Alvarez & Marsal sets out framework to accelerate industrial localization in Gulf economies
The localization of industrial production is an important pillar of Gulf economies, aiming to strengthen domestic manufacturing capabilities, reduce reliance on imports, and drive long-term economic diversification. With many industrial localization goals still ahead, a new study from Alvarez & Marsal outlines a framework for accelerating progress.
The economies of the UAE, Saudi Arabia and other Gulf states place strong emphasis on the manufacturing industry, with the aim of significantly expanding the manufacturing sector’s contribution to GDP as part of broader efforts to diversify away from oil dependence and build a competitive industrial base.
In the UAE, for instance, the industrial strategy aims to expand the industrial sector’s contribution to GDP from AED 133 billion to AED 300 billion by 2031. In Saudi Arabia, the objective is to increase industry’s share of GDP from around 12% today to 20% by 2030.
In driving growth, Gulf countries are placing particular emphasis on building a national industrial ecosystem, a strategy known as localization. This includes increasing domestic manufacturing capacity across sectors such as automotive, pharma, defense, mining, and energy, reducing reliance on imports by developing local supply chains, and attracting foreign direct investment while encouraging international companies to establish local manufacturing operations.
The next phase of industrial localization
While notable groundwork has been achieved in recent years, placing the region broadly on track for its ambitions, significant steps remain. This is where Alvarez & Marsal’s new study (‘Industrial Manufacturing Localization: A Strategic Imperative’) comes in, outlining how Gulf countries can accelerate industrial localization execution as they enter the second half of their ambitious agendas.
Drawing on global localization case studies from countries such as Italy, Turkey, Brazil, China, and Mexico, the study analyses how nations can shorten traditional industrial development cycles from decades to years through disciplined policy frameworks, deep technology transfer, and ecosystem orchestration.
Historically, manufacturing industries take decades to reposition their footprint and mature. The paper highlights the complexity of industrial capability building, while arguing that Gulf countries are well positioned to “achieve materially shorter timelines” if they make the right strategic decisions and combine them with rigorous execution and coordinated public-private collaboration.
“Across the GCC, governments have made significant commitments to localize manufacturing and build domestic capability for many years,” said Andrea Di Lello, Senior Director at Alvarez & Marsal. “Our research demonstrates that with the right policy design, disciplined execution, and a sustained focus on technology transfer and R&D, industrial development timelines can be dramatically shortened.”
How to accelerate
One of the main conclusions of the research is that successful industrial localization is not defined by the pace of factory buildout, but by the depth of engineering capability, design authority, and innovation capacity established in-country. The whitepaper argues that localization delivers sustainable economic value only when countries move beyond assembly to develop ownership of product development, manufacturing processes, and international certification.
“Industrial localization requires more than capital investment,” explained Angelo Carella, Managing Director at Alvarez & Marsal. “It demands structured execution, credible knowledge transfer, and a clear pathway from operational capability to innovation leadership.”
The Industrial Localization Model
At the center of Alvarez & Marsal’s whitepaper is its proprietary Industrial Localization Model, which provides a practical four-step pathway from initial assembly to global competitiveness.
The first step focuses on initial setup, establishing protective regulatory frameworks and clear industrial policy foundations, alongside the introduction of final assembly, maintenance, repair, and overhaul (MRO), and aftersales activities. This stage is supported by targeted incentives, including tariffs, tax measures, and local content requirements.
The second step involves industrial build-up, advancing beyond assembly through genuine technology transfer via joint ventures, offset agreements, and licensing. The emphasis is on qualitative know-how absorption, including product design, process engineering, and supplier-led innovation, alongside the development of resilient local supply chains capable of supporting end-to-end industrial activity rather than manufacturing operations alone.
The third step involves ecosystem maturity, with sustained investment in human capital and innovation infrastructure through vocational training, advanced engineering programs, R&D centers, and academic collaboration. This phase enables countries to develop independent certification capabilities and the ability to design and build production lines locally.
The fourth step focuses on global integration, aligning regulatory frameworks with international standards and enabling consolidation to build global champions through cross-border partnerships and mergers.
Across all four stages, the study identifies local R&D capability, certification autonomy, and sustained innovation output as the decisive indicators of long-term localization success.
While assembly and production capacity are essential foundations, Di Lello emphasizes that only countries that embed innovation ecosystems and retain design ownership are able to build globally competitive, self-sustaining industrial sectors. “The imperative is to move beyond assembly and anchor long-term competitiveness in innovation and design.”
