GCC countries should strengthen supply chains to ensure industrial growth: Oliver Wyman

Special GCC countries should strengthen supply chains to ensure industrial growth: Oliver Wyman
Vulnerabilities in global supply chains came under greater scrutiny in recent years. Shutterstock
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Updated 19 April 2024
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GCC countries should strengthen supply chains to ensure industrial growth: Oliver Wyman

GCC countries should strengthen supply chains to ensure industrial growth: Oliver Wyman

RIYADH: Countries in the Gulf Cooperation Council region should develop supply chain resilience strategies as they embark on large-scale industrialization of their economies, a report said. 

According to management consulting company Oliver Wyman, current risk levels in the logistics sector need to be mitigated, especially for countries like Saudi Arabia and the UAE which depend on high-criticality products such as transformers and minerals which are crucial for industrial growth. 

“In Saudi Arabia, 75 percent of transformer imports originate from only three countries. Any potential disruption in transformer supply could significantly impact several sectors such as power, manufacturing, transportation, and healthcare,” the report said. 

It added that logistical issues could impact power supply, leading to decreased industrial productivity, infrastructure vulnerabilities in systems that require constant energy supply, and economic instability. 

“As GCC countries scale up their economic diversification plans, including their industrial sectors, it is vital that they redouble initiatives to increase supply chain resilience to ensure the smooth functioning of all sectors and aspects of society in the event of unexpected upheavals in the supply chain,” said Frederic Ozeir, partner and head of Automotive and Manufacturing Industries, India, Middle East and Africa region at Oliver Wyman. 

The vitality of supply chain resilience

Oliver Wyman noted that vulnerabilities in global supply chains came under greater scrutiny in recent years following the pandemic and numerous climate-change-induced natural disasters, in addition to cybersecurity threats, logistics challenges, and geopolitical issues. 

During these years, industries across the spectrum have been forced to grapple with production delays, shortages, and an increase in prices, as well as growing demand and unexpected bottlenecks, which have highlighted the critical importance of resilient logistical chains.

“For example, of all the electrical machinery and equipment imported to both Saudi Arabia and the UAE, 60 percent and 65 percent, respectively, are imported from just three countries. Similarly, for excavation machinery and valves, Saudi Arabia and the UAE import 50 percent and 55 percent of the total from three countries,” said Oliver Wyman. 

The US-based firm added that various sectors are directly dependent on the industrial supply chain, and any disruptions could have a domino effect which will amplify vulnerabilities in vital sectors that are important for health, safety, and security.

Highlighting the necessity to maintain a functional supply chain, the report noted that the healthcare industry relies on the timely delivery of medical equipment and pharmaceuticals, while the power sector hinges on a steady inflow of critical machinery and components, such as turbines, generators, and transformers. 

Moreover, GCC countries are heavily reliant on desalination machinery such as membranes, pumps, and valves because desalination is the source of most of the urban water in the region.

Saudi Arabia leading the region to ensure supply chain resilience

Oliver Wyman, in its report, also lauded Saudi Arabia’s efforts to ensure a healthy logistics sector in the Kingdom, as well as the whole region. 

“In 2022, KSA launched the Global Supply Chain Resilience Initiative as part of its National Investment Strategy. This aims to position the Kingdom as a location of choice for leading global industrial companies, attracting investments in supply chains in order to mitigate the impact of global disruptions,” said the report. 

The study added that the UAE is also focussing on improving food supply chains through various programs such as those that support local and sustainable food production, as well as by establishing new logistics hubs and deploying cutting-edge technological solutions. 

Key actions to bolster supply chain resilience in the GCC

According to the report, governments in the GCC region should develop supply chain resilience strategies that seamlessly align with their national industrialization programs. 

Moreover, such strategies should be supported by a set of enablers covering governance, private sector involvement, capabilities, and technology. 

Oliver Wyman also underscored the necessity of having a collaborative governance framework between different countries to strengthen the supply chain in the Middle East region. 

“GCC ministries of industry and mining can work with other ministries, especially those of vital sectors to ensure supply chain resilience. As an example, a GCC Ministry of Industry that collaborates with its counterpart in the Ministry of Health would be able to better develop appropriate actions for ensuring resilience of the supply chain of medical devices,” said the report. 




