Global supply chain impairs even as Saudi logistics industry shows signs of recovery

Analysis Global supply chain impairs even as Saudi logistics industry shows signs of recovery
According to Riyadh-based Saudi Market Research, the Kingdom plans to inject $147 billion into the development of the transportation and logistics industry to turn the country into a transportation hub. (AFP)
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Updated 26 June 2022

Global supply chain impairs even as Saudi logistics industry shows signs of recovery

Global supply chain impairs even as Saudi logistics industry shows signs of recovery
  • China’s COVID-19 restrictions, surge in oil prices and demand shock have shaken global services

RIYADH: China’s stringent rules to curb COVID-19, the surge in oil prices and the worldwide demand shock have shaken the tectonic plates of the international supply chain and cast a long shadow on the global logistics business.

The troika has exposed not only the fault lines in companies’ distribution strategies but also the lack of resilience among logistics firms to cope with the vagaries of the global economy.

“China is sadly passing through another lockdown, impacting our volumes. The challenge has nothing to do with us; it is from China itself,” Abdulaziz Busbate, country general manager of DHL Saudi Arabia, told Arab News.

The leading logistic firm has seen a 20 percent rise in the cost of operations since the outbreak of the universal pandemic. The same holds true even for smaller supply chain companies. 

“Before the pandemic, it took about $2,000 to import one container from China. Now it takes almost $7,000. Product prices are increasing daily,” said Muhammad Omer, co-founder and CEO of Aiduk Trading, a Riyadh-based company established in 2015.

According to Bloomberg Economics, a leading macroeconomic research service, China’s supply chain significantly dropped since April and is expected to worsen. What’s even worse? China’s port activity has fallen back to 2020-lockdown levels.

Global inflationary winds

The Russia-Ukraine conflict has impacted inflation rates of many food, commodities and raw materials. Countries neighboring Russia and Ukraine have been hit the hardest — Lithuania, Estonia, and Latvia have endured inflation rates of 14 percent, 12 percent and 10 percent, respectively.

“The combination of the war and the supply and demand imbalances, especially in energy, will push up base metals, precious metals and energy together,” Paul Christopher, head of global market strategy at the Wells Fargo Investment Institute, told Bloomberg Television.

According to Jadwa Investments’ inflation report, the Kingdom’s inflation is expected to rise 2.4 percent in 2022 as the Russia-Ukraine war, COVID-19 lockdowns in China and higher food consumption will add to the price pressure.

“Inflation globally is impacting us as well as the increase of fuel prices,” Busbate added. 




Abdulaziz Busbate, country general manager of DHL Saudi Arabia.

The lockdowns in parts of China are adding more challenges to the already affected global supply chains, resulting in higher import costs from key trading partners such as Saudi Arabia.

Although the Kingdom’s inflation rate is expected to increase to 2.7 percent in 2023 — a 0.5 percentage point increase from 2022 — it will achieve the lowest inflation levels among the G20 economies and the third lowest worldwide, following Japan and Switzerland.

Within the G20, the Kingdom outperformed its peers, decreasing the annual inflation rate from 3.1 percent in 2021 to 2.2 percent in 2022.

Changing market dynamics

According to Busbate, the sector is seeing a growing demand in the business-to-consumer segment.

“During COVID-19, we took advantage of our e-commerce and B2C services as most people wanted to purchase online, while consumer behavior has completely changed in this current scenario,” he said.

DHL Saudi Arabia had a successful year in terms of revenues in 2020, thanks to a remarkable increase in their B2C operations. 




Mohammed Omer, co-founder and CEO of Aiduk Trading.

Aiduk Trading also booked a significant increase in sales during the pandemic as people could not go out, and the online delivery market was booming.

“The industry of last-minute delivery during the pandemic was working day and night delivering goods to different consumers,” the CEO of Aiduk told Arab News.

However, business-to-business demand decreased heavily in 2020 as most industries were negatively affected by the pandemic.

“In 2020, we were 90 percent performing in B2C, while B2B was nearly 10 percent,” DHL’s Busbate said.

In 2021, businesses started to get back on track, and the B2B volume increased to 40 percent of their operations.

The company nearly doubled its crew in the call center to accommodate the number of calls they received and increased its drivers’ network by about 60 percent to deliver their shipments daily, pointed out Busbate.

Wading off the headwinds

Starting in 2015 with a 1,000- square-meters warehouse, Aiduk’s warehouse today is more than 20,000 square meters, offering e-commerce fulfillment services to their clients.

Meanwhile, DHL built three gateways in the major cities of Riyadh, Jeddah and Dammam, investing more than $50 million in the Kingdom since 2014.

