Sarwant Singh is Managing Partner and Regional Leader for the Middle East, Africa and South Asia at Frost & Sullivan. He is also the company’s Global Head of the Mobility, Aerospace, Defence & Security Practice and the author of New Mega Trends. His counsel has been sought by the Prime Minister’s Office in the UK, international organizations, private equity firms and investment banks. A former member of the World Economic Group’s Automotive & Transport Council, he is now on the Advisory Board of Nissan, Aerospace Technology Institute and Leeds University Business School.
A potent mix of 10 mega trends—transformative, global trends with a far-reaching impact on business, societies, economies, cultures and personal lives—are dramatically remolding the Middle East. Economic growth is strengthening even as the region begins to showcase cutting-edge developments in fields ranging from manufacturing to mobility, tourism to trade, and energy to entertainment.
Dark industries step into the limelight
The rise of automation and the growth of online orders globally is leading to a number of dark industries that are either entirely automated or have small teams to provide products to remote consumers.
Against a backdrop of last mile delivery generating about $450 million last year in the Middle East, dark stores—warehouses that have no consumers or shoppers but store goods to fulfil online orders—are becoming big business. Both the UAE and Saudi Arabia are investing heavily in automation in the manufacturing sector to leverage the opportunities from Industry 4.0 and the convergence of robotics, the Internet of Things and artificial intelligence.
A heterogeneous society radiates harmony
The Middle East is becoming more socially diverse, characterized by differences in incomes, ethnicities, gender, age, cultures and political views. Expats currently account for 48% of the GCC’s population of 54 million and continue to be a critical ingredient of the region’s social fabric as evinced by Saudi Arabia’s new permanent residency scheme and the UAE’s much coveted “Gold Card” long term residency permits.
The growth in wealth in the Middle East is set to outpace the global rate, expanding the region’s share from 3.6% to 4.1% by 2026. The number of Dubai-based ultra-high-net-worth individuals with personal assets of $30 million or more is expected to climb by nearly 60% by 2026.
Mega events push the Middle East towards a podium finish
Led by big-ticket events like Expo 2020 and the FIFA World Cup 2022, the sports and mega event industry in the GCC is projected to grow at a CAGR of 8.8% between 2017 and 2020. These events are seen as having a dual objective: firstly, to channel the region’s economies away from their traditional dependence on oil cycles and petrodollars and, secondly, to burnish the Middle East’s global credentials.
More immediately though, these events will catalyze economic and infrastructure development in the region. The FIFA World Cup, for example, will significantly benefit Qatar and its neighboring countries by generating an estimated $100 billion in infrastructure investments and creating nearly 1.5 million jobs across related construction, transport, hospitality and retail sectors.
Specialist tourism booms
Besides tourism linked to mega events, specialist tourism has taken off as countries in the Middle East look to broaden their appeal to a more diverse demographic. The tourism industry is set to double in size over the next decade with the highest growth coming from medical tourism driven by Oman and the UAE. Dubai plans to bring in 500,000 medical tourists annually by 2020 for treatment in areas such as dentistry, orthopedics, dermatology, ophthalmology and cosmetology. Ras Al Khaimah is positioning itself as an adventure tourism hub, while Saudi Arabia, with Mecca and Medina, will continue to be the center of religious tourism.
Technology works for a healthier future
Driven by an increasingly sedentary lifestyle and rising obesity, non-communicable diseases are spiraling. Today, the GCC region has among the highest levels of diabetes and heart diseases in the world, with cardiovascular disorders expected to account for more than 50% of deaths in the region over the next 20 years. This is motivating healthcare providers to focus on new technologies, such as AI, that have the potential to improve patient outcomes and the efficiency of care delivery. The UAE, for example, launched its Artificial Intelligence Strategy 2031 to bring AI to various sectors, including healthcare.
The entertainment economy primes for box office bonanza
A broadening palette of entertainment options is, on the one hand, a response to the region’s large proportion of young people with a voracious appetite for leisure activities and, as importantly, the ability to pay for it. On the other hand, it is part of a concerted effort by the Middle East to sprinkle some stardust on its global image. For instance, Saudi Arabia has earmarked a budget of $64 billion for investments in culture, leisure, heritage and entertainment projects over the next decade as part of its Vision 2030 agenda. The aim is to secure up to a quarter of the $20 billion currently spent overseas every year by Saudis looking to be entertained.
The (re)incarnation of the silk route
Strategic location has continued to highlight the Middle East as the ideal global commercial hub. Trade with Asia and Sub-Saharan Africa feature high on the agenda, with the region well positioned to take advantage of China’s Belt and Road Initiative. Trade between China and the UAE is expected to grow to $70 billion by 2020, with the UAE reinforcing its position as a lynchpin in repackaging and redistributing Chinese imports to countries across the Middle East and Africa. Indeed, Dubai’s own Silk Road strategy will boost air and sea freight and enhance logistical integration, further strengthening its status as a strategic link in global trade.
Innovative mobility modes race ahead
Many futuristic initiatives based on Connected, Autonomous, Shared, and Electric (CASE) technologies are underway in the GCC to create much more integrated and multimodal mobility solutions. Dubai is particularly futuristic in its mobility visions, and Dubai’s Autonomous Transportation Strategy forecasts that 25% of all mobility journeys will be made by driverless systems by 2030.
Connectivity, digitization and e-commerce ready for lift off
High rates of internet penetration and mobile connectivity, along with a young, tech-savvy population and high levels of disposable income, will drive the growth of the GCC’s e-commerce market. In 2018, online shoppers in the GCC made 58% of their online purchases from overseas retailers. However, such trends are set to shift as companies in the region enhance their marketplace strategies and draw more on local e-commerce.
Meanwhile, global e-commerce giants like Amazon are also strengthening their presence in the region. While cash on delivery is still a major payment method—which increases the cost of operations for e-commerce companies—the rise of digital payments will help companies become more competitive. Backed by these trends, the e-commerce market in the Middle East is expected to balloon to $48.6 billion by 2022.
The future of energy is decarbonized, decentralized and digital
The energy sector in the GCC will become decarbonized, decentralized and increasingly digital. The energy mix will continue to diversify, adding 85GW+ of renewable generation in the next 10 years. Decentralization and new business models will gain momentum. Remote locations will become prosumers (both producing and consuming energy), reflecting the rise of renewable and distributed energy resources. This will create opportunities for the next generation of services such as virtual power pools, micro grids and distributed energy management systems.
Digitization is also an area for disruption as the region aims to enhance flexibility and operational efficiency across the entire value chain, including generation, transmission, distribution and consumption. DEWA in Dubai is already leading this evolution, having launched its first AI based Digital Command Centre in the region.