In our efforts to keep members informed on the progression of the Saudi Vision 2030, a social, cultural, and economic transformation plan that reflects the strengths, capabilities, and ambitions of the Kingdom, we are publishing summaries of the sections of the “Delivery Plan for the National Industrial Development and Logistics Program (NIDLP)”.
The NIDLP aims to transform Saudi Arabia into a leading industrial powerhouse and a global logistics hub in promising growth sectors (with focus on Industry 4.0), which would generate ample job opportunities, enhance the Kingdom’s trade balance, and maximize local content.
The program focuses on four key sectors: Industry, Mining, Energy, and Logistics, as well as enablers including the development of Policies and Regulations, Financial Enablement, Infrastructure, Industrial Lands, Special Economic Zones, Research, Development and Innovation.
Section 5: Logistics
Overview
Saudi Arabia, the world’s 18th largest economy, is strategically located within five hours air transport from half of the world’s population. Geographically, it is located at the crossroads of the East and West, along one of main trade routes in the Red Sea, and near the Middle East, North Africa, and West Africa regions. The Kingdom is expanding the existing infrastructure and internal distribution network to become an effective platform for export and re-export in order to raise exports to over $266 billion (SR1 trillion) by 2030.
Over the last 10 years, the Kingdom has invested over $100 billion into the development of its transport and logistics sector, with a focus on developing roads, railways, and airports. Saudi Arabia currently has 9 operational ports and 27 airports, including five international airports. Private sector participation has been encouraged through the BOT model in the Jeddah Islamic Seaport, King Abdullah Seaport, and at the Madinah Airport. Additional efforts are being made to improve the operation of this sector to capture an increasing share of the regional freight transit volumes, decongest cities, streamline import/export processes, and liberalize air cargo capacity.
However, the Kingdom has yet to fully utilize all its natural advantages relative to the logistics sector. Therefore, the Vision 2030 reform program places considerable importance on the need to act expediently to develop this vital and lucrative sector. The Kingdom hopes to achieve the goal of becoming a global logistics hub by:
Objectives
- Improving custom procedures
- Streamlining booking and tracking systems
- Setting high standards for freight and storage
- Integrating and capturing maximum benefits from existing and new infrastructure
- Achieving integration between national and international transport companies
The key components and objectives to transform Saudi Arabia into a leading logistics hub are:
- Export platform: Position Saudi Arabia as an efficient export platform to set correct estimates and provide the necessary capacity and capabilities to avoid waste and support overall national industrial diversification strategy
- Regional platform (for re-export): Transform Saudi Arabia into a regional distribution hub in the Gulf and East Africa areas that offers lower prices and higher speed than competitors
- Local and internal connectivity: Use a highly diversified distribution system for goods distribution at optimal cost across current and target population centers
Challenges
The report identifies several obstacles facing the logistics sector in the Kingdom such as:
- Lengthy import and clearance process at ports of entry due to strict security measures.
- Sectoral efficiency: impacted by challenges related to licensing processes and discrepancies relative to regulations surrounding warehouse and transportation standards
- Lack of intermodal integration
- Need for an improved and integrated system for tracking and tracing shipments.
Sectoral Strategy
The strategy to improve this sector was developed in base of three key factors:
- Saudi Arabia’s aspirations as defined by Vision 2030
- Competition with regional peers to become a regional logistics hub
- Future trends such as the development of eco-friendly vehicles and autonomous vehicles, utilization of data to analyze passenger flow, use of high-speed transport (rail) automation, and real-time tracking of goods and people at airports.
To become a regional global hub, the Kingdom will need to further improve its physical infrastructure, streamline its border procedures, improve sector governance and regulations, further encourage private sector participation. It also has to implement programs that will help outdo its peers in terms of freight speed and cost, and provide a similar level of tracking and tracing services.
The logistics sectors development plan was designed taking into consideration various components of the NIDLP such as:
- Mining: The mining sector is expected to become the third pillar of the economy by utilizing available mineral reserves. Future sectoral developments will be reliant on efficient and effective transportation to support a competitive value chain.
- Industry: The Kingdom is focused on boosting local industries to diversify the economy and support local employment. For example, the food industry will benefit from an improved distribution network.
- Special Economic Zones (SEZ): SEZs help in addressing sector-related functions, such as building a seaport and storages for car carrier trailers to promote efficiency and to build logistics hubs.
- Industry 4.0: The potential of the logistics sector can be further enhanced through alignment with related initiatives and utilization of innovations such as smart containers, smart transit flow management, technical assistance at ports, and customs digitization
- Local Content: Consolidation and integration of local content initiatives and opportunities across the logistics sector, such as the metro and rail projects equipment.
Current Efforts
Saudi Arabia has introduced sectoral reforms to enhance service quality and increase private sector participation. New regulations have been drafted concerning road transport and brokers to enhance service standards and enable a higher level of competition. Railway and port sectors have been restructured to enable independent regulatory control, improve operational efficiency and increase private sector participation.
The existing airfreight market was opened to many international companies that will invest in developing and operating existing and new facilities. A national strategy was developed for SEZs to promote the ease of doing business in Saudi Arabia and attract more investments and trade. Current projects are related to improvement of re-export activities at existing zones, and rehabilitation of existing economic zones and cities to upgrade them to the SEZ status.
Saudi Arabia is currently seeking to streamline customs and other border procedures to reduce import and export time and cost. Achievements to date include reduction of the time to “authorize clearance” from approximately 4.8 days in February 2017 to 1.9 days in March 2018. The Kingdom is also focusing on digitizing its procedures by using electronic systems to track and trace freights, managing entities across ports and airports (port and airport community), as well as accelerating and managing payments.
Current initiatives underway for this sector are handled by the Ministry of Transport, the Saudi Ports Authority, the Saudi Customs, and the Ministry of Economy and Planning.
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To take advantage of business and investment opportunities in this sector, join the Delivering Change: Innovation and Localization Mission to Saudi Arabia, Oct 26-31. The mission will facilitate participation at the Future Investment Initiative (FII), hosted by the Public Investment Fund in Riyadh on Oct 29-31. Themed “What is next for global business?”, the FII will include in-depth conversations about future global investment opportunities, analysis of industry trends, and networking with an influential community of top global leaders, investors, experts, and innovators. Apply for the mission and learn more: here
For a copy of the NIDLP delivery plan, please visit https://vision2030.gov.sa/en/programs/NIDLP