Healthcare has been identified as one of the sectors at risk from supply chain disruption. Shutterstock

The report also added that GCC governments should leverage the private sector as a crucial partner in their supply chain strategies. 

According to the report, countries in the region can ensure supply chain durability by incentivizing logistical resilience initiatives among the private sector, and implementing inspection and corrective actions.

Moreover, the consulting firm added that GCC countries should establish specialized teams within their ministries of industry, comprising professionals with expertise in risk assessment and management, logistics operations, data analytics, and technology to build up the logistics network. 

“Various capabilities are also required across the industrial sector, such as risk assessment and management, advanced technology integration and utilization, data analytics and business continuity planning, cybersecurity, and collaboration and information sharing,” the report added. 

The study highlighted that nations in the region should also encourage the adoption of technology through advanced manufacturing policies that will drive the use of 3D printing, robotics, augmented reality, and automation. 

Industrial cybersecurity requirements should also be considered given the connectivity and data sharing within factories, driven by automation and the Internet of Things, the consulting firm added. 

Oliver Wyman noted that GCC countries should adopt a holistic approach that combines localization with other supply chain resilience levers to safeguard the industrial growth of these nations. 

“Achieving supply chain resilience in the industrial sector is not a one-size-fits-all endeavor. The levers deployed to fortify supply chains, such as localization, shoring, and partnerships, must be applied to the supply chain components of products with high criticality and risk,” Ozeir. 

The study concluded that supply chain resilience is not just a choice for GCC nations, but a necessity, and one that will guarantee the sustainability of their burgeoning and all-important industrial sectors.


Saudi Arabia’s proptech investments surge 35% to $9m: MAGNiTT report

Saudi Arabia’s proptech investments surge 35% to $9m: MAGNiTT report
Updated 34 min 38 sec ago
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Saudi Arabia’s proptech investments surge 35% to $9m: MAGNiTT report

Saudi Arabia’s proptech investments surge 35% to $9m: MAGNiTT report

CAIRO: Property technology venture capital investments in Saudi Arabia saw an annual increase of 35 percent in 2023 to reach $9 million, according to MAGNiTT’s latest report.  

The venture data platform emphasized that the Kingdom outpaced Africa, the Middle East, Pakistan, Turkiye, and Southeast Asia regions with six proptech deals last year. 

In funding amount, Saudi Arabia ranked fifth across all markets, with Indonesia leading with $54 million, followed by the UAE with $35 million, and South Africa and Singapore with $13 million and $11 million, respectively. 

In terms of deal count, the UAE followed the Kingdom with five deals, while Indonesia, South Africa, and Turkiye each had three. 

Total funding across all markets in 2023 amounted to $157 million, marking an 81 percent decrease compared to the previous year. 

Deal count also experienced a significant annual decline, reaching 34 transactions, reflecting a 40 percent fall compared to 2022. 

MAGNiTT’s Emerging Venture Markets Real Estate report focused on analyzing the property marketplace, co-working, tenancy management, and facility management subsectors. 

The property marketplace was the leading sub-industry, attracting $120 million in funding, though this represented an 83 percent decline compared to the previous year. 

Africa was the best-performing region, with a 10 percent annual increase in funding, reaching $22 million. 

Property management was the most funded subsector on the continent, receiving $18 million in 2023, reflecting a 6 percent annual growth. 

In terms of deal count, Africa experienced a 53 percent drop, totaling seven transactions for the year. 

In the MEPT region, $59 million in funding was deployed in 2023, marking a 78 percent year-on-year decrease.  

This was spread across 19 deals, with the property marketplace being the most funded subsector at $38 million and the most transacted with 11 investments. 

Notably, seven out of the 10 most active investors by capital deployed in the region are headquartered in the US. 

Founded in 2014, MAGNiTT is the largest venture capital data platform in the Middle East, Africa, Pakistan, Turkiye, and Southeast Asia, with a database of over 32,000 startups and 11,000 investment firms. 


Italy’s Fincantieri launches Saudi shipbuilding unit to strengthen collaboration 

Italy’s Fincantieri launches Saudi shipbuilding unit to strengthen collaboration 
Updated 23 May 2024
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Italy’s Fincantieri launches Saudi shipbuilding unit to strengthen collaboration 

Italy’s Fincantieri launches Saudi shipbuilding unit to strengthen collaboration 

RIYADH: Italian shipbuilder Fincantieri plans to enhance collaboration with Saudi Arabia through a newly established unit, the company said. 

