Transitioning away from oil and gas, the Middle East market still demands security

Local governments are transitioning away from reliance on oil and gas as a single source of revenue. Investments in infrastructure projects will drive the security industry in the region forward.

“In general, the players in the GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) security sector are the same as in the other parts of the world. The region has little local manufacturing and is import-oriented. Therefore, the top 50 players appearing in a&s magazine’s ‘Security 50’ play a similar role as they do in other parts of the world,” explained Andreas Rex, Intersec Show Director for Messe Frankfurt Middle East. “There is one notable exception in the fire and safety market. In this market segment, there is local manufacturing spearheaded by a company called NAFFCO, and this poses a higher entry barrier to overseas players. But in the security industry, we see the same trends as in other parts of the world. Namely growing presence from mega-companies like Hikivision and Dahua, which now operate their own offices in the region as well as the M&A activities among other security players.”

The two strongest verticals in the region are oil and gas and construction. Infrastructure regulations and new government directives gave the security sector a major push. Dubai is changing its fire and safety code, and there is room for “smart” solutions. A new fire safety code will ban non-fire rated cladding panels on skyscrapers. Also, they opened the first Civil Defense Academy in the U.A.E. to train firefighters.

“In addition, The Dubai Police issued new standards that any new building needs to have video surveillance cameras in all entrances and car parks. There will also be a demand for retro-fit projects for existing buildings” said Rex. “The government is pushing for more sophisticated and smart solutions, and there is potential for systems that combine both security and IT. The Dubai government, for example, has developed a system called ‘Makani’ which gives buildings a unique identification code. If someone reports a fire, he can give the code to the emergency services and all the relevant information such as GPS location, number of inhabitants, business nature, etc. is sent directly to the on-board computer in the fire trucks.”

Future mega events, such as the 2020 World Expo and the 2022 Football World Cup, are other key drivers. To diversify revenue sources, GCC governments are investing in real estate, education, hospitality and healthcare. “The Saudi Arabian ‘National Transformation Plan 2020,’ a part of the ‘Vision 2030,’ is such a plan which aims to diversify the country’s economy and invests heavily in non-oil sectors, and is a serious boost to the security industry,” added Rex.

Other changes are driving growth in the security sector. “There is stronger demand for cybersecurity solutions: the recent attacks on critical infrastructure from the oil and gas industry came from the internet line, not the fence line,” he added. Spending for cybersecurity solutions remain high with an expected annual growth rate of approximately 14 percent.

Change in Purchase Behavior
The Middle East region have always been perceived as an oasis protected from the turmoils of the global economy, and the GCC area was not considered price-sensitive; however, the dropping of oil prices in the last two years have influenced purchase behavior.

“There is still a demand, especially in the government and hospitality sector, for high quality and state-of-the-art products and the market is not prone to compromising on quality for price. However, there is more due diligence in the process and more efficient investment and future proofing. Making sure that the investment will be relevant also a few years into the future,” said Rex. He added that all these trends, products and services can be seen live during the next Intersec event from January 22 to 24, 2017.