The Middle East security market had a rough 2020, mainly due to COVID. However this year there are reasons to be optimistic. This article examines why.
The Middle East security market had a rough 2020, mainly due to COVID. However this year there are reasons to be optimistic. This article examines why.
The Middle East was not able to escape the
negative impacts of COVID-19. Though relatively lower compared to other parts of the world, infection rates across the region were still significant. At the time of this article’s writing, COVID has infected 5.5 million in the Eastern Mediterranean region (which includes the Middle East and North Africa),
according to the World Health Organization.
The pandemic had a significant impact on Middle East economies. “The immediate, rapid consequence was a dramatic decline in demand for oil, as a succession of lockdowns suppressed global economies. The resulting fall in revenue not only affected the Gulf States but also those adjacent countries that rely on income from their resource-rich neighbors,” said Joon Jun, President of Global Business Division at
IDIS.
According to World Bank, as of October 1, 2020, gross domestic product (GDP) in the Middle East and North Africa was expected to contract by 5.2 percent in 2020, 4.1 percentage points below the forecast in April 2020, and 7.8 percentage points worse than that of October 2019.
How this has affected security
Inevitably, the downturn had a devastating impact on the region’s security market last year. “The industry was impacted mainly in Q2 and Q3 with slowdown in construction of new projects (and as a result the delay in procuring related security systems), and deployment of new security systems overall – all driven by cost savings and various lockdowns,” said Itsik Kattan, CEO of
Agent VI.
“Security industry in the Middle East in 2020 started off weak then became worse as COVID-19 pandemic hit harder towards the end of Q1. Q2 and Q3 are heavily impacted as well due to construction delays of major projects and the postponement of major events such as World Expo in Dubai,” said Bing Wan, Director of Middle East Operations at
Rasilient, a U.S.-based server and storage solutions provider.
Meanwhile, lockdowns, travel restrictions, and cancellations of
tradeshows and face-to-face meetings, which Middle East security relies much on, have also taken a heavy toll on the market. “The security industry, as well as many other industries in the Middle East, relies heavily on face-to-face business arrangements. Shelter-in-place orders in the region practically eliminated face-to-face meetings. Traveling was out of the question as we saw countries locking down borders,” Wan said.
“COVID-19 definitely had an impact on the Middle East security market, and reduced travel, social distancing, lockdowns and isolating all impacted the ability to do business, hold face-to-face meetings and attend conferences, exhibitions and these types of client interactions. With the average size of installations larger in the Middle East than other parts of the world due to major infrastructure projects, we think this region has been hit harder by projects delays and program slippages,” said Mark Horton, VP of
Bandweaver Technology.
Industries impacted
Security companies cite certain Middle East industries that were particularly hard hit, as budget-constrained end users either stopped investing in security or cancelled related projects.
“From the customer's point of view, the SMB business had the most serious impact. The reason is that many small and medium-sized customers are not diversified across multiple business areas and therefore they are more exposed to some risks. They experienced a sharp decline in business and even bankruptcy due to the impact of the pandemic,” said Binson Xu, President of MENA at
Hikvision. “At the same time, due to the catastrophic impact of the epidemic on the hotel, tourism and offline retail industries, the integrator business in related industries has been severely affected. In addition, many countries' government budgets have been lowered or allocated to anti-epidemic related departments, and the government related security business has shrunk significantly.”
Jun of IDIS meanwhile identifies Middle East’s high-end jewelry sector as one industry that felt the pinch. “The sector, noted by affluent consumers for stand-out pieces, has also felt something of a chill. Not only have commodity prices for silver and gold risen, but consumer demand has also been dampened by the postponement of major life events including weddings. While these pressures look to be temporary, and there haven’t been significant job losses, global economic uncertainty is likely to maintain pressure on commodities and discourage price-sensitive consumers,” he said. “Beyond the need to remain compliant, few businesses in this sector will have the appetite for ambitious security upgrades during the current conditions.”