A gateway is a point at which freight moving from one territory to another is interchanged between transportation lines.

The gateway in Jeddah is around 15,000 square meters, while Riyadh is about 12,000 square meters.

The German logistics behemoth is in no mood to stop as it plans to invest $8.5 million in its expansion plans in Riyadh.

The new expansion is expected to come into operation by the end of the year, said Busbate.

DHL today has a 58 percent market share in the Kingdom, managing around 20,000 shipments daily.

Turnaround strategy

According to Riyadh-based Saudi Market Research, the Kingdom plans to inject $147 billion into the development of the transportation and logistics industry to turn the country into a transportation hub.

Saudi Arabia’s strategic location has attracted foreign players into the Kingdom’s logistics industry.

For instance, the US logistics giant FedEx has announced its decision to invest $400 million into domestic logistics operations to attract other foreign players to contribute to the vast developments, said the report.

The Kingdom is already the leading transportation and logistics operator in the Middle East and North Africa, earning $27.6 billion annually.

Also fueling the Kingdom’s supply chain ambitions is the development of new trade zones such as Jazan Economic City, NEOM Airport, SPARK zone, and the Red Sea Gateway Terminal.

The forecast exceeds the Kingdom’s pre-pandemic levels and is expected to continue its growth until 2025, when the industry reaches $50 billion in value.


Saudi banks increase loans by $77.1bn in Q2

Saudi banks increase loans by $77.1bn in Q2
Updated 28 min 28 sec ago

Saudi banks increase loans by $77.1bn in Q2

Saudi banks increase loans by $77.1bn in Q2
  • Kingdom is moving toward Vision 2030 by developing the trade sector and ensuring its sustainability

CAIRO: Saudi Arabia’s bank loan portfolio rose by SR289 billion ($77.1 billion) in the second quarter of this year from the same quarter a year ago, according to a recent statistical bulletin released by the Saudi Central Bank, also known as SAMA.

Bank loans totaled SR2.42 trillion at the end of the second quarter of 2022, up from SR1.95 trillion in the second quarter of 2021, showed the SAMA report.

The SR289 billion increase was led by an SR191.1 billion growth in miscellaneous activities. Its share increased by 2 percentage points to 52 percent in the second quarter of 2022.

The data showed that the value of Saudi banks’ aggregate loan portfolio totaled SR2.24 trillion at the end of the second quarter of 2022, up 14.8 percent from the year before and up 4 percent from the previous quarter.

The annual growth in bank loans dropped to a negative in 2017 and remained below zero until the third quarter of 2018. However, bank loans have been seeing an upward trend ever since, according to the SAMA report.

From the third quarter of 2018 until the end of 2019, the value of Saudi bank loans grew at an average rate of 3.7 percent year on year; between 2020 and the second quarter of this year, it grew at an average rate of 14.8 percent year on year.

The dominating segment in the Kingdom’s loans was miscellaneous economic activity, which acquired 52 percent of the total loans this quarter.

Commerce came in second, holding 17.2 percent of total loans in the country, recording SR385.7 billion in the second quarter, showed the data.

The Ministry of Commerce in the Kingdom has been moving toward the Saudi Vision 2030 by developing the trade sector and ensuring its sustainability, according to the Kingdom’s Unified National Platform.

The platform stated: “The Ministry of Commerce’s mission focuses on improving the business environment in Saudi Arabia through enacting, developing and supervising the implementation of flexible and fair trade policies and regulations.”

Even though total bank loans expanded this quarter, two economic activities saw a quarterly decline in bank credit in the second quarter of this year: manufacturing and processing and transport and communication.

Bank loans to transport and communication fell by SR6.2 billion in the second quarter of 2022 from the same quarter the previous year.

Compared to the previous quarter, the sector dropped from 2.1 percent of total loans in the first quarter to 1.9 percent, showed the SAMA bulletin.

Bank loans given to manufacturing and processing fell by SR4 billion in the second quarter of 2022 from the same quarter the previous year.

The data showed that the sector dropped from 7.2 percent of total loans in the first quarter to 6.9 percent compared to the previous quarter.


QS Monitor taps 90% of global food trade

QS Monitor taps 90% of global food trade
Updated 40 min 29 sec ago

QS Monitor taps 90% of global food trade

QS Monitor taps 90% of global food trade
  • Platform currently operates in 72 countries: Managing director Burak Karapinar

RIYADH: UAE-based global food trade startup QS Monitor has created a platform for food traders to ship their goods risk-free.

Established in 2020, the company mitigates the risk for exporters as they streamline their shipments to avoid food loss by providing traders with the requirements for their goods to pass security measures.

