CIFFA Report
Technology be Damned...It's Back to the Basics Time
In our fascination with new technology and our fixation on how it will make logistics more effective, supply chains more integrated and companies more profitable, we have a tendency to completely overlook the more mundane world of the “old” economy.
This is nowhere more obvious than recent events in the North American stock market where both the Nasdaq and the NYSE have suffered heavy losses and market capitalization has lost hundreds of billions of dollars in the technology sector. However, Warren Buffet’s approach of sticking to the “old” economy, for example, has been much vindicated by his quickly recovering share prices and profits that far exceed anything the market has to offer in the technology sector.
Similarly, we in the logistics industry, have almost forgotten that it is the manufacturing sector and the exchange of real goods and consequently the opening up of new markets, that keeps the industry alive and profitable.
Let us thus venture, beyond our borders and look at what is happening in the far away world of Central Asia! While formerly in the domain of the Soviet Union, the republics of Kazakhstan, Turkmenistan, Uzbekistan, Kyrgystan and Tajikistan all became independent in 1991.
Totally integrated in an outdated and completely centralized economy during the Soviet sphere of influence, these republics have taken masterful strides in developing an independent and self-sufficient economy, whilst clearly recognizing their interdependence on each other in terms of transport infrastructure and cooperation. Naturally, their economies are still flawed due to the continuation of single product economies based on a wide range of raw materials and agriculture. But gradually, thanks to a highly educated workforce, a multiple sector economy with a mixture of the old and the new, is developing.
All the countries are basically landlocked when discounting the Caspian and Aral Seas that have no interconnectivity to intercontinental waterways. Thus, interregional trade can be enhanced through water routes in the two seas, but true independence will be measured by their ability to develop better transport routes and systems that allow for the smooth exchange of goods beyond the region’s borders. This is made all the more difficult as access must either take place through ports in Russia, the Arabian Sea or, interestingly enough, China! Naturally, this requires a political balancing act of such delicacy that it is hardly possible for “us” in North America to understand. Nevertheless, multiple access routes are clearly developing and it behooves the wily logistician to take the time to evaluate the various route alternatives available today.
At the same time, let us also take note of the more recent developments in Iran where the long established “Islamic Republic of Iran Shipping Lines” (IRISL) is undertaking a major effort to become an international player with particular emphasis on the CIS countries and the Caucasian regions. For decades, IRISL has acted solely in the interest of the nation but now wants to follow the signs of the market and observe the trends in global shipping at the same time. Therefore it has specifically identified new opportunities in the rapidly evolving markets of Central Asia in which it wants to become a major player. Geographically well situated to reach these markets in the shortest period of time, and with a rail and road infrastructure superior to that of Russia and China, the ports of Bandar Abbas and Bandar Imam Khomeini are strategically well placed to effectively service the hinterland beyond its own borders. Both these ports are operating at international standards and efficiency and have, in the more recent past, lowered their rates to become more competitive as well.
Therefore, IRISL is working towards upgrading its organization to effectively service the Central Asian regions with efficient and competitive door to door services. To this effect, heavy investments in state of the art IT systems for tracking and tracing, online booking, electronic bills of ladings, customs clearance and accounts management are under development. Furthermore, plans are being made to enhance the infrastructure through the construction of inland container stations and warehouses so that it can keep pace with the ever increasing demands for warehousing and distribution as well as container storage.
Asian and European carriers are already seeking a closer cooperation with IRISL, Iran’s dominant carrier, in terms of vessel sharing and slot allocations. Negotiations are going on as this article is being written and it is expected that new strategic alliances will be announced within the next months.
With its close proximity to the Central Asian region, its obvious know how and ability to monitor the economic and political developments of this region, IRISL has made a major commitment to taking advantage of these evolving markets. May it not, likewise, be in our interest in the logistics and manufacturing industries of North America to take notice and prepare to be part of it, rather than leave these new markets to the other economic giants of Asia and Europe?