New technologies open unexpected opportunities for Saudi Arabia

Throughout history, human ingenuity has been the key driver of economic and political changes.

Whether by accident or deliberate action, humans have often developed and adopted new technologies whose impact on the rise and fall of empires and regions far exceed their original inventors’ imagination.

From the domestication of the horse, which led to the rise of transcontinental empires around 3000 B.C., to the transfer of the humble but nutritious potato from South America to Europe, which led to the explosion of Europe’s population after 1600 A.D. and led to their domination of most of the globe by 1900, technological changes have often created historical turning points by shifting the balance of economic power between peoples across the globe.

This is not to mention the invention of gunpowder, the printing press, and the steam engine, which turned history on its head and transformed the balance of military power in just 400 years between the European continent and the 10,000-year-old cradles of civilization in Asia and Africa.

So, it was with the invention of the single biggest driver of globalization since World War II, the humble shipping container. In 1955 the owner of a trucking company in the US, Malcom McLean, was looking for a way to avoid the cost of newly introduced interstate weight restrictions and fees. To solve the problem, he thought of shipping freight by sea inside truck trailers without wheels, later called containers.

This innovation saved costs, in time and labor, because it cut out the need to unload a customer’s cargo piece by piece from a truck onto a ship, and then load it back piece by piece into another truck at the destination port.

When Malcom McLean developed the container shipping method, his aim was simply to make more money because his trucking profits were being squeezed by government fees and regulations. Little did he know that his innovation would change the balance of economic power around the world, and bring wrenching changes to America’s industrial base by allowing manufactured goods from countries in Asia with low labor costs to be shipped across the world to the US for less than it cost to truck them from one state to another.

At a global level, if container technology had not reduced shipping costs by 90 percent, the Chinese and smaller Asian Tiger economies would simply not have achieved double-digit annual gross domestic product growth after 1980. Furthermore, it’s highly unlikely that peace would have prevailed in most of Asia from the end of the Vietnam war to the present, if it had not been for this unprecedented economic boom.

Container shipping not only gave birth to what we positively or negatively refer to as globalization, but it also shifted much of the global shipping industry away from the traditional great port cities to completely new ports that had adequate land around them to handle the loading and unloading of thousands of containers.

NEOM airport could become one of the largest air transshipment hubs in the world, with other businesses like 3D manufacturing to follow

Nabil Alkhowaiter

Ancient and crowded Mediterranean ports such as Marseille and Genoa were bypassed as container ships went directly to Rotterdam, which became Europe’s container hub. Historical UK ports like Liverpool, Glasgow and Bristol declined as new container shipping ports like Felixstowe were born. In the US, east coast ports like Baltimore and New York declined while the formerly small west coast port of Oakland became one of the biggest ports in the world.

Possibly the most unlikely beneficiary of container shipping’s technological turning point was a tiny trading town on the southern shores of the Arabian Gulf called Dubai. It is based relatively far from the world’s traditional shipping lanes and is plagued with the driest, hottest, and most humid climate in the world. Looking forward from 1980, Dubai was probably the least likely place one would have expected to be the 13th largest container transshipment port in the world in 40 years.

The key to Dubai’s success in taking advantage of the historical turning point that container shipping technology offered in the 1970s was the ingenuity of its ruler Sheikh Rashed bin Al-Maktoum who established one of the world’s first free-trade zones at the Jebel Ali Port. Any port on the southern shores of the Arabian Peninsula from Oman to South Yemen would have been better placed geographically to take advantage of the growing international container ship traffic.

However, Oman was torn by a rebellion in its Dhofar province throughout the 1970s, and South Yemen was ruled by a socialist government that all but closed it off from international trade. Dubai had become the busiest port in the Middle East by 2000, making it difficult for any potential rival to match its success, and by 2020 the city of Dubai itself had become the world’s fifth most popular travel destination.

Nevertheless, the world does not stand still and today two new technologies, electric battery-powered aircraft and 3D printing, are converging to potentially create a new technology-driven historical turning point. Battery-powered aircraft will eventually reduce the cost of transporting air cargo over distances of less than 1,000 kilometers. And 3D printing is slowly eliminating the capital and space costs of storing spare parts and finished products by manufacturing them on-demand, without the need for large factories to achieve economies of scale.

This means that strategically-located 3D manufacturing sites around the world could theoretically provide parts and products to a 1000-kilometer area around them in a day or less.

One such strategic location that comes to mind is the NEOM special economic zone, in northwest Saudi Arabia. A consultant study produced in 2014 identified the northwest quadrant of the Arabian Peninsula, which includes NEOM, as a geostrategic location for airfreight transshipment because it is almost equidistant from the major population centers in Asia, Europe, and Africa. Therefore, the NEOM airport has the potential for becoming NEOM’s anchor business that kickstarts its rise to become a global business hub.

Two things are needed to make the NEOM airport its main engine of future growth. One, is turning it into one of the world’s very few Open Skies airports that allow any airline to use it as a hub, and two, is to make it a tax-free global airfreight transshipment point.

Just as Dubai used the Jebel Ali Free Trade Zone in the early 1980s to put itself on the global container shipping map, NEOM airport could become one of the largest air transshipment hubs in the world, with other businesses like 3D manufacturing to follow. Also, while it might take time and major infrastructure investments to attract large-scale tourism to NEOM, it would take very little investment to turn its airport into an airfreight shipping hub, with holidaymakers to follow.

• Nabil Alkhowaiter is a Saudi Arabian writer based in Dhahran