Burak Karapinar, the managing director and founder of QS Monitor, told Arab News that the platform currently operates in 72 countries, which amounts to almost 90 percent of the global food trade industry.

“We are in 72 countries and growing, but this represents almost 90 percent of the global food trade. So, the ones we don’t have on the platform right now are either small countries or ones that are not big in the food trade,” Karapinar said.

Calling it the “Google for food trade,” Karapinar explained that traders input the product along with the destination, and QS Monitor will provide a complete list of requirements.

But that is not at all. Joe Hawayek, the board member of QS Monitor, told Arab News that the platform also links users to testing laboratories in their country.

“We are linking them with a testing laboratory in their country that can conduct these tests, issue them with the relevant certification that says they have passed, and they take it and travel with it for their product from the start,” he added.

By linking these players, Karapinar is trying to mitigate the food loss in the supply chain caused due to contamination. 

FASTFACTS

• As the Ukraine-Russia war affected the global food trade sector, the company plays a huge role in ensuring importers are still connected with exporters.

• Saudi Arabia and the UAE import most of their eggs from Ukraine, and because of the platform, importers could find alternative sources for their products.

“To give you an idea, 72 percent of global food loss happens in the supply chain, not at home or on the consumer’s plate,” he pointed out.

As the Ukraine-Russia war affected the global food trade sector, the company plays a huge role in ensuring importers are still connected with exporters.

“That’s another beauty that we can provide to this platform. The onboarding of a supplier takes months. You need to be able to verify all the information and make sure the supplier meets your criteria and standards.

“Through our platform, you don’t need to do that. You can gather this information. And you can make your decision. So, we also add the trust element between the buyer and the seller,” Karapinar said.

Hawayek also added that Saudi Arabia and the UAE import most of their eggs from Ukraine, and because of the platform, importers could find alternative sources for their products. With a network of over 400 laboratories, the company provides several services through its platform and certification for Halal requirements for certain foods.

“We did more than 10,000 transactions last year; this includes certification testing, inspection, product registration, and supplier audits,” Karapinar added.

With 6,000 traders on the platform, Karapinar stated that the company currently has 1,000 traders on QS Monitor from the Kingdom and is planning to grow that number by a minimum of five times.

In addition, the company is currently in series A funding stage and is on its way to raising $8 million and expanding its staff from 18 to 60 people in the next five months.

QS Monitor also won UAE’s FoodTech Challenge provided by the Ministry of Climate Change and Environment, which features almost 600 companies.


Gazprom ramps up gas flow to Hungary via Turkstream pipeline, official says

Gazprom ramps up gas flow to Hungary via Turkstream pipeline, official says
Updated 49 min 35 sec ago

Gazprom ramps up gas flow to Hungary via Turkstream pipeline, official says

Gazprom ramps up gas flow to Hungary via Turkstream pipeline, official says
  • The agreement with Gazprom is for 15 years, with an option to modify purchased quantities after 10 years

BUDAPEST: Russia’s Gazprom has ramped up flows to Hungary via the Turkstream pipeline that brings gas to Hungary via Serbia, a Hungarian Foreign Ministry official said on Saturday.

EU member Hungary has maintained what it calls pragmatic relations with Moscow since Russia’s invasion of Ukraine, creating tensions with some EU allies keen to take a tougher line.

Hungary, which is about 85 percent dependent on Russian gas, firmly opposes the idea of any EU sanctions on Russian gas imports and Prime Minister Viktor Orban has also lobbied hard to secure an exemption from EU sanctions on Russian crude oil imports.

Foreign Minister Peter Szijjarto met his Russian counterpart Sergei Lavrov in Moscow last month, seeking a further 700 million cubic meters of gas on top of an existing long-term supply deal with Russia.

Under a subsequent agreement, Gazprom started ramping up gas flows to Hungary on Friday, Hungarian Foreign Ministry State Secretary Tamas Menczer said in a statement.

Menczer said Gazprom would add 2.6 million cubic meters of additional gas per day to previously-agreed deliveries via Turkstream through August, with the amount of September deliveries being negotiated.

Hungary’s reserves stored 2.84 billion cubic meters of gas by the middle of July, the lowest level for that period over the past five years based on data by the national energy regulator.

Under a deal signed last year, before the start of the war in neighboring Ukraine, Hungary receives 3.5 billion cubic meters of gas per year via Bulgaria and Serbia under its long-term deal with Russia and a further 1 bcm via a pipeline from Austria.

The agreement with Gazprom is for 15 years, with an option to modify purchased quantities after 10 years.


