transformed the business model and the intrinsic nature of many multinationals. Companies such as Nike, Nokia, Apple, Dell, Benetton, are essentially focusing on managing their brand and their logistics network, decentralising and synchronising production around the world. DWC will be a natural magnet for multinationals delivering time-sensitive items and customized products. They in fact must locate in close proximity to logistics hubs because connectivity, speed and reliable delivery represent their fundamental competitive edge: having the right thing, at the right place, at the right time. And it is not too farfetched to predict that throughout the first part of the 21^st century logistics will become increasingly pervasive in all industries. Dubai thanks to state of the art logistics facilities, a geographical position which allows it to reach 2 billion consumers within 4 hour of flight and a time zone that overlaps with those in Asia Europe and the Americas has a unique appeal.

In order to fully exploit these advantages, together with infrastructure Dubai must face additional challenges involving institutional and organizational capital. Connectivity is not merely a matter of physical links, but requires facilitation within and across borders, efficient processing of documentation, permits, fees payment, i.e. the seamless integration of private sector logistic chains with public sector functions. In other words, to fully exploit its infrastructure, a logistics hub must be universally recognised as a place where the environment is business-friendly, and the regulatory and legal framework is transparent, hidden costs are minimal and cross border operations are transparent, swift 
and synchronised.

By addressing these issues Dubai could become the quintessential Aerotropolis serving as a model for a new generation of logistic hubs with full integration of supply, manufacturing and distribution, uninterrupted flow of goods and materials, 24 to 48 hour delivery anywhere in the world, total asset visibility throughout the pipeline, real-time asset control across the globe. Importantly it will be the basis of a New Silk Road, connecting a MENASA region that has been sidelined in the global economy.

(Dr Nasser Saidi is a Chief Economist at DIFC and Fabio Scacciavillani is a Director- Macroeconomics & Statistics, DIFC.)

By Dr Nasser Saidi and 
Fabio Scacciavillani

© Khaleej Times 2010