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 / Autumn 2007 / Issue 48(originally published by Booz & Company)


Paving the Silk Road

Regional Logistics and Distribution Hub. Ideally, this could act as a distribution point for goods throughout the area immediately surrounding the Middle East. Such hubs need not be as large as a global hub nor accommodate as great a range of vessels, but the quality of services and processes must adhere to the same high standards. The infrastructure must simultaneously provide good connections to global hubs and exporting countries as well as excellent links to neighboring regional markets. This requires appropriate overland connections within the region, as well as a port infrastructure for smaller ships. A regional hub does not have to be multimodal but instead could simply be an airport or seaport in a strong trade lane. A few traditional gateways to the Middle East, such as the Nile Delta, the Red Sea ports, Kuwait’s coastal area, and the northern shores of the Persian Gulf, could develop into regional hubs.

Domestic Transport and Logistics Services. Finally, if a country cannot meet the needs of a global or regional hub, its government could focus on the development of do­mestic transport services. The infrastructure to provide such ser­vices is not easy to design. For in­stance, roads must mimic the actual flow of trade and goods within the country. Ports require a balance between efficient handling of short sea transportation and allowing for dedicated connections to long sea passages. Middle Eastern countries with smaller domestic markets, such as Bahrain and Qatar, may lack the scale and volume to support a global or regional hub but could potentially execute this approach.

In addition to strengthening infrastructure, governments in the Middle East must implement the standard regulatory policies that lend themselves to growth, such as permitting full foreign ownership of local entities, which allows multinational companies to control their assets in the region without relying on local partners. Simultaneously, governments must offer services crucial to the logistics industry, such as efficient customs declaration.

The countries that succeed at establishing robust transportation and logistics networks can expect to see a number of benefits: increased economic activity, improved industry competitiveness as foreign challengers come into the market, and growth in job opportunities. Those that fail, however, may find themselves falling by the wayside on the well-traveled Silk Road.

Author Profiles:

Fadi Majdalani ([email protected]) is a vice president in Booz Allen Hamilton’s Beirut office, leading the firm’s transportation work in the Middle East. He focuses on corporate transformation, corporate and business unit strategy, organizational redesign and change management, and information technology in industries including air transport, logistics, and postal and express.
Ulrich Kögler ([email protected]) is a principal in Booz Allen’s Düsseldorf office, focusing on strategy, restructuring, turnaround, and operations for the rail, postal, and logistics industries.
Simon Kuge ([email protected]) is a senior associate in Booz Allen’s Munich office whose work focuses on postal and logistics companies, transportation providers, and railways. 
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