The National Industrial Development & Logistics Program
We keep hearing the phrase: “In any economy, the logistics sector is the backbone of the economy.” I admit I did not realize the impact of this phrase until I heard it firsthand from senior government officials at Davos reacting to the strategic intent of Deutsche Post DHL Group (DPDHL) to set up a global logistical hub out of Saudi Arabia.
Almost five years ago, as part of the Vision 2030 reform plan roadmap, the Council of Economic and Development Affairs mandated the transformation of the Kingdom into a leading logistics hub through the National Industrial Development and Logistics Program (NIDLP). The NIDLP’s mandate is to transform the Kingdom into a leading industrial powerhouse and a global logistics hub in promising growth sectors that will generate job opportunities for Saudis, enhance the trade balance and maximize local content.
The NIDLP seeks to position the Kingdom as a global logistics hub, focusing on creating an export platform, developing a regional distribution platform and establishing an efficient internal distribution network to enable industry and service supply chains.
Saudi Arabia is strategically located at the crossroads of the East and West along one of the Red Sea’s main trade routes. The Kingdom is also ideally located near the MENA and West Africa regions, with an infrastructure that enables it to serve these markets. This infrastructure was developed under the supervision and guidance of Saudi Arabia’s leadership, which has always strived for a better future.
The Kingdom has invested over $100 billion in the last 10 years, especially in infrastructure projects to develop roads, ports, railways and airports. This has resulted in a robust network with adequate coverage and capacity. However, the Kingdom has still not leveraged the potential of its natural advantages. There is great room for development in this sector as the Kingdom does not perform as well as other countries and regional peers in terms of developing and providing for the sector’s needs. Vision 2030 identified Saudi Arabia’s capabilities and emphasized the need for immediate action.
In attracting foreign direct investors to this sector, the government is trying to position the Kingdom as a leading logistics hub in order to support the overall national industrial diversification strategy, transform Saudi Arabia into a regional distribution hub in the Gulf Cooperation Council and East Africa offering lower costs and higher speeds than competitors.
From my own observation, while wearing BMG Financial Group’s hat, DPDHL is not the only global investor exploring expansion opportunities into the country’s logistics sector. It was music to my ears when I recently met leading Saudi family groups who confirmed their discussions with other global investors as well.
Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.