Fincantieri Arabia will bolster the Kingdom’s Vision 2030 development agenda in the cruise, defense, and offshore sectors, the group disclosed in a press release, issued on the sidelines of an industrial conference in Riyadh. 

Fincantieri is the only shipbuilding group active in all high-tech marine industry sectors, the release added. 

The new unit aims to highlight the group’s wide-ranging capabilities in shipbuilding, maritime equipment and systems, and naval logistic support services, including training and simulation.  

It will also manage stakeholder relationships in the Kingdom and seek out local partners.  

Moreover, Fincantieri said it plans to share its technological expertise in shipbuilding across cruise, defense, and offshore sectors, thus opening up opportunities for Saudi nationals. 

The firm’s CEO Pierroberto Folgiero: “Our commitment to the Kingdom of Saudi Arabia is steadfast. Fincantieri stands out in the shipbuilding industry for its vertically integrated model and our leadership across naval, cruise, and oil and gas sectors. We are proud to offer these world-class capabilities built on decades of naval heritage and excellence to help the Kingdom achieve its Vision 2030 objectives.”  

He added: “Given the maritime industry’s pivotal role under Vision 2030, we eagerly anticipate establishing strategic partnerships. Through these collaborations, we aim to enhance local technological capabilities, create opportunities for Saudi talent, and foster knowledge exchange.” 

The state-controlled Fincantieri has expanded its presence in the Middle East in recent years. In March 2023, Folgiero stated that the group would venture into the Saudi market and was strategically positioned for growth in the region. 

The Italian group is also aiming to enhance its focus on defense, a sector that presently contributes to around a quarter of its revenues. 

On May 20, Fincantieri concluded a shipbuilding joint venture, named Maestral, with Abu Dhabi-based EDGE Group. The two entities announced the signing of a €400 million ($433 million) contract with the UAE’s Coast Guard Forces for the supply of 10 advanced 51-meter offshore patrol vessels. 


Lebanon’s reforms insufficient for recovery, IMF says 

Lebanon’s reforms insufficient for recovery, IMF says 
Updated 23 May 2024
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Lebanon’s reforms insufficient for recovery, IMF says 

Lebanon’s reforms insufficient for recovery, IMF says 

Lebanon’s economic reforms are insufficient to help lift the country out of its economic crisis, the International Monetary Fund said on Thursday. 

Ernesto Ramirez Rigo, the head of the IMF mission visiting Lebanon, said in a statement that Lebanon’s ongoing refugee crisis, fighting with Israel at its Southern border and the spillover from the war in Gaza are exacerbating an already dire economic situation. 

Israeli forces and Lebanon’s Hezbollah have traded fire across Lebanon’s southern border since the war in Gaza broke out in October last year. 

Israel launched its assault on Gaza following a Hamas-led attack on southern Israeli communities on Oct. 7 in which fighters killed 1,200 people and captured more than 250 hostages. 

Since then, Israel’s assault has killed more than 35,000 people, with thousands more feared buried under the rubble, according to Gaza health authorities. 

The conflict “has internally displaced a significant number of people and caused damage to infrastructure, agriculture, and trade in southern Lebanon. Together with a decline in tourism, the high risks associated with the conflict create significant uncertainty to the economic outlook,” Rigo said. 

Fiscal and monetary reforms carried out by Lebanon’s finance ministry and the central bank, including steps to unify multiple exchange rates for the Lebanese pound and contain a currency slump, have helped reduce inflationary pressure, according to Rigo. 

However, he said more needs to be done if Lebanon is to alleviate its financial crisis. 

“These policy measures fall short of what is needed to enable a recovery from the crisis. Bank deposits remain frozen, and the banking sector is unable to provide credit to the economy, as the government and parliament have been unable to find a solution to the banking crisis,” he added. 

“Addressing the banks’ losses while protecting depositors to the maximum extent possible and limiting recourse to scarce public resources in a credible and financially viable manner is indispensable to lay the foundation for economic recovery.” 

Since Lebanon’s economy began to unravel in 2019, its currency has lost around 95 percent of its value, banks have locked most depositors out of their savings and more than 80 percent of the population has sunk below the poverty line. 

The crisis erupted after decades of profligate spending and corruption among the ruling elite, some of whom led banks that lent heavily to the state. 

