Saudi Arabia is developing its economic conditions under the new leadership of the crowned Prince of the nation. The government of Saudi Arabia has taken up the expansion of various economic activities that are beyond oil, gas, creating greenfield industrial sites and cities with business-friendly regulatory environments. These projects are well equipped with industry and logistics facilities. In Saudi Arabia, the ports are an important gateway for logistics and warehousing market serving 500 million people. The historical Red Sea global trade market considers the logistics and warehousing market as a necessity and not as a choice. The expansion of Jeddah and Dammam airport as proposed by the Saudi Arabia government will witness a rise in the logistics and warehousing market. The number of cargo units that need to be transported through the ports will increase rapidly along with the expansion of railways and airline networks.
Sea freight movement has majorly dominated the market for Logistics in Saudi Arabia. The increase in the trade scenario in the country has attributed to the increase in the percentage share of sea freight. The rising import and export value from other countries has triggered the demand of sea freight in Kingdom. The total container port traffic at Saudi Arabia port is 6,326,861 TEU.
The leading competitors of logistics and warehousing industry in Saudi Arabia are DHL, Panalpina, DB Schenker, TNT, UPS, Agility, Aramex, Almajdouie group, Al-Jabri group, Arabian Hala. Co. Ltd, Four winds Saudi Arabia limited, GAC, Globus logistics, Kuehne+Nagel, Logistics service provider, WPL, Wared logistics, and Zahid group. Aramex, DHL and other leading competitors are planning to expand in the coming years to gain stronghold in the logistics and warehousing market.
Freight forwarding segment has dominated the Logistics and warehousing industry in Saudi Arabia over the past few years. The increase in demand for transportation of goods from one place to another has accelerated the size of the freight forwarding services in the country. Growing expatriate population, increase in the fuel prices, rising industrialization has triggered the market size. Moreover, the increase in the export and import value has positively impacted the freight forwarding industry in the country.
The huge investment by the government on the manufacturing and construction industry in the country has triggered the size of engineering and equipment industry in the country. The transportation and storage of the products from this industry has led to the increase in demand for logistic and warehousing services in the country. The engineering & equipment segment has contributed 25% share to the revenues in 2015. There are several metal producing companies in the country, which have their manufacturing plant in the kingdom.
According to the study “Saudi Arabia Logistics & Warehousing Market Outlook to 2020 – Expanding Industrial and Retail Activities Supported by Infrastructure Spending to Support Growth”, the country’s economic policies focus on achieving higher economic diversification and growth, while safeguarding macroeconomic and financial stability. The logistics industry was transformed with the launched a cloud-based B2B platform, Trukkin Middle East, that connects customers with shippers and truckers in the country to create new business opportunities and with the delivery of streamlined logistics solutions. Trukkin opens doors for new suppliers, services on demand and lower transport overheads supported by transparency and business development. The Trukkin ecosystem consists of multi-lingual customer app on iOS and Android and a portal. All the transportation fleet owners along with the drivers use the portal and application.
Investments in infrastructure projects enhance the logistics services in the country. Several initiatives are taken to improve the logistics services such as Multi-Modal Logistics Hubs in Yanbu and in Jubail Industrial Cities, removing trade restrictions on air and truck transportation, and the localization and transfer of transport and logistics technology.
Saudi Arabia depends on imports and has become the logistics hub of the Gulf region. In Saudi Arabia, the logistics and warehousing market is growing rapidly with the national transformation plans and development of a borderless GCC customs union. Saudi Arabia will be able to outshine in the United Arab Emirates (UAE) focus as the GCC’s main trading hub with the soaring trade volumes and with various project on hand that improve the transportation infrastructure. It was recorded that Saudi Arabia’s imported 300 million tons of cargo in the year 2005, however it was expected that the volume may treble to 900 million tons by the year 2020.
Saudi Arabia’s economy is heavily dependent upon foreign immigrant as they constitute more than 30% of the total population. The country has been facing a critical shortage of skilled labor since past few years due to increasing competition from foreign labor. Unemployment rate was at an all time high of 13% in 2011 due to availability of cheap foreign labor. Later, it has been observed that firms face problems in employing foreign labor as government has heavily regulated the visa procedure to protect the interest of domestic labor. Also Majority of the companies in the country are facing challenges in delivering the products on time, especially express logistics companies owing to the poor infrastructure of the kingdom and also due to lack of digital technology used for transportation and logistics purpose. However, rising retail and FMCG industry of the country will accelerate the demand for warehouses storage and transportation & logistics facility.
Ankur Gupta, Head Marketing & Communications