JEDDAH: Saudi Arabian oil industry and the Kingdom's active diversification into oil-based businesses are expected to cause a surge in exports (nearly $271.58 billion in 2010), creating opportunities for the nation's freight forwarding market, Frost & Sullivan said in its report Tuesday. The spectacular growth in export-import volumes, backed by a rise in the domestic uptake of major manufacturing and consumer-oriented industries such as retail, fast-moving consumer goods (FMCG), engineering, chemicals, food, and electronics, has catapulted the Kingdom ahead of other leading Middle Eastern countries in the logistics field, the report said. Frost & Sullivan's "Strategic Analysis of the Logistics Market and Contract Logistics in Saudi Arabia" noted that the markets earned revenues of $13.78 billion in 2010 and is expected to reach $20.54 billion in 2015. The rising complexity in supply chains has made it imperative for companies to outsource their logistic functions, the report said. The high value of items being traded is another reason companies are increasingly seeking the services of third-party logistics services, it added. "In addition, being the largest economy in the Gulf Cooperative Council (GCC), accounting for almost two-thirds of the council nations' collective economy size, has made Saudi Arabia a (fertile) ground for logistics service providers (LSPs) in Middle East," said Frost & Sullivan Transportation & Logistics Program Manager Srinath Manda. "The country's growing population of nationals and expatriates and its strong economy are further accelerating the growth of the local delivery services sector." On the flip side, the expanding population causes traffic congestion on the national and international highways, which affects the industry's performance and restrains logistic activities. The current road network in Saudi Arabia, particularly at international borders with the United Arab Emirates, Yemen, and Oman, has posed capacity issues, resulting in long waits for load carriers. It said the impressive performance of the industries and their strong expansion plans, despite the global economic downturn have opened up several prospects for logistic outsourcing. There has been an influx of global majors in all industries including food and beverages, FMCG, and EECE, as they are looking to expand their geographical reach and capture the highly lucrative Saudi Arabian consumer market. Moreover, the report noted that "at present, due to the lack of integrated multi-modal transportation service, Saudi Arabian industries depend on discrete single modes of transportation (primarily road) throughout their distribution network, which leads to high logistics costs," Srinath said. "The government has plans to invest heavily on infrastructure, thus enabling multimodal transportation and consequent cost savings," he added. Saudi Railways Organization's (SRO) ambitious project, the Saudi Landbridge, is expected to transform the existing rail network in the Kingdom into a world-class freight and passenger rail link across the country.
