Saudi Arabia’s logistics sector is pioneering the path of global connectivity｜Arab News Japan

• Industry analysts believe the Kingdom will attract more global players to the sector

Nadin Hassan

RIYADH: Saudi Arabia’s logistics sector has undergone a remarkable transformation in recent years, driven by visionary initiatives such as Vision 2030 and the National Industrial Strategy. As the sector continues to grow, what are the game-changing strategies that will propel it forward?

The Kingdom offers significant opportunities for global logistics players. With a population of around 36 million and a gross domestic product of $1.81 trillion at purchasing power parity at the end of 2023, Saudi Arabia is a central hub for extensive trade routes supported by world-class infrastructure.

Another major catalyst for growth is Saudi Arabia securing bids for Expo 2030 and the 2034 FIFA World Cup – both of which will attract significant business opportunities around the world, opening new channels for trade and commerce.

Industry analysts believe the Kingdom will only attract more global players to the sector, with Hakan Lanfredi, board member of Dussmann Group, telling Arab News: “For international logistics companies, this development creates lucrative opportunities to establish or expand operations, capitalizing on major global and growing events demand for advanced supply chain solutions.”

Dominik Baumeister, head of PwC Middle East and global partner in transportation and logistics, shares this view and told Arab News about the existence of untapped opportunities in Saudi Arabia’s logistics industry that could be attractive to global companies.

“There are several blank spots in Saudi Arabia’s logistics landscape that offer interesting opportunities for global players. In particular, the logistics services space is still in its early stages of development, and more specifically in freight forwarding, 3PL and warehousing,” Baumeister said.

He added: “Privatization of airports and ports is an ongoing effort, and roads, while perhaps on the logistics periphery, are opening up to a public-private partnership environment.”

Lanfredi also flagged the growth of e-commerce and last-mile delivery services, driven by growing digital consumer engagement.

“This change requires robust and flexible logistics solutions to meet growing consumer expectations and increase delivery efficiency,” he said.

New Logistical Flashpoints

Saudi Arabia is rapidly establishing several logistics hubs, taking advantage of important government programs and a favorable business environment.

“In addition to NEOM and the Riyadh Logistics Park, the Eastern Province has become a key logistics hub due to its proximity to major oil operations and the King Abdulaziz Port,” Saud Al-Sulaiman, CEO of Saudi investment firm Alsulaiman Group, told Arab News.

He added: “These hotspots are attractive due to their advanced logistics infrastructure and strategic location that facilitate regional and international trade.”

Lanfredi of Dussmann Group also pointed to the Integrated Customs Logistics Zone in Riyadh as an excellent example of a logistics hub, as it offers a number of attractive incentives for investors and businesses.

“It offers direct access to a huge market of 5 billion people in Europe, Asia and Africa within an eight-hour flight,” he said.

There are several gaps in Saudi Arabia’s logistics landscape that offer interesting opportunities for global players.

Dominik Baumeister, PwC Middle East Director and Global Partner for Transport and Logistics

Lanfredi added: “ILBZ aims to make the Kingdom a major logistics hub in the region by providing significant incentives such as a 50-year tax holiday, 100 percent foreign ownership and efficient goods processing, whereby products can be ready for market within just four hours of arrival.”

He also noted that additional points of interest include the Dammam Free Zone and various free zones along the Red Sea Strategic Corridor.

“Jizan is emerging as a key hub on the Silk Road, underscoring its growing importance on global trade routes. These zones benefit from advanced infrastructure and strategic positioning, which are strengthened by government support and regulatory improvements,” he continued.

Technological innovation

According to PwC, the emphasis in the Kingdom is on improving efficiency and competitiveness through technological innovation.

“Saudi Arabia’s logistics sector is making significant progress in technological innovation to increase efficiency and competitiveness,” Baumeister said.

He added: “Saudi Customs is enhancing its capabilities through single window initiatives and integration with various data flows, with the support of port operators, shipping lines and airlines.”

He also noted that PwC is seeing the emergence of innovative technologies, including some of its own, particularly in the e-commerce and parcel space.

Baumeister cited examples of this, including geospatial solutions combined with artificial intelligence and new ways of collecting and analyzing multiple data sources

“These technological advancements will support the realization of the Kingdom’s Vision 2030, provide more optimized operations and predictive analytics for future projects,” he said.

Navigating through uncertainty

The logistics sector in Saudi Arabia faces challenges, and stakeholders are actively working to address them to facilitate growth and ensure operational efficiency.

According to Dussmann Group’s Lanfredi, the challenges are three-fold. The first is the complexity of navigating the customs and regulatory framework, especially for new entrants and multinational companies.

“The need to ensure compliance at various levels – local, regional and international – increases the complexity of logistics operations,” he said, adding that this could be addressed by providing “streamlined customs clearance services” via sea, air and ground transportation gateways.

A second area requiring consideration is managing extreme temperatures in the Middle East, as this could complicate the storage and transportation of goods sensitive to climate fluctuations.

This change requires solid and flexible logistics solutions that will help meet growing customer expectations and increase delivery efficiency.

Hakan Lanfredi, board member of Dussmann Group

“Specialist cold chain logistics capabilities, leveraging advanced technology for live temperature control and monitoring at every stage of the supply chain are essential requirements for professional service providers,” he explained.

The third challenge is the shortage of skilled labour in the logistics sector, especially in emerging areas such as automation and robotics.

This can result in operational inefficiencies and increased costs for businesses. To address this issue, initiatives to support workforce development, such as partnerships with institutions such as the Saudi Academy of Logistics, are essential.

By investing in training and education, logistics service providers not only improve their operational capabilities, but also contribute to preparing a new generation of skilled professionals specifically tailored to the needs of the logistics industry in Saudi Arabia.

PwC highlighted the potential of Saudi Arabia to become a leading player in the global logistics industry thanks to strategic cooperation between the public and private sectors.

“Saudi Arabia’s megaprojects and mega-events will create additional opportunities and logistical capabilities that can provide the country with a significant competitive advantage,” Baumeister said.

He continued: “As competition in the region intensifies, Saudi Arabia stands out with its significant import activity and a solid diversification program.”

With key ports in strategic locations, competitive advantages in aviation and connectivity capabilities in land transport, Saudi Arabia can play a key role in connecting freight corridors from India to Europe.

Furthermore, Lanfredi predicts that within the next five to ten years, Saudi Arabia will be poised for transformational change and development, in line with the country’s strategic commitment to sustainable development as outlined in the Saudi Green Initiative and Vision 2030.