The Rise of Industrial Logistics Zones in MENA: What to Watch in 2025

The Middle East and North Africa (MENA) region is transforming its economy, with industrial logistics zones playing a key role in this shift. These zones integrate manufacturing, warehousing, and distribution under simplified regulations, offering tax benefits and advanced infrastructure. Positioned between Eastern and Western markets, MENA is becoming a vital global trade hub.

Key drivers in 2025 include:

• Economic Diversification: Moving away from oil dependency, MENA nations are investing heavily in logistics zones. Saudi Arabia plans to expand from 22 to 59 zones by 2030, with over AED 9.8 billion in investments.
• Infrastructure Growth: Projects like Saudi Arabia’s King Salman Airport expansion and Morocco’s Tanger Med port are boosting connectivity.
• Technology in Logistics: Smart systems, IoT, and AI are reshaping operations, improving efficiency and tracking.
• Sustainability: Green logistics practices are gaining traction in response to stricter environmental mandates.
• E-commerce Boom: Expected to hit USD 50 billion in 2025, driving demand for last-mile delivery and fulfilment centres.

Challenges include geopolitical risks, cybersecurity threats, and policy complexities. However, with over AED 9.9 trillion allocated for infrastructure development by 2030, MENA is well-positioned to lead in logistics and trade.

The future of MENA logistics lies in technology adoption, infrastructure investments, and localised supply chains, making the region a critical link in global trade.

Growth Drivers in MENA Industrial Logistics Zones

The MENA region is undergoing a logistics revolution, fuelled by strategic initiatives aimed at reshaping its economic landscape. Governments across the region are leveraging logistics zones to diversify their economies, moving beyond hydrocarbons and fostering non-oil growth.

Economic Diversification Beyond Oil

Logistics zones are playing a pivotal role in the MENA region's shift away from oil dependency.

The GCC is expected to see economic growth rates of 3.2% in 2025 and 4.5% in 2026, driven by non-oil sectors, increased private consumption, investments, and reform initiatives. Research suggests that every additional unit of fiscal expenditure can boost non-hydrocarbon output by 0.1–0.45 units across the GCC.

In Saudi Arabia, the Industrial Gate City in Riyadh reported SAR 300 per sq. m in Q1 2025, while Jeddah Islamic Port experienced an 11.1% annual rental growth. These trends are supported by rising demand for temperature-controlled warehousing, especially in the food and pharmaceutical sectors.

"The resilience of GCC countries in navigating global uncertainties while advancing economic diversification underscores their strong commitment to long-term prosperity." – Safaa El Tayeb El-Kogali, Division Director for the GCC countries at the World Bank.

Infrastructure Investment and Connectivity

Expanding non-oil sectors necessitate robust infrastructure to support growing trade volumes. Significant investments are enabling efficient multimodal connections, reducing costs and improving logistics performance.

Saudi ports handled 7.5 million containers in 2024, with port utilisation climbing to 64%, up from 50% in 2019. The Kingdom also added 34 new shipping services and successfully integrated rail transport from Jubail Commercial Port to Riyadh Dry Port via the Eastern Network.

On a regional scale, Morocco's Al Boraq high-speed railway project has strengthened links between key economic regions, backed by a USD 7 billion investment. Tanger Med, connecting to 186 ports globally, manages up to 9 million containers, 1 million cars, and 7 million passengers annually. To sustain such growth, the MENA region will require an estimated USD 100 billion per year until 2030, equivalent to 7% of GDP, for infrastructure development.

Policy and Regulatory Changes

Governments in the region are implementing reforms to attract investments and streamline logistics operations.

Saudi Arabia is leading the charge, aiming to expand logistics zones from 22 to 59 by 2030, with investments exceeding SAR 10 billion. Since 2021, the Kingdom has seen a 267% increase in facilities, alongside the introduction of 15 new incentives in January 2025.

The adoption of national logistics platforms, such as Single Window systems, is improving communication between logistics operators and government entities. Meanwhile, updated investment laws are enhancing transparency and simplifying the process for investors.

