Numerous shocks causing widespread disruption to global supply chains have pushed governments to consider adding extra layers of resilience across their networks, especially in the technology and digital sectors, where competition is intensifying to establish national manufacturing ecosystems.
Governments in the Middle East that are actively pursuing economic diversification and localization should pick the technology and digital sectors wisely and seek out as tenants those multinational tech firms looking for a regional presence.
According to the most recent analysis from Strategy& Middle East, a member of the PwC network, the production of three key product categories in the region, advanced materials, advanced components, and advanced products could generate over $125 billion in revenues by 2025. Countries in the Middle East need to try to localize that value as much as they can rather than importing it.
“The COVID-19 pandemic threw into sharp relief the susceptibility to supply chain disruptions and questioned the region’s resilience. It was difficult or impossible for companies to secure all the essential components on which they now heavily depend,” Mr. Alessandro Borgogna, Partner at Strategy& Middle East, observed.
“Localizing tech and digital is therefore vital as it secures the supply of parts and products that are integral to economic and business activity,” Mr. Borgogna added.
“As competition intensifies to establish national tech manufacturing ecosystems and satisfy captive and global demand, Middle East governments should make the right choices as to which areas they can succeed in,” Mr. Chady Smayra, Partner with Strategy& Middle East highlighted.
The major areas which would be focused are;
- Financial Incentives
- Global Supply chains
- Regulatory and Policy Support
- Reliable and Cost-effective Utilities Infrastructure
- Enabling Business and Trade Policies
“Companies that invest significantly in R&D warrant special consideration; given the blistering pace of change in the tech industry, these companies are more apt to retain their leadership position and remain viable over the long term,” said Mr. Maha Raad, Principal at Strategy& Middle East.
Already in the Middle East, NEOM Tech & Digital Company, founded in 2021 as the first subsidiary to be established out of NEOM, is building advanced digital infrastructure. Likewise, the industrialization and innovation strategy of the UAE led by Mubadala projects is focused on the localization of high-tech products.
“To bolster the likelihood of success with its localization strategy, governments should target start-ups who are innovating with cutting-edge tech or tenants that hold leadership positions in their industries who, by virtue of their prominence, can attract other companies into their operating sphere,” Mr. Raad concluded.