Logistics business in the UAE: trends and prospects

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The geographical location of the United Arab Emirates, the country's infrastructure, and governmental support for logistics contribute to the development of the logistics business both domestically and as a transit point for international shipments. Trends and prospects for the development of the logistics business are associated with streamlining transportation routes for transit and customs clearance of goods.

Logistics in Dubai, UAE

As Dubai's economy grows and its global significance increases, the government of the Emirates supports the modernization of the logistics sector. Moreover, logistics in Dubai are optimized not only as auxiliary activities for the functioning of other market segments but also as an independent industry.

Additionally, global economic and political trends influence the development of the UAE's transportation network: the imposition of sanctions on the import and export of certain goods has transformed Dubai into an international transportation hub connecting the West and the East. This is particularly important for freight transport, which is carried out through various means:

  • Air transport: Suitable for all types of cargo (including dangerous and oversized), allowing goods to be transported over long distances in short periods. Depending on the distance to the customer, air freight from UAE warehouses takes about three to five days.
  • Sea transport: The longest type of freight transport, taking over two weeks, but significantly reducing transportation costs.
  • Road transport: Relevant for multimodal transport or domestic cargo transportation. Due to high transport accessibility, road transport allows for door-to-door delivery of consolidated and general cargoes. Despite the high cost of the service, this type is in demand in Dubai, where entrepreneurs prioritize improving the quality and convenience of logistics for customers.

After restrictions on the import of goods from Europe, many Russian companies use complex transportation schemes with transit through the UAE, with air and sea transport being the most popular methods. For example, goods are shipped to Russia from Dubai by sea to the ports of Novorossiysk or Saint Petersburg. However, regardless of the transportation direction, Dubai has well-thought-out transportation schemes that combine aviation and maritime hubs to reduce cargo transportation time and simplify customs clearance.

Dubai, Logistics - Freight and Passenger Transport

Logistics business in Dubai is one of the efficient sectors suitable for both novice entrepreneurs and scaling up transportation companies to enter the international market. This is due not only to the high demand for transit shipments and exports of goods but also to the need to ensure transportation within the region. Despite the pace of economic development in the UAE, associated with the industrial, technical, and innovative sectors, the tourism sector also plays a significant role. As Dubai develops all types of tourism (business, industrial, medical, etc.), transportation companies focus not only on improving service quality but also on increasing accessibility for various categories of citizens.

Transport optimization is a priority direction for the state support of the emirate, which is implemented within the initiative "Dubai - City of the Future." The government engages technical startups, scientific research, and venture funds in optimizing the sector. Special coworking platforms operate in Dubai, where developers can not only test transportation optimization ideas but also find a partner to implement their project.

Regardless of the business format and market entry stage in the UAE, opening a company in the logistics sector follows the standard scheme for the Arab Emirates and requires obtaining the corresponding license, which is issued for one year. Operating in the transportation sector in Dubai is characterized by several advantages:

  • Free economic zone: Company registration in the free zone provides entrepreneurs with a range of preferential conditions, including zero tax rates, the possibility of foreign management, simplified customs clearance, etc.
  • Logistics companies are exempt from paying VAT.
  • Multinationality: Allows attracting employees of different nationalities, each of whom will be responsible for a specific direction of transportation. This is convenient for dealing with the nuances of transit shipments through other countries and ensuring comprehensive goods control without language barriers.
  • Government support for the industry: The formation and development of the Dubai Logistics City in the free economic trade zone ensures high-quality international transportation through a unified trust of aviation and maritime communication. At the same time, the complex includes transit storage warehouses and procedures for attracting customs brokers.

Currently, Dubai is a major transportation hub that utilizes advanced logistics technologies and current trends to increase passenger traffic and freight transport. Therefore, entrepreneurs strive to enter the emirate's market to attract international partners and expand their businesses.

Prospects of the Industry in the UAE

Economic trends have propelled the United Arab Emirates to the top ranks of transportation hubs, transforming Dubai Logistics City into a full-fledged brand. State support for logistics in the country has allowed, for the first time globally, to integrate all types of international transportation into a single transportation structure, simplifying interaction with foreign partners and enhancing the efficiency of transit routes. Global optimization of cargo movement started in the country during the pandemic to expedite the transport of medicines between Europe and Asia, which subsequently allowed adapting the logistics scheme for commercial freight transportation.

Government initiatives stimulate the industry's development pace by envisioning the development of a distribution center and cargo clearance hub. The unified system within the aviation and maritime hubs simplifies all logistical processes, including transit cargo storage and the organization of multimodal transportation. Moreover, registering a business in the transportation sector involves several types of licenses depending on the specific type of company activity, structuring the sector's operations and facilitating regulation by relevant authorities.

When applying for registration of a transportation company, one can choose a license for customs brokerage, organization of warehouse storage, or for a specific type of freight transportation. Additionally, logistical activities are supervised by several government agencies, not only the customs and regional police but also local units responsible for transporting specific goods - food products, hazardous goods, or living organisms. To optimize the sector, an electronic platform has been launched in the UAE, gathering key carriers in the region depending on the type of goods, available methods of freight transportation, and the level of customer service.

Organizing freight and passenger transport in the United Arab Emirates is one of the priority directions for the development of the regional economy, as it simplifies trade interactions between foreign partners. The prospects for the development of the logistics business are primarily associated with optimizing Dubai's unified transportation hub and increasing the volume of international freight transportation due to the reduction of material and time costs for logistical operations in multimodal transport. Experts from The Level Consulting evaluate the effectiveness of the UAE's logistics scheme and also assist in launching a business in the transportation sector from scratch or through relocation and scaling.

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