published Date NOV 2015

Greater Arab Free Trade Area (GAFTA), US-GCC Free Trade Agreement and Most Favorable Tax Regimes are Boosting GCC Industries

Mordor Intelligence is pleased to announce the release of our industry analysis of major sectors of the GCC economic model on 1st September 2015. The report contains a detailed analysis of major promising sectors like Agriculture, Dairy, Meat, Fruits & Vegetables, Aquaculture, Desalination and Manufacturing & Construction over the period 2015-2020.

GCC nations experienced economic prosperity 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% of food requirements.

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 %, 12.13 % and 7.24% respectively over the last year.

Get the full report here: Analysis of Major Sectors of the GCC Economic Model

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 % of the water requirements in GCC nations are supplied by desalination plants.

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. 

Manufacturing sector in GCC is witnessing a tremendous growth. This industry is expected to grow at a CAGR of 4.32% over the next five years. 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 favorable tax regimes.

However, lack of skilled labor and high reliance on imported labor 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 labor intensive manufacturing. To boost domestic manufacturing, fast-growing economies such as the UAE, KSA and Qatar are investing in large-scale transport and logistics infrastructure.

For more information, visit: Mordor Intelligence

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