MENA’s 10 most funded fintech startups

MENA’s 10 most funded fintech startups
Updated 11 sec ago

MENA’s 10 most funded fintech startups

MENA’s 10 most funded fintech startups
  • Technology-based sectors starting to dominate the business landscape in the region

RIYADH: The entrepreneurial ecosystem has been on the rise in the Middle East and North Africa region for a while, with technology-based sectors starting to dominate the business landscape.

Financial technology, popularly known as fintech, has been a promising sector for business people and investors alike, with startups entering and exiting the industry like never before.

The numbers speak for themselves. Startup funding increased 540 percent in the first quarter of 2022 compared to the same time last year, reported Dubai-based MAGNiTT, a startup research platform.

To get a sense of the action in the fintech domain, Arab News has compiled a list of the 10 most funded fintech startups in the MENA region.


Foodics

Founders Ahmad Al-Zaini, Musab Al-Othmani

Funding $198 million

Rounds: 5

Investors 17 investors including STV, Sanabil and Prosus

Headquarters Saudi Arabia

Foodics offers a point-of-sale management system for restaurants that lets business owners keep track of all their operations, from the kitchen to employees and sales.

The company offers many facilities that support restaurant operations, including micro-lending and payments catering to food and beverage establishments.

In its latest funding round, Foodics secured $170 million in a series C round, allowing it to grow its fintech arm and micro-lending operations.


Tabby

Founders Hosam Arab, Daniil Barkalov

Funding $186 million

Rounds 7

Investors 19 investors including STV, Global Founders Capital and Raed Ventures

Headquarters UAE

One of the leading buy-now-pay-later platforms in the region, Tabby aims to provide financial freedom to shoppers by offering solutions without interest or debt fees.

Focusing on the retail sector, the company wants to improve the shopping experience of its loyal customers by offering a flexible checkout experience.

Tabby raised $54 million in its last series B round, and it aims to use it to expand its product offering.


Tamara

Founder Abdulmohsen Al-babtain, Abdulmajeed Al-sukhan, Turki Bin Zarah

Funding $116 million

Rounds 4

Investors 9 investors including Impact46, CheckOut.com and Nama Ventures

Headquarters Saudi Arabia

Another pioneer in the buy-now-pay-later market, Tamara is a Saudi-based fintech that offers its solutions to merchants and buyers alike.

The company aims to create a seamless experience for shoppers by providing a zero-interest fee for its services.

In 2021, Tamara raised $110 million in a series A round, making it a record-breaking round last year.


Paymob

Founder Islam Shawky, Alain El-Hajj, Mostafa Menessy

Funding $68.5 million

Rounds 4

Investors 10 including PayPal Ventures, Nclude and A15

Headquarters Egypt

Paymob, one of the players that changed the game in the Egyptian market, is a complete fintech solution for emerging markets and small and medium enterprises.

The company offers a complete digital payment solution for businesses to accept online and in-store payments.

Founded in 2015, Paymob raised $50 million in a series B funding round in May 2022, which was used in product development and market expansion. 

Ahmad Al-Zaini, the co-Founder and CEO of Foodics, a Riyadh-based startup which helps food outlets with their digital transformation. (Supplied)

PostPay

Founder Tariq Sheikh

Funding $63.5 million, according to Forbes

Rounds Undisclosed

Investors Touch Ventures and AfterPay

Headquarters UAE

Founded in 2019, Postpay is a flexible payment firm that offers shoppers to pay in three monthly interest-free installments at its partner stores.

The company works with leading global brands such as H&M, Footlocker, Dermalogica and domestic merchants such as The Entertainer and Squat Wolf.

Last June, the company secured $10 million in equity investment; the funds will be used to fuel its expansion plans across the MENA region.


HyperPay

Founder Muhannad Ebwini

Funding $50.5 million

Rounds 4

Investors 8 including Mastercard and AB Ventures

Headquarters Saudi Arabia

HyperPay offers a payment gateway for online businesses to accept and manage
payments online with flexibility and security.

Founded in 2014, the company has an extensive network of partners with banks across the Middle East and North Africa to better facilitate online payments in local currencies.

In its last funding round, HyperPay secured $36.7 million in June 2022 to enable the company to grow its team and introduce new payment solutions. 


Khazna

Founder Omar Saleh, Ahmed Wagueeh, Fatma Shenawy

Funding $47 million

Rounds 7

Investors 12 including Quona Capital, Khawazimi Ventures and Nclude

Headquarters Egypt

Another Egyptian fintech startup that tops the list, Khazna, is a financial super app that offers a wide range of solutions for underserved individuals.

