How your choice of a special economic zone in the GCC can impact your logistics business costs

Labor cost is the most important cost driver for most sectors including logistics. Supporting the movement and delivery of intermediate and final goods requires a high concentration of labor in several occupations. The logistics sector ranks high in the labor share of production due to numerous touchpoints that are not easily mechanized. In fact, labor costs are equivalent to approximately 62% of the total cost in the case study. This study makes use of proprietary data collected from various company HR departments to analyze wages by occupation in the industry. The analysis provides this data for 17 typical occupations for a temperature-controlled warehouse.

This study finds that BLZ is the lowest-cost location for labor, which contributes significantly to the zone’s overall low cost of doing business. On an annual basis, the case study company can expect to spend roughly $902,000 in payroll for its fifty-five employees, which is US$178,000 (16%) less than the average. KAEC is the highest cost location for labor. The annual cost of US$1.28m in KAEC is 19% above the average.

For the case study company, the second most significant expense to consider is the cost of renting a warehouse and commercial office space. The analysis assumes that the company will rent a pre-built warehouse of 3,000 m²  for its logistics operations and 200 m² of commercial office space. The KAEC offers the most cost-effective option for rental expenses. The total annual rental cost in KAEC is US$207,000, which is significantly lower — approximately US$264,000 below the average rate of US$471,000. On the other end of the spectrum, the DAFZ is the most expensive location for leasing a pre-built warehouse, with an annual cost of US$1,005,000.

Utilities represent another major expense for the case study company, primarily due to the high electricity consumption required for refrigeration and significant fuel usage for machinery and equipment. The BLZ is identified as the most competitive location for utility expenses, with an estimated annual cost of US$156,000, which is US$49,000 less than the average utility cost of US$205,000. In contrast, zones in Dubai and Abu Dhabi within the UAE have the highest utility costs, according to the estimates based on the consumption levels detailed in the case study.

Cost of living case study

The cost of living is a crucial factor for companies, as it directly influences the salary levels required to attract and retain employees. The study offers an in-depth analysis of living expenses in the benchmarked locations, encompassing typical family costs such as housing, utilities, private schooling, vehicle expenses and domestic help for a family of four (two parents and two children) residing in a three-bedroom villa.

Key insights from the study indicate that the cost of living is most affordable for families in the vicinity of the BLZ, followed by those near SOHAR, with notably competitive housing and education expenses contributing to this affordability. In contrast, areas around two of Dubai’s free zones, Dubai Investment Park (DIP) and Dubai Airport Freezone (DAFZ), have the highest living costs, primarily driven by higher-than-average housing expenses.

The study illustrates that the annual cost of living for a family near BLZ is substantially lower compared to those near zones in the UAE. With an annual expense of around US$44,000, families living near BLZ benefit from a more manageable cost of living.

Families considering a move to SOHAR also enjoy lower living costs, which are 35% below the average. Conversely, the cost of living near DAFZ is the most expensive, being 147% higher than that of BLZ.