Digitalisation, policy and regulation are what Saudi Arabia “must focus on” if it is to see its $2.7bn investment in logistics infrastructure pay off.
The Middle East kingdom announced on Sunday it had earmarked the funds to incentivise global supply firms to invest in Saudi as a logistics hub, part of its ambition to become one of the top 15 economies in the world by 2030.
The state-run Saudi Press Agency said the plan “will ensure provision and sustainability of supply chain access to all of the world effectively and with highly competitive advantages”.
It added: “Covid, trade disputes and the geopolitical landscape have broken or weakened global supply chains, driving up prices and disrupting production and distribution. This initiative aims to strengthen the position of Saudi Arabia and mitigate the impact of global disruptions.”
Nonetheless, the largest economy in the Gulf Cooperation Council region expanded 2.9% last year, with non-oil exports up 61% for the 12 months and expectations that the country will record its first budget surplus in a decade.
Logistics consultant for Ti John Manners-Bell told The Loadstar: “Saudi’s large domestic economy will attract logistics companies. Despite its deep pockets, it will definitely need foreign investment, so it’s essential to build an environment in which foreign investors feel confident enough to commit to the market long-term.”
Ti’s 2022 Emerging Markets Index indicates that the kingdom has laid out a series of incentives for next year aimed at achieving this, including access to a network of free zones, modern manufacturing facilities, favourable tax regimes and improved logistics infrastructure.
And, alongside the news of the additional funding, came the announcement that Saudi intends to grow 59 new logistics zones.
Efforts so far taken have resulted in some pay-off, with its Ministry of Investment announcing five investment agreements in the aerospace, finance and technology sectors. Among these are deals with Boeing, advanced metals manufacturer Tasnee and space training company Orbite, which the country hopes will allow it to localise half of its aerospace expenditure in the next eight years.
Mr Manners-Bell provided three recommendations on the “musts” to meet its supply chain ambitions, including provision of a single supply chain and logistics regulator.
“This body would need to be endowed with the legal and administrative authority to impact change across all government agencies, and there would need to be special attention to land-use policy and administration,” Mr Manners-Bell continued. “This is an area plagued by regulatory ambiguity and uncertainty. It leads to confusion and loss of confidence among investors.”
He further suggested digitalisation of all supply chain, business and logistics processes across a common technology platform to “dramatically” improve capacity and manage change within the supply chain and its extended network of public and private stakeholders would help.
“$2.7bn is a tiny proportion of what has already been invested by the Saudi government and it will need a lot more if it is to reach its targets,” said Mr Manners-Bell.
“But it’s in the midst of maybe the world’s most ambitious economic makeover as part of its Vision 2030, an effort that has seen it spend more than $100bn on infrastructure and related projects to position it as a global logistics hub at the crossroads of Asia, Europe and Africa.”