Whilst industry reports have forecast a bright future for Saudi Arabia's maritime industry, does the Kingdom have a suitable transportation infrastructure to handle unprecedented growth in cargo volumes?
The growth of Saudi Arabia's maritime sector has continued at full pace in 2008, primarily fuelled by the Kingdom's numerous port developments and a sustained boom in the local consumer market.
As a result, the volume of cargo being handled at Saudi Arabian ports is hitting record highs, rising by 13.5% during the first six months of the year, from a combined tonnage of 11.4 million in January 2008 to 13.4 million in July 2008.
With such robust growth, it's hardly surprising that the Kingdom has established itself as an attractive proposition for both regional and international investors, all scrambling over themselves to capitalise on this continued economic boom.
In particular, Jeddah Islamic Port has emerged as Saudi Arabia's principal seaport, handling approximately 60% of the Kingdom's sea freight imports.
Although this success should be celebrated, the facility has almost become a victim of its own success, with traffic build-up becoming such a concern that shipping lines were reportedly skipping Jeddah Islamic Port and unloading their cargo at alternative, less congested facilities.
Taking action before the situation reached a detrimental and potentially critical stage, Saudi Seaports Authority (SSA) recently announced a US$140 million development programme, involving the construction of three additional wharfs in the northern container terminal, together with a series of infrastructure enhancements to speed the cargo handling process.
"Jeddah Islamic Port has experienced a record period of growth in 2007, with around four million containers being handled. This is a sizeable increase over 2006 and we want to reach six million containers in the near future," says Dr Khaled bin Ahmed Bubshait, SSA's president.
"Studies are currently underway for an expansion, which will increase the capacity to handle larger ships and containers. This includes the ongoing construction of the third container station in the north west of the port, which will cost approximately half a billion dollars, with a capacity to handle up to 1.5 million containers."
Investments have also been earmarked for the Kingdom's other leading ports, including King Abdulaziz Port in Dammam, which ranks second among the commercial ports in volume, and Jubail Commercial Port in the Eastern Province of Saudi Arabia.
Although smaller in size compared to a number of its counterparts, Jubail Commercial Port has received a significant amount of attention in recent years, helping to alleviate the burden on King Abdulaziz Port, which is 80 kilometres to its north, for both import and export shipments.
"Saudi Arabia has envisaged an investment of $8 billion on modernising its ports, which will be done with the participation of the private sector. The development of seaports is essential to future growth," admits Bubshait.
The development programmes have been heralded by traders affected by the congestion, many of whom have openly spoken about their concerns.
In particular, a proposed strategy to divert ships bound for Jeddah Islamic Port earlier this year received a lukewarm response from the local business community.
That plan wasn't suitable because Damman and Jubail are also congested," a local newspaper was told by Saleh Al-Darwish, president of customs clearance firm Moayed Saleh Al-Darwish.
"The authorities have not been able to solve this problem because of the increasing volume of imports every year. All the players, from the seaport authorities to importers and transportation companies, are being stretched to their limits at major ports."
Although a section of the market is pointing the finger of blame at Saudi Seaports Authority, Bubshait believes a unified approach, involving all relevant parties, will help to alleviate the problem and allow the Kingdom to truly capitalise on its potential as a maritime hub.
"A lot of ports in the region are facing similar issues, especially during peak periods. Our development plans will certainly help, although a number of additional factors should be taken into account. For example, port operations have been impacted by a shortage of workers at the handling companies and we are coordinating with the Labour Ministry to address this problem," he says.
"Also, some traders are keeping their consignments at the terminal for two to three weeks, which has put unnecessary pressure on the port. However, we will assist traders to get their goods cleared as quickly as possible."
Defining a reasonable amount of waiting time at ports is fundamental to the recovery process, although judgment is clearly varied across the industry.
The Jeddah Chamber of Commerce and Industry (JCCI), which has recently been instructed by Jeddah Governor Prince Mishaal bin Majed to form a committee and propose ideas to solve the congestion problem, has provided a target for Saudi Seaports Authority.
"The reasonable time for waiting at the port is four hours for a shipping line because of its commitments to other ports. They have to leave Jeddah when the time exceeds the limit," reiterates Ibrahim Al Oqaily, head of the JCCI customs clearance committee.
"The crisis has led to the piling up of goods at the port, causing huge financial losses to traders. Port authorities should acknowledge the problem in order to solve it, instead of trading accusations."
With a turnaround in the situation likely to take place sooner rather than later, investors are still optimistic about future growth prospects for Saudi Arabia's maritime sector.
A host of regional and international companies have already established their base in the country, while industry experts have forecast continued growth, despite the global credit crisis.
"Companies in Saudi Arabia's logistics industry, including the maritime sector, have experienced a period of significant growth in recent years, with growing complexity and variation in demands from their customers," states Husam Al-Saleh, general manager of Hala Supply Chain Services, which recently published the Saudi Arabian Supply Chain Intelligence Report (SASCIR).
"Our research into the market has pointed towards continued growth in the future and we are making suitable investment to capitalise on this situation. By networking in the industry, we believe a large number of other companies are taking a similar approach too."
As part of the development package outlined by Hala Supply Chain Services, the company has invested in a shipping company and 60,000m2 of overflow warehousing space in Dammam, Riyadh and Jeddah, seemingly undeterred by recent market challenges such as port congestion.
"Our development plan is based on sound research," says Al-Saleh.
"I believe our ports are experiencing normal growing pains, but the clear vision of expansion by the Kingdom's leaders will turn our current challenges into competitive strengths in the future years to come."
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