Jordan calling

Capitalising on its stability and geography, the Jordanian government is turning the country, particularly Aqaba, into a logistics hub for the Levant.

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By  Neil Denslow Published  September 6, 2005

|~|Xavier,-George-----HGB-HOLD.jpg|~||~|Over the last few years, Jordan has undertaken a number of reforms to improve its attractiveness as a logistics centre. The country has cut through the red tape, encouraged investment, especially in Aqaba, and also allowed competition in the air transport sector. However, in many ways, its greater attraction is its location and political stability. “You can just look around the borders of Jordan, and see that it is the only sane place in a sea of trouble,” as Gerd von Mansberg, interim general manager of Transworld Airfreighters (Trafic), puts it. This stability has allowed Jordan to become one of the main gateways for the goods needed for the reconstruction of Iraq. The country has also developed a growing export market of its own, focused on pharmaceuticals, garments and agriculture. Combined, this two-way traffic has attracted a host of logistics companies to invest in the country, ranging from 3PLs building or expanding facilities, to all-cargo carriers, such as CargoLux and Trafic, launching services into or out of the country. However, Jordan has not just relied on its geography and stability. The Kingdom has also made it easier for logistics companies to do business there. It has, for instance, eased the process of registering a company and setting up operations, as well as cutting import and export red tape. “Jordan is a logistics-friendly country,” says Mohamad Shahin, Jordan country manager, Aramex. “In recent years, the government and the various authorities have been continuously exploring and implementing ways to simplify and ease all procedures and formalities, especially border and customs procedures for imports and exports,” he adds. This freer trading environment has also seen the country introduce open skies at Amman and Aqaba airports, which has expanded the air cargo capacity available in and out of the country. This is being further enhanced by the launch of private Jordanian airlines, such as Trafic, which are supplementing Royal Jordanian’s already sizeable cargo operation. “This company was unthinkable five years ago,” comments von Mansberg. “The reason it happened was because Royal Jordanian could not keep up with demand and it could not offer the market sufficient space to grow exports.” Trafic is already flying regularly to Iraq, and it has also signed a codeshare deal with the US cargo carrier, Evergreen International, which gives it direct access to America. In the near future, the Jordanian airline is also planning to launch services to Sudan and Turkey. “Iraq is our mainstay, our bread and butter, but we are lessening our dependence on that market as we speak,” says von Mansberg. At present, Trafic flies out of both Amman and Aqaba, but it is planning to eventually switch all of its services to the later. This is in line with the wider development of Jordan’s logistics sector, as the country is heavily investing in developing Aqaba as a regional hub. Situated at the northern tip of the Red Sea, Aqaba is Jordan’s only major seaport. It is the centre of the 375 km² Aqaba Special Economic Zone (ASEZ), a free zone that was established in 2001. The ASEZ also encompasses a number of tourist developments, the King Hussein International Airport and the Aqaba International Industrial Estate, which has been designated as a Qualified Industrial Zone (QIZ) by the US government. This means it offers duty free and quota free access for goods heading to America. The Jordanian government is encouraging companies into the ASEZ by offering a host of tax breaks and simplified processes. The private sector has also been offered a role in running key operations in the ASEZ in order to attract investment and improve efficiency levels. The consultancy firm, BearingPoint, for instance, heads up an international consortium managing the Aqaba Development Corporation (ADC), which owns Aqaba’s ports and airport, as well as various other pieces of land. ADC’s mission is to develop Aqaba as a logistics and business centre, and its responsibilities also include finding international partners to build or run other facilities within the free zone. “ADC’s development philosophy is to seek to partner, rather than compete, with the private sector,” explains Nasim Al Ahmad, the corporation’s vice president, transport & infrastructure. “We are also simultaneously packaging strategic real estate development projects, as well as creating the critical economic and social enablers essential to stimulating the competitive growth of Aqaba,” he adds. For instance, two years ago, ADC awarded a management contract for the Aqaba Container Terminal (ACT) to Denmark’s APM Terminals. The port has subsequently seen a surge in traffic; the number of containers handled in 2004 was 358,723, over 30% more than was handled 2002. A further 15% growth is expected this year, as 21 shipping lines now serve the port. Efficiency levels have also been raised with berth waiting times falling by 50% over the last 12 months. Handling will be improved further early next year as well, when six RTGs, each with a capacity of six containers, enter service. ||**|||~|Xavier,-George-----HGB-HOLD.jpg|~||~|Following the success of the ACT deal, ADC has also recently issued tenders to run the air cargo terminal at the airport and the container logistics park. The contracts for these deals are expected to be awarded by the end of the year. Other tenders are likely to be issued in the coming months as well. “The strategies and bid packages for private sector participation for a number of opportunities are now being finalised,” says Al Ahmad. “Projects at the port expected to be tendered by October include the oil terminal, the industrial bulk