Saudi Arabia’s “Vision 2030” program designed to build global logistics hub

Saudi Arabia’s National Transport and Logistics Strategy (NTLS) in investing big into developing the nation’s logistics infrastructure.

Saudi Arabia (KSA) has made headlines by pumping billions of dollars into golf and soccer which its detractors condemn as ‘sports washing’ aimed at deflecting attention from its human rights record.

What is far less well-known is that the oil-rich state is also investing substantial sums in logistics infrastructure and freight handling capacity in order to become not only a regional but global player in the sector as set out in its Vision 2030 program.

Strategic Investment

The National Transport and Logistics Strategy (NTLS) makes provision to invest around US$133 billion to enhance KSA’s multi-modal freight transport and logistics capabilities.

In the maritime sector, large-scale projects are in the pipeline to upgrade existing ports and terminals – and to develop new ports and introduce new trade routes. The aim is to more than quadruple the country’s annual container throughput to 40 million TEU by 2030.

While the country’s rail network is to be expanded significantly, connecting KSA’s Red Sea and Arabian Gulf ports, while air cargo capacity will be doubled to at least 4.5 million tonnes.

Towards the end of last year, Saudi Arabia launched a project to transform the current Riyadh Airport into a massive aviation hub with six parallel runways, as well as incorporating a Special Integrated Logistics Zone covering three million square meters and with room for expansion.

Interviewed by local media at the time, Transport and Logistics Services minister Saleh bin Nasser Al-Jasser noted that KSA is targeting “100 of the biggest global companies to build logistical centers for them in this zone.” Apple is rumored to be one of the first multi-nationals to invest in the zone.

A new national airline, Riyadh Air, set up to rival Middle East giants Emirates, Qatar Airways and Etihad, will be based at the revamped airport.

Vision 2030

In August this year, KSA’s de facto head of state, HRH Crown Prince Mohammed bin Salman, (often called MbS by the international press) unveiled a Master Logistics Centers Plan, to boost local, regional, and inter-continental connectivity for international trade networks and global supply chains. The Plan entails the construction of around 40 new logistics centers, with a total area exceeding 100 million square meters, compared to approximately half that number currently and up from just two in 2020.

Vision 2030 also encompasses the development of ‘economic’ cities, lifting demand for both industrial and consumer goods, amid projected population growth, resulting in the demand for additional cargo volumes.

Saudi Arabia’s logistics ambitions appear grandiose in terms of the scale/cost of the infrastructure/facilities it is planning. So where is demand likely to come from in the next decade or so to justify such ‘mega’ resources, especially when Dubai is already the hub in the Middle East?

According to John Manners-Bell, chief executive of Transport Intelligence (TI), a UK-based market research company specialized in transport and logistics, part of the goals of Saudi’s Vision 2030 will be to diversify economic activity, increasing non-oil GDP from 16% to 50%.

“This will result in significant demand from heavy industrial sectors such as cement, chemicals, plastic, glass and steel. The market’s access to cheap oil and gas will allow it to benefit from considerable foreign investment in energy-intensive sectors.

“However, there will also be increased demand for logistics from consumer goods manufacturers as the population rises and income inequality reduces. As well as transport related services, this will also result in strong demand for better warehousing facilities serving the contract logistics market. In addition, there has been high demand in the pharmaceuticals sector as well as for perishables goods which is driving cold chain logistics.”

He believes there is room for a second global logistics hub in the Middle East.

“Saudi Arabia has the resources and ambition to become a major regional and global hub over the next decade - a conduit for trade between some of the fastest growing markets in Asia and Africa, as well as serving the rest of the Middle East and parts of Europe. Its large domestic and export market will give it an advantage over other hub ports in the region which focus largely of transshipments.”

Manners-Bell isn’t the only believer in the value of a Saudi logistics hub.

The DHL Group is “deeply involved” in a broad spectrum of logistics operations, with one of its “substantial” investments being the establishment of three key ‘gateways’ in Riyadh, Dammam, and Jeddah, according to Sue Donoghue, CEO Arab Cluster, DHL Global Forwarding

“These gateways play a vital role in facilitating the efficient flow of global trade between Saudi Arabia and its international partners and have helped strengthen Saudi Arabia’s position in the global logistics landscape.”

Donoghue underlined that one of the Kingdom’s significant advantages lies in its strategic geographic location. “It has access to key waterways like the Gulf, the Red Sea, and the Indian Ocean, complemented by a well-developed infrastructure, particularly in ports, railways, and roads. This existing infrastructure serves as a strong base for further logistical growth.”

Ocean Hub Port

Turning to Saudi Arabia’s potential as a major hub for ocean freight, Dean Davison, head of maritime advisory at infrastructure development consultancy Infrata, sees this focusing on the Red Sea ports of King Abdullah Port (KAP) and Jeddah Islamic Port (JIP) which already boast major container facilities.

“The geographic location is a good one – box routes between Asia and Europe/Mediterranean (and to a lesser extent, based on volumes and ship sizes, Asia to North America East Coast) need to use the Suez Canal. So, vessels serving two massive trading blocs and regions of high consumption (North America and Europe) – are sailing past the front door of KSA’s Red Sea ports.

“These are important factors in generating routes and links between KSA and both east and west trades. Jeddah and KAP also offer transshipment opportunities in the region such as East Africa.”

Commenting on the objective set out in Vision 2030 for a four-fold increase in the number of TEU, Davison said: “It certainly is an ‘aggressive’ total and target. The key question is the extent to which the program will generate future containerized cargo demand growth.

“The initiatives are extremely widespread and include the development of new cities and infrastructure. But the exact level of growth is not something that can be forecasted and will likely be accompanied by a number of relevant caveats.”

(see DP World has “Robust Presence” in Saudi)

Air Cargo Center

As for KSA emerging as a leading hub for air cargo under the Vision 2030 program, the challenge appears huge.

“Its dominant airline, Saudia has seven freighters and over 150 passenger aircraft but does not feature within the world’s top 25 cargo carriers by tonnage transported,” observed Glyn Hughes, director general of The International Air Cargo Association (TIACA).

“The freight forwarding community is predominantly based on local companies who support the oil industry. There are only 13 IATA registered agents in the country, the same as Guatemala and less than a third of the number registered in the UAE. Although some global major forwarders do have a presence there, mostly deal with large-scale project activity.”

As to airports, he said Riyadh is the leading one in KSA for cargo throughput, although in 2021 it only ranked at number 78 globally and 7th in the Middle East/Africa region. Jeddah was 99th and 10th.

“The establishment of Riyadh Air as part of the national aviation policy will see significant additional capacity entering the market. With an order for over 70 Boeing 787s the amount of belly cargo capacity connecting a planned network of over 100 destinations will be considerable,” Hughes underlined.

“The key for any airline or hub success is to deliver high quality, cost effective solutions. With Istanbul, Doha, and Dubai already well-established within the region and with each showing strong steady growth, the key to Saudi Arabia’s air cargo expansion and growth will be to identify new markets and expand its connectivity. Air Cargo still only transports about 1-2 % of global trade by volume. Opportunities exist to grow this.”