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The Middle East's challenge to diversify the economy by moving from oil dependence

The Middle East's challenge to diversify the economy by moving from oil dependence
With the price of oil not being an attractive factor anymore, countries in the Middle East are scrambling to diversify sources of income. According to a report from the Peterson Institute for International Economics, three factors are driving efforts of diversification.
 
First, oil prices have fallen considerably since 2014. Second, unemployment has become a major issue, and third, fossil fuels are losing demand due to climate change concerns. Governments in GCC feel that developing businesses outside the oil and gas sector is critical to solving these problems. 

“We see a lot of interest in diversifying the economy in the Middle East,” said Paul Such, VP of EMEA Sales at Avigilon. Dubai, for instance, has been making major infrastructural investments, relaxing FDI norms, and making changes to visa policies to encourage business developments. 
Opening up for Tourism

According to data from Statista, inbound tourism to the Middle East countries is estimated to have grown at 4.3 percent year on year in 2019. The latest news in this sector is from Saudi Arabia, which opened its borders to tourists from select countries for the first time. 

This has helped the security industry. Kenneth Hune Petersen, Chief Sales & Marketing Officer and acting VP for EMEA at Milestone Systems, pointed out that the economic diversification plan has helped demand in various verticals, especially tourism. 

Retail on the Rise 


The retail sector is another important vertical that is expected to grow in the coming years in this region. Already, events like the Dubai Shopping Festival attract people from all over the world, and this itself is enough reason to take measures to improve security in the region. 

According to Euromonitor International, the retail industry in four major Gulf countries, UAE, Kuwait, Saudi Arabia, and Oman, is expected to grow over US$ 24 billion in the next five years, with UAE leading the growth at 16 percent.  

Banking Sector


Despite the influx of oil-based revenue, the banking sector in the Middle East has a lot of room for growth. As part of Saudi Arabia’s development plans, its banking sector has received a major push. IDIS, which was part of providing solutions to one of the major banks in Saudi, elaborated on this. 

“One of the components of the diversification plan was to have a more successful banking system,” said Harry Kwon, General Manager at IDIS Middle East & North Africa. “This led to the upgrade of security in banking. IDIS began work for the National Commercial Bank in 2018, but that project has grown massively, encompassing over 400 branches and close to 2600 ATMs.”

IDIS has also announced a similar project for the Central Bank of Jordan, providing further evidence of investments in this vertical.

Transport


Traffic is a vertical that requires much attention once the tourism sector is opened up. Sive Hu, Marketing Communications Director at Hikvision MENA, said that their company was part of transportation projects in MENA region. Hu pointed out that in the Middle East and especially in the UAE, intelligent transportation systems and safe/smart cities are some of the biggest markets for the company now. 

Closely related to transport is the sector of logistics that is developing in the Middle East. The e-commerce market in this region is growing at a fast rate, with the likes of Amazon having a successful presence. This has given rise to an increase in demand for security solutions in the logistics division. 

However, although interest in such diversification plans is strong, many companies point out that they are yet to see the effect of any initiative. They suggest that any growth in verticals outside oil and gas is yet to be seen as the government implements its plans and demand picks up.


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