The Effects Of Delay In Importing And Exporting Of Goods In Saudi Arabia

Introduction

The aim of this research is to analyse the effects of delay in the exporting and importing of goods in Saudi Arabia. This analysis will determine how time delays affect Saudi’s imports and exports using data from various sources. Saudi Arabia, is natural resource (oil-based) economy. The oil is used both for domestic purposes and the rest is exported to foreign countries. So far, oil is the main product exported by Saudi Arabia, and therefore plays a huge role in the country’s economy. According to an analysis by the Saudi Arabia Monetary Agency (2012), the oil sector alone accounts for about 92% of the government revenues, 55% of the GDP, and about 90% of the export earnings. Besides, according to reports from The Trading Economics, Saudi Arabia $29450 million on imports (De Santis, 2003). From such statistics it is clear that international trade is the backbone of the Saud Economy and therefore, this sector ought to be made as efficient as possible so that Saudi Arabia can fully benefit from it. Delay in importing is among the most prevalent problems facing most states, including Saudi Arabia (Sandberg and Abrahamson 2011, p. 61). However, the effects of time delay are catastrophic for Saudi Arabia since international trade contributes significantly to the economy. This is evident in the annual reports published by the World Bank every two years since 2007; according to these reports, in 2007 Saudi Arabia was ranked at number 41. In 2014, the position dropped to 49 with a score of 3.62, while in 2018 the country’s logistics index dropped further to 52, with a score of 3.08. Such statistics are an indicator that the Logistics industry in Saudi Arabia is dwindling in terms of its performance index which is majorly influenced by time delays. Therefore this study will use Cost-Benefit Analysis (CBA) methodology to evaluate the impact of delay time on international trade. In this respect, this research will seek to answer the following queries in regards to the effects of delay time on international trade in Saudi Arabia, these are;

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What is the impact of delay on the international trade in terms of time and the expenses incurred by Saudi tax-payers?

What impact does this issue has on domestic the economic outcomes of the country?

Objectives of the Study

Saudi Arabia has a strategic plan dubbed ‘the vision 2030,’ which is a comprehensive plan for all sectors of the economy, and logistics is among these sectors. The strategic plan aims at making Saudi Arabia an international Logistics Hub in the Middle East region, and to become among the top 25 countries in Logistics. For Saudi Arabia to achieve this vision, it needs improve some aspects of its logistics activities. Mira, Choong and Thim (2019, p. 509) wrote that an efficient logistics system should be prompt in terms of clearing and forwarding goods, should have good records and ought to have the necessary evaluation tools. The study will delve on the necessary changes that ought to be implemented in Arabia’s customs department to reduce the delays in the logistics procedures. Besides, the authors also examined the important features of the Indian logistic system, and concluded that the use of high technological tools, systems and collaborations, are fundamental in ensuring that logistics systems run efficiently. Besides, the logistic provider, which in this is the Saudi government should also reduce the logistic costs incurred by their respective clients, while at the same time improve the service standard. WTO (2014) explored various ways on how to establish logistics competitiveness in Spain. The researchers elaborated the connection between operative and dynamic logistics abilities and justifiable competitive advantage. The analyses recognised five main dynamic abilities that could transform logistics in Spain by reducing delay time; these included managerial presence and knowledge, effective control, cross functional collaboration, learning, and supply chain networks. These elements are significant for the progressive growth of any logistic process, with an integration of information technology systems.

World Bank (2002) examined the causes of attractiveness in logistics and revealed the major facets that are needed for an entity to develop a successful logistics hub. The author used Singapore as a case study and the implications it had in the Southeast Asia region. This revealed that most companies lack alternative option and have only resorted to using the government-preferred customs unit, when importing or exporting products because they have no options. Besides, most government custom agencies lack a comprehensive understanding of the needs of their clients, and therefore, the first measure to achieving efficiency is by first understanding the needs of their clients to meet their expectations. El Sheikha (2015, p. 3) came up with a model of examining the significance of Information Technology in the field of logistics. The researcher concluded that entities must adopt a double methodology to information technology; the first step should be to develop capability to effectively implement some standard solution in an opportunity-based approach. Secondly, an entity should consider embedding its IT scheme in the organisation with a robust support and obligation for the top administration and a well-defined premeditated alignment. To establish a competitive edge logistics governmental urgency should outsource I.T applications. Sundarakani (2017) related Canada’s logistics and supply chain organisation presentation, both in regards to international trade and from the standpoint of innovative procedures that have been adopted by the most Canadian companies that serve the domestic market. The investigation compared the performance of both Canadian and American entities in regards to logistics costs. The study concluded that as mu ch as most Canadian industries tried to improve their logistics sector, they have insufficiently lacked the techniques for evaluating and understanding the performance scope of their logistic system in regards to supply chain. As seen in the various studies, most researchers have related logistic activities with Information technology system for the sake of enhancing logistic processes. It has also been noted that indeed logistic activities can improve economic outcomes of various entities and states.

