GCC members to solve cross-border issues by creating logistics company

Talks are underway among members of the Gulf Cooperation Council (GCC) –Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates – to establish a joint integrated logistics company.

Although a feasibility study is currently underway, according to reports, each country will have equal share in the company which is expected to begin operations by the third quarter of 2014. This logistics company will be based on a public-private partnership (PPP) model and will have offices in each of the member countries. It will focus on road transport, customs clearance, visa issuance and insurance and rail services may also be included once the GCC rail network begins tentatively set for 2017.

According to an article published in October, the proposed company would regulate the activities of companies and institutions involved in the GCC transportation sector. The secretary-general of the GCC’s federation of chambers noted that the proposed company would not compete with other logistics companies operating in the region but instead will determine how to remove obstacles. According to the secretary-general, “Investors in the transport sector need to address obstacles such as slow customs procedures, delays of trucks at border crossings and lack of standardized sampling and inspection arrangements. There is also inadequate technology in loading and unloading operations, poor infrastructure, high transport costs and the absence of services staff on a 24-hour basis at border points.”

Indeed, according to a recent survey conducted by Barloworld Logistics, respondents indicated that they face several constraints in expanding operations in the Middle East among which includes inconsistent cross-border trade rules within the region. Another concern is constant changes in government rules and regulations.

By creating such an entity focusing on the six member countries, it is quite possible that these issues and perhaps others may be resolved. However, questions such as fees, processes, standards, regulations and so on will need to be agreed upon. As such, there are more questions than answers at this point as discussions continue and the completion date of the feasibility study has not yet been made public.

Perhaps this may result in a consolidation in the fragmented domestic road freight market? Perhaps it may increase investments by international logistics providers? Implications for logistics providers also remain unknown. However, interest in the region is high as companies continue to invest and expand their operations within the region. For example, TNT Express recently announced that it had begun construction of its new road and air hub at Dammam’s King Fahd International Airport (KFIA) in Saudi Arabia. According to the company, the new facility, will enter service by January 2015 and will provide for customs clearance efficiency and speed.