Could Saudi Arabia’s new Special Economic Zone be a game changing solution?

Tempo de leitura: 2 minutos

Recent supply-chain shocks have made the world’s 6,500 special economic zones (SEZ) pivotal to the recovery and yet the model for such zones tends to be templated across the world. Riyadh’s Special Integrated Logistics Zone pioneers a new model that is bespoke in nature and designed entirely for leading multinational corporations. 

SEZs are geographically-defined areas within which governments facilitate industry with special support and incentives. They come in many sizes and types. But what makes the newly-launched Special Integrated Logistics Zoneso different is its strategic location and its package of measures that are designed to give multinationals the most competitive launchpad possible into the Saudi market, MENA and beyond.

Situated beside Saudi Arabia’s King Khalid International Airport, the new Special Integrated Logistics Zonehas both global connectivity, thanks to the rapidly-expanding Saudi aviation sector, and tax-free access to the Middle East’s largest national economy. As a consequence, Apple and other world-leading companies are making it their base, knowing that the zone’s regulatory framework was designed in partnership with its investors, creating a base of operations that is tailored to their needs. 

When the 3 million-square-meter zone became operational in August it was a game-changing moment for the logistics sector in the Gulf region. The Special Integrated Logistics Zone opening followed a Saudi government decree specifying that imported products from free zones in the six-member Gulf Co-operation Council (GCC) would no longer enjoy preferential tariffs. 

These signals of Saudi’s determination to be the dominant hub in the Middle East’s supply chain have created a business case for multinationals to establish their operations inside the Kingdom of Saudi Arabia, which has by far the largest GDP in the GCC and 65.6% of its total population. Previously multinationals would base themselves outside of Saudi Arabia leading to slower delivery times for customers in the Kingdom and less resiliency in Saudi logistics. The decree sought to strengthen Saudi logistics infrastructure to ensure more resilience in the face of supply chain shocks.

TheSpecial Integrated Logistics Zone is Saudi Arabia’s first special economic zone with a package of operational fiscal and regulatory benefits, whereas neighbouring countries have long established special economic zones. The Saudis believe that they can achieve competitive advantage over regional and international rivals by introducing expedited B2C customs clearances for e-commerce solutions to the Saudi mainland and other jurisdictions to accelerate the movement of goods and cut delivery times to a minimum. The zone offers investors a 50-year tax holiday, 100% foreign ownership, and aims to serve a market of 5 billion people within 8 hours flying time in Europe, Asia and Africa.

The new Saudi facility can process goods for dispatch to market within only four hours of arrival in the zone, compared to more than 24 hours at other established zones in the region. Additionally, the Special Integrated Logistics Zone provides investors with VAT advantages on servicing and assembly, whereas other zones apply VAT charges, making manufacturing and assembly more expensive.

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