In a special report for the MEED Awards 2019, MEED identifies ten trends that will drive future business opportunities in the GCC
Many of the biggest challenges facing policymakers in the Middle East today would be recognised by their predecessors.
Satisfying the demands of a rapidly growing population, diversifying the economy away from oil, and installing adequate infrastructure to support urban expansion have long been key objectives in the region. Other challenges, such as the need to reduce carbon dioxide emissions to limit the effects of climate change, have emerged more recently.
An understanding that oil prices will stay lower for longer and the perception that ‘Peak Oil’ – the point at which demand from oil stops growing – could be just around the corner, has added sustainable fiscal management to the list of challenges facing the region.
Meanwhile, the transformation of the Asian and southern hemisphere economies from centres of production into producers of technology and major consumers is redrawing the dynamics of the global economy, underpinning the region as a global hub for business and trade.
But while many challenges might be familiar, advanced digital technologies such as artificial intelligence have created solutions that have never previously been available, so long as the skills can be found.
In a special report for the MEED Awards 2019, MEED examines ten key trends that will drive new business opportunities in the Middle East in the years ahead.
Investing in infrastructure for life
More than 70 per cent of the GCC lives in urban areas. In the UAE, the figure stands at 93 per cent, with the population expected to double by 2027. The pressure is on to meet the needs of the region’s growing urban population.With about $495bn of infrastructure projects planned or under way, governments in the GCC will continue to invest in transport, buildings and utilities to enable their long-term development. Increasing use of public private partnerships (PPP) will see private developers increase their role. But in the future, governments want to get more for their money. Increasingly, infrastructure spending will be seen as whole-life investment rather than just a construction opportunity. There is a growing interest in low impact, energy-efficient developments that are designed to maximise the physical and mental wellbeing of the community. The increase in green building certification schemes and government regulation makes it imperative for developers focus on their green credentials.
Smarter cities for happier communities
Dubai’s ambition to become the smartest city in the world by 2021 highlights a growing trend in the region to invest in balanced urban infrastructure using smart technologies with a sustainable, human-centric, community approach. Greenfield urban development provides the opportunity for holistic, future-proofed planning, but collaboration between traditionally siloed industries is required to deliver the ambition.
Smart grids for energy efficiency
Some $17.6bn is to be invested in the development of smart electricity grids across the Middle East and North Africa by 2027, according to the US-based Northeast Group, with the majority in the GCC. Smart technologies will increasingly being used to manage electricity distribution and to decentralise electricity supply, allowing multiple, small alternative energy providers to feed into a single grid. As well as reducing the region’s reliance on fossil fuels, smart grids also improve efficiency, reliability and security.
Adding value through downstream oil and petrochemicals
Abu Dhabi’s $45bn megaproject to develop Ruwais refinery into a global hub for refined oil products and petrochemicals production highlights a region-wide drive to diversify export revenues away from crude oil and into higher value products, and also to tap growing consumer markets in Asia. Saudi Arabia, Kuwait and Oman are all increasing downstream capacity as well as the UAE.
The region faces a chronic shortage of the local skills needed to sustain a locally-driven, knowledge-based economy. The adoption of advanced technologies and advanced manufacturing is at odds with curriculums across the region that are often outdated. The lack of local skills is a major factor in high unemployment rates. Governments across the GCC have been investing in building state-of-the-art schools and universities and importing modern education systems. One area that has been overlooked however is vocational training. In the coming years, governments will increase collaboration with industrial partners and international training bodies to increase vocational training and apprenticeships in the GCC.
Adding value through local manufacturing
International companies will be increasingly expected to establish production and research capacity in the region to support their tender bids. Led by the national oil companies including Saudi Aramco, Adnoc and PDO, government agencies will promote local manufacturing capacity by forcing companies to include locally sourced goods and services in all tenders for government contracts.
A growing global hub
The rise of the Asian and southern hemisphere economies, led by India and China, as consumers and as sources of technology provides the GCC states with a golden opportunity to continue their development as a global hub for business, travel and trade. But with competition increasing from around the world, maintaining that position will underpin considerable future investment in ports, airports, railways and freezones to ensure that the region’s transport and logistics capacity remains world class.
A decade of 5G investment
2020 is set to be the year that 5th generation (5G) of mobile phone technology takes off. The development of 5G networks is needed to deliver many of the future goals for better functioning cities, greater energy efficiency and higher levels of productivity. 5G networks will process data 100 times faster than 4G, removing time latency in telecommunications. New networks, data centres, and technology applications will enable disruptive technologies ranging from autonomous vehicles to smart cities. Over the next decade, billions of dollars will be invested in telecoms infrastructure and front-end applications.
The drive to privatise
The worldwide interest in the proposed sale of a 5 per cent stake in Saudi national oil company Saudi Aramco, demonstrates the international interest in investing in the oil-rich Gulf economies, if the offer is right. Privatising state assets will raise capital for governments and allow finance ministries to remain focused on tight fiscal management and the need to drive ever higher levels of productivity in the economy. So while the ambitions to privatise inefficient state run entities has proved frustratingly slow, the desire to use the private sector to deliver public services remains a top priority.
Circular economy adds waste to clean energy agenda
Led by Dubai and Abu Dhabi, the Gulf states have emerged as leading players in the development of renewable energy, particularly solar energy. With every country in the region setting high targets to increase the percentage of clean energy in their electricity supply, the development of alternative sources of energy will continue to be a high priority. The increasing focus on recycling and the circular economy will see the emergence of alternative fuels such as solid waste. Waste-to-energy projects not only provide clean energy but also reduce the amount of waste sent to landfill.