terminal, marine services and a new passenger/freight ferry terminal.” The ADC and the wider liberalisation drive have also made it easier for companies looking to set up operations in Aqaba. PWC Logistics, for instance, recently opened a new 15,000 m² warehouse in the free zone, and the company’s Jordan general manager, Hani Rabie, says it was a straightforward process. “Doing business with these guys [ADC] is quite a pleasure,” he says. “They went out of their way to facilitate things and to make everything possible.” Despite the development of the Aqaba free zone, challenges still remain for Jordan and its logistics sector. One of the most noteworthy, security problems caused by neighbours’ instability, was highlighted last month, when a missile fired at a US warship in Aqaba port missed its target and destroyed a warehouse instead. However, ADC argues that the missile only had a limited impact. “The incident had very minor effect on the business and living environment in Aqaba and the rest of the country,” says Al Ahmad. “Of course, the proper security measures were also immediately implemented and the situation was contained on the spot.” “Furthermore, a major agreement was signed just two days later between the Aqaba Development Corporation and Al Baddad Aircraft Company [part of the Al Baddad International Group] to set up a [$15 million] aircraft maintenance centre… This provides clear evidence of the ineffectiveness of this malicious attack on investments and tourism inflow into Aqaba,” he adds. The maintenance centre will specialise in Russian-made aircraft, which are often used for services into Iraq because of their self-loading capabilities. However, the fact that Western aircraft are not part of the business plan reflects Aqaba limited air links with the wider region and the rest of the world. These are starting to improve. For instance, a private passenger carrier, Jordan Aviation, has recently launched schedule services to Dubai. Royal Jordanian is also soon to use its mainline aircraft out of Aqaba rather than its Royal Wings regional fleet; however, in general, the Aqaba airport is much quieter than Amman airport 300 km to the north. “There is a good airport [in Aqaba], and they have a good cargo facility there, but it is not well utilised yet,” comments Rabie. This limited service cuts down on the potential to use Aqaba for the kind of sea/air traffic that Dubai is targeting with the Jebel Ali airport, as goods have to been driven to Amman before they can be put on a flight. This is creates additional cost and complication, particularly as Jordan does not have a well-developed road haulage industry using its excellent road network. “The land transport sector is underdeveloped with minimal corporate investment,” notes Shahin. “Most of the fleet is owned by individuals and it is relatively old, so there needs to be considerable changes to the land freight sector to allow for a more efficient supply chain.” Jordan’s logistics sector also suffers from a lack of industry knowledge and skilled managers. The country’s universities are producing well-educated graduates who will be able to develop these skills in the years ahead, but there is a shortage of experienced Jordanian logistics professionals ready to run operations now. “You do not have a pool of expertise,” comments von Mansberg. “There is a lot excellent aviation people, flying crews and so on, but when you want somebody that understands the commercial side of the cargo business, those people are just none existent… The cargo community is just too small for that,” he says. Recruiting expatriate staff is also not an easy fix for this problem, as Arabic is the language of everyday business and English is as not widely spoken among unskilled workers. “There is a language barrier issue,” says von Mansberg. Jordan’s logistics bureaucracy is also still heavily reliant on paper documents. This paperwork has been greatly simplified in recent years, and exporting and importing goods is easier in Jordan than in many other countries in the region. However, the lack of technology in the supply chain and government offices does slow procedures. For instance, it is impossible to pre-releasing goods at customs by computer. “From a technology point of view, Jordan is a few steps behind, so things do take a little longer,” says von Mansberg. Companies operating outside of the transport sector in Jordan also have a limited awareness of the importance of logistics to their operations. This partly reflects, an is reinforced by, the low level of skills training in the country, as there few senior managers making the case for improving their companies supply chain management. “In the country in general, the standard of the logistics function is very low,” comments George Xavier, logistics manager of HBG Holdings, which owns the Amman-based FMCG distributor, Spinneys Jordan. “They just perceive it as moving boxes, and [logistics departments] just see their job as receiving a container, unstuffing it, loading it in a truck and then sending it on.” However, there does some to be some growing awareness of the advantages of outsourcing logistics, as 3PLs are seeing this as a key growth opportunity. PWC, for instance, has three or four clients, including Jordanian companies, preparing to use into its Aqaba facility, and Aramex reports similar trends. “We are witnessing growth in outsourcing services, specifically in warehousing, as companies are opting more and more to concentrate on their core competencies,” says Shahin. Such a move suggests that Jordan’s wider economy is being to learn from the government’s decision to focus on logistics and the transportation sector. These national efforts have seen the country’s entrypoints become important gateways for the wider region. It therefore seems only appropriate that the country’s own companies and supply chain should benefit from these developments as well. ||**||

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