Iraq bound
Forwarding executive believes Middle East country offers strong niche potential.
By Chris Gillis
Iraq, with its social unrest and battered infrastructure, is one of the last places most freight forwarders seek to plant their commercial flag.
However, Omnitrans Corp., a small New York-based forwarder with a long history of taking on logistics work in some of the toughest markets in the world, believes it's time to enter this Middle East country as its economy emerges from the ashes of war.
'Iraq has enough educated people and potential that we believe within the next 10 to 20 years there will be a successful business story to tell,' said Markus Raab, Omnitrans' president, in a recent interview. 'The situation in Iraq today versus 2007 has already improved a lot.'
| Raab |
Omnitrans became involved in the Iraq freight market in 2008 through a joint venture with M.G. International Transportation in Germany and Iraqi partners in Baghdad, Bashra, Umm Qasr and Zakhu.
M.G. International has operated in the Iraq market for 30 years, despite disruptions from the Iran-Iraq war of the 1980s, and the first and second Gulf wars in the past two decades. 'Their professional staff is highly experienced and motivated,' Raab said.
Other firms offer forwarding services to Iraq, including multinationals like Inchcape Shipping Co., Agility, Norton Lilly International, Kuehne + Nagel, and Panalpina, as well as numerous local players, such as Barwil Iraq Shipping, Iraq International Freight Co., and Sharaf Shipping Co. But most commercial forwarding services to this difficult market have been largely restricted to the Umm Qasr port vicinity.
Raab said that's where Omnitrans and its partners largely differ from the competition. 'Our company can arrange all transportation services from any place in North America to any place in Iraq. We can offer tailor-made and customized solutions from door to door, or as the shipment needs require,' he said.
Omnitrans provides U.S. shippers a myriad of services in Iraq, including:
' Export declaration and legalization of documents.
' Customs clearance.
' Cargo storage, transloading and handling.
' Transportation within the country.
' Jobsite preparation and installation.
' Low-profile and armed security escorts.
Raab explained it's important that when cargo is offloaded from the vessel at Umm Qasr it keeps moving to its final destination. 'If the consignee doesn't handle the customs clearance, then the cargo will sit at the pier and the high demurrage charges become a big wakeup call,' he said.
In 2009, Omnitrans estimated it handled $35 million worth of cargo shipments to Iraq, and it expects to handle an equivalent amount this year. In May, Omnitrans participated in the largest shipment in years to cross the docks at Umm Qasr ' 35,000 cubic meters, or 11,000 pieces, of water pipe and accessories.
'It took 10 days to unload the pipe and only one was damaged,' Raab said. 'Compare that to another recent shipment of similar cargo at a lesser amount that took days longer to unload and with pipes dropped in the water.'
Raab said Omnitrans is fortunate to work with a veteran firm like M.G. International in Iraq, with its access to adequate cargo handling equipment and experienced dockworkers. 'I would say that nine out of 10 times it works out fine,' he said.
Industry Investments. A benefit to forwarders operating in Iraq has been the government's investments in port and ocean shipping infrastructure.
Iraq officials said in April that Italian engineering firm Technital would begin construction of a large new port in Al-Faw, on the Persian Gulf near the border of Iran. An Iraqi news agency quoted Transport Minister Amer Abdul-Jabbar Ismail as saying the Al-Faw port would be among the 12 biggest harbors in the world, with 100 quays and capacity to move 99 million tons per year. The new port will be linked by rail to the Turkish border.
Also, earlier this year, Iraq's transport minister was part of a delegation to New Orleans to discuss investment opportunities in Iraq ports such as Um-Qasr and Kour Al-Zubaeer, as well as Al-Faw.
The Iraqi government in September reportedly signed a deal linking state-run Maritime Transportation Co. with Global Refinery, a unit of a company based in the British Virgin Islands, to jointly operate 66 cargo ships and provide training of merchant crews. According to news accounts, Iraq only has two cargo ships and four oil tankers. Most of its fleet was destroyed during the Iran-Iraq war and 1991 U.S.-led Gulf War.
