Staying connected in a fast-changing world
The last decade has seen governments across the Gulf Cooperation Council (GCC) launch country visions and diversification plans to reduce oil dependency. The resulting economic expansion coupled with population growth is driving greater demand across GCC markets for consumer goods and heavy manufacturing products, which in turn has led to an increased volume of international trade. GDP growth across the Gulf Cooperation Council region increased by 2.1% in 2019, and the US$1.5 trillion market is expected to grow by approximately 3% on average over the next two years. Increasingly, investors are taking note.
Regional logistics hub
Strong logistics business capabilities are essential for accessing this rapid logistic growth opportunity. The Kingdom of Bahrain is emerging as a regional logistics hub and has become home to all the major logistics players, as well as the primary distribution hub for DHL in the region. 2019 alone has seen the entry of multiple logistics companies into Bahrain -such as Kerry Logistics, one of Asia’s largest third-party logistics providers, who plan to use Bahrain as a base for accessing the largest of the Gulf markets, Saudi Arabia.
Kerry logistics are not alone in their Saudi-focused ambitions. Indeed, Bahrain’s unrivalled access to Saudi Arabia is one of the key factors setting it apart in the region. The King Fahad Causeway connects the two Kingdoms by a 40-minute drive. To improve the movement of goods, Bahrain has deployed new high-tech scanners that rely on artificial intelligence all along the Causeway. These have the capacity to screen 120 trucks per hour. During the second quarter of 2019, 25% of Bahrain’s overall non-oil exports went to Saudi Arabia, making it the country’s largest importer of non-oil goods*.
Bahrain’s connectivity to Saudi Arabia and other GCC countries in the region is in a state of continuous improvement. Developments including a number of new bridges have allowed for faster transportation times between warehouses in Manama and border crossings such as the King Fahad causeway or Khalifa Bin Salman port. Indeed, plans are underway for a second causeway to Saudi Arabia. Works are set to begin on the US$3.5 billion King Hamad Causeway project following the appointment in October of the consultancy consortium to start developing the financial model and other requirements necessary for construction. The new 25 km long bridge will also include two railway lines to eventually become part of the proposed Gulf Railway. The strategic project will enhance the Kingdom’s logistics sector while reinforcing strong bilateral relations with Saudi Arabia.
Beyond Saudi Arabia
But it is not just its access to the region’s largest market that makes Bahrain such a draw for leading players in logistic growth. As of July 2019, there were US$1.5 billion of planned developments in the region and a staggering US$1.2 trillion construction and transportation projects planned or underway across the GCC countries. Bahrain is only an hour’s flight away from its other GCC neighbours, with multiple flights daily by the national carrier, Gulf Air. Also due for completion in the first quarter of next year is a new terminal for Bahrain International Airport, which will increase the annual capacity of passengers by 75% to 14 million, and cargo capacity to 1 million metric tonnes per annum. The Kingdom enjoys duty free access throughout the GCC and Greater Arab Free Trade Area; free trade agreements with the US, Singapore, Norway, Iceland and Switzerland, not to mention other bilateral agreements with over 40 countries, including China, France, India, Singapore and the UK.
Agile and evolving
The success in growing Bahrain’s logistics sector comes at a time when the entire region is introducing initiatives to boost logistic growth. What makes Bahrain stand out is its agility in adapting to a fast-changing world. The island Kingdom has been a commercial hub, linking trade between East and West for thousands of years. What once was the epicentre for the global pearl trade is now the regional base for global manufacturers like Mondelez, which is now bringing its flagship Oreo cookies to Saudi Arabia, the wider GCC and beyond.
Sources: *MOFNE Quarterly report, Q2 2019