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IN PROFILE: Making Saudi Arabia a global logistics hub

IN PROFILE: Making Saudi Arabia a global logistics hub

The growth and diversification will be achieved through a range of measures, including maximising the value capture from its massive energy sector through refining and chemicals manufacture, unlocking the potential of the non-oil sector in areas such as mining, manufacturing and retail, and positioning the Kingdom as a global logistics hub.

An integral part of the plan is to seek greater contribution from the private sector to the national economy and to attract foreign direct investment opportunities. It also looks at increasing employment opportunities for Saudi Arabia’s growing young demographic and the goal of nationalisation through ‘Nitaqat’. Finally, it seeks the further integration of the Kingdom into the regional and global economies as a hub connecting three continents – Asia, Europe and Africa.

“Saudi has the biggest port network in the Middle East – of nine ports, compared to just four ports in 1976; and is currently undergoing further major expansion,” says Jens O. Floe, Chief Executive Officer of Red Sea Gateway Terminal, the modern container facility at Jeddah Islamic Port (JIP).

“The government is undertaking a multitude of large investments in transportation infrastructure, with new projects such as the Saudi Rail-Roads Expansion, as well as substantial investments from the private sector e.g. JIP and the Dammam Port upgrade, the new economic cities, etc.”

Even as there is significant investment and expansion of major infrastructure projects, there is a crying need to improve the supply chain – and the Vision 2030 plan has dealt with this vital aspect. Ship agency services, for example, have been freed from the restriction of being performed only by 100% Saudi owned companies or by a Saudi national.

“SAGIA (Saudi Arabian General Investment Authority) and MAWANI (Saudi Ports Authority) have confirmed that a non-Saudi investor can now perform all ship agency services, except for supplying fuel and Customs clearance services,” says Rizwan Osman, Legal Director for the law firm Clyde & Co. “This will encourage foreign investors, raise standards and is in line with the privatisation of the ports.”

More than $750m is being spent on King Abdulaziz Port in Dammam; and over $70m is being spent on the Red Sea Gateway Terminal in Jeddah. There is the new King Abdullah Port in Rabigh, serving a new economic city; it will further boost over-all container handling.

“In the roads sector, a new motorway is being constructed between Saudi Arabia and Oman,” says Osman. “Once it is commissioned, there will be much lower lead times and trading costs will be lowered. Only the railway sector remains somewhat underdeveloped in terms of extent and usage, but whatever exists is of a relatively high quality.”

At the moment, there are five railway lines – a freight line between Dammam and Riyadh, via Abqaiq, Hofuf, Haradh and Al Kharj; a passenger rail line linking Dammam with Riyadh, via Abqaiq and Hofuf; the Dammam Port line which connects Hofuf with the Port of Dammam; a new railway service between Riyadh and the Qassim; and a line which opened only in October this year to service Makkah and Medina from Jeddah.

With over $10bn being invested on beefing up the roads, rail and port infrastructure over the next decade, and several Saudi ports in the process of being privatised, there is bound to be substantial international investment and a big improvement in cargo throughput by 2030, the terminal year of the vision of turning Saudi Arabia into a global logistics hub.