The Five Industry Sectors Keeping The GCC On The Global Map While the GCC is a small economy, some players in its leading sectors of healthcare, retail, transport and logistics, energy and power and real estate stand proudly on the global scene.
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.
The GCC has grown to become an epicenter of global trade. From the UAE's globally recognized logistics hubs to Saudi Arabia's groundbreaking developments in the renewable energy field, the GCC states have produced some of the world's foremost hubs across multiple industries. Here's a look at the top five sectors in which GCC states are establishing innovative, world-leading standards:
1. ENERGY AND POWER
The GCC is home to Saudi Aramco. The oil and gas company is the world's most valuable and the largest by revenue. Recent leaked figures have shown the company to be more profitable than Apple. While it continues to produce billions of barrels of oil each year, the Saudi Arabian government is however pursuing its plan of economic diversification as part of its Vision 2030 plan. As part of these efforts, Aramco is pushing ahead with multiple innovative projects that see the Kingdom leading the way in the sector. As part of its commitment to the development of the private sector, Aramco is currently working on building the King Salman Energy Park (SPARK) in the Kingdom's Eastern Province. A global industrial hub for energy-related manufacturing services, it is expected to attract some of the world's biggest -and most innovative- energy industry names. It is expected to contribute SAR22.5 billion annually to the Kingdom's GDP by 2025.
With a strong awareness of the limited supplies of oil, the region has also invested in the development of the renewable energy sector. Within the region, the UAE has some of the most ambitious projects. Abu Dhabi's Shams Solar Park, for example, is the first utility-scale solar plant in the Middle East, while the Dubai Electricity and Water Authority (DEWA) recently announced the world's largest concentrated solar power facility, setting a world record with the lowest price ever for a CPS power plant at just 7.3 cents per kilowatt-hour. By 2050, the country plans to have 44% of its energy provided through renewable sources. Saudi Aramco is similarly committed to the renewable energy sector and earlier this year entered into a five-year $25 million collaboration with the Massachusetts Institute of Technology (MIT).
2. TRANSPORT AND LOGISTICS
Regarding transport and logistics, the GCC is a powerhouse within the global sector; its success owing to government diversification strategies. Taking advantage of trade routes between Asia, Europe, and Africa, the UAE's investment in its infrastructure, from its ports to its airports and roads, has cemented its position on the globe as a leading logistics hub. DP World, founded in 1999, has today grown into the world's fourth-largest port operator, largely through acquisitions. With a portfolio of upward of 70 marine and inland terminals across six continents under its operation in high-growth markets, the company continues to pursue its strategy of international expansion. Its profits rose by 7% in 2017 to reach close to $1.2 billion. In an example of how one GCC company is trailblazing ahead of the market, DP World announced its investment into the Hyperloop technology. The brainchild of Elon Musk, the new form of transportation can travel at speeds of up to 1,200km/h, offering revolutionary time saving on cargo shipments. If successful, DP World would be among the world's first companies to operationalize the Hyperloop.
Other prominent logistics players in the market include Khalifa Port Container Terminal, operated by Abu Dhabi Terminals, which in 2015 gained second spot in the Alphaliner Top 110 growing ports in the world; and Kuwaiti logistics company Agility, which is among the world's top ten. In the air too, the GCC leads the way in aviation. The success of Emirates, the world's largest and best airline, and a recipient of several industry accolades, is well established. The airline was the first and only one to operate the Airbus A380 and Boeing 777 aircraft for its passenger flights. Etihad also has its fair share of industry accolades, and, together, these carriers combine to making the region a global leader in the sector, setting new standards in travel experiences and customer service.
Building on the rise of e-commerce, Aramex has become one of the leading courier companies in emerging markets. Its use of technology and outsourcing has allowed it to disrupt established players and grow faster than its competitors, to keep up with the demands of the ever more demanding e-commerce shopper.
Healthcare is a sector where societal issues are resulting in unique health issues. An ageing and growing population, combined with an increase in chronic diseases, is placing increasing demand on the sector, driving significant government investment to create transparent, streamlined, personalized and safe services that enable patients to make well-informed decisions to optimize their health. The three most prominent health issues in the GCC are:
- Genetic diseases According to Dubai-based Centre for Arab Genomic Studies (CAGS), the Arab countries contribute approximately USD 30 billion per year to their populations' suffering from hereditary genetic diseases.
- Obesity Healthcare spending in the UAE is predicted to more than double to $47.5 billion by 2040 as obesity tightens its grip on the nation's health according to the latest Global Burden of Disease study
- Diabetes Figures from the International Diabetes Foundation revealed that in 2017 17.3% of the UAE population between 20 and 79 have type II diabetes, placing the country 15th worldwide for age adjusted comparative prevalence.
