Saudi Arabia’s logistics sector accelerates growth with landmark reforms and private sector surge

As Saudi Arabia advances its Vision 2030, the logistics and last mile delivery industry is set to become a key pillar, driven by infrastructure investments, regulatory reforms, and technological innovation, attracting substantial private investment and transforming trade routes across Africa, Asia, and Europe.

The Kingdom of Saudi Arabia (KSA) is witnessing a profound transformation in its economy, largely propelled by the ambitious Saudi Vision 2030. Central to this vi...

sion is the development of the logistics and last mile delivery sector, poised to become a significant pillar that supports the country’s aspiration to be a global trade corridor linking Africa, Asia, and Europe. According to industry research, the Saudi logistics market is anticipated to grow substantially, with projections estimating a market size approaching USD 35.9 billion by 2030, expanding at a healthy compound annual growth rate (CAGR) of around 5.7%.

This growth trajectory is underpinned by several key drivers. First, the explosive rise in e-commerce, particularly in the business-to-consumer (B2C) and consumer-to-consumer (C2C) segments, is creating unprecedented demand for efficient last mile delivery services. Growing digital integration and consumer expectations for speed, such as express and same-day deliveries, especially in dense urban centres like Riyadh, Jeddah, and Dammam, are reshaping logistics strategies. Second, the government’s large-scale investments in transport infrastructure, such as dry ports, rail networks, and bonded logistics hubs, are fortifying the country’s capability to handle burgeoning freight volumes and streamline cross-border trade. An estimated USD 133 billion is being allocated to airports, railways, and ports, reinforcing KSA’s strategic position at the crossroads of major global trade routes.

Furthermore, regulatory changes enhancing market accessibility are stimulating foreign investment. For example, relaxation in cabotage laws has broadened domestic route access for foreign carriers, encouraging more international logistics players to enter the market. At the same time, the government is pushing advances in cold chain logistics, driven by increasing pharmaceutical imports and rising demand for fresh produce, creating a lucrative niche that commands higher margins but requires specialized infrastructure and compliance with the Transport General Authority (TGA)’s standards.

Establishing a logistics and last mile delivery business in KSA, however, demands navigating a complex and tightly regulated environment. Compliance with multiple agencies, most notably the Ministry of Investment of Saudi Arabia (MISA), the Ministry of Commerce, and the TGA, is mandatory. Foreign investors must secure an investment license from MISA, authorizing 100% foreign ownership under Vision 2030’s reforms. Commercial registrations need to align precisely with specified activities, whether for courier services, land freight transport, or express parcel delivery.

Of critical importance is obtaining operating licenses from the TGA, which requires rigorous validation of fleet standards, financial robustness, and adherence to safety protocols. Companies must budget carefully for licensing fees and vehicle registrations. Moreover, Saudization policies impose strict employment quotas for Saudi nationals, particularly in customer-facing and administrative roles, with non-compliance attracting hefty penalties and potential operational restrictions. Businesses must develop detailed Saudization strategies and labor force plans, including recruitment, visa sponsorship, workforce training, and retention. Innovative approaches such as crowd-shipping models are emerging to tap into local Saudi youth employment schemes, while maintaining regulatory compliance and operational efficiency.

Technology plays a pivotal role in this sector’s success. Last mile delivery costs can exceed half of the total shipping expenses, making technological investment non-negotiable for competitiveness. Advanced AI-driven route optimisation software reduces travel distances, fuel consumption, and driver hours, while integration of the national addressing system tackles the long-standing challenge of inexact delivery locations. Digital customer engagement tools, such as real-time tracking apps, flexible delivery scheduling, and seamless cash-on-delivery reconciliation, enhance the consumer experience and meet regional payment preferences.

Financially, companies face high upfront capital expenditures on fleet acquisition, ranging from motorcycles and small vans for urban last mile deliveries to light trucks for longer hauls, and technology systems encompassing warehouse and transport management. The rising adoption of electric vehicles offers potential cost savings over time. Warehousing logistics also demands strategic urban centre placements and large-scale distribution hubs within key economic zones. Pricing models must be flexible and competitive, including tiered parcel rates, express delivery surcharges, and specialised B2B contract pricing. Establishing key performance indicators like cost per delivery and delivery success rate is essential to monitor profitability and operational performance. Additionally, compliance with the Zakat, Tax and Customs Authority (ZATCA) for VAT registration and e-invoicing is vital, especially for cross-border freight operations.

Specialist consulting firms such as Aviaan have positioned themselves as invaluable partners within this landscape, offering comprehensive, localized support that covers legal, regulatory, financial, and operational domains. Aviaan’s expertise encompasses securing the necessary MISA investment and transport operating licenses, managing the full Saudization compliance spectrum, and integrating government tax mandates. Their approach includes detailed financial feasibility studies benchmarking costs and projections against major local competitors like Aramex and Noon, advising on fleet investment strategies, and preparing investor-grade business plans aligned with Saudi Vision 2030’s transport and logistics strategies. Aviaan also mitigates risks related to labor laws, driver recruitment, and cash management systems, facilitating smoother market entry and scalable operations.

A notable case involved the launch of “KSA Express,” a hyperlocal delivery startup in Riyadh focusing on food and e-commerce segments using a crowd-shipping model. Initial plans overlooked critical regulatory compliance for non-owned vehicles and driver Saudization reporting, risking costly delays. By partnering with Aviaan, the company secured the necessary licenses, optimised recruitment strategies, and implemented ZATCA-compliant financial systems, attracting major local investors and enabling rapid market success.

Saudi Arabia’s logistics sector is not only growing due to internal demand but also benefiting from significant private sector participation. Government estimates project that nearly 80% of planned sector investments, projected to be worth approximately USD 64 billion by 2030, will be driven by private entities through the privatization of ports, airports, and cargo terminals. The number of logistics facilities has surged significantly since 2021, particularly in the Eastern Province, further bolstering capacity.

Industry reports from multiple sources reaffirm this promising outlook. KSA’s logistics market size is estimated to grow from approximately USD 27 billion to near USD 36 billion by 2030, with contract logistics and third-party logistics sectors registering steady growth supported by economic diversification and increased outsourcing. Major infrastructure projects, such as the development of The Oxagon in NEOM and King Salman Energy Park (SPARK), are set to introduce advanced, clean energy-powered logistics hubs, emphasizing sustainability and innovation.

In summary, while Saudi Arabia’s logistics and last mile delivery market presents expansive opportunities aligned with Vision 2030, success is contingent upon embracing a technology-driven, strategically focused business plan that rigorously addresses regulatory complexity, Saudization mandates, and operational efficiency. With expert local guidance and financial planning, investors and entrepreneurs can navigate this dynamic environment, positioning themselves to capitalise on the region’s logistics revolution and the shifting patterns of global trade facilitation.

Source: Noah Wire Services