Manufacturing Holds the Key to Economic Diversification in the Middle East: A Frost & Sullivan Perspective

June 24, 2014

Despite many underlying tensions, the Middle East (ME) has maintained a positive economic outlook. This is evident from the region’s ability to maintain a positive growth rate when most economies globally have struggled to be above the red line. The Gulf Co-Operation Council (GCC) countries, specifically, have maintained an average Gross Domestic Product (GDP) growth rate in excess of 5 per cent over the past decade and half. The region’s rich oil and natural gas reserves have been instrumental in its growth and prominence in the global scenario and their contribution is likely to continue in the future, too.

In the past decade, we have witnessed trends where abundance of natural resources has actually helped vitalise the non-oil economic growth in the GCC countries. Thus, developments in the region indicate the increasing focus on non-oil sectors as a means to achieve sustained economic development and elevated social status.

The current low penetration of manufacturing contribution to GDP depicts the enormous opportunities for this sector to be a key focus area for the region. Middle East, today, accounts for nearly 40 per cent of the global gas reserves. However, the region contributes to only less than 10 per cent of the global gas production due to the high costs involved in liquefaction process needed for exports. This in itself presents a huge opportunity in the manufacturing / production sector. Invoking participation of the private sector in tapping this magnanimous opportunity in gas exploration and production would help in improving the manufacturing status of the region apart from creating extensive job opportunities.

To partner organisations in their quest to optimise manufacturing and supply chain processes, Frost & Sullivan has launched its International Supply Chain Excellence Programme (ISCEP), Gulf Edition 2014. Focussing on process quality compliance and effectiveness of systems, this Programme will be running in India, GCC, Indonesia, Thailand and Turkey. Based on scientific assessment of adequacy and effectiveness of the systems implemented in an organisation, this programme measures the maturity of systems and the extent of compliance in making the supply chain processes reliable and capable of delivering the planned results. ISCEP, Gulf Edition registration is now open for production facilities in sectors like Chemicals and Petrochemicals, Refinery Operations, Capital Goods, Metals and Minerals, FMCG, Food and Beverages and Logistics.

It is pertinent to note that the distinction between manufacturing and services sector is blurring. Every dollar of manufacturing output is said to contain 20 cents of service input. Similarly, nearly 30-55 per cent of jobs in the manufacturing industry are set to be for the services sector. Such cross linkages demonstrate that advent of manufacturing sector growth in the Middle East will itself unfurl enormous untapped opportunities for the services sector; thus, ensuring wholesome growth of the economy.

The ME is going through a very significant transformative phase for its economy. According to Frost & Sullivan, focus on the manufacturing sector as a key diversification measure is expected to be the way forward. Legacy global success stories and assessment of the region’s economic growth highlight that economic diversification is the solution to most of its problems. Identification of target industries for manufacturing promotion appears to be the next logical step. A structured approach for elevating the educational system to cater to the needs of industrial growth is deemed critical. Favourable policy environment that encourages industrial development and attracts investment will be pivotal to achieving economic growth.

If you wish to know more about the International Supply Chain Excellence Programme or would like to register for it, please contact Tanu Chopra, Corporate Communications, at [email protected] or log on to www.frost.com/ISCEP-Gulf2014

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