Saudi Arabia building Middle East’s biggest logistics hub

Dubai’s crown as the logistics superhub of the Middle East could be threatened by Saudi Arabia.

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By  Robeel Haq Published  July 30, 2006

Dubai’s crown as the logistics superhub of the Middle East could be threatened by Saudi Arabia, which has announced plans to construct one of the largest distribution centres in the region. The Saudi Arabia General Investment Authority (SAGIA) is planning a series of economic cities to develop the country’s economy and create employment opportunities for the local population. The plans include a range of transportation, logistics and supply chain centres, primarily located in Prince Abdul Aziz Bin Mousaed Economic City, located in the North of the country. The project has already attracted a group of regional investors, including Gulf Finance House, Abu Dhabi Investment House, Tanmiyat Group and PWC Logistics. “The value proposition of the Prince Abdul Aziz Bin Mousaed Economic City centres around the development of a comprehensive transportation and logistics hub to take advantage of the region’s unique core strengths,” explained Esam Janahi, chief executive officer of Gulf Finance House. “Projects such as this create a rare niche for a diverse range of private sector investment opportunities.” Covering an area of over 150 million square metres, the Prince Abdul Aziz Bin Mousaed Economic City will include an international airport, which is expected to attract 3 million passengers per year, while a railway station will handle an additional 2 million passengers annually. The project also includes dry ports and operation centres, which are capable of handling over 1.5 million tons of cargo every year. “Located in the heart of the Kingdom, Hail is equidistant from Jeddah, Riyadh and the Eastern province, and provides the perfect northern gateway to the Kingdom, linking a number of key trade routes,” said Sheikh Sleiman Bin Abdul Aziz Al-Majed, chairman of Tanmiyat Group. “It can be accessed by 12 Arab capitals in only one hour by plane. We are sure this would immensely add to the attractiveness of the project and enhance both shareholder value and returns.” Although SAGIA’s choice of Hail, instead of Dammam or Jeddah, has raised some eyebrows in the region, the ambitious project has attracted a largely positive response from the logistics industry. However, some question marks surround its chances of matching Dubai’s success story in attracting international logistics activities. Syed Mustafa, the vice president of logistics at Saudi-based Al Majdouie Group, believes the plans for Prince Abdul Aziz Bin Mousaed Economic City are encouraging, although investors need to address a number of key issues surrounding the project. “Whilst the concept of Prince Abdul Aziz Bin Mousaed Economic City is impressive, the logistics industry is bound to question certain aspects of the project,” said Mustafa. “For instance, is Hail really the best city to accommodate a logistics hub? The necessary infrastructure is currently unavailable and could take fifteen years to develop.” “In addition, the nearest seaport is either Jeddah or Dammam, which is some distance away. If companies can transport their cargo directly from Dammam to Dubai, would they really consider taking the consignments via Hail? Could the additional cost be justified?” added Mustafa. The target market for the project will probably demand simpler customs and clearance procedures before investing in the economic city, according to Mustafa. “If customs and clearance is being delayed due to complicated procedures, I think foreign companies will be reluctant to invest in the logistics city,” he said. “Dubai has gained a logistics advantage by offering greater business incentives and service levels to companies. In order to successfully compete, Saudi Arabia needs to adopt a similar model. Everything depends on the project’s ability to compete with something like Dubai Logistics City, in terms of cost, efficiency and infrastructure.”

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