Saudi logistics sector set to grow on imports, reforms, says study

Saudi Arabia can become a key logistics hub in the GCC due to its heavy reliance on imports and its long-term plans to develop the non-oil sector, research consultancy Solidiance said in a new whitepaper.

Saudi cargo volumes are expected to triple from 300 million tons in 2005 to 900 million tons in 2020, and the kingdom represents the GCC’s largest transportation and logistics market, with its industry accounting for $19 billion out of the total value of $47 billion for the region last year, the report said.

Among the main drivers of Saudi Arabia’s logistics sector is its heavy reliance on imports. Over 70 percent of goods coming into the Jebel Ali port in the United Arab Emirates—one of the region’s busiest ports—are destined for the kingdom.

Industrial products such as machines, engines and pumps contributed to 15.8 percent of total Saudi imports in 2015, followed by vehicles, electronic equipment and iron/ steel products at 14.7 percent, 11.5 percent and 3.4 percent respectively.

“With soaring trade volumes and a number of projects in the pipeline to improve the freight infrastructure in Saudi Arabia, vast opportunities for logistic companies ready to tap into the market will follow through,” the report noted.

In the long-term, growth in the logistics sector will be driven by reforms under the kingdom’s Vision 2030 initiative, which aims to diversify the Saudi economy away from oil prices.

Meanwhile, growth in the medium-term will come from Saudi Arabia’s further integration into the GCC Customs Union, and the expected commissioning of a major new port at the King Abdullah Economic City. Moreover, the kingdom has two new major free trade zones under development, and has begun to issue new foreign business licenses to international logistics firms.

In the short-term, on the other hand, a key opportunity resides in the delivery and point-to-point logistics market, Solidiance said.

“Overall, Saudi Arabia appears to become an even more important logistics market, if not a key hub, in the GCC region – sooner or later taking away some of the strong focus from the UAE as the region’s main trading hub,” the firm concluded.