Investment and regulations boost growth in the Middle East

Investment and regulations boost growth in the Middle East
The Middle East continues to remain one of the most lucrative as well as dynamic markets for the security industry.

There are several reasons behind this, from the economy that is persistently strong despite oil price concerns and continuing security concerns across the region to government policies and fresh investment initiatives.

Much water has flowed under the bridge since the OPEC/non-OPEC meeting last year that reached an agreement to throttle output and push the prices back up. What was intended to ease the pressure on the economy proved to be a bane when production outside the Middle East took a hit and Saudi Arabia itself resorted to over-compliance. This pushed output to significantly low levels, pushing the prices way over the baseline in October 2016.

Now as of the time of writing this piece, analysts are weighing in on the issue, anticipating a potential change of guard from the OPEC nations. According to Goldman Sachs, oil prices could rebound in 2019. Local media reports indicate the region could report an economic growth of 2.9 percent this year from the 0.1 percent reported in 2017. As the output cuts are expected to be phased out, the economic outlook for 2019 looks promising.

Speaking on the matter recently, Mohamed Bardastani, ICAEW Economic Advisor and Senior Economist for the Middle East at Oxford Economics, had pointed out that the region as a whole, including those countries that are primarily oil importers and not producers, is set to see a revival.

“Middle East economies are recovering from the difficult years of a low oil environment, various austerity measures and geopolitical risks,” Bardastani was quoted by a local daily. “But more reforms are required to address the fundamental problems that have plagued so many countries of the region for so long, including reducing high unemployment rates, promoting fair competition and better regulation, investing in talent and strengthening women’s legal rights.”

Security concerns and the security market

In line with economic development, the Middle East security market is expected to grow at a robust rate in 2019. According to a statement from Messe Frankfurt ahead of the Intersec trade show in Dubai, the region’s fire safety systems and equipment market, which alone is valued at US$1.9 billion, will post solid growth in the next six years as government regulations regarding safety and infrastructure investments kick in.

A report from 6Wresearch projects the region’s firefighting systems, fire detection and alarm systems, and emergency exit and lighting, are set to be worth $3 billion by 2024, growing at a compound annual growth rate (CAGR) of 8 percent. After a slowdown between 2014 and 2016, the market had picked up in 2017 as factors such as government initiatives of economic diversification began to bear fruit.

In 2016, the UAE Civil Defense had rolled out a revision of its fire and life safety campaign, giving a much-needed shot in the arm for the industry. Demand for passive fire systems in new buildings has grown since then, as have requirements to retrofit systems that comply with new laws in older structures.

The market for commercial and cybersecurity, fire protection, smart home solutions and drones, worth a combined $7 billion in 2018, is expected to grow to $16.4 billion by 2024.

As part of Messe Frankfurt’s statement, Frank Ackland, MD for Middle East at Eaton, said that such renewed regulations have boosted the standards in the region. “All those involved in the construction process are placing greater importance of meeting, and exceeding, the standards set out,” Ackland said. “That doesn’t mean there isn’t more work to be done, and this is where we see a significant investment in retrofitting also taking place in the UAE, in order to make older buildings safer and in line with current regulations.”

Beyond fire and safety, the physical security market, which also includes video surveillance solutions, access control, perimeter security and others, is also expected to see growth in the coming years. The market for commercial and cybersecurity, fire protection, smart home solutions and drones, worth a combined $7 billion in 2018, is expected to grow to $16.4 billion by 2024.

Within this, the commercial security segment, which includes video surveillance, intrusion detection solutions and access control, remains the biggest market. Worth about $2.9 billion in 2018, the market in the Middle East will expand to $7.4 billion by 2024 as infrastructure investments and regulatory policies provide support.

There will be growth in several other segments too, according to 6W Research. For instance, the market for cybersecurity is set to increase from $1.4 billion in 2018 to $2.7 billion in 2024. Smart home would expand from $344 million to $869 million, and drones $507 million to $2.4 billion during the same period. All these clearly point to a lot of movement in the region in the years to come.
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