Saudi logistics sector: A boom in the offing
Along with other non-oil sectors, the logistics industry in the Kingdom is undergoing immense changes and upgrades. This is expected to bring opportunities for logistics players, technology companies, and other stakeholders.
In my opinion, the logistics sector with its three pillars — distribution, warehousing and transportation — will be a promising key growth sector in the Saudi economy for years to come.
Because of its central location and large economy, Saudi Arabia is an important international logistics hub. However, location advantage and size alone are not sufficient to achieve this target. The country, therefore, has taken up an ambitious plan to improve its logistics infrastructure.
Saudi Vision 2030 encompasses a ninepoint strategy of process streamlining, market liberalization, privatization, infrastructure enhancement, new free economic zones, governance and regulatory reforms to maximize its strategic advantage to evolve into the “go-to logistics hub” for the Middle East region.
Out of all Middle East and North Africa (MENA) countries, Saudi Arabia has witnessed the most changes and activity in the logistics industry during the last 2-3 years. In the last two years, the market has grown by SR3.8 billion ($1 billion) and is expected to witness high growth, primarily attributable to the establishment of a borderless GCC customs union.
As the country has high food import volumes and an arid climate, it becomes vital for it to not only have a robust logistics system but also a warehousing and distribution system. Moreover, the rising retail and fast-moving consumer goods (FMCG) industry will accelerate the demand for logistics facilities.
Most of the FMCG and retail industry in Saudi Arabia require warehousing and cold storage to accommodate all the products safely. Additionally, the booming e-commerce industry as I mentioned last week will also trigger the demand for logistics and warehouse storage in the country.
Realizing the region’s potential and the growing importance of trading links, logistics companies who already have a strong presence in the Kingdom, are currently expanding further to maintain their stronghold in the market.
Using Saudi Arabia as an international logistical hub, companies can service more than 2 billion potential customers across three continents. With the gates opening for the private sector including major players such as Al-Faisaliah, Abu Dawood, Tamer, Sunbulah, Al-Baik, Flow, among others, it is expected that these companies will upgrade and enhance the country’s logistical infrastructure to capitalize on the new opportunities.
Investments in new infrastructure along with specialized facilities and economic zones will further extend these opportunities. In my future articles, I will explore the investment opportunities offered by every logistical pillar on its own including warehousing, distribution and transportation with its different channels— sea, rail, road and air.