REPORT: Saudi Arabia the sleeping logistics giant
During the opening session at the Leaders in Logistics Summit, Olaf Schirmer, senior director, consumer & industrial products and services practice, PwC, warned that although Dubai is the dominant logistics hub in the region, Saudi Arabia is fast catching up.
“The UAE is on-par with developed markets in terms of the logistics and transport sectors’ share of the economy, at around 10%,” he told delegates. “The UAE is also ranked at number 11 on the Logistics Performance Index for 2018, with Germany at number 1, while Saudi Arabia has dropped to 55, behind Oman at 43.”
This explains why the UAE remains dominant in terms of transshipment in the region, he said, but added that with infrastructure investment in Saudi Arabia ramping up for Vision 2030, this was unlikely to remain the case for long.
“King Abdullah Port was the eighth fastest growing port in the world in 2017, and this and other infrastructure improvements will help KSA increase its KPI ranking,” said Schirmer.
With the development of an integrated rail network between the two countries, the UAE’s share of transshipment bound for KSA was likely to shift significantly, he added.
“We expect a significant shift in cargo transport from road to rail in the UAE, Oman and KSA. There is a $350-billion investment in rail and port infrastructure between now and 2025,” he said.
“All these countries want to be logistics hubs, but how many more can we really have? In the UAE alone we already have Dubai, Abu Dhabi, in Oman we have Salalah for transshipment into Africa, but King Adbullah Port is trying to position itself for that as well.
And then there’s the Saudi Land Bridge, which officials in the country have said will transform the local logistics sector, offering multimodal transport options between the two biggest ports on the west and east coast for the first time.
It will be possible for mainliners to call in Jeddah, or King Abdullah Port just up the coast, and discharge cargo bound for Damman, Riyadh or any other city, without that cargo needing to tranship through Jebel Ali in the UAE.
Of course, without ongoing improvements to the country’s ports and customs infrastructure, that tendency toward transhipment will remain, lest ship owners find their vessels delayed due to port congestion in Jeddah. But, this is where King Abdullah Port comes in, the full-service commercial port just 90-kilometres from Jeddah, with a unique strategic location on the red sea, serving countless markets and destinations in Asia, Africa and Europe.
Facilities at the port include multipurpose terminals for containers (a 20 million TEU capacity is planned), roll-on/roll-off (1.5 million CEU planned) and break bulk & general cargo (15 million tons planned). Logistics services include a Logistics Park within the port premises of more than 750,000 square meters and a bonded zone adjacent to the port of more than 3.3 million square meters.
Most importantly, the port masterplan takes into consideration a direct link to the Saudi Land-bridge Railway connecting the major cities of Saudi Arabia. It’s for this reason that Rayan Mustafa Qutub, CEO, King Abdullah Port, says the port and its freezone will be a leading global example of the integration of supply chains.
“This industry suffers from a lot of legacy equipment and developments that hinder efforts to enhance the local supply chain and improve its efficiency and effectiveness. By building the port and freezone from scratch, we’re changing this entirely,” he says. “This is why 2018 has been such a strong year for us, we saw growth in traffic of 50.5%, and we want that to grow even more.”
According to Qutub, with 26% of global trade passing through the Red Sea, the opportunities for transhipment in King Abdullah Port are huge. “At present Saudi Arabia is only capturing 16% of that market, so we see major opportunities for growth.”
Will this mean that King Abdullah Port will be competing with transhipment hubs like Khorfakkan and Jebel Ali? According to Qutub its about collaboration not competition. “There’s potential for the region as a whole to be a global logistics hub,” he says. But in order to take full advantage of these factors, port operators and other leaders in the logistics industry must collaborate to achieve the ‘master plan’.
“There is a need for greater coordination between the stakeholders in the industry, we need to collaborate on the master plan and this is ongoing,” he says. “We’re in touch with all the big players and are looking to compliment rather than compete.”
Collaboration versus competition is an approach that has been adopted by Saudi Customs as well. “Our aim is to establish Saudi Arabia as the premier logistics hub in the Middle East and one of the most important worldwide,” says Faisal Saad Albedah, deputy governor for Trade Facilitation, Saudi Customs, echoing the sentiments expressed by Qutub.
“We are working to enhance ties with our counterparts abroad to facilitate international trade and improve the Kingdom’s reputation in this respect. The agreements comprise of providing customs cooperation, managerial support, and information exchange between the involved nations,” he adds.
An example of this is Saudi Customs recent signing of the United Nation’s TIR convention (Convention on International Transfer of Goods), alongside 74 member states, including the UAE. This convention aims to unify and facilitate customs procedures and enhance overall security through the transit of goods within secured containers.
It therefore eases transhipment, which will help Jebel Ali retain its position as the key transhipment hub in the region, especially for overland transport into Saudi Arabia, but Saudi Customs is working to enhance direct shipment into the country as well.
“The 24-hour Clearance Program that was launched in late 2017 has improved customs procedures mechanisms and their overall flexibility. It is based on five main pillars and has drastically improved business operations,” says Albedah. “This reduced the number of documents required for importing and exporting goods. Moreover, Saudi Customs now accepts manifests written in English without requiring their translation into Arabic and authentication, and has cancelled penalties imposed on changing or updating these documents.”
More than 80% of all imported goods are now clearing customs within 24 hours, which is a huge improvement on the 7 to 14 days that was common just five years ago, and which has supported Jebel Ali’s dominance as the leading transhipment port for Saudi-bound goods.