The Economic effects of Logistic Activities

The mentioned in the above sections, logistics plays a crucial part in the current economy and the market capacity of logistic activities has previously attained a significant level in most economies, especially those of developed countries. Attia (2018, p. 1019) analysed the impact of logistics activities as follows; logistic events accelerate economic progress and production, which ultimately reduces the poverty levels in a country, especially in a country that is trying to improve the lives of its citizens like Saudi Arabia. Alexander (2016, p. 48) argued that trade liberalisation is directly linked to faster productivity in a country. The author assumes that increased trade because of efficient logistic systems, has a potential of promoting economic and social growth, through an increase in productivity and a decrease in poverty levels. Besides, logistics teams up to among of the areas where business incur more expenditure, which means that it directly affects other aspects of the economy, while at the same time it is affected in equal measure. Most importantly is that it is only through logistics that the movement and flow of various transactions can be handled. This is an essential activity that facilitates the sales of all goods and services in a country, and therefore it ought to be as efficient as possible (Wang, Wu, and Yang 2013, p. 1220). For one to understand this role from a systematic level, one should consider that if goods delay there is a possibility that customers might fail to buy them or if goods cannot be delivered in the right place and in the appropriate condition, then the business fails to make any sale. In short, any failure in the logistic system means that the whole supply chain is likely to suffer. Lee, Son, Park, and Jang, (2016, p. 16) wrote that logistics is the best source of competitive advantage that any entity (a state or organisation) can have, since it is difficult easy to duplicate the elements of logistics in comparison to other facets in the marketing mix.

Vallee and Dircksen (2011, p. 82) added that logistics is an essential factors of a nation’s competitiveness. As much as it is an integral part of the economy, it is prone to suffer from insufficient inter-state coordination of networks like non-integrated time schedules, delays in the customs, incompatible stands, and insufficient flow of information on the delays. However, if a state is able to solve the inefficiencies in its logistics system, then they would be capable of delivering products at a competitive rate, quality and prices. Chienwattanasook and Jermsittiparsert (2018, p. 217) argued that an efficient logistics system reduces the cost of transport and the time taken in transit, but it also reduces the general cost of production. In cases, where logistic systems are not efficient, then local companies are expected to record higher inventories at almost every phase of production chain, which requires extra working capital such larger go-downs to store more stocks. Moussa (2019, p. 66) contended that especially for semi-arid states like Saudi Arabia, an efficient logistics system can help the state to in importing basic foodstuffs, and can be ferried around country easily at a lower cost, which eventually leads lower food prices and increased citizen welfare. Besides, local producers in Saudi Arabia can easily access new markets, in different regions of the world promptly if they could access an efficient logistic systems. Finally, Jazairy, Lenhardt, and von Haartman (2017, p. 513) wrote that logistics is a source of employment for many people in a state, the more streamlined and efficient it is, the more it has the capability of accommodating more employees and hence creating more employment positions. In labour intensive countries like Saudi Arabia, the logistic industry is likely to accommodate more people as compare to developed countries.

The essence of an efficient logistic system has not been widely accepted, by various states. The efficacy recorded in the supply chain logistics performance, is referred to as Logistic Performance Index, the higher the index, the more efficient the logistic system is. This performance mostly depends on the policy made by the government, through a thorough analysis of policies implemented in various countries (Guan, An, Gao, Huang, and Li 2016, p. 410). A survey conducted by the World Bank (2002) identified an efficient logistic system to have the following components; efficacy in the customs and boarder management agencies, the quality of transport infrastructures, the viability of arranging competitively priced shipments.