The company aims to provide
the 20 million underserved Egyptians with banking and financial options through their smartphones.

Founded in 2019, the company raised $38 million in March 2022, allowing it to replace cash-driven alternatives across Egypt.


BitOasis

Founder Daniel Robenek, Ola Doudin

Funding $30 million

Rounds 6

Investors 15 including Wamda and Jump Capital

Headquarters UAE

A new kind of fintech added to the list, BitOasis is a cryptocurrency trading platform that offers a digital asset wallet.

Founded in 2015, the company allows users to buy, sell, trade and exchange crypto assets in the UAE.

Raising $30 million in its last funding round, BitOasis got approvals from the Abu Dhabi General Market and partnered with police entities to combat crypto fraud.


Telr

Founder Khalil Alami

Funding $28.9 million

Round 4

Investors 4 including Cashfree Payments and iMena Group

Headquarters UAE

An award-winning payment gateway provider, Telr has offices in Singapore, the UAE, India, and Saudi Arabia.

The company offers businesses a set of application programming interfaces and tools to enable them to accept and manage online payments.

Telr raised $15 million in a funding round in 2021 by India-based Cashfree payments to better facilitate cross-border payments.


Paytabs

Founder Abdulaziz Al Jouf

Funding $25.3 million

Rounds 2

Investors Saudi Aramco

Headquarters Saudi Arabia

Another award-winning startup, Paytabs, is a B2B online payments solutions provider that aims to give merchants digital payment features on their websites.

The company offers application programming interfaces to facilitate transactions in multiple currencies and other markets.

Founded in 2014, Paytabs is a Saudi Aramco-backed company that currently operates in the UAE, Saudi Arabia and Egypt.


DCO startup passport cuts the red tape on cross-border trade

DCO startup passport cuts the red tape on cross-border trade
Updated 13 August 2022

DCO startup passport cuts the red tape on cross-border trade

DCO startup passport cuts the red tape on cross-border trade
  • Program helps startups do business across borders more efficiently while maintaining their local footprint

RIYADH: The Digital Cooperation Organization, a global initiative focused on improving the digital economy, is working toward encouraging fledgling companies to tap international markets through its startup program.

Called Startup Passport, the program helps startups do business across borders more efficiently while maintaining their footprint in their country of origin, said Hassan Nasser, vice president of international affairs of DPO.

The program has opened up potentially lucrative markets with a combined population of over half a billion people and a combined gross domestic product of nearly SR7.5 trillion ($2 trillion), reported the Saudi Press Agency.

Hassan Nasser

“By creating a new market expansion in DCO countries and beyond, you will positively impact these other markets,” said Naseer.

He said that the expansion of startups would create new economic entities, improve employment within DCO member states and nurture innovative solutions.

By creating a new market expansion in DCO countries and beyond, you will positively impact these other markets.

Hassan Nasser

According to Nasser, these innovative solutions could find wider acceptance with most startups focusing on sustainability and conservation.

In fact, the DCO Global Roundtable Series at the World Telecommunication Development Conference in June was meant to bring together global leaders to advance digital prosperity.

Naseer explained that the roundtable provides a platform for leaders worldwide to exchange perspectives on improving cooperation in the digital space and delivering an inclusive, sustainable digital economy.

The first roundtable had around 35 participants from 20 different countries.

FASTFACT

$2tr

The program has opened up potentially lucrative markets with a combined population of over half-a-billion people and a combined gross domestic product of nearly SR7.5 trillion ($2 trillion).

In Nasser’s view, cross-border cooperation is one of the critical reasons for the existence of DCO. “That’s one of the reasons DCO exists, to help on that and drive this cross-border cooperation,” he said.

Developing an efficient model requires cooperation, reducing costs and increasing return on investment by defining the best solution.

“There are a lot of challenges when it comes to digital investment, digital skills, digital empowerment, where we need more cooperation,” Nasser said.

As Nasser explained, DCO does not compete with anything but addresses a gap and complements a need.

The DCO will deliver its future roundtables in Latin America, Europe, Asia, and the United Nations General Assembly in New York.

Commenting on the UN General Assembly, he said it “will be a place where we get a global audience for this important session.”

He added: “A vital component of the organization’s mission is launching initiatives that will benefit all member states.”

With 11 member nations, DCO aspires to bring inclusive growth in the digital economy across its member nations, such as Bahrain, Djibouti, Jordan, Kuwait, Morocco, Nigeria, Oman, Pakistan, Rwanda, Saudi Arabia, and Cyprus.

The organization was launched in early 2022 at LEAP, a global event for future technologies held in Riyadh.