"The Kingdom has opened its logistics ecosystem through full foreign ownership allowances, streamlined customs procedures, and the development of strategic economic zones such as King Abdullah Economic City - collectively reducing barriers for international firms seeking to establish or expand their presence." – Paolo Carlomagno, partner at Arthur D. Little.

Technology Adoption in Logistics

Digital advancements are reshaping MENA's logistics landscape. From smart port automation and real-time tracking to predictive maintenance and optimised cargo handling, technology is becoming a cornerstone of logistics operations.

Developers and investors are increasingly focusing on facilities equipped with advanced technologies to support modern supply chain demands. Innovations like advanced demand forecasting, inventory management, and route optimisation are becoming standard. Regulatory updates, such as ZATCA's changes to less-than-container load handling in seaports, are further boosting operational efficiency.

Green Logistics and Environmental Practices

Sustainability is taking centre stage in MENA's logistics sector, driven by environmental mandates and consumer demand. The region's cross-border e-commerce market is projected to hit USD 50 billion by 2025, growing at a rate of 12.7% CAGR. This growth is fuelling the need for eco-friendly last-mile delivery solutions and sustainable fulfilment centres.

"The Middle East logistics industry is undergoing a significant transformation, driven by economic diversification initiatives, technological advancements, and substantial infrastructure investments aimed at sustainability".

Together, these growth drivers are shaping a dynamic environment for logistics zone development. Economic diversification provides the strategic direction, infrastructure investments lay the groundwork, policy reforms ease operational hurdles, technological adoption enhances efficiency, and green practices ensure a sustainable future. These factors set the stage for exploring the region's major hubs and projects in the next section.

Major Hubs and Projects Across MENA

The MENA region is undergoing a logistics transformation, driven by strategic initiatives and infrastructure investments. These developments are turning the region into a vital bridge connecting Asia, Europe, and Africa.

Leading GCC Logistics Hubs

Saudi Arabia is at the forefront of this transformation, with significant upgrades to its logistics centres. Port utilisation in the Kingdom has jumped from 50% in 2019 to 64% in 2024, alongside a surge in logistics licences, which now total 2,401.

Jeddah Islamic Port has emerged as a key player, recently earning recognition as an LME delivery point for copper and zinc in 2024. This designation boosts its role in global commodities trading.

Riyadh is also cementing its position as an inland logistics hub. The city is set to benefit from the USD 21 billion Riyadh Metro expansion announced in December 2024, a project aligned with Vision 2030. Riyadh's central location supports efficient distribution across the Kingdom.

The UAE continues to lead in regional logistics, with Dubai, Abu Dhabi, and Jebel Ali acting as major hubs. These locations serve as critical links between Asia, Europe, and Africa, supported by robust infrastructure. Notably, 80% of online shoppers in the UAE make purchases from international sites, with domestic deliveries averaging just 2–3 days.

Beyond these established hubs, ambitious projects across the wider MENA region are reshaping the logistics landscape.

Major MENA Logistics Projects

Several transformative initiatives are further positioning MENA as a logistics powerhouse. For instance, Saudi Arabia is expanding King Salman International Airport in Riyadh to accommodate up to 185 million passengers annually.

The GCC Railway Project is another standout, aiming to connect all six member states through an integrated rail network.

In Egypt, Abu Dhabi’s sovereign wealth fund, ADQ, signed a USD 35 billion agreement in February 2024 to develop the Ras El Hekma area along the north coast. Meanwhile, Morocco has greenlit the next phase of the Zenata Eco-City project near Casablanca, supported by the African Development Bank, as part of its urban regeneration efforts.

Digital infrastructure is also expanding. In Q2 2025, du and Microsoft announced an AED 2 billion collaboration to build a hyperscale data centre in the UAE. This development aims to strengthen the digital backbone supporting smart logistics systems.

Hub Comparison: Features and Benefits

The MENA logistics sector is seeing strong investment flows. Foreign direct investment (FDI) inflows reached USD 13.8 billion in Q2 2021, while the logistics industry recorded a 179% year-on-year funding increase in Q1 2021.