Methodology

The study aims to use both qualitative and quantitative methodology to answer the research question. The researcher will use both primary and secondary data collected from various individuals and publications respectively. Secondary data offers a straightforward and compelling set of data for this study (Johnston 2017, p. 619). As much as there is no study that has so far analysed time delay in Saudi Arabia, there are various studies that have done so. Therefore, the researcher will use the data collected and resolutions made by various studies to establish an authenticated and validated results on the study questions (Swart, Gothe, Geyer, Jaunzeme, Maier, Grobe, and Ihle 2015, p. 124). A quick search of the term, “The effects of delay time in imports and exports in Saudi Arabia,” on Google Scholar (one of the largest libraries), yielded more than 300 articles that were published between 2009 to 2019, which were directly related to the subject topic. This is an indicator that there are enough publications for the subject topic. One major problem of using secondary data, is that one is prone to make the assumptions that the initial researcher made, use unauthentic sources or outdated content. To ensure validity of this study, the researcher will strictly stick to peer reviewed articles, publications, journals, and books, which have been published with a span of not more than 10 years. The data will be analysed using systematic literature review.

Systematic Literature review

The systematic literature review will help to provide a comprehensive and transparent analysis of the secondary data, which will also reduce the bias effect of the initial researcher (Mason, Nicolay, and Darzi 2015). The same methodology will also help the validate the study. In systematic literature review, inclusion, and exclusion criteria (Adams, Jeanrenaud, Bessant, Denyer, and Overy 2016, p. 180). For this study the inclusion criteria will involve the following conditions.

Inclusion Criteria
Types of studies Publication published from 2009- up to date
Articles published in any geographical location
Publications written in English
Analyses that have used qualitative analysis (to discuss the delay time in the logistic industry) seeking to understand the dynamics and effects of delay time in the logistics industry, studies seeking to improve the status quo of the logistic department in any state or organisation, describing the process of improving logistics or the customs department. It will also comprise of original qualitative research work analyses that comprises of secondary qualitative analysis of qualitative data, and a qualitative research as a portion of a mixed methodology study
Categories of participants All participants of any study must be 18 years and above.
Those who have worked in the logistics industry or have an in-depth knowledge about the same. Policy makers in the logistics or related fields, government official in the logistics industry, custom officers, private entities’ logistics personnel, and studies from reputable logistic companies such as DHL or Bollore Transport and Logistics.
Any study that has respondents with one or all the qualities above form any region will be admitted into this study
Types of outcome measures Logistical burdens such as the limitations facing various customs departments or in logistic industry as a whole. Technological limitations facing the logistic industry in any state or region of the world. Policy recommendations on the logistics industry of any state, or organisation in all regions.

This study would be informed based on the Purchasing Power Parity theory, which states that if some goods are perfectly tradable across borders, with less trade barriers or transaction costs, then prices are likely to remain constant across various countries. This has given rise to the ideology of purchasing power parity, a concept of exchange-rate adjustment that is founded on the law of one price.

Contributions of this study

The study will be informative to Saudi Arabia policy makers whose aim is to improve the logistics industry by reducing the delay time. Such policy framework will help to govern various facets of the economy that directly rely on the logistic system in the country. Besides, efficient policies help in ensuring an effective and streamlined logistic sector, which trickles down to economic progress in the country. Therefore, this study will not only be beneficial to the logistic industry only, but ultimately it will help in improving Saudi Arabia’s economy.

Saudi Arabia, aims at becoming the number one logistic hub in the Middle East by 2030, to achieve this objective, the government must enhance its logistic industry. In this respect, this study offers a portion of guidelines that can be used by the government to streamline the logistics industry. The insights provided by this study are well researched and analysed and therefore, the outcome of implementing the recommendations of the study is likely to be positive.

The study will also identify gaps in the logistics and customs department, that could encourage delays when clearing and forwarding goods. Therefore, the relevant departments and organisations can use this study to improve on their outcomes and general productivity, in case the government is hesitant in adopting the recommendations made by this study. Lastly, this study is not only applicable to Saudi Arabia, rather it can also be used by government officials, policy makers and bureaucrats from different countries, regional blocks and organisations to improve on their respective logistic departments or industry.

