Logistics industry jeopardised by political crisis

The political crisis between Lebanon and Israel could have serious long-term implications for the Middle East’s logistics industry.

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By  Robeel Haq Published  September 3, 2006

The growing political crisis between Lebanon and Israel could have serious long-term implications for the Middle East’s booming logistics industry, warns a recently published trade report. According to Middle East Logistics 2006, published by UK-based research organisation Transport Intelligence, the region currently offers some of the best opportunities in the world for international logistics companies. However, if the present conflict in Lebanon spreads further throughout the region, the future of the Middle East’s logistics industry could be seriously jeopardised. “Instability is bad for long-term economic prospects and could affect the investment plans of logistics companies in the region,” said John Manners-Bell, director, Transport Intelligence. “The Lebanon crisis must be seen in the wider context of relationships between countries in the Middle East, US and Europe. If more countries are drawn into the conflict, this could have serious repercussions for the Gulf States, and consequently the associated logistics industry.” Various countries in the Middle East have invested millions of dollars to develop their transport infrastructure, hoping to capitalise on the soaring demand for logistics services. However, the region’s political instability could weaken the return on investment, potentially to dangerous levels. Manners-Bell believes the cracks are already beginning to show in the logistics industry. “The vulnerability of the Straits of Hormuz, the main channel through which crude oil is moved to the West, already presents significant supply chain risks,” he said. “The disruption of the supply of oil to the West, whatever the reason, would represent a major set back to the Gulf’s investment plans. It would also inevitably result in foreign investors, be they banks or logistics companies, becoming less willing to commit resources to the region and logistics growth would be severely compromised.” However, according to Manners-Bell, the immediate region-wide threat to the express and logistics sectors has been limited, due to the size and socio-economic diversity of the Middle East. “At the moment, there has been little material impact on the Middle East logistics industry as a whole, as the powerhouse of the region, the Gulf States, have not been affected,” he said. “In fact, some logistics companies have actually benefited from the crisis, as there are large volumes of reconstruction and aid supplies now flowing into Lebanon by air, sea and road.” Most logistics companies in the Middle East have already implemented a contingency plan in case of political upheaval, which keeps service disruptions to a minimum. Although a number of industry players initially complained about backlogs at customs warehouses and disruption to travel infrastructures following the first round of bombings in Lebanon, the majority of cargo was promptly diverted, reaching their final destination with nominal delays. “The Middle East has always been plagued by risk, whether it is regional conflicts, internal disarray or governmental changes,” said Jeff Khoury, managing director of BALtrans Logistics in the Middle East. “Dubai, as a logistical hub, has successfully managed to ride through any of the storms that have brewed in neighbouring countries. On the contrary, Lebanon could provide an opportunity for Dubai, in terms of becoming a hub for the reconstruction of Beirut.”

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