18 May 2022
Industrials and logistics have been identified as two core pillars to diversification agendas and key drivers of Foreign Direct Investments (FDI) into GCC economies. The GCC has become a central node in the worldwide circulation of commodities. The reasons for the growth of the Gulf’s logistics infrastructure relate to its strategic geographic location along the Asia–Europe trade route, which has resulted in large levels of expenditure on mega transport infrastructure in various GCC states, including ports, airports, trains and roads.
More than 60% of the total expenditure on ports in the Middle East is in the GCC. Both new mega port construction and expansion of existing ports are taking place, with new, highly automated ports designed to accommodate the largest container ships in the world. These port projects are also integrally linked to the development of wider logistics networks, including passenger and freight railway schemes, airports, special economic zones and so-called logistics cities. In addition to being central to commodity circulation from Asia to Europe, GCC maritime ports are also positioned as crucial feeder ports to smaller East African ports.
In Saudi Arabia, the National Industrial Development and Logistics Program (NIDLP) was established with plans to transform the Kingdom into a leading industrial powerhouse and a global logistics hub by focusing on four key sectors; industry, mining, energy and logistics. USD 93billion King Abdullah Economic City (KAEC) includes the largest port in the Red Sea region and a logistics and industrial area.
Kuwait’s new Mubarak Port is designed to enhance its position into a regional trade hub. Bahrain’s Vision 2030 projects Bahrain as a regional manufacturing and logistics hub. Qatar’s National Vision 2030 has the construction of ‘world-class infrastructure’ as a principal element of its future development. The Omani state aims to leverage the position of ports outside the Strait of Hormuz to establish itself as a regional logistics hub. As with Jebel Ali, both Oman and Qatar seek to build an integrated logistics space that connects maritime ports, airports, rail and road. Linking ports with free zones that can assemble, label and repackage commodities due for re-export. This hard infrastructure is augmented by a soft infrastructure that seeks to incentivize international firms to relocate their activities to the new logistics spaces.
Key drivers of the sector growth are increasing contribution of the non-oil sector to GDP, infrastructure development, growth of free trade zones and industrial parks, and greater regional trade cooperation. One of the key challenges is that the sector is fragmented by many small and medium service providers with inefficient processes, weak supply chain management practices, and legacy IT infrastructure and systems. Unlike most other industries, the decline in economic activity during the pandemic has not affected global logistics too negatively. The sector offers opportunities for growth through acquisitions.
To know more about the sector read our latest report on GCC Logistics Sector.
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