Five opportunities for growth in GCC’s industrial sector in 2025

The Gulf Cooperation Council (GCC) is well-positioned to see robust industrial activity in 2025. Contrasting with other leading economies, GCC countries offer stable economic outlooks and increasingly attractive investor and business environments.

Still, to make gains in the coming year, GCC countries will have to navigate a landscape fraught with challenges, including geopolitical tensions, global trade wars, and skills shortages.

Here are five opportunities for the GCC to capitalise on while also tackling challenges that may arise

1. The friendshoring opportunity: Friendshoring — relocating manufacturing and sourcing to countries that share similar values and interests — is a strategy that aims to mitigate geopolitical risks for both governments and businesses, enhance supply chain resilience, and strengthen economic ties with nations or regions that have mutual interests.

The GCC is well-positioned to become a strategic hub for friend-shoring, owing to its perceived neutrality on the global scene and its significant competitive advantages. The region boasts world-class infrastructure, including state-of-the-art ports, warehousing facilities, and transport networks.

Additionally, the GCC offers low utility and energy costs, robust regional demand, access to essential raw materials, and supportive industrial policies designed to boost competitiveness.

2. The advanced manufacturing opportunity: The Oliver Wyman Industrial Goods Europe Index indicates that semiconductors are a bright spot for rising valuations. This aligns closely with the initiatives undertaken by GCC countries to localize semiconductor manufacturing and, more generally, boost advanced manufacturing.

Notably, Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics have expressed interest in establishing semiconductor manufacturing facilities in the UAE, The Wall Street Journal reported in September.

Meanwhile, Saudi Arabia’s $100bn Alat project, led by its sovereign wealth fund, seeks to position the nation as a global leader in advanced industrials and semiconductor manufacturing.

3. The China opportunity: Chinese companies are increasingly targeting markets abroad due to a domestic slowdown In addition, they are facing increasing trade barriers and pressure on their exports. This presents an opportunity for the GCC to work with Chinese companies to establish localised manufacturing within the region, thereby providing access to both local and global markets.

Nearly 40 Chinese firms are reportedly planning to build manufacturing plants at the China-UAE Industrial Capacity Cooperation Demonstration Zone (ICCDZ) in Khalifa Industrial Zone Abu Dhabi (Kizad), representing a $10bn investment under the Belt and Road Initiative.

Additionally, a Saudi delegation in early 2024 led by the Ministry of Industry and Mineral Resources embarked on a high-profile economic visit to East Asia, with the aim of enhancing bilateral relations, attracting investment, and exploring joint-venture opportunities. This is in line with Vision 2030’s goals to diversify Saudi Arabia’s economy and establish the Kingdom as a leader in the industrial sector.

4. Green industrial potential: GCC countries have an opportunity to diversify their economies and become hubs for green industries, while also reducing emissions of greenhouse gases. This won’t happen overnight due to a lack of access to renewable energy, limited supporting policies, and unfavourable local demand conditions – despite low-cost green energy and ambitious green hydrogen plans.

Leveraging these competitive advantages to decarbonise their industrial sector by producing green steel or green cement is essential in order to meet future demand and ensure compliance with both today and tomorrow’s regulations across global markets.

5. Addressing the growing regional demand: The outlook regarding industrial goods in the Middle East cannot be completely separated from global risks.

The majority of the industrial products manufactured in the GCC – mostly large-scale globally traded commodities such as petrochemicals and basic metals – are expected to face recessionary pressures, either due to oversupply or decreasing oil prices.

In addition to diversifying into advanced manufacturing as discussed above, GCC countries should look to shift their focus to manufactured goods that boast strong regional demand, such as materials for oil and gas infrastructure, construction, utilities, and ports.

While 2025 will pose challenges for industrial goods and manufacturing companies, there is cause for optimism in the GCC. The region’s strengths and strategic initiatives provide a solid foundation for growth and innovation which will enable manufacturers to thrive, despite the obstacles ahead.

The writer is the IMEA head of Automotive and Manufacturing Industries at Oliver Wyman.