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RSGT: Planning for the Future at the Crossroads of Global Trade

Vessels plying trade goods up and down the Red Sea represent a maritime tradition at least 4,000 years old, but an ancient maritime heritage also poised for larger role in the modern global economy. The Red Sea, linking maritime trade between Europe, Asia and Africa via the Suez Canal, continues to become an increasingly important component of the Global Logistics Chain, as the global economy and international trade continue to expand. Where modest wooden ships once carried frankincense and myrrh from Arabian suppliers north to Egypt, Ultra-Large Container Ships (ULCS) able to carry over 20,000 Twenty-Foot Equivalent Units (TEUs) now carry global trade connecting to Europe via the Suez Canal (occasionally running into problems their predecessors did not experience, as the recent blockage demonstrated).

The Port of Jeddah, Saudi Arabia, the Red Sea’s largest port, is already ranked among the world’s 40-busiest container ports, handling over four million TEUs annually. The Red Sea Gateway Terminal, the largest at Jeddah Port, (and also the only facility at the port capable of accommodating ULCS), has announced plans to expand operations, including a $1.7 billion infrastructure investment program which will increase annual container throughput capacity from 2.5 million TEUs at the beginning of 2020, to 5.2 million TEUs by 2023, and to 9 million TEUs by 2030. Annual global container traffic through the world’s ports is approaching 1 billion TEUs, while the value of global trade has been projected to reach $19.8 trillion this year. The need for new infrastructure, and the opportunity for growth in the logistics field is clear.

As a regional logistics hub with global aspirations, the 12-year old Red Sea Gateway Terminal finds itself as well at key crossroads in development and growth. At present, 12% of the world’s seaborne cargo moves through the Red Sea, providing a rather substantial built-in base of vessel traffic for RSGT, which can benefit from current trends in local, regional and international trade patterns. From a local perspective, the IMF has projected the economic output of the Middle East and Central Asian region to grow from USD $3.7 trillion in 2020 to $5.2 trillion over the next five years. Saudi Arabia’s economy is projected to expand from USD $805 billion this year to $966 billion (USD $2.2 trillion, calculated by Purchasing Power Parity) in 2026. The Saudi Arabian economy will also undergo a massive transformation qualitatively as the current liberalization push drives consumerism and creates new expectations as well as sudden new demand for domestic consumption among the Kingdom’s populace of 35 million. This push for diversification is a central tenet of Saudi Arabia’s bold Vision 2030 Plan, by which RSGT finds itself in a uniquely poised situation for domestic, as well as international growth, with some national backing.

RSGT’s transformation into a vertically-integrated logistics provider with an expanding global presence, has already been set into motion. In January of this year, Saudi Arabia’s sovereign Public Investment Fund, and Hong Kong-based COSCO Shipping Ports both purchased 20% equity stakes in RSGT, providing ready capital for investment; as noted recently in Bloomberg, RSGT plans to invest in at least three international ports in the next five years. Aligned with Saudi Arabia’s national investment policies and strategy for diversification, and allied with some of the world’s largest terminal operators, RSGT has been laying the groundwork for growth. With resources and expertise in developing landside intermodal logistics infrastructure, as well as port operations, RSGT can look to the future of the Red Sea and the Middle East to become Saudi Arabia’s first (and only) home-grown global port and terminal operating company, with interests and capabilities extending beyond containerized cargo. The goal is to build from its current starting point not only in Saudi Arabia to the Arabian Gulf Coast, but through the Maghreb region of Africa- a key target area, and into South and Southeast Asia where long-standing cultural ties are conducive to cooperative joint efforts. The Red Sea is at the precipice of a new era of trade growth, and while the market for Frankincense and Myrrh may have abated, the tradition of maritime trade is now stronger than ever.
Source: Red Sea Gate Terminal

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