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References

  • Adams, R., Jeanrenaud, S., Bessant, J., Denyer, D. and Overy, P., 2016. Sustainability‐oriented innovation: A systematic review. International Journal of Management Reviews, 18(2), pp.180-205.
  • Alexander, A., 2016. Building Green Transport Ecosystem in the Operation of Logistics in the Kingdom of Saudi Arabia. International Journal of Operations and Logistics Management, 5(1), pp.42-54.
  • Attia, A., 2018. Supply logistics integration in the Saudi food industry. Business Process Management Journal, 24(4), pp.1007-1022.
  • Chienwattanasook, K. and Jermsittiparsert, K., 2018. Supply Chain Integration, Supply Chain Risk Practices and Supply Chain Performance: A Contingent View. Opción, 34(86), pp.2160-2177.
  • De Santis, R.A., 2003. Crude oil price fluctuations and Saudi Arabia's behaviour. Energy economics, 25(2), pp.155-173.
  • El Sheikha, A.F., 2015. Food safety issues in Saudi Arabia. Nutrition and Food Technology, 1(1), pp.1-4.
  • Guan, Q., An, H., Gao, X., Huang, S. and Li, H., 2016. Estimating potential trade links in the international crude oil trade: A link prediction approach. Energy, 102, pp.406-415.
  • Jazairy, A., Lenhardt, J. and von Haartman, R., 2017. Improving logistics performance in cross-border 3PL relationships. International Journal of Logistics Research and Applications, 20(5), pp.491-513.
  • Johnston, M.P., 2017. Secondary data analysis: A method of which the time has come. Qualitative and quantitative methods in libraries, 3(3), pp.619-626.
  • Lee, K.H., Son, S.H., Park, J. and Jang, Y.H., 2016. Logistics Hub Strategy of the GCC Countries and Policy Implications: with a Focus on Saudi Arabia and the UAE. KIEP Research Paper World Economy Update, (16-16).
  • Mason, S.E., Nicolay, C.R. and Darzi, A., 2015. The use of Lean and Six Sigma methodologies in surgery: A systematic review. The Surgeon, 13(2), pp.91-100.
  • Mira, M., Choong, Y. and Thim, C., 2019. Mediating role of port supply chain integration between involvement of human resource practices and port performance in Kingdom of Saudi Arabia. Uncertain Supply Chain Management, 7(3), pp.507-516.
  • Moussa, R.A., 2019. King Abdullah Economic City: The Growth of New Sustainable City in Saudi Arabia. In New Cities and Community Extensions in Egypt and the Middle East (pp. 51-69). Springer, Cham.
  • Sandberg, E. and Abrahamson, M.,2011. ‘Logistics Capabilities for Sustainable Competitive Advantage’, International Journal of Logistics, 14, 61-75.
  • Sundarakani, B., 2017. Transforming Dubai logistics corridor into a global logistics hub. Asian Journal of Management Cases, 14(2), pp.115-136.
  • Swart, E., Gothe, H., Geyer, S., Jaunzeme, J., Maier, B., Grobe, T.G. and Ihle, P., 2015. Good practice of secondary data analysis (GPS): guidelines and recommendations. Gesundheitswesen (Bundesverband der Arzte des Offentlichen Gesundheitsdienstes (Germany)), 77(2), pp.120-126.
  • Vallee, F. and Dircksen, M., 2011, ‘Extended Logistical Factors for Success in International Trade’, World Customs Journal, 5(2), 1-94.
  • Wang, Y., Wu, C. and Yang, L., 2013. Oil price shocks and stock market activities: Evidence from oil-importing and oil-exporting countries. Journal of Comparative Economics, 41(4), pp.1220-1239.
  • World Bank, 2002, ‘Trade Logistics Facilitation: Key to Competitiveness’, Report, International Trade Department, Washington.
  • WTO and OECD, 2013. ‘Aid for Trade and Value Chains in Transport and Logistics’, Report, Switzerland.
  • WTO, 2014, ‘Connecting to Compete-Trade Logistics in the Global Economy, The Logistics Performance Index and Its Indicators’, Trade Report, Washington.

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