The Shifting Sands Of Middle-Eastern Trade
The Middle East is renowned for its oil exports which are critical to the vitality and growth of economies in the region. As a result of this asset among other valuable resources, continuous cashflow allows these countries to make large investments into a wide range of industries.
One industry that has always been a priority for Middle Eastern nations is the logistics industry. Competition between countries in this region to become the main ‘logistics hub’ of the Middle East encourages a big amount of government spending and expansion of operations into new and existing markets. They see this as essential to maintaining their wealth and status.
Consequently, there has been a recent drive in the Middle East to industrialise some Middle Eastern countries to diversify their economies away from oil and transition towards smart circular economies.
This strategy shift is due to rising inflation impacting the prices oil, which incentivises governments to expand their breadth of where to spend and focus on.
For a long time, Dubai has stood as the region’s leader when it comes to trade. Its demographic is a significant factor for this prestigious position. This, accompanied by highly advanced infrastructure and world-class logistics facilities are the keys to success that constitute over 14% of the UAE’s GDP.
The city provides unrivalled services such as innovation, trade and logistics to the region due to considerable investments into infrastructure. Dubai is now a major regional gateway and a re-export hub between the East and West.
The relationship between the Dubai government and the private sector speeds up global trade opportunities through the implementation of policies aimed at enhancing supply chain efficiency in the UAE and globally.
A recognisable element of the UAE’s trade success is the introduction of free-trade zones after joining the World Trade Organisation. The large free-trade zone of Port Jebel Ali was developed during the 1980s, attracting foreign manufacturers and revolutionising logistics in the Middle East. Any business associated with this zone has the opportunity to connect with markets with over 3.5billion consumers.
Similarly, the World Logistics Passport, established in the Dubai Silk Road Initiative, encourages trade through Dubai in return for more efficient custom clearances and cost and time savings. This has already augmented trade by 10%.
Saudi Arabian advancements
Despite Dubai having a strong presence in Middle Eastern trade, Saudi Arabia is competing for dominance in the logistics world. Being the Arab world’s biggest economy, Saudi Arabia has plans for more than 300 projects in transport and logistics through collaborations with the local and international private sector.
Their plans involve expansion of airports, increased capacities at ports, enlarging railways and investing in a futuristic flair in their public transport technology. They are pumping approximately $133bn into this project in the path of diversification and to increase non-oil GDP.
The objective is to become a global logistics powerhouse, instead of just being regional. They aim to more than quadruple the country’s annual container throughput, to 40m teu, by 2030, as well as double all air cargo capacity to at least 4.5m tonnes.
Its extensive domestic and export market will provide a competitive edge over other ports in the region that primarily concentrate on transshipments. These strategies will also boost tourism and retail, therefore funnelling more money into the economy, leading to a constant cycle of revenue.
What’s to come…
Saudi Arabia’s main interest shifting from entertainment such as sports, to wanting to create a global logistics hub in its desert kingdom could be a potential deflection of the country’s negative record regarding human rights.
It is yet to be seen what links this infrastructure advancement will have on trade with the Western and Eastern world and which companies will be attracted by this investment. The UAE’s popularity as a leading Middle Eastern trade country is still a dominant force that is yet to be beaten.
However, with an economy as wealthy as Saudi Arabia’s, the future of logistics and trade in the Middle East will bring inevitable changes.