Why challenges need to be overcome in Saudi Arabia
Written by Syed Mustafa, vice president, Almajdouie Group.
Time to tell it like it is. Saudi Arabia’s logistics industry faces some major challenges. Labour issues, a lack of logistics infrastructure, and illogical reasoning are some of the biggest issues we currently have to deal with. In terms of employing staff, we are experiencing a hard time. If you employ local workers you face the difficult prospect of training them, which obviously takes time. We have a situation here, just as in many other countries in the world, where there is just not a readymade pool of skilled logistics workers available.
It’s a similar problem when employing foreign staff. As current government policy supports the hiring of local staff, getting a visa for workers from abroad generally encounters difficulties. It’s an unfortunate situation which often leaves logistics companies stuck in the middle, but it is one that I cannot see being resolved in the near future. Infrastructure wise, Saudi Arabia is seemingly well set up. We have a very good road network and a lot of available warehouses and there are a number of trucking companies available. Despite this, there are some shortcomings.
Firstly, there are a lack of professional warehouses in Saudi Arabia. Almajdouie is working towards resolving the problem, but it remains a big task. The main issue is that most of Saudi Arabia’s warehouses are just seven or eight metres high with very few exceptions and many do not have a sufficient amount of loading bays. It's rare when adjustable loading bays are available.
Secondly, with regards to trucking, whilst there are many companies operating over 100 trucks, many of them are not professionally managed. There remains a lack of suitably experienced drivers who are capable of driving the trucks and in terms of maintenance, this is something that needs to be addressed for the benefit of the logistics sector.
Thirdly, in my opinion, facilities around port areas need to be improved in order to make logistics easier. This will significantly help improve supply chain management. Saudi Arabia is a large Arab economy which is moving faster than many other countries in the region. The Saudi Government recently awarded a number of projects for water desalination plants, power plants and petrochemical plants as well as a number of other infrastructure projects which are helping the economy to grow. But at times, the Saudi Arabian logistics sector struggles with confusing policy that dictates operational efficiency. The movement of freight trucks between the UAE and Saudi Arabia is an example of this.
There have been instances where trucks have become stuck at the border and caused 30 km long queues on the UAE side, which has resulted in a ban on oversized cargo crossing the Saudi Arabian border from the UAE. Another issue is that the UAE wants firms to pay customs deposit when moving cargo out of the free zones−which is understandable. However, to then pay Saudi Customs another duty on top of this makes for a problematic system. In my view, the Saudi Arabian logistics industry would benefit from initiatives that promote efficiency and education.
In terms of shipping, electronic scanning equipment would help simplify customs clearance procedure. Shipments could be cleared through and if there was any doubt, it could be physically inspected. The use of technical equipment in regards to traffic permission issues would further assist in the granting of immediate permission, cutting delays. I also think the provision of training and education programs for Saudis in the logistics sector would help improve the talent pool for logistics firms to draw from. Whilst there are challenges that face the logistics industry in Saudi Arabia, I feel great optimism for the future.
Economically, Saudi Arabia is encouraging overseas investment by improving the condition of investment and the development of the petrochemical industry will further provide opportunities for specialised logistics companies.
Almajdouie currently accounts for only 65 per cent of the market share, highlighting the fact that there is demand for more skilled companies to enter the market. With this in mind, I think the Middle East logistics sector has some exciting times ahead, especially the Arabian Gulf region, in the coming five to ten years.