With direct land, air and sea links connecting to Europe, Asia and Africa, a rapidly strengthening infrastructure, and an inviting environment for the private sector and foreign direct investment, Saudi Arabia is fast emerging as a major global logistics hub.

Saudi Arabia lies at the crossroads of key international trade routes between three continents: Asia, Europe and Africa[1].  With half the world’s population accessible within a five-hour flight, and 300 million consumers within three hours’ air travel[2], taking advantage of this uniquely connected location represents a major opportunity for the country.  A fact recognized by the government in the ambitious plans set out in its Vision 2030 national development strategy.

“We have already invested heavily in the construction of ports, railways, roads and airports.  To take full advantage of these investments, we plan to work with the private sector and enter into a new series of international partnerships to complete, improve and link our infrastructure internally and across borders.  …  Air, maritime, and other transport operators will be encouraged to make the most of their capacity: achieving durable links between existing trade hubs, as well as opening new trade routes.  This will reinforce our position as a distinctive logistical gateway to the three continents.”

-Vision 2030

Economic diversification is a central benefit of achieving this ambition, facilitated, in part, through the creation of special economic zones in exceptional and competitive locations.  Vision 2030 lists logistics zones, alongside tourist, industrial and financial zones, promising that “special commercial regulations to boost investment possibilities and diversify government revenues will be applied to these zones”.

Fuelled by the vision, commitment and investment that lies behind these ambitions, Saudi Arabia is already experiencing significant growth in its logistics capabilities across air, sea and land, and measurable steps are being taken to realize the country’s ambition of improving its ranking in the global Logistics Performance Index from 49 to 25 by 2030.

Reaching for the skies

Over the past few years, Saudi Arabia’s aviation industry has achieved significant growth in both passenger and freight figures.  In February 2018, this acceleration was underlined when the government approved the construction of a new civilian airport, in Al-Qunfudah, on the country’s Red Sea coast[3], as part of plans to expand the transport sector to cope with the air traffic growth projected in Vision 2030.

Similarly, at Jeddah’s King Abdulaziz International Airport (KAIA), a US$ 7.2 billion expansion[4] is almost complete after more than a decade of construction work. When finished, it will stretch the airport’s capacity to 30 million annual passengers through 46 gates for international and domestic flights[5].

Other elements of the expansion include automated transport, a 120-room hotel, a large mosque, and a railway station on the Haramain high-speed rail project that links Medina and Makkah over a 281-mile track.

Outside, a 15km bridge deck – the largest airport case bridge deck in the world – provides the main route in and out of the airport[6].  Costing more than US$ 666 million, the bridge deck alone is an eye-catching statement of intent for an airport with even grander ambitions over the next 20 years.

The current expansion is only the first of three phases planned for KAIA.  By 2025, it aims to have expanded capacity to 43 million annual passengers, and then grow again to process 80 million annual passengers by 2035[7].  The early evidence suggests it is on track to meet its 2025, goal, with passenger numbers increasing 9.4% in 2017[8], rising to a total of
34 million from 226,894 flights (up 3.46%), and with the move to start issuing tourist visas, this looks only set to continue.

International air passengers at the airport rose by 16.8%, while the number of international airlines operating through KAIA rose from 64 to 80. Eventually, the airport will serve 36.5% of the total passengers using Saudi Arabian airports.

Freight growing fast

Further expansion is also occurring in air freight volumes, where Middle East year-on-year volumes increased 4.6% in October 2017[9].

In response to this growth, and to capitalize on further opportunities, Abdul Latif Jameel is building a 5,500m2 express gateway facility at Riyadh’s King Khalid International Airport that will cater for increased demand[10].

The General Authority of Civil Aviation (GACA) signed its construction agreement with Abdul Latif Jameel in summer 2017, and the facility is set to be running by early 2019. Faisal Al-Samannoudi, Vice Chairman of Abdul Latif Jameel Investments, said:“The new, state-of-the-art facilities at King Khalid International put Abdul Latif Jameel at the forefront of logistics in the Kingdom, building our shared capabilities to meet all our customers’ import and export needs.”

A series of smaller developments also reaffirm the direction of travel. In April 2017, DHL Express added a new flight between Jeddah and Bahrain[11]. Over its seven flights a week on the route, DHL Express can now carry a total of 154 tons of cargo.  Elsewhere, Crane Worldwide Logistics showed its belief in Saudi Arabia’s growing status as a future logistics powerhouse by opening a new office in Al-Khobar[12] at the start of 2018.

These investments are based on sound evidence of the potential of Saudi Arabia as a major global entrepot.

Saudi Arabia was listed as sixth on the overall 2018 Agility Emerging Markets Logistics Index and fifth on the same index for countries with GDP over US$ 300 billion[13]. Almost 97,000 tons of air freight flowed from the EU to Saudi Arabia in 2017, the seventh biggest global air freight lane between an EU or US base and an emerging market, with particular growth in iron and steel goods, ceramics and vegetables.

Making waves in the maritime industry

Saudi Arabia can look beyond just the skies in its search for increased logistics capacity. The country already benefits from its strategic location on a key international shipping route between east and west. Jeddah Islamic Port, for example, is the largest and busiest port across the MENA region, while new ports – such as the 43 million sq.m. development at Al-Lith, 230 km south of Jeddah – will provide Saudi Arabia with even greater flexibility.

The objectives of Vision 2030 will not be achieved by the public sector alone, however.  At King Abdullah Port, which is spread over 15km2 close to King Abdullah Economic City’s Industrial Valley, the private sector has already invested US$ 2.7 billion – with the final total expected to reach US$ 5 billion[14]. The port is now the second largest in the country, having announced a 21% increase in its annual throughput compared to 2016, reaching 1,695,322 TEU (Twenty-Foot Equivalent Units) by the end of 2017[15].

