Strengthening supply chains key for industrial sector growth in GCC

06 May 2024 3 min. read

Cultivating a robust supply chain is important for the GCC countries as they undertake ambitious endeavors to strengthen large-scale industrial development. That is according to a report from Oliver Wyman, which looks at supply chains and disruptions.

For countries in the GCC, becoming more resilient will mean fitting into current industrial development agendas and addressing supply chain issues. The best way to do that is by nurturing local capabilities, leveraging emerging technologies, and building strategic cooperations at industry-level and between various regional governments.

“As GCC countries scale up their economic diversification plans, it’s vital that they redouble their efforts to increase supply chain resilience,” said Frederic Ozeir, partner at Oliver Wyman.

Strengthening supply chains key for industrial sector growth in GCC

“Heeding this call is critical to ensure the smooth functioning of all sectors and safeguard national security in the event of unforeseen supply chain disruptions,” Ozeir continued.

As far as concrete steps taken by GCC countries to address supply chain issues, there have been a few notable examples, particularly in the UAE and Saudi Arabia.

For their part, the UAE pursued a ‘near shoring’ policy: the Emirati agricultural investment firm Jenaan formed a partnership with Egypt to cultivate several hundred square kilometers of land with wheat, maize, and other essential crops.

The Saudis, too, looked towards international partnerships as a solution – but further afield. The country’s Public Investment Fund and mining company Ma’aden bought a $3.4 billion stake in Brazil’s largest mining company in order to have better access to important minerals like lithium, copper, iron, and nickel.

In addition, the KSA’s Agricultural Livestock Investment Company acquired a grain cultivation and livestock company in Australia and a company operating 25 skinning factories in South America. These investments help the country out of a bind when it comes to essential resources and products that the nation can’t generate on its own.

Strengthening supply chains key for industrial sector growth in GCC

As for the machinery and equipment sector, access is also quite limited and supply chain disruptions can really cause trouble for the GCC countries. Accord to Oliver Wyman’s risk profile, some of the machinery that has the fatal combination of both high risk and high criticality include things like filtering machinery, valves, transformers, and air conditioning machinery (clearly an essential in the Middle East).

Bottlenecks are a feature (not a bug) of any complex supply chains, especially in regions like the Gulf, which relies quite heavily on imports in many sectors. In order to strengthen large-scale industrial development, cultivation of a robust supply chain is important.

“By embracing a holistic approach that combines localization with other supply chain resilience levers, GCC policy makers can better safeguard the industrial growth of their nations, ensuring adaptivity and responsiveness in an ever-changing global landscape,” concludes the report.