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Digitalization, policy and regulation are what Saudi Arabia “needs to focus on” if it wants its $2.7 billion investment in logistics infrastructure to pay off.
The Middle Eastern kingdom announced on Sunday that it had earmarked funds to attract global supply companies to invest in Saudi Arabia as a logistics hub, as part of its ambition to become one of the top 15 world economies by 2030.
The state-run Saudi Press Agency said the plan “will ensure the provision and sustainability of supply chain access worldwide in an efficient manner and with highly competitive advantages”.
He added: “Covid, trade disputes and the geopolitical landscape have broken or weakened global supply chains, driving up prices and disrupting production and distribution. This move aims to strengthen Saudi Arabia’s position and mitigate the impact of global disruptions.
DHL’s latest Global Connectivity Index, from 2020, ranked the country 42nd globally economically, while neighboring UAE ranked fourth, Qatar 31st and Bahrain 39th.
Nonetheless, the largest economy in the Gulf Cooperation Council region grew 2.9% last year, with non-oil exports up 61% year-on-year and expectations that the country will record its first budget surplus in a decade.
Ti logistics consultant John Manners-Bell said The Loadstar“Saudi Arabia’s large national economy will attract logistics companies. Despite its deep pockets, it will certainly need foreign investment, so creating an environment in which foreign investors feel confident enough to engage in the market for the long term is essential.
Ti’s Emerging Markets Index 2022 indicates that the kingdom has put in place a series of incentives for the next year aimed at achieving this, including access to a network of free zones, modern manufacturing facilities, favorable tax regimes and improved logistics infrastructure.
And alongside the news of the additional funding came the announcement that Saudi Arabia intended to develop 59 new logistics zones.
Efforts so far have paid off, with its Ministry of Investment announcing five investment deals in the aerospace, finance and technology sectors. Among those are deals with Boeing, advanced metals maker Tasnee and space training company Orbite, which the country hopes will see it localize half of its aerospace spending over the next eight years.
Manners-Bell made three “must-haves” recommendations to meet his supply chain ambitions, including the establishment of a single supply chain and logistics regulator.
“This body should be given the legal and administrative authority to influence change in all government agencies, and special attention should be given to land use policy and administration,” Mr. Manners-Bell. “This is an area plagued by regulatory ambiguity and uncertainty. This leads to confusion and loss of investor confidence.
He further suggested that digitizing all supply chain, business and logistics processes onto a common technology platform to “significantly” improve capacity and manage change within the supply chain. supply and its extensive network of public and private actors would be useful.
“$2.7 billion is a tiny fraction of what has already been invested by the Saudi government and it will need much more to achieve its goals,” Manners-Bell said.
“But it is perhaps in the midst of the world’s most ambitious economic metamorphosis under its Vision 2030, an effort that has seen it spend more than $100 billion on infrastructure and related projects to position it as a global logistics hub at the crossroads of Asia, Europe and Africa.