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Tuesday, July 16, 2024

Saudi Arabia steps up competition in Middle East with new logistics plan

As part of his vision for Saudi Arabia, Prince Salman intends to introduce a new national carrier, construct a new airport in Riyadh, and expand the railway tracks, thus turning the Kingdom into a logistics hub for the Middle East region.

Recent announcements by Crown Prince Mohammed bin Salman of plans to turn the kingdom into a transportation and logistics hub that connects continents take to a new level Saudi efforts to replace the United Arab Emirates and Qatar as the Middle East’s go-to addresses.

Prince Mohammed’s plans, which include the creation of a new national carrier alongside Saudia, currently the kingdom’s aviation flagship, and construction of a new airport for the capital, Riyadh, aim to position Saudi Arabia as the Middle East’s hub at the crossroads of Asia, Africa, and Europe.

Read more: Why is Saudi Arabia launching second national airline?

The UAE, bolstered by Emirates and DP World, currently serves as the region’s transportation and logistics hub. DP World handles ten percent of the world’s global container traffic and operates some 80 ports as well as marine and inland terminals in more than 40 countries.

Emirates ranks globally number five among airlines in terms of numbers of countries served and number four in terms of brand value and scheduled passenger and freight-tonnes kilometers.

Qatar Airways has made the Gulf state a stiff competitor as an aviation hub. The airline gives Emirates a run for its money when it comes to the number of countries served and scheduled freight-tonne kilometers.

Read more: Qatar Airways: Journey towards providing best service in the World

Challenging the UAE and Qatar’s first mover advantage is likely to prove a tall, albeit not impossible, order. That is also true for Turkish Airlines, the Middle East’s other major carrier with ambitions similar to those of Emirates and Qatar Airways

Logistics plan for Saudi Arabia

Prince Mohammed said his transportation and logistics plan aims to make Saudi Arabia the country with the fifth-largest number of transit passengers served by Saudi airlines that would fly to more than 250 international destinations.

Saudi Arabia currently services destinations in 39 countries. Under Prince Mohammed’s plan, it would cater to pilgrims to Mecca and Medina while the new airline would focus on tourist and business travelers.

By comparison, Qatar Airways services at least 160 passenger and cargo destinations, Emirates 139 destinations, and Turkish Airlines, topping the list with 200 international destinations.

Read more: MBS’s Vision 2030: Modernization, reforms and authoritarianism

Prince Mohammed further targets doubling the Saudi air cargo sector’s capacity to 4.5 million tonnes of freight annually aided by developing port infrastructure and enhancing integration with the country’s shipping lines and rail and road networks.

Railway tracks would be expanded from 5,330 to 8,080 kilometers and ensure that Saudi Arabia’s Arabian Sea ports are connected to those on the Red Sea.

Prince Mohammed said his plan was designed to ensure that Saudi Arabia ranks among the top ten on the Logistics Performance Index. The kingdom currently logs in at number 55.

Prince Mohammed said he hoped that transport and logistics would ultimately account for 10 percent of Saudi GDP, up to four points from the current six percent.

Read more: Saudi Arabia stepping up efforts to replace UAE and Qatar?

The Kingdom’s Vision 2030

Prince Mohammed’s effort to shift the Middle East’s geopolitical, infrastructural, economic, and commercial gravitas to the kingdom is part of his Vision 2030 strategy that aims to create jobs, diversify the Saudi economy, and reposition the country regionally as well as globally.

“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,” Prince Mohammed said in his launch of the transportation and logistics plan.

Vision 2030 appears to be working by one measure amid question marks about the crown prince’s big-ticket projects approach such as Neom, a futuristic US$500 billion city on the Red Sea.

Read more: How Tehran is using Red Sea naval bases to encircle Saudi Arabia

Unemployment among Saudi nationals fell to 11.7% in the first quarter of this year compared to 12.6% in the fourth quarter of last year, its lowest level in nearly five years.

The problem is that the unemployment rate tells only part of the story. The drop in unemployment was not wholly attributable to job creation in a country that needs to create at least 150,000 new jobs a year to keep unemployment steady. It was in part the result of Saudis withdrawing from the workforce.

The kingdom’s General Authority for Statistics reported that Saudi labor force participation fell from 51.2% in the fourth quarter of last year to 49.5% in the first three months of this year, the sharpest drop since an economic downturn in 2017.

Read more: Will ‘vision 2030’ prove to be a savior for the Saudi Arabian economy?

Prince Mohammed’s expansion of competition with the UAE, Qatar, and Turkey to transport and logistics follows earlier moves that include challenging the UAE’s position as the regional headquarters of international business, an announcement of plans to operate regional ports and container terminals, and a focus on sports as a soft power tool, among others by possibly bidding for the hosting rights of the 2030 World Cup.

Prince Mohammed’s ambitions are beyond doubt. Stepping up competition for regional positioning raises the stakes in ensuring that the crown prince’s ambitions ultimately translate into trickle-down tangible achievements.

A podcast version of this story is available on Soundcloud, ItunesSpotifyStitcherTuneInSpreakerPocket CastsTumblr, Podbean, Audecibel,  Castbox, and Patreon.

Dr. James M. Dorsey is an award-winning journalist and a senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies in Singapore and the National University of Singapore’s Middle East Institute as well as an Honorary Senior Non-Resident Fellow at Eye on ISIS. The views expressed in the article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.