The manufacturing sector in GCC is expected to grow at a compound annual growth rate (CAGR) of 4.32 per cent over the next five years, according to a new analysis from Mordor Intelligence.

The key factors contributing to the growth of manufacturing industry are low cost of setting up and running industrial facilities, duty free access of manufactured goods to the GCC, the Greater Arab Free Trade Area (GAFTA) and the USA (through the US-GCC Free Trade Agreement), and most favourable tax regimes, said the analysis.

However, the lack of skilled labour and high reliance on imported labour can affect the growth of this industry. In order to overcome this, many rich nations like Saudi Arabia and UAE are focusing on capital intensive manufacturing over labour intensive manufacturing, it added.

To boost domestic manufacturing, fast-growing economies such as the UAE, Saudi Arabia and Qatar are investing in large-scale transport and logistics infrastructure, it said.

Mordor Intelligence, a market research and consulting firm, has released an industry analysis of major sectors of the GCC economic model.
 
The report contains a detailed analysis of major promising sectors like agriculture, dairy, meat, fruits and vegetables, aquaculture, desalination and manufacturing and construction over the period 2015-2020.

Additionally, GCC nations experienced economic growth due to high oil prices during 1980s; earning majorly from exporting oil and petroleum products. Despite having a positive balance of trade, GCC nations relies almost entirely on food imports; importing about 88 per cent of food requirements.

Economic crisis in the USA penetrated the world economy and the tsunami that struck the shores of Japan affected the manufacturing capacity of world's fourth largest exporter of goods. The resulted economic impact affected oil prices, which in turn created a dent in the revenues of GCC countries. Taking this into account, GCC countries started drafting plans to diversify their revenue sources and placed greater emphasis on manufacturing and infrastructure, it added.

The economic growth leading to higher disposable income is changing the consumption preferences of its citizens and a shift from carbohydrate-based diet to protein-based diet is being witnessed in the region. This is forcing the nations to focus more on agricultural and animal husbandry development. Agriculture, meat and dairy sectors have witnessed a growth of 6.14 per cent, 12.13 per cent and 7.24 per cent respectively over the last year.

Due to poor geographical location, these oil exporting nations suffer from portable water scarcity. To reduce the demand supply gap of fresh water, governments are investing in large desalination projects which are financed by growing oil revenues.

However, environmental pollution in the region has forced governments to focus on solar desalination projects and related technologies. Currently, 80 per cent of the water requirements in GCC nations are supplied by desalination plants, it added. – TradeArabia News Service