Logistics Sector Sets the Stage for Business Expansions and Saudi Arabia's Global Leadership
The logistics sector in Saudi Arabia is set to rapidly expand, creating a plethora of opportunities for global companies.
Saudi Arabia has set the goal of constructing 59 logistics centers across over 100 million square meters by 2030, aiming to develop logistics infrastructure and integrate Saudi Arabia into global supply chains.
The government's efforts in this regard have started to pay dividends. Last year, the Kingdom climbed 17 places to claim 38th rank in the World Bank's Logistics Performance Index 2023.
Several key growth factors support the rapid expansion of Saudi Arabia's logistics sector. All of these are aligned with the broader objectives of Vision 2030 and the National Transport and Logistics Strategy to achieve a 4% increase in the transport and logistics contribution to the GDP to reach 10% by the same year.
Rising Local and Global Investments Drive Saudi Logistics Growth
The Kingdom has already made hefty investments in infrastructure to increase connectivity and streamline trade routes. The establishment of logistics-focused Saudi economic zones (SEZ), like those in King Abdullah Economic City (KAEC) and the Riyadh Integrated SEZ, directly targets the logistics and supply chain sectors, encouraging larger inflows of global businesses to expand to Saudi Arabia.
Other governmental initiatives, such as the Global Supply Chain Resilience Initiative and the National Industrial Development and Logistics Program (NIDLP), are creating an environment that’s conducive to growth.
That was exemplified by the marked increase in private sector participation and an uptick in investments directed towards the logistics sector. According to industry reports, private sector investments in the logistics zones at Saudi ports now surpass the SAR 10 billion ($2.7 billion) mark, encompassing an area of six million square meters (sqm).
For instance, the expansion of ports like the Jeddah Islamic Port and the development of new logistics centers across key regions such as Riyadh, Makkah, and the Eastern Province are concrete examples of the Kingdom's focus on supporting supply chain integration.
Noteworthy deals include recent Maersk’s SAR 1.3 billion investment in Jeddah Islamic Port and the launch of Arcapita’s SAR 1.8 billion logistics fund and the Saudi Ports Authority's (Mawani) $4.5 billion investments in the Kingdom’s maritime, logistics, and ports sectors. The Mawani investment comes a few months after it signed multiple agreements to establish five new logistics parks and centers at a cost of over SAR 4 billion.
Besides, the ongoing transformation of the Saudi logistics space is opening the door for impactful collaborations and partnerships among global industry leaders. This outlook was reflected during the Saudi Warehousing and Logistics Expo and the Saudi Wood Expo, recently held in Riyadh, featuring more than 3,500 products and services and showcasing the latest advancements in logistics.
Opportunities Abound for Global Companies as the Saudi Logistics Sector Expands
In the second quarter of this year, the Saudi logistics sector showed the highest growth among its non-oil sectors, recording the most license registrations.
The number of active commercial registrations reached 11,928, representing a 76% growth compared to 6,742 registrations in the previous year, demonstrating the sector's continued attractiveness to foreign investors.
Driving the sectoral boom are global companies like Unipart Group, a UK-based global provider of manufacturing, logistics, and consultancy services, which is among AstroLabs' expansion leaders that recognized immense growth opportunities in the Saudi logistics sphere.
Unipart’s expansion into Saudi Arabia was prompted by the Kingdom’s geographic location and the significant government investment aimed at modernizing and enhancing its logistics infrastructure, such as the commitment to inject $150 billion into the logistics sector.
The company's partnership with AstroLabs has been instrumental in helping Unipart successfully navigate the Saudi market expansion, Tahir Malik, Unipart’s country director, noted, adding that the support offered by AstroLabs has enabled the company to rapidly set roots and prosper in the fast-growing market.
E-commerce: Fueling the Growth of the Saudi Logistics Sector and Attracting Technology Companies
The projected expansion of Saudi logistics presents compelling opportunities for global companies, particularly in the lead-up to Expo 2030 and the 2034 FIFA World Cup, opening new avenues for trade and commerce.
The surge in e-commerce is a standout factor driving the growth of the Saudi logistics industry. The increasing demand for last-mile delivery services is accelerating the need for advanced logistics amid the rising popularity of e-commerce services among consumers in Saudi Arabia. According to industry reports, the number of e-commerce users has grown by 42% between 2019 and 2024 and is expected to reach 34.5 million by next year.
Projections indicate that e-commerce revenue in the Kingdom will double to $22.68 billion by 2027, driving an increase in the sector's contribution to GDP to 12% by next year.
The Kingdom’s logistics infrastructure is being rapidly upgraded to meet this demand, leading to an industry-wide adoption of cutting-edge technologies such as automation. This makes the Kingdom an even more attractive destination for global technology players unlocking opportunities arising from the need for solutions like cargo transport, fleet and warehouse management, blockchain, and IoT.
Central to the shift towards technology in the logistics sector is the integration of sustainable practices in alignment with the Saudi Vision 2030 to reach carbon neutrality by 2060.
Moreover, the Saudi e-commerce sector provides a fertile ground for impactful partnerships between global and national companies, as demonstrated in France's Marseille signing of a joint venture (JV) agreement with Saudi Almajdouie Logistics. The JV will enable both parties to leverage each other’s strengths and support the growth of e-commerce solutions in the Kindom. Once completed, the JV entity will result in the creation of a local fleet of over 2,000 assets, providing 2,000 jobs to Saudi employees.
By introducing global best practices, advanced logistics solutions, and a wealth of experience, the efficiency and competitiveness of Saudi Arabia’s logistics industry are significantly enhanced. This aligns with the broader goals of Saudi Vision 2030, which aim to diversify the economy and cement the Kingdom’s global leadership.
