The Vision 2030 transformation program is based upon growing inward investment to stimulate and diversify the economy and transform the Kingdom into a global hub connecting Asia, Europe and Africa. Its geographical competitive advantage based on accessibility to major emerging markets and important marine passages will play a key role in this transformation. The transportation and logistics sector is large and strongly supported by state-led investment in rail, maritime, road, airport and logistics infrastructure. Economic growth, population maturation and rapid urbanization are all factors driving Saudi Arabia to invest in the expansion of its transportation networks. This includes the introduction of urban transport systems such as metros and buses, as well as inter-urban networks such as freight and high-speed railways, by working closely with leading global logistics companies via public-private partnerships (PPP). One aspect of the new approach is the increased promotion of special economic zones in parts of the country, creating industrial clusters with multi-modal freight links to a range of international destinations.

The Saudi Arabian government (SAG) is committed to developing the sector and has set aside considerable capital for expansion plans. The SAG 2019 budget includes a 28 percent increase in planned government expenditure on infrastructure and transportation, an increase from $14.6 billion to $18.6 billion.

Saudi Arabia’s goal is to strengthen the private sector’s role in transportation as it pushes to diversify its economy. Vision 2030 aims to make the Ministry of Transport projects 20% self-financed, creating a significant scope for private participation in ports, airports, rail, and road infrastructure.

Private entities are being encouraged to collaborate with the government as it develops the Kingdom’s transportation infrastructure. Partnerships for operating seaports, airports, and their related supply chains are in demand. Public-private partnerships (PPP) are being pursued to fund several key schemes, while several of the country’s publicly operated transportation facilities are preparing for full privatization. Under the Saudi Foreign Investment Law, foreign investors can now own 100% of businesses after obtaining a license from the Saudi Arabian General Investment Authority (SAGIA) and can then bid in PPP projects directly or through a local consortium. A draft law covering partnership between the government and the private sector is under discussion to attract fresh foreign investments. By 2020, the target is for private sector companies to be involved in the development and operation of at least 5 percent of roads, 50 percent of railroads and 70 percent of ports.

A key pillar of Vision 2030 is transforming the Kingdom into the go-to logistics hub for the region, capable of efficiently linking trade across Asia, Europe, and Africa. A strategic location provides the Kingdom with a unique advantage over other nations, which could enable it to become a leading regional logistics hub.

Saudi Arabia’s logistics market is valued at $18 billion, making it the largest among the GCC nations. It accounts for 55 percent of the total GCC logistics market and is ranked third-most attractive within emerging markets. It is also one of the fastest growing logistics sectors globally and was predicted to reach almost $25 billion by 2020.

The government aims to raise Saudi’s global ranking in the Logistics Performance Index from 49 to 25 and increase its capacity to welcome Umrah and Hajj visitors from eight million to 30 million a year. Import and export processes are being streamlined and governance structures and regulations are being reformed to open a path toward market liberalization and private-sector participation. In addition, there are hopes that public-private partnerships will help finance the infrastructure and bring capabilities from the top logistics markets. By 2030, Saudi Arabia plans to be among the foremost logistics hubs in the region.

KSA has managed to reduce the time, cost, and variability of importing goods through process re-engineering and automation. Average declaration clearance time at seaports has been cut in half to 2.2 days and at airports to 1.2 days, and the amount of import-export paperwork has been reduced by 75 percent.

The predictability and reliability of the clearance process has also improved, with 40 percent of customs declarations in seaports now cleared within 24 hours and 70 percent within 48 hours. These results have been achieved by enabling declaration submission prior to arrival, digitizing declaration processing, making customs operate 24/7, reducing the level of manual inspection through enhanced risk management, and enhancing the collaboration and integration among all government institutions involved in the import/export process.

KSA is modernizing its airports and expanding its air cargo facilities to eliminate infrastructure bottlenecks. The objective is to increase total air cargo capacity in the Kingdom from 0.8 million tons/year today to 6 million tons/year in 2030.

Technology is improving security and control over the import-export process in the Kingdom. Today, importers can track the status and progress of their shipments in real time. Customs brokers receive automated notifications on their mobiles about the status of their shipments and are prompted to create their declarations as soon as the shipping manifest is available online, i.e., prior to ship arrival. The Kingdom recently launched a port  system to guarantee secure and efficient exchange of information among all parties involved in the import/export process, covering vessel and terminal operations, digital payment, and truck management.

The logistics market is expected to grow at 22 percent Compound Annual Growth Rate (CAGR) until 2020 to reach a value of $2.2 billion. Consequently, the warehousing market is expected to further grow at 9 percent CAGR to reach a market size of $4.2 billion by 2020. Growth in this segment is expected to materialize because of planned increases in manufacturing activity, international trade, rising domestic consumer consumption and the easing of government regulations.

The cold chain segment of the logistics market has also seen growth in recent years. Growth is expected to reach $1.64 billion by 2020 because of active participation by the pharmaceutical industry and the increasing demand for fresh/processed fruits, vegetables, meat and dairy.

The Saudi government has announced the establishment of a special economic zone (SEZ) in Riyadh, which is the first of its kind and will provide some degree of support for growth in the road freight sector in the coming years. The SEZ will focus on integrated logistics, with those situated in the zone enjoying special rules and regulations aimed at attracting more multinational companies.

The new zone is set to be opened at the King Khalid International Airport in Riyadh, as a part of Vision 2030 plans to attract foreign investment and develop manufacturing by creating special zones that receive financial, trade and visa derogations. The focus will be on integrated logistics at the new SEZ (called Integrated Logistics Bonded Zone - ILBZ), which has been assigned to the GACA and Saudi Arabian General Investment Authority (SAGIA). All goods at the zones with a pending status or those that are moved temporarily for maintenance or repair will be exempt from VAT.