Major container carriers calling Umm Qasr have enhanced their terminal activities at the port during the past year. In April, CMA CGM opened a renovated berth at the port, allowing the French liner 'complete autonomy in the handling of its containers into and out of Iraq.' The terminal also enables CMA CGM to offer a direct reefer service into the country.
CMA CGM operates a weekly service from the Umm Qasr port to Khor Fakkan with two 880-TEU vessels. The line has three offices in the country at Baghdad, Basra and Umm Qasr.
Also this year, Umm Qasr witnessed the opening of a reefer yard, built by Kuwaiti terminal owner Global Logistics and Warehouse Co., in cooperation with Maersk Line. The move followed Maersk's introducing a feeder service to the port from Jebel Ali, Dubai and Mesaieed in Qatar. The yard has 150 plugs available.
Before that, most refrigerated cargo to Iraq moved overland via Kuwait, Turkey and Jordan. 'The new reefer yard means greater access and flexibility for exporters looking to reach Iraqi markets with perishable goods,' Maersk said.
As a forwarder, Omnitrans has the flexibility to offer shippers access to more alternative transit points into Iraq, including Siloupi/Zakho (Turkish/Iraqi border); Al Tanf/Waleed and Al Yarubia (Syrian/Iraqi border); Al Karameh/Trebil (Jordan/Iraqi border); and Safwan (Kuwaiti/Iraqi border).
Trade Mission. Shippers and forwarders have also benefited from direct U.S. government trade support of Iraq. In July 2005, the United States and Iraq entered a Trade and Investment Framework Agreement. The TIFA provides a forum for Iraq and the United States to examine ways to expand bilateral trade and investment. It created a Joint Council that considers a wide range of commercial issues and sets out basic principles underlying the two nations' trade and investment relationship.
In 2004, U.S. exports to Iraq were valued at $856.5 million, while imports from the country were valued at $8.5 billion, mainly petroleum. By 2008, Iraq became the fourth-largest U.S. import supplier among Middle East and North African countries at $22.1 billion.
To help finance short- and medium-term sales of U.S. exports to Iraqi buyers, the U.S. Export-Import Bank recently set up operations in Iraq. 'Iraq's economy is growing, offering specific opportunities for U.S. exporters in a variety of industries. Ex-Im Bank can help by reducing the repayment risk, especially for small businesses at this time,' said Bijan R. Kian, a bank board member, in a statement.
Ex-Im Bank can provide export-credit insurance, loan guarantees and direct loans for creditworthy export sales to Iraq. Short-term insurance is available for transactions with repayment terms of 180 days or less, and up to 360 days for capital goods. Medium-term insurance, loan guarantees and loans are available for transactions with terms of up to seven years.
In October, the Commerce Department led its first trade mission to Baghdad since the end of U.S. combat operations in Iraq. Omnitrans was among the 15 companies invited to participate and the only forwarder.
The department said interest generated by the U.S.-Iraq Business and Investment Conference in October 2009 and the activities of the U.S.-Iraq Business Dialogue have demonstrated an opportunity for increased trade and investment in the region. Iraq's gross domestic product has more than doubled since 2006, from $57 billion to $112 billion in 2009.
Iraq's government has also budgeted more than $80 billion for infrastructure development, focusing on a number of large projects related to construction, highways, railways, telecommunications and security and defense.
The mission provided U.S. participants with first-hand market information and access to government officials. Additionally, one-on-one meetings were arranged with potential agents, distributors and partners.
Raab, who joined Omnitrans in 2006 as a sales manager for special projects and was promoted by founder Hermann Amsz to president in 2009, described his participation in the U.S.-Iraq trade mission with some of the largest American shippers as 'rewarding.'
'The Commerce Department did an excellent job with security and the U.S. embassy in Iraq treated the mission as presidential business,' he said.