"The business outlook for capital project logistics in the Middle East remains very positive, with government spending on capital investments expected to increase by more than 6.5% next year."
– Steffen Behrens, president, deugro Middle East

These hubs are thriving due to the region's strategic location and economic diversification efforts. Saudi Arabia, for example, allocates around 9% of its annual budget to infrastructure and transportation, with construction output expected to hit USD 150 billion by 2025. Initiatives like the UAE’s in-country value programme and Saudi Arabia’s Vision 2030 are driving intra-regional trade and strengthening supply chains across MENA.

Market Opportunities and Risks for 2025

As we delve deeper into the logistics landscape of the MENA region, it’s clear that 2025 presents a mix of promising opportunities and notable challenges. With the transport and logistics sector contributing around 10% to the region's GDP, businesses and investors are eager to seize emerging prospects while staying vigilant about potential risks.

New Opportunities in Industrial Logistics

The cold chain market is one of the brightest prospects in the logistics sector. By 2030, this market is expected to hit US$41.1 billion, growing at an annual rate of 8.8% between 2025 and 2030. This growth is driven by advancements in temperature-controlled warehousing, which are critical for food and pharmaceutical industries.

E-commerce is another powerhouse of growth, set to reach US$50 billion by 2025. This boom is creating demand for advanced fulfilment centres and efficient last-mile delivery solutions, reshaping the logistics infrastructure in the region.

Additionally, the region’s construction boom, exemplified by Saudi Arabia’s projected US$150 billion output, and rapid digital transformation are enhancing logistics efficiency and capacity.

"We foresee strong growth driven by continued infrastructure development, energy projects and industrial expansion across the Middle East."
– Kieve Pinto, chief operating officer (COO), Al Faris

Risks to Monitor

While opportunities abound, the logistics sector faces several risks that require careful navigation. Geopolitical instability continues to be a persistent challenge in the region. Conflicts, economic uncertainties, and infrastructure issues can all disrupt supply chains [36–38].

Cybersecurity threats are escalating in tandem with digital transformation. These attacks can disrupt operations, tarnish reputations, and lead to heavy financial losses. Another significant hurdle is policy complexity. Corruption remains a problem, with over half of MENA countries ranking below the global average on Transparency International's Corruption Perceptions Index.

Financial instability is another pressing concern. Youth unemployment has reached 25%, and public debt exceeds 70% of GDP in some nations. Currency volatility poses additional risks, as seen in 2023 when the rapid devaluation of the Nigerian naira left logistics firms unable to pay for imported spare parts or fuel, leading to missed deliveries. Similarly, South Africa’s citrus industry suffered losses exceeding R5 billion in 2024 due to port and rail failures [37,38].

Fraud and poor data management are also significant risks. In 2025, two UAE-based shell companies - Alataya General Contracting and Double Heights Contracting - placed fake cargo orders to Oman and disappeared without payment. Poor data quality alone costs companies an estimated US$12.9 million annually.

Opportunities vs. Risks Analysis

To better understand the balance between opportunities and risks, here’s a comparative analysis:

Industry Resilience

Resilience is a defining trait of the logistics sector. Over 62% of logistics professionals have restructured their supply chains to tackle challenges like inflation, trade tariffs, and economic downturns. Meanwhile, 55% of respondents believe a global recession is either likely or inevitable, and 82% report that tariffs and trade protectionism are significantly affecting their operations.

"There is wariness and uncertainty among shippers, carriers, forwarders and others when it comes to the geopolitical factors that drive up costs, affect trade volumes, and alter supply chains."
– Tarek Sultan, Agility Vice Chairman

Business and Investment Considerations

The MENA region, with its growing logistics sector, offers a wealth of opportunities for businesses. However, entering this market requires a well-thought-out strategy. The UAE, for instance, attracted a staggering US$30.68 billion in FDI in 2023, securing its position as the second-largest recipient globally and the top destination in West Asia, accounting for 47.1% of regional inflows. A robust regulatory framework supports investment and operational practices across the region, making it essential for businesses to understand local regulations, develop effective entry strategies, and adopt operational best practices.