Today, the sector is working to keep up with digital transformation, and while much investment is required to deliver the services required, the government is looking ahead and working to implement 21st century technologies to improve diagnostics, treatment, and care. Examples of investments in the sector include AI, digital devices, and other technologies to enable remote service provision.
Thanks in large part to the petrodollars, combined with the demographic drivers in the region, the GCC has become a global center for consumerism. Arab consumers are reported to have spent $320 billion on luxury fashion alone in 2016, with that number expected to reach $490 billion by 2019. The region's appetite for fashion is marked by the recent launch of fashion magazine Vogue Arabia. Arguably, no one has achieved as much success in the retail sector as Dubai. The city has, for decades, been drawing in shoppers from around the region. The establishment of the world's premier shopping facilities such as The Dubai Mall attracts shoppers from across the world, with Chinese and Russian shoppers flocking to the malls in tour buses. Behind the success of the consumer sector lies several retail conglomerates from across the region. Kuwaiti retailer Al Shaya has brought over 90 brands into the region, including the likes of Starbucks, H&M, and Boots to name just a few. Serving the KSA and wider region, Fawaz Al Hokair has similarly brought numerous high-street brands to the region, from the likes of Zara, Bershka, Aldo and La Senza. The list goes on with the Apparel Group, Chalhoub Group, and many others.
5. REAL ESTATE
Meeting the demand for both commercial space as well as residences, the GCC region is well known for its ambitious real estate projects. Dubai Mall developer, real estate company Emaar is one of the largest in the world, and in 2017, was valued at $14.6 billion. With a presence across the Middle East, North Africa, Pan-Asia, Europe and North America, it announced an increase in revenue for the first three months of 2018 of 37% to AED5.59 billion. Majid Al Futtaim, another key player in the real estate and consumer retail market, has a presence in the Middle East and Africa, owns 21 shopping malls across 15 markets and employs 40,000 people.
WHAT DOES THIS ALL MEAN FOR INTERNATIONAL COMPANIES AND INVESTORS?
While the GCC's economy is only a small part of the overall world economy, some of the region's companies can make a significant impact on the success of their suppliers and business partners. This impact is both financial given their deep pockets, and reputational, given the high profile of certain players in their respective sectors. This impact will be most substantial on any young startups which can demonstrate access to such prestigious and well-funded clients.
Many capital-hungry entrepreneurs come to the Middle East seeking investment into their companies or customers for their businesses. While it may be flattering to be offered the exclusive opportunity to partner with a successful international business, Arab investors need to be cautious of not being the victim of "negative selection." In this case, negative selection would mean being targeted by a business, which is struggling to find customers or investors in their own home market. For the right cooperation to be put in place, international businesses need to demonstrate success in their home market before venturing far and wide, including into the Middle East. Successful experiences at home need also to be applicable and adapted for the GCC markets.
Not all products and solutions that work in California or France have an application in Dubai for example. Conversely, some businesses' success depends almost entirely on their home markets. For example, some "deep technology" companies that emerge in California to serve other high-tech companies, may only need to penetrate a few clients in Silicon Valley, and then, after that, their next relevant market would be China.
On the other hand, if a company is offering a unique solution for malls management, it would be amiss not to feature Emaar or MAF at the top of its potential partners globally. Similarly, if a health tech company is aiming to disrupt the way certain genetic diseases are treated, the GCC may be a natural place to start and show proof of concept.
As an example in the logistics sector, What3Words is a leading UK startup that has mapped the world using a proprietary algorithm into 3x3 square meter areas, designated by unique three-word combinations in a long and growing list of languages. This solution addresses a number of logistical pain points, including:
- 75% of the planet does not have clear unique addresses (such as "10, Downing Street") but actually relies on descriptive addresses ("between Liberty House and Central Park Towers")
- Even unique addresses are not unique: Allenby street can be found in Beirut, Canberra, and Manchester, Hamilton NZ among others
- Unique addresses can be confused due to spelling and pronunciation issues, making them hard to communicate using voice or typing
- One efficient solution is the use of GPS addresses, but this solution is totally inefficient for human-to-human communication, or even human-to-machine communication
When Aramex invested in What3Words, it included it in its delivery app to make it easier for GCC e-commerce shoppers to designate their delivery addresses. However, this investment and business partnership also helped increase the visibility of W3W, and, in turn, Daimler made a much bigger investment, and is adding W3W to its in-car navigation systems, helping drivers communicate addresses using voice in a user-friendly way.
As such, while the GCC is a small economy, some players in its leading sectors of healthcare, retail, transport and logistics, energy and power and real estate stand proudly on the global scene. International investors, corporations and startups aiming to be successful in these sectors need to take note, and devise the appropriate strategies for interacting with the regional players in these sectors and devising win-win partnerships.