The white paper from Eurogroup Consulting and Newton Vaureal provides an in-depth examination of the changing supply chain dynamics within the Gulf Cooperation Council (GCC) area. It outlines the region’s dedication to integrating its supply chains with worldwide networks, enhancing integration opportunities, and strengthening supply chains through local production enhancement. The document highlights the rapid development of the GCC as a central business hub, emphasizing its robust infrastructure and favorable tax policies. It discusses the critical role of supply chains in driving economic change and the importance of continuous adaptation in supply chain management. The conclusion of the paper points to significant initiatives and successes in the GCC, including the national industrial and logistics development programs, the Jebel Ali port, and Bahrain’s status as an international sea-air hub.
The report mentions that GCC nations have developed logistics solutions suited to their unique needs, resulting in the creation of various free-trade zones. For instance, Saudi Arabia has established special economic zones to attract investments and recently introduced a new economic zone featuring Apple as a major investor. The GCC’s free-trade agreements with different countries and trade blocs reflect its goal to become a leading global business junction. Changes in policies regarding local sponsorship on company boards, particularly in the UAE, which now permits foreign ownership in certain sectors, mark a significant move. With a common external tariff system that applies a 0% rate to essential goods and 5% to others, the GCC aims to foster the growth of its manufacturing industries. Specifically, Saudi Arabia is focusing on Industry 4.0 and local content, aiming to position itself as a key industrial and logistics hub globally through its national industrial and logistics development program.
By 2030, Saudi Arabia aims to rank among the top ten in the Logistics Performance Index. In the 2022 rankings, it improved by 17 places to 38th. Achieving this goal requires improvements in trade facilitation, regulation, customs procedures, and infrastructure, including reducing customs clearance times to an average of 2 hours and providing incentives to foreign investors. The paper outlines five critical areas for supply chain transformation in the GCC: updating logistics master plans, improving organizational maturity, focusing on sustainable development, enhancing urban logistics for smart cities, and achieving operational excellence. It stresses the need to meet current and future logistics needs and to upgrade the skills of supply chain personnel, taking into account local employment quotas.
The GCC has opportunities for transforming supply chains, including greater use of railways, preparation for alternative fuel technologies, exploration of waterways, sustainable urban development for efficient last-mile delivery, and decarbonizing warehouses. With goals for carbon neutrality by 2060 and a shift towards renewable energy by 2030, the GCC is emphasizing sustainability. For example, making warehouses, which are responsible for a significant portion of logistics chain CO2 emissions, more sustainable through low-carbon construction methods and energy efficiency. Innovations like Talabat’s delivery robots and Saudi Arabia’s integrated logistics park illustrate these efforts.
Advanced urban planning in the GCC is revolutionizing supply chains and logistics. Notable projects like the NEOM and Oxagon smart cities in Saudi Arabia aim for carbon neutrality and excellence in port logistics. The surge in e-commerce and urban trade introduces last-mile delivery challenges, yet initiatives like Saudi Arabia’s national addressing system and what3words are improving efficiency. For GCC companies, attaining operational excellence is key to optimizing operations and ensuring sustainability, involving a focus on service rates and the adoption of technology for better efficiency. Eurogroup Consulting is at the forefront of supporting supply chain transformation and operational enhancements in the Middle East.
Significant aspects to note include:
- Economic Diversification: With initiatives like Vision 2030, GCC nations, especially Saudi Arabia, are investing $1.7 trillion by 2030 to reduce oil reliance.
- World-Class Infrastructure: Investments in developing ports and logistics centers, including the $500 billion NEOM project in Saudi Arabia, are underway.
- Free Trade Agreements: The GCC’s extensive free-trade agreements are crucial for expanding international trade and establishing their global business prominence.
- Local Manufacturing: Emphasizing local manufacturing, particularly through Saudi Arabia’s industrial development program, aims to increase local production and contribute to the manufacturing sector’s GDP.
- Carbon Neutrality Goals: The GCC’s ambition for carbon neutrality by 2060 includes significant sustainable initiative investments, running into hundreds of billions of dollars.
- Urban Logistics Transformation: Investments in urban logistics, including delivery robots and smart warehouses, with projects like NEOM city, are significant.
- Business Pressures: GCC companies face growing demands to improve operational excellence, with investments in efficiency and tracking technologies reaching billions of dollars.
These points underscore the comprehensive efforts and investments by GCC countries to modernize their supply chains.