Why things look better in 2021
For this year, things are looking a little better, according to the security players we spoke to. “We've seen some recovery in Q4 with customers willing to proceed with commitments on projects that will be implemented during 2021. Countries with stronger and more robust economies were able to resume most of their business initiatives during Q4,” Kattan said.
Some security players expressed the view that a rebound in business will be more noticeable in the second half. “The Middle East security market may see a less than ideal Q1 and maybe Q2 in 2021,” Wan said. “Long sales cycle from six months to a year is common for the security industry. Because of the slowdown of Q1-Q3 in 2020 and the lack of, or delay of projects, we may finally see the real impact of the pandemic in the first two quarters of 2021. Ramadan being in April will also play a part on Q2 performance as we've experienced in the past.”
“2020 was obviously heavily impacted by COVID19 with a number of large projects postponed or even cancelled. Bandweaver are expecting a number of these projects to come back online during 2021 but most likely in the second half of the year so we expect Middle East revenue to increase from Q3 onwards. Things will accelerate when people can once again move freely and we expect to see the release of some pent up demand,” Horton said.
In particular, there are certain positive factors that make security players feel optimistic about Middle East security 20201. These are summarized as follows.
Vaccination
Vaccination programs have been rolled out in the region, with Israel’s vaccination rate of 1.96 per 100 people
being the highest in the world at the time of writing. This offers hope that finally, the end of the pandemic is in sight. “2021 seems to be promising at first glance. As the rollout continues for vaccines and enhancement of contact tracing implementations, it looks like some richer countries may be able to get the pandemic under control,” Wan said.
“Markets are looking towards the positive impact of vaccination programs, not least in places like the UAE and Bahrain which, by mid-January were ranking in the top-three globally for their pace of vaccinations, behind Israel but ahead of the UK,” Jun said. “We believe that recovery will be rapid once vaccination programs begin to have an effect, particularly in Europe and the US.”
Demand for more automation
The Middle East market has for a long time relied on guards and manpower for security. While this trend will not go away, the pandemic and subsequent stay-at-home measures have caused end users to reduce dependency on manpower and instead turn to technology for both security and COVID-prevention. “We believe that given some of the manpower difficulties experienced during 2020 that were caused by lockdowns and reduced travel, this will affect how risk mitigation solutions are designed and implemented with a move to more technological solutions with less reliance on large guard forces,” Horton said. “There will be more demand for solutions that provide accurate real time intrusion detection solutions that can be monitored and responded by a minimal number of security personnel. This will reduce the risk of potential security breaches cause by limited security manpower.”
“With many activities turning ‘remote’ during the pandemic, including remote guarding services (for businesses as well as residential) – these type of services have proven themselves and it has now become common and acceptable to replace guards and desk clerks with remote services. It is recognized both as cost savings measure as well as a practical way to maintain service / operation and high level of facility security,” Kattan said.
Compliance
Finally, while this has less to do with COVID, the Middle East is heavily driven by compliance which further triggers demand for security solutions.
“For example, KSA has some of the world’s most stringent video surveillance performance standards and the Saudi Arabian Momentary Authority (SAMA) requirements have influenced the adoption of higher performing solutions more widely across the region,” Jun said. “And Dubai’s SIRA (Security Industry Regulatory Agency) has also updated its regulations to include higher resolution cameras to provide improved image capture as it steps up public safety measures ahead of Expo 2020, due to start in October this year. To achieve this, SIRA has set two megapixels as the minimum resolution along with a minimum of 31 days retention. In Abu Dhabi, regulation is the responsibility of the Abu Dhabi Monitoring and Controlling Center (ADMCC), which manages and regulates the use of monitoring and control systems, including video surveillance in vital public spaces and a number or private facilities. It has upped its standards, mandating a minimum two-megapixel for network cameras and storage of up to 180 days. Combined these updated regulations provide systems integrators particularly with sector knowledge plenty of upgrade and exciting new project opportunities.”