Entry Methods for Logistics Zones

Approaching the Gulf as a single, interconnected logistics market rather than fragmented individual markets can significantly reduce costs and enhance operational efficiency. For instance, Bahrain emerges as a cost-effective entry point, with operating costs that are approximately 30% lower than those in the UAE or Saudi Arabia for logistics, warehousing, and labour.

Free zone warehousing offers another strategic advantage, allowing businesses to defer import duties until goods are moved into the local market. Selecting the right entry point - whether it’s the UAE, Bahrain, or Saudi Arabia - can optimise duty exposure, reduce lead times, and manage costs effectively.

"You don't need to launch in five countries. You need one smart entry point and a regional distribution plan."

Aligning product specifications with local regulations and leveraging duty-free conditions can further streamline market entry. Building strategic partnerships is particularly useful for newcomers navigating local business practices. Notably, the UAE permits 100% foreign ownership of mainland companies, granting investors full control and direct access to local markets.

Regulatory and Compliance Requirements

Navigating compliance across MENA markets requires a clear understanding of local regulations. In Saudi Arabia, for instance, logistics operators must adhere to Saudisation policies, safety protocols, and environmental standards. Non-compliance can result in fines or even licence suspensions. The Saudi logistics market is forecasted to reach US$81.2 billion by 2033, underscoring its potential.

In the UAE, recent regulatory updates allow 100% foreign ownership, subject to licensing requirements, AED capital compliance, and a corporate tax cap of 9%. Additionally, Anti-Money Laundering (AML) regulations have tightened, requiring logistics firms to conduct thorough due diligence on ownership and monitor high-risk clients. AI and automation are increasingly being used to enhance compliance and threat detection.

The regulatory landscape is shifting to attract more investment. For instance, Saudi Arabia has introduced a new investment law, and Bahrain has amended its foreign ownership rules to encourage foreign participation. Legal and tax experts can provide invaluable guidance on navigating these evolving frameworks and ensuring compliance. Embracing technology-driven compliance systems is becoming a necessity for logistics firms.

Warehousing and Cold Storage Best Practices

Once businesses clear market entry and regulatory hurdles, excelling in warehousing operations becomes critical. In MENA's challenging climate, maintaining precise temperature and humidity control is non-negotiable. This is especially vital given that the global food system loses over 1.6 billion tonnes annually, equivalent to 13% of global food production.

Efficient storage practices are key. For instance, multi-deep cold and frozen storage areas must be optimised to maximise space usage while minimising energy consumption. Dividing warehouses into distinct zones based on product requirements can further enhance operational efficiency.

Humidity control is another critical factor. Excess moisture can lead to mould or freezer burn, while low humidity can dry out products. Modular storage systems, such as reconfigurable racks, offer the flexibility needed to handle diverse product types and volumes.

Traceability systems are indispensable for ensuring proper product rotation and enabling efficient recall management.

"Complete visibility and traceability is incredibly important in case of recalls. Our ability to track a product from production or harvest all the way to consumption is critical for ensuring quality."

AI-powered tools can also predict maintenance needs for refrigeration systems and optimise energy usage, ensuring operational efficiency. By adopting advanced warehousing and cold storage practices, businesses can protect their investments and thrive in this competitive market.

Conclusion: 2025 Outlook and Key Points

The industrial zones across the MENA region are playing a pivotal role in driving economic diversification and strengthening its position as a leader in regional trade. With more than AED 9.9 trillion allocated for infrastructure development in the Gulf by 2030, the area is steadily transforming into a global logistics hub. This transformation is being propelled by cutting-edge digital technologies that are reshaping operational efficiency.

Technological advancements like AI, IoT, and predictive analytics are revolutionising logistics. These tools are enhancing routing, streamlining warehouse operations, and improving asset utilisation. Companies adopting these innovations are already outperforming traditional operators, showcasing the tangible benefits of embracing digital transformation.

