UAE and Qatar were most in favour of increased local production.
UAE and Qatar were most in favour of increased local production.

GCC firms likely to localise due to supply disruptions

13 October 2020

Almost a third of business leaders in the Gulf region are likely to “relocate supply chains more locally” in response to Covid, according to a report.

In a report by Oxford Business Group (OBG), a survey of CEOs' responses to Covid found 31% were likely to localise supply chains due to global supply chain disruptions, and 33% expected the crisis to boost local industries and manufacturing. 

According to the survey, involving 100 CEOs across all industries within the Gulf Cooperation Council (GCC) region, the UAE and Qatar were most in favour of increased local production.

More than eight in 10 (83%) said the pandemic had caused delayed supply chains in their sector, ranging from days to months, as a consequence of restricted international transport services. 

The report said: “This is likely to lead to a renewed focus on localisation, which dovetails with the pre-existing plans of Gulf countries to diversify their economies towards more sustainable models while providing private sector employment for citizens.” 

Two thirds (67%) said oil prices would significantly or very significantly impact economic recovery, following lower global demand as planes were grounded and businesses shut worldwide between March and April.

April experienced the largest fall in Brent crude oil prices in the last 18 years when the value per barrel dipped below $20. Prices recovered in September to $44 a barrel.

The report highlighted that “the broader economic recovery will in part depend on global energy demand”.

However, business sentiment remained “cautiously optimistic” in the GCC, as 73% of CEOs expected their businesses to have recovered to operate above 60% capacity by September 2020.

OBG said discussions with many businesses revealed that the swift reaction to Covid impacts “was enabled by the level of coordination between different authorities and stimulus efforts to bolster the local economy”.

The survey found 61% felt satisfied or very satisfied with their government’s economic response to the pandemic, while 24% were neutral.

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