Jul 07 | 2021
(MENA) Vision 2030 Drives Breakbulk Growth
By Malcolm Ramsay
Authorities in Saudi Arabia said they plan to invest about US$150 billion to upgrade and expand transport infrastructure across the kingdom, as the government aims to turn the country into a global logistics hub.
The announcement from Transport and Logistical Services Minister Saleh Aljasser on July 5 includes plans to spend 550 billion riyals over the next nine years on a variety of projects, driving breakbulk demand across the kingdom.
“The strategy will strengthen human and technical capabilities in the transport and logistics sector. It will enhance the connection with the global economy and enable our country to invest its geographical position in the middle of the three continents in diversifying our economy by establishing an advanced logistics services industry … Transport and logistics are a major focus of the programs of the Kingdom's Vision 2030 and a vital enabling factor for economic sectors towards sustainable development," said Crown Prince Muhammad Bin Salman.
The government’s Vision 2030 plans has been the driving force behind this radical shift over the last five years, shaking up of the logistics sector with billions of dollars poured into megaprojects designed to reshape the kingdom and diversify the economy away from oil.
“The vision 2030 is helping the breakbulk and project cargo businesses,” Rafael Vicens, head of global projects and industry solutions, Middle East & Africa at DB Schenker, told Breakbulk. “Megaprojects and the other investment announced by KSA like the landbridge project between Riyadh and Yeddah are also going to positively impact our sector.”
The government forecasts that most of the new transport sector investment will come from private investors, as it pushes ahead with plans to attract as much as US$6 trillion in foreign equity to the country over the next decade.
“Thirty-five percent of spending will come from the government and the rest from the private sector as officials launch a new international airline, expand airports, build a broader train network and explore new technologies,” said Kamran Bokhari, director at Newlines Institute for Strategy and Policy.
Under the proposals, Saudi airlines will launch the new airline and aim to increase its capacity to 330 million passengers a year, up from 103 million. Abdulaziz Alduailej, president of the General Authority of Civil Aviation, estimates that air connections from the country will rise from the current 90 destinations to 250 destinations worldwide by 2030.
In total, this strategy is expected to boost the contribution of the transport and logistics sector from 6 percent of GDP currently to 10 percent by 2030, according to research consultancy Nasser Saidi.
The upgrade in transport networks is matched by the government’s commitment to develop numerous industrial and urban megaprojects in the country, with much construction that had been paused due to the pandemic now ramping up for development.
“There are a lot already announced like The line, Landbridge project and others, already in construction like NEOM, Qiddiya, Red Sea. There are around US$300 billion in investments announced in KSA for the next year creating a number of opportunities,” Vicens said.
A lack of capacity in global shipping brought about by the pandemic has also highlighted the need for greater resilience in shipping supply chains and the need for new port infrastructure, as well demonstrating the flexibility of the breakbulk sector.
“The situation in China and worldwide with the lack of containers is helping the breakbulk sector, as we are now moving cargo that was previously moved only by containers, so we cannot be happier. This will last at least until Q1 next year. Obviously, there is congestion in the ports, but so far we have not experienced a dramatic situation,” Vicens said.
A division of transportation and logistics group Deutsche Bahn, DB Schenker employs more than 74,000 employees globally and operates in about 2,100 locations worldwide. The firm is an exhibitor at Breakbulk events.
The rapid rate of development has been driven in part by the government’s desire to diversify the economy away from oil, a strategy which has been accelerated by low oil prices last year. While many new opportunities are emerging for breakbulk operators outside the oil industry, the price per barrel still remains a key factor.
Vicens predicts that the recent strengthening of oil price will have a net positive effect, noting that while the underlying challenges are the same as the previous years, “the current situation with the brent barrel at US$77 and the forecast of reaching US$100 barrel before end of this year absolutely will help our industry stimulating the governments to invest on new developments.”
This positive outlook was hampered, however, when OPEC+ talks ended in acrimony on July 5, when officials from the UAE rejected proposals for an eight-month extension to output curbs, despite calls from Saudi Energy Minister Prince Abdulaziz bin Salman for “compromise and rationality.” The failure of talks helped to sustain a short-term rise in prices, but longer-term the pressure remains for the Saudi government to diversify the economy as quickly as possible.
Following a record agreement by OPEC+ members to cut output by almost 10 million barrels per day last year, markets have recovered with the price per barrel now at its highest since 2018.