Following the completion of Berths 5 and 6 in 2017, the port can now handle four million TEU.  This development has been hailed by Abdullah Hameedadin, managing director of the Ports Development Company, the owner and developer of King Abdullah Port.  He said:  “This will extend the port’s reach to the most important trade hubs in the region and the world, solidifying the roles of the private sector in general, and King Abdullah Port in particular, in achieving Vision 2030.”

Rayan Qutub, CEO of King Abdullah Port, told visitors at Breakbulk Middle East 2018 that he expects to see a significant increase in breakbulk volumes over the next three years. The port processed 19.6 million tons in 2017, a figure that he expects to rise to 29.5 million tons by 2020[16].

This anticipated growth will consolidate what are already well-established trade links with the west across Saudi Arabia’s ports. During 2017, over 15 million tons of sea freight flowed from the EU to Saudi Arabia, making it the fifth biggest global sea freight lane between an EU or U.S. base and an emerging market[17].

Laying a track to the future

Saudi Arabia’s internal transit and transport network is also being developed through significant investment.  Between 2015 and 2024, the Saudi Arabia General Investment Authority (SAGIA) plans to invest more than US$ 141 billion on rail, metro and bus projects.

The Haramain high-speed rail project links Medina and Makkah via King Abdullah Economic City, King Abdulaziz International Airport, and Jeddah.

An inaugural train completed the 450km trip on 31 December 2017 in two hours and 52 minutes[18], with commercial services – run by Spanish operator RENFE – set to begin in March 2018.

Other public transport initiatives include the Riyadh Metro Project, which features 85 stations and 176km of track along six lines across the city[19].  It has an allocated investment of SAR 90 billion and is scheduled to launch operations in 2018[20]. Similar projects in Jeddah, Dammam, Makkah and Medina are at different stages of planning and development.

The Riyadh metro project is one of the most significant in Saudi Arabia’s commitment to lay an additional 10,000 kilometers in rail and metro by 2030[21]. The majority of this will come from just five flagship projects – including the Riyadh metro – which covers a combined length of 5,500km.

Investing in an attractive and growing logistics hub

With the initial expansion of Jeddah airport almost complete, Abdul Latif Jameel’s contract to provide a new 5,500m2 facility at Riyadh airport underway, rising freight passing through expanded developments at sites including King Abdullah Port, and a succession of rail projects in progress, Saudi Arabia looks set to make a bold move to become a major global logistics hub.

In turn, this is likely to lead to increased foreign direct investment – a stimulus that is being actively encouraged by a government determined to secure private sector funds into its pipeline of projects.

According to SAGIA, “growing demographic pressure, urbanization, and the Kingdom’s long-term commitment to infrastructure development are key characteristics that make the transport and logistics sector attractive to investors[22].”

Indeed, SAGIA asserts that by “participating in the development of infrastructure at the scale and speed required, experienced investors can take advantage of many exciting opportunities” in Saudi Arabia.

For more than 60 years, Abdul Latif Jameel has supported the government’s efforts to deliver continuous improvements to Saudi Arabia and its people. It has also used global understanding and local expertise to form enduring partnerships with, and support for, overseas companies looking to invest in Saudi Arabia.

To learn more about investing in Saudi Arabia with the Abdul Latif Jameel, visit us here.

[1] Vision 2030, Kingdom of Saudi Arabia.
[2] Saudi Arabia: Transport and Logistics Opportunities, Saudi Arabia General Investment Authority, September 2016
[3] Saudi Arabia planning new airport along the Red Sea, Zawya, 14 February 2018
[4] Jeddah airport expansion project 90% complete, Construction Week Online, 17 July 2017
[5] KAIA Expansion to be Developed in 3 Phases, King Abdulaziz International Airport, accessed February 2018
[6] World’s largest bridge deck for KAIA expansion, World Highways, November 2013
[7] KAIA Expansion to be Developed in 3 Phases, King Abdulaziz International Airport, accessed February 2018
[8] Jeddah airport at new altitude with record number of flights, passengers, Arab News, 7 February 2018
[9] October gets fourth quarter off to a strong start, says IATA, AirCargoNews, 1 December 2017
[10] New facility for King Khalid International Airport, Opening Doors, summer 2017
[11] DHL Express expedites Bahrain-Jeddah operation with new flight, Air Cargo News, 12 April 2017
[12] Crane Worldwide opens new Saudi Arabia office, Air Cargo News, 15 January 2018
[13] Agility Emerging Markets Logistics Index 2018, Agility, January 2018
[14] Saudi port anticipates breakbulk ‘hypergrowth’, Breakbulk Events & Media, 6 February 2018
[15] With an annual growth of 21%, King Abdullah Port is the second largest port in the Kingdom, King Abdullah Port, 15 January 2018
[16] Saudi port anticipates breakbulk ‘hypergrowth’, Breakbulk Events & Media, 6 February 2018
[17] Agility Emerging Markets Logistics Index 2018, Agility, January 2018
[18] Inaugural run on Haramain high speed line, Railway Gazette, 31 December 2017
[19] King Abdulaziz Project for Riyadh Public Transport, High Commission for the Development of Arriyadh, accessed February 2018.
[20] Saudi Arabia: Transport and Logistics Opportunities, Saudi Arabia General Investment Authority, September 2016
[21] Saudi Arabia: Transport and Logistics Opportunities, Saudi Arabia General Investment Authority, September 2016
[22] Saudi Arabia: Transport and Logistics Opportunities, Saudi Arabia General Investment Authority, September 2016