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Executive summary
The Gulf Cooperation Council (GCC) countries are growing in importance in the realm of global trade and logistics. These countries now have the opportunity to address their logistics challenges and gain a competitive edge over peers that are disrupting the logistics sector and claiming market share through digitization-first policies and practices.
Although GCC countries either have reviewed or are reviewing their strategies and processes, and have set aggressive digitization targets, digital applications are not yet the norm in the sector. Manual processes still dominate. Similarly, important transport infrastructure upgrades, the development of logistics parks, the creation of special economic zones, and national logistics champions have not had sufficient impact, as these plans are often piecemeal, rather than an integrated part of policy planning.
Most GCC countries need to catch up with, and overtake, their peers. Digitization is crucial in this effort, spanning policy, the replacement of legacy systems, and innovation. By creating a digital-first mindset, GCC governments can reclaim their positions as significant logistics players and improve their competitive edge. This can be done through giving digitization an integral role in policy; using digitization to replace legacy processes; streamlining logistics with digitization; and enabling digitization for gateway ports. The digitization of logistics would also contribute to national digital ambitions, helping move GCC countries from being digital technology adopters to becoming disruptors.
GCC countries are behind the logistics curve
The development of an efficient and capable logistics sector is vital for the economic diversification agenda of GCC governments. The logistics sector is critical to local, regional, and global economies, as it supports supply chains and facilitates international trade flows. It is essential to businesses and individuals in all industries. GCC governments are engaged in ambitious plans to change the economic base, move toward sustainability, and capitalize on the region’s strategic location as a hub for international trade, and are seeking to increase localization in such areas as pharmaceuticals, aluminum, and consumer goods. These goals are attainable only if the logistics sector undertakes concerted modernization and digitization efforts.
GCC countries have an opportunity to capture an important share of the value created by logistics. In early 2020, the transport and logistics sector accounted for 11 percent of GDP globally. The sector is often linked closely to the economic cycle. Despite the recent slowdown caused by the COVID-19 pandemic, the global transport and logistics sector market is set to grow robustly from around US$8 trillion in 2020 to around $12.8 trillion in 2025. Several factors will lead to growth: an increase in global trade activities and commodity exports from developing economies, more global and regional trade-related agreements, the expansion of e-commerce, investments in logistics infrastructure around the world, technological advances, and the enabling and efficiency effects of digitization on logistics.
“GCC countries have an opportunity to capture an important share of the value created by logistics”
Unfortunately, most countries in the GCC region have not done enough to win their fair share of global logistics business and to lay out the foundations that enable economic growth. Except for the United Arab Emirates (UAE), which ranks 11th in the world, these countries are behind their peers on all indicators of the World Bank’s Logistics Performance Index (LPI). For instance, Qatar ranks 30th overall whereas Singapore and Switzerland, with similar GDP per capita, rank seventh and 13th, respectively. Similarly, Saudi Arabia ranks 55th, compared with the U.K.’s ninth-place ranking and France’s 16th place.
GCC countries perform above average, but behind their peers, on logistics
GDP per Capita (PPP) vs. Logistics Performance Index (LPI) score (2018)
Conclusion
GCC governments have a central role to play in articulating and implementing top-down logistics transformation. They need to embed digitization into policymaking to ensure a “digital-first” approach that can address logistics challenges and ensure that they are competitive globally. GCC countries are at a turning point. To make real efforts to transform and modernize their economies, they will need first to create high-efficiency, digitized logistics to enable growth and competitiveness.
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