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Michael Proffitt Laredo 29 th May 2013 Slide 2 AGENDA Introduction Overview Share Personal Experiences: - Dubai Logistics City - India Key Learnings Slide 3 FIRST OPTION Slide 4 Build it and they will come Slide 5 SECOND OPTION Slide 6 UNDERSTAND YOUR MARKET Slide 7 Supply Chains Visual Representation Component Suppliers Manufacturers Distribution Customers Build Plan Sales DataDemand PlanningSupply ManagementProcurement Slide 8 Slide 9 Key Supply Chain Issues - Summary Forecasting Extended supply chains Environmental issues Collaboration Visibility through the Supply Chain Customs Corruption Security / Risk Infrastructure Slide 10 Complexity of Developments Logistics Clusters Logistics Parks Logistics Villages Logistic Cities Slide 11 Why Develop? Support Ports and Airports Enable Efficient Transit Movement Enable Efficient National Distribution Provide Stockholding Opportunities Allow Value Added Services to be Performed Support Reverse Logistics Slide 12 Key Parties Involved in Developments Users/ Customers GovernmentsDevelopers Investors Slide 13 What is Required? Adequate Road Network inside the zone and outside Proximity to Railways IT Infrastructure Adequate Power Container Park and Support Services Truck Facilities Commercial Support Facilities Over-Dimensional Cargo Areas Warehouses People Slide 14 Game Changer Articulate Value Proposition Slide 15 The 4Ps/SAVE PRODUCT/ SOLUTION PLACE/ ACCESS PRICE/ VALUE PROMOTION/ EDUCATION MARKETING MIX Slide 16 6Ps/SAVE PRODUCT/ SOLUTION PLACE/ ACCESS PRICE/ VALUE PROMOTION/ EDUCATION MARKETING MIX PUBLIC OPINION POLITICAL AUTHORITY Slide 17 Slide 18 Images of Dubai Slide 19 Dubai: Sustainable Growth Through Diversification 19 2 bn consumers in greater region, and growing Healthy growth, liberal business environment Prominent geographical location Oil & GasTourism Finance & Banking Trade & Logistics Create an integrated logistics platform to establish Dubai as the leading hub for the region Slide 20 A Unique Opportunity 20 A visionary approach Thinking long-term Strengthen Dubai as hub for the greater region Create the best trading and distribution environment Build the worlds first truly integrated logistics platform, with all transport modes, logistics and value added services, including manufacturing and assembly, in a single bonded and Free Zone environment. Slide 21 Dubai as a Logistics Hub for the Region 21 2 Billion consumers Solid growth rates The most liberal business environment in the Region The most professional location for distribution business Next step into the future: Integrating logistics into a single platform a quantum leap for logistics Slide 22 Projected Passenger Growth Dubai International Airport 22 Slide 23 Dubai An Excellent Location for Innovative Logistics For global supply chains 23 As a hub for the region Slide 24 Dubais Logistics Platform 24 Jebel Ali Port and Free Zone DubaiLogisticsCity Dubai World Central International Airport Slide 25 Jebel Ali Port and Free Zone 14 m. TEU in 2012 #8 world-wide Area of 100+ square kilometers 100,000+ tons sea-air via DXB 7,000+ companies in JAFZA 25 Slide 26 Jebel Ali Terminal Expansion Extension of existing Terminal 1, with total additional capacity of 5m TEUs Phase 1 will consist of 1.6km of quay, 4 berths, 17m depth alongside, 2.0m TEUs capacity Phase 2 will consist of additional 1km of quay, 3 berths, 17m depth alongside, 3.0m TEUs capacity Estimated Phase 1 operational commencement: July 2007 26 Demand-led investment, able to cater for Suezmax + vessels (12,000 TEUs) Adjacent to Terminal 1 and, therefore, the Free Zone also Maintain leading position in customer service having the most advanced infrastructure and superstructure Terminal 2 Future Possibilities Slide 27 Dubai: Integrated Logistics and Freedom for Business FREE ZONE: No customs duties No taxes Liberal visa policy Free capital transfer 100% ownership Logistics know-how Quality labor at competitive cost Abundant space 27 Integrated Logistics- Platform Slide 28 Linking DLC and JAFZA 28 Jebel Ali Port and Free Zone DubaiLogisticsCity Main road Port DLC (bonded, within Free Zone) Dubai World Central International Airport Slide 29 Dubai Logistics City Slide 30 Dubai Logistics City Master Plan 30 Slide 31 Slide 32 India has experienced a consistent GDP growth of over 6% in the last decade, and a 7% growth in 2011 (Indias Central Statistical Organization) India has been one of the 10 fastest-growing economies in the world in the last two decades Domestic consumption is the largest contributor to the GDP (58% in FY11) Foreign exchange reserves totals over US$ 250 billion (as of Dec11) India ranks 26 th in terms of world exporters, contributing over 1.3% of globally consumed merchandise, with