The government estimates losses in the financial system total more than $70 billion, the majority of which were accrued at the central bank. 


 


Oil Updates – prices fall for fourth straight day as US rate hike prospects emerge

Oil Updates – prices fall for fourth straight day as US rate hike prospects emerge
Updated 23 May 2024
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Oil Updates – prices fall for fourth straight day as US rate hike prospects emerge

Oil Updates – prices fall for fourth straight day as US rate hike prospects emerge

LONDON: Oil prices eased for a fourth straight session on Thursday after the minutes of a US Federal Reserve meeting revealed discussions of a further tightening of interest rates if inflation remained sticky, a move that could hurt oil demand, according to Reuters.

Brent crude futures fell 20 cents, or 0.2 percent, to $81.70 a barrel at 9:51 a.m. Saudi time. US West Texas Intermediate crude futures were down 29 cents, or 0.4 percent, at $77.28. Both benchmarks fell more than 1 percent on Wednesday.

Minutes released on Wednesday from the Federal Reserve’s last policy meeting showed the US central bank’s response to sticky inflation would “involve maintaining” its policy rate for now but also reflected discussion of possible further hikes.

“Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate,” minutes of the Fed’s meeting said.

Higher interest rates boost borrowing costs, crunching funds that could boost economic growth and oil demand in the world’s largest oil consuming nation.

Also weighing on the market, US crude stocks rose by 1.8 million barrels last week, according to the Energy Information Administration, compared with an estimate for a 2.5 million-barrel draw.

Globally, physical crude markets have more recently been pressured by soft refinery demand and ample supply.

“Recent market softness has come on the back of weaker data, including rising oil inventories, tepid demand, and refinery margin weakness and the increasing risk of run cuts,” Citi analysts said in a note on Thursday.

Russia said it exceeded its OPEC+ production quota in April for “technical reasons” and will soon present to the Organization of the Petroleum Exporting Countries Secretariat its plan to compensate for the error, the Russian Energy Ministry said late on Wednesday.

Citi said it still expects that OPEC+, which groups together OPEC and allies led by Russia, will hold its production cuts through the third quarter of this year when it meets on June 1.

Citi also said it continues to see Brent averaging $86 a barrel in the second quarter of 2024. 


Saudi EXIM Bank signs 2 agreements with Japan’s SMBC and MUFG banks

Saudi EXIM Bank signs 2 agreements with Japan’s SMBC and MUFG banks
Updated 23 May 2024
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Saudi EXIM Bank signs 2 agreements with Japan’s SMBC and MUFG banks

Saudi EXIM Bank signs 2 agreements with Japan’s SMBC and MUFG banks

TOKYO: On the sidelines of the Saudi-Japan Vision 2030 Business Forum in Tokyo, Saudi EXIM Bank signed two cooperation agreements with SMBC Business Banking and MUFG Bank.

The agreements aimed to foster cooperation and create co-financing opportunities to promote non-oil exports in target markets, according to the Saudi EXIM Bank.

The two agreements were signed separately by Saad bin Abdulaziz Al-Khalab, CEO of Saudi EXIM Bank, along with Akihiro Fukudom, CEO of SMBC Bank and Hironori Kamezawa, CEO of MUFG Bank, a statement confirmed.

Commenting on the partnerships, Al-Khalab stated: “This collaboration with Japanese entities is part of our joint efforts to strengthen economic relations between both countries and achieve the Saudi-Japan Vision 2030. The acceleration of commercial projects between our nations toward broader horizons comes as a result of the strength, advanced economic status, and promising investment opportunities.”

During the roundtable meeting, which brought together several ministers from both sides, Al-Khalab reviewed Saudi EXIM Bank’s activities with Japanese financial institutions and commercial companies to enhance economic and trade relations and identify projects of mutual interest.

During the financial sector’s roundtable meeting, Al-Khalab emphasized the critical importance of collaborative efforts between all financial institutions and business sectors. This is to ensure the provision of comprehensive, incentivizing credit solutions that can accelerate the pace of trade and mutual and global investment activities.

The Saudi EXIM Bank aims to empower the Kingdom’s non-oil national economy in accordance with Vision 2030. The bank is focused on enabling Saudi non-oil exports to expand and penetrate global markets by bridging financing gaps and reducing export risks.