Saudi Arabia: At the heart of global trade routes
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. With half the world’s population accessible within a five-hour flight, and 300 million consumers within three hours’ air travel, 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.”
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, 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 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.
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. 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. The early evidence suggests it is on track to meet its 2025, goal, with passenger numbers increasing 9.4% in 2017, 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.
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.
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. 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 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. 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. 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.
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.
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.
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.
Four Principles ‘Lean’ consultancy enjoys full-fat growthIt is two years since Lean Management consultancy, Four Principles, established a joint venture with Abdul Latif Jameel to spread the ‘Lean philosophy’ across the MENAT region. ...Read more
Economic reforms deliver rapid results for Saudi ArabiaThe modernization of Saudi Arabia’s corporate sector is gathering pace after an encouraging 2018 – with economic and social initiatives capturing the eye of global businesses and pointing to an even brighter future for the country. ...Read more
A vision to become an investment powerhouseOpening Doors spoke to the Governor of SAGIA about these opportunities and how Saudi Arabia will position itself for investors and growth into the future. ...Read more
Unlocking hidden value: Meet the entrepreneur bringing ‘Kaizen’ to Saudi ArabiaFeature from Thompson Reuter’s Zawya (zawya.com) Four Principles Co-Founder and Managing Partner Seif Shieshakly outline’s his extraordinary career and why he is so determined to spread the Japanese philosophy of ‘Kaizen’ – or Lean Management – across Saudi Arabia and the wider MENAT region. From an early age, Riyadh-born entrepreneur Seif Shieshakly has always challenge ...Read more
Lucky to be part of this ‘once-in-a-lifetime’ changeWith the recent government announcements and rising importance of women in the Saudi Arabian economy, Abdul Latif Jameel Opening Doors speaks to Alanoud Alhejailan, Chief Engagement Officer, Abdul Latif Jameel Insurance, about the changes in Saudi Arabian society, her working role and the future for women in the workforce in Saudi Arabia. You’ve previously studied and worked in the UK and t ...Read more
Leading from the front: our first female of financeAt a time when women are starting to make an ever-increasing contribution to Saudi Arabian society, one woman is demonstrating that when it comes to corporate success, gender is no barrier at Abdul Latif Jameel. Nilüfer Günhan is recently appointed Chief Financial Services Officer, at Abdul Latif Jameel, and was previously Chairman of ALJ Finans, which provides financial services products to co ...Read more
Women at the wheel: what’s changed in Saudi Arabia?One year after Saudi Arabia made the decision to allow women drivers, what has been the impact for the country’s families, communities, businesses and economy? ...Read more
Lean management expert Takao Sakai discusses the benefits 'Kaizen thinking' could deliver to Saudi Arabian businessesIn an exclusive interview with Opening Doors, Mr. Sakai explained his family links to the Toyota Way and the philosophy of Kaizen. ...Read more
Storing Up Success: How Batteries Are Revolutionizing the Global Energy MarketAs battery storage systems become increasingly advanced, and research and development continues around the world at an unprecedented rate, what is the current outlook for this exciting technology – and how could it impact energy planning in the future? ...Read more
Unlocking Digital Success: Combining Industry 4.0 and Lean ManagementWhat are the key elements of Industry 4.0, how can Lean digitalization provide a better business environment for all? ...Read more