Saudi Arabia is emerging as a key player in the logistics sector. Its market is expected to grow to AED 142.4 billion by 2026, with an annual growth rate of 5.85%. The kingdom's ambitious plans to expand logistics zones from 22 to 59 by 2030, supported by investments exceeding AED 9.8 billion, underline its commitment to strengthening the sector.

Sustainability is no longer just an ethical choice - it's becoming a strategic advantage. Regional policies and ESG-focused initiatives are opening up fresh opportunities for businesses, aligning profitability with environmental responsibility.

The integration of multimodal transport is also reshaping logistics across the region. For instance, Saudi Arabia's successful rail-based container transport from Jubail Commercial Port to Riyadh Dry Port in 2024 highlights the efficiency of such approaches. Additionally, port utilisation has seen a significant boost, climbing from 50% in 2019 to 64%.

Efforts to localise supply chains are gaining momentum, supported by initiatives like the UAE's in-country value programme and Saudi Arabia's Vision 2030. By focusing on localised supply chains, the region is not only reducing its exposure to global disruptions but also reinforcing its broader strategic goals.

Looking ahead, the future of MENA logistics will rely heavily on rapid adoption of technology, strategic infrastructure investments, and a deeper integration of ESG principles. With over USD 106.6 billion already invested, the region is well-positioned to build on these trends.

These logistics zones are doing more than facilitating trade - they are actively reshaping the economic landscape of the MENA region. As they continue to evolve and interconnect, they will be the backbone of the region's shift towards knowledge-driven, diversified economies that can compete on a global scale across various industries.

FAQs

How do industrial logistics zones in MENA support economic diversification and reduce reliance on oil?

Industrial logistics zones across the MENA region are pivotal in reshaping economies by attracting foreign direct investment (FDI), boosting regional trade, and accelerating growth in non-oil sectors like manufacturing, technology, and logistics. These zones are specifically designed to connect local economies to global supply chains, lower logistics expenses, and enhance the region's overall competitiveness.

Governments in the region are focusing on developing specialised economic and free zones to draw investments into industries such as advanced manufacturing, technology, and services. This approach not only diversifies the economic landscape but also reduces reliance on hydrocarbons, aligning with long-term national strategies for economic transformation. With a strong emphasis on modern infrastructure and business-friendly policies, these zones are becoming increasingly attractive to both regional and international investors.

What are the key technologies transforming logistics zones in MENA, and how are they enhancing efficiency?

Technological developments are transforming logistics zones across the MENA region, bringing improved efficiency and reliability to the forefront. Tools powered by artificial intelligence (AI), such as route planning and predictive analytics, are playing a key role in cutting delivery times and lowering operational expenses. At the same time, real-time shipment tracking provides enhanced visibility, helping businesses maintain better control over their supply chains.

On top of that, blockchain technology is stepping in to boost transparency and security in logistics processes. This not only makes operations more secure but also simplifies them, creating smoother workflows. These advancements are enabling businesses in the region to manage warehouses more effectively, reduce delays, and elevate supply chain performance, paving the way for sustained growth in the years ahead.

What are the key risks for the logistics sector in MENA, and how can businesses address them effectively?

The logistics sector in the MENA region faces a number of challenges that can disrupt operations and add to costs. Geopolitical instability often creates uncertainty, affecting trade routes and increasing shipping expenses. On top of that, infrastructure issues, such as inconsistent regulations or gaps in transport networks, can slow down the movement of goods. The region’s extreme weather conditions - from intense heatwaves to sandstorms - further complicate supply chain efficiency.

To tackle these hurdles, businesses can take several steps. Diversifying suppliers and transport routes helps create resilient supply chains, reducing dependency on any single path or partner. Conducting regular risk assessments allows companies to stay prepared for geopolitical shifts or environmental challenges. Investing in technology and cybersecurity not only streamlines operations but also strengthens crisis management capabilities. Finally, proactive planning and working closely with regional partners can make navigating these risks more manageable.

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