exports growing at a rate of 22% India ranks 17 th in terms of world importers, consuming over 2% of globally produced merchandise, with a consumption rate growing at 35% (WTO) Indias urbanization rate is the fastest growing in the world. By 2030, over 40% of Indias population will be living in urban areas (U.N. Population Fund) OVERVIEW OF THE INDIAN ECONOMY Slide 33 By 2025, India will have a middle class population of 583 million people, becoming the worlds 5 th largest consumer market (McKinsey Global Institute) Consumption in India will grow in real terms from US$ 378 billion presently to US$ 1.56 trillion by 2025 a fourfold increase By 2020, India is projected to have an additional 47 million working population, almost equal to the total world shortfall, with an average Indian age of 29 Comparatively, the average population age of other economies at that time will be 37 in China, 45 in the U.S. & Western Europe and 48 in Japan 66% of India's 1.1 billion population is currently under the age of 35 & is expected to outpace China by 2030 The estimated size of Indias real estate market in terms of total economic value of development activity is US$ 40-45 billion, representing 5 - 6 % of GDP, growing at 30% p.a Residential property constitutes almost 75% of the real estate market in India GROWING CONSUMERISM & EVOLVING MIDDLE CLASS Slide 34 INDIAS EMERGING MIDDLE CLASS 2 out of the top 5 most populous cities in the world are in India (Mumbai 13 mil & Delhi 12.56 mil) Population in major metro cities in India which exceed 4 million, including the above, are Bangalore, Chennai, Hyderabad, Kolkata, Ahmedabad & Pune Additionally there are 48 agglomerations with a population of 1 million or more By 2030, India will have 68 cities with a population of over 1 million, 13 cities of over 4 million & 6 megacities of over 10 million In 2030, India's largest cities will be bigger than many major countries in both population and economic output Ahmedabad Pune Population > 4 million Slide 35 Mumbai Singapore STRATEGIC POSITIONING Slide 36 BUT ITS NOT ALL OPTIMISM . Slide 37 As per World Banks 2010 survey, India is ranked 134 th amongst 183 economies in terms of Ease of Doing Business, - It includes variables such as Starting a Business, Registering Property, Paying Taxes, Trading Across Borders, Enforcing Contracts & Closing a Business As per the Transparency International's Corruption Perception Index, 2010, India ranked 87 th out of 178 countries in terms of corruption in public & private sector Delay in legal proceedings & litigations Lack of implementation & enforcement of intellectual property laws Inadequate or lack of infrastructure for supporting the fast pace economic growth, specially in transportation (Road & Rail) and logistics (Ports, Warehousing, Distribution, Hinterland Connectivity & Domestic Consolidation Hubs) Complex Tax structure (Direct & Indirect) Archaic labour & property ownership laws CHALLENGES OF DOING BUSINESS IN INDIA Slide 38 Logistics cost in India is high at around 14% of GDP against 8% - 9% in most developed nations. On a GDP of USD 1.6 trillion, this represents an absolute value of in-efficiency (and therefore logistics market potential) of over USD 65 billion India's level of containerization is less than 25% as against a global average of 60% - 70% The average time taken to clear import & export cargo at ports is about 19 days in India against 3 to 4 in Singapore India's container throughput in CY10 was just over 7.7 million TEU's as compared to Dubai (12 million), Singapore (24 million) & China (186 million) India burns nearly US$2.5 billion worth of fuel on account of trucks standing idle on state check-posts World Banks 2010 Logistics Performance Index (LPI) ranks India 47 th in terms of logistics in-efficiency as compared to 130 countries globally in terms of - Customs Clearance, Infrastructure, Timelines, Shipments, Logistics Competences, Tracking & Tracing INDIAS LOGISTICS REALITIES: Leading to Strategic & Operational in-efficiencies for doing business in India Slide 39 Transport Challenges Slide 40 Free Trade Warehousing Zones (FTWZs) To enable EXIM cargo Consolidation, Value Addition and allow India to become a Regional Trading Hub Domestic Distriparks For Domestic distribution, cargo value addition and consolidation for Rail transportation to remove dependency on road Rail Infrastructure Solutions Comprising of innovative Customized Containers for specific product types, Service Level agreements on timeline and deliver with Key Performance Indicators State-Of-The-Art Rail Terminals at strategic locations across India with modern equipment to increase speed of loading/unloading Integrate Logistics Infrastructure with Global Logistics, Domestic Supply Chain Management, Transport & Handling and IT Global ocean & air logistics, domestic forward and reverse supply chain management with ownership on reduction of working capital and product visibility & control, through technology CAPITALIZING ON INDIAS LOGISTICS OPPORTUNITY What does it take? Slide 41 ARSHIYAS PAN-INDIA INFRASTRUCTURE FOOTPRINT 5 FTWZs Rail Connected, Planned Pan-India Mumbai (Operational since Nov10), Delhi (Go Live Q2FY12) followed by Nagpur, Chennai & one in the East 5 Domestic Distriparks - Planned Pan-India, Complimenting the FTWZ Network First of the Domestic Distriparks (in Khurja near Delhi) operational by Q2FY12 150 Train Pan-India Rail Operations Providing unique and customized solutions to marquee customers with long term contracts Inducted 15 trains since FEB09 and one of the most profitable Private Container Train Operators (PCTO) Pan-India Rail Terminal Network complimenting each FTWZ, Domestic Distripark & Rail Operations accelerating cargo distribution through aggregation Slide 42 INDIAS FIRST - ARSHIYAS FTWZ IN MUMBAI 165 Acre State-of-the-Art facility 24 kms from JNPT Port featuring: - 24x7 On-Site Custom Clearance House - State-of-the-Art Infrastructure, Equipment & Facilities - Connectivity to our Pan-India Rail Network accelerating distribution through aggregation at strategic locations Slide 43 MUMBAI FTWZ - JULY 2009 Slide 44 Slide 45 SAME VIEW AUGUST 2010 Slide 46 CONTAINER YARD - AUGUST 2009 Slide 47 CONTAINER YARD - SEPTEMBER 2009 Slide 48 CONTAINER YARD - JULY 2010 Slide 49 ARSHIYAS MUMBAI FTWZ Warehouse & Main Access Road Slide 50 ARSHIYAS MUMBAI FTWZ Customs Office Slide 51 ARSHIYAS MUMBAI FTWZ Container Yard & Material Handling Equipment Slide 52 ARSHIYAS MUMBAI FTWZ Date Center & Electrical Sub Station Slide 53 ARSHIYAS MUMBAI FTWZ Warehouse Interiors & Loading Dock Slide 54 ARSHIYAS UPCOMING INFRASTRUCTURE KHURJA (DELHI) 315 Acre Comprehensive Facility 90 km from Delhi & 53 km from Dadri - Side-by-Side FTWZ (135 Acres) and Domestic Distripark (130 Acres) - Arshiya Rail Infrastructure (50 Acres), including on-site Rail Siding - Operations live as of CY Q211 to be joined by similar models in Chennai & Nagpur Slide 55 GLOBAL AUTOMOBILE MANUFACTURERS CURRENT SUPPLY CHAIN Duty paid storage of spares implicating higher working capital of the supply chain implicating higher cost of product Limitations in volume of storage increasing lead time for customer deliveryHigher lead time for client delivery creating customers dissatisfaction (unauthorised spares in the market)Quality control post duty payment increasing hassle for re-export and therefore cost International Suppliers Indian Ports India Manufacturing Plant Dealers in India Supply of spares and parts to Dealers in India for after sales and service Rejection after duty payment Storage of Spares, Parts and Components for after sales & service post duty payment Rejection after duty payment Slide 56 ARSHIYAS SOLUTION THROUGH FTWZ Duty deferred storage reducing working capital and therefore cost of product Reduction in lead time in supplying the spares for after sales and limitless capability of spares storage Quality control before duty payment enabling hassle free re-export process and therefore lowering of associated supply chain costs Regional Distribution capability leveraging cost/skill arbitrage of India in addition to Income tax exemption of profits from this activity International Suppliers FTWZ Dealers in India Storage of Spares, Parts and Components for after sales & service without duty payment Rejection without duty payment Regional distribution of spares and parts enabling the income tax exemption on the re-export of imported spares and parts Rejection without duty payment International Dealers Slide 57 FTWZ : A GAME CHANGER FOR INDIA India is worlds 2 nd largest developing & fastest growing economy just behind China With a population of 1.1 billion, the domestic consumption comprises 58% of GDP Strategically located between South East Asia & Middle East there are 7,000 kms of coastline & unlike China Indias population is evenly spread across hinterland Unlike Dubai, India has a strong manufacturing base where global companies are producing products for domestic as well as export opportunities Logistics infrastructure is the single largest challenge as well as the biggest opportunity for sustaining Indias fast paced GDP growth The FTWZ is a game changer for India Slide 58 Key Learnings Logistics Cities are not Products they are Supply Chain Enablers Successful Planning and Development Requires Extensive Collaboration The Key Infrastructure must be Planned but then Retain Flexibility Clarifying the Value Proposition is Mandatory Marketing the City to Potential Sectors/Clients needs a very Professional Approach Slide 59 GRACIAS