{"id":71156,"date":"2023-05-31T00:00:00","date_gmt":"2023-05-31T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/logistics\/2023\/05\/31\/the-gcc-can-become-the-new-vanguard-of-the-global-economy-by-strengthening-diversifying-its-supply-chains\/"},"modified":"2023-05-31T00:00:00","modified_gmt":"2023-05-31T00:00:00","slug":"the-gcc-can-become-the-new-vanguard-of-the-global-economy-by-strengthening-diversifying-its-supply-chains","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/logistics\/2023\/05\/31\/the-gcc-can-become-the-new-vanguard-of-the-global-economy-by-strengthening-diversifying-its-supply-chains\/","title":{"rendered":"The GCC can become the new \u201cvanguard of the global economy\u201d by strengthening + diversifying its supply chains"},"content":{"rendered":"<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"\"><\/span><span style=\"font-weight:700\"> GCC countries could leverage the reconfiguration of global value chains \u2014 but they need <\/span><span style=\"font-weight:700\">to act fast:<\/span><span> Global value chains (GVCs) across the globe are shifting away from being cost focused, and being reconfigured to be more resilient, agile, and sustainable. Consultancy firm Strategy&\u2019s <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/ent.news\/2023\/5\/1008.pdf\" style=\"\">Reconfiguring Global Value Chains report (pdf)<\/a><\/span><span style=\"font-weight:400;\"> looks at how the GCC \u2014 made up of Qatar, Saudi Arabia, Bahrain, Oman, Kuwait and the UAE \u2014 can take advantage of this occurring shift and use it to boost their competitive \u201cgreen advantage\u201d and become a global GVCs hub, potentially generating an estimated USD 300 bn in foreign direct investment (FDI), creating 150k jobs, unlocking USD 25 bn in non-oil exports annually, and possibly offsetting 75 mn tons of CO2 emissions, according to the report. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">But first, what are GVCs?<\/span><span> A global value chain encompasses the different stages of the production processes across different locations and countries, according to the <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/www.oecd.org\/industry\/global-value-chains\/\" style=\"\">Organisation for Economic Development and Cooperation<\/a><\/span><span> (OECD). Some 70% of global trade today involves GVCs, according to the <\/span><span>OECD<\/span><span>, as services, raw materials, and parts used to produce <\/span><span>goods<\/span><span style=\"font-weight:400;\"> cross borders back and forth, and once put into a final product, is shipped to consumers all over the globe.<\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">What\u2019s changing about how GVCs work today?<\/span><span style=\"font-weight:400;\"> GVCs in the past have tended to focus on cost reduction \u2014 no matter how complex the supply chain could become to accommodate that \u2014 with \u201clittle end-to-end oversight or management,\u201d the report says. The problem with this type of GVC is it\u2019s prone to disruption from exogenous factors such as pandemics, supply constraints, energy price volatility, and logistics bottlenecks, according to the report. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">The last few years have shown that the cost-focused GVC model is not sustainable: <\/span><span>The covid-19 pandemic drastically impacted trade, and the <\/span><span style=\"text-decoration-skip-ink:none;-webkit-text-decoration-skip:none;\"><a href=\"https:\/\/enterprise.news\/egypt\/en\/news\/story\/e19a20d8-cbc0-42a7-a36d-3fd425817f31\" style=\"\">Ever Given<\/a><\/span><span style=\"font-weight:400;\"> which blocked Egypt\u2019s Suez Canal cost some USD 57 bn halt in trade, are prime examples of those disruptions. The shift has caused \u201ccompanies to relocate key elements of their GVCs,\u201d the report writes. This leaves the chance to attract these relocating companies up for grabs.<\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">The GCC has it all \u2014 but the window \u201ccould be fleeting\u201d:<\/span><span style=\"font-weight:400;\"> The GCC benefits from plenty of competitive advantages, including an abundant and cost-competitive supply of green energy, its geographic location, robust industrial and logistics infrastructure, greenfield megaprojects, talent, research and education, the report lists. But these all need to be leveraged quickly, because other countries  are \u201ccompeting vigorously\u201d to attract relocating GVCs, the report states. If GCC governments and their stakeholders act collaboratively \u2014 and fast \u2014 they can position the GCC as the \u201cvanguard of the new global economy.\u201d <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">So what needs to be done? Start by improving \u201cbackward GVC participation.\u201d <\/span><span style=\"font-weight:400;\">GCC countries are strong on \u201cforward GVC participation,\u201d which involves exporting basic resource-based goods such as oil and basic chemicals, the report writes. Backward participation, on the other hand, involves importing raw materials to produce complex components or finished products such as semiconductors or electronics, it adds. Saudi Arabia\u2019s current backward participation rate is just 4%, falling comparably low next to the top 15 exporting countries in the world. Improving its rate would \u201cbring GVCs to the region and boost domestic productivity,\u201d the report says.<\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">GCC countries should focus on attracting downstream manufacturing \u201cto develop high-value-added end products,\u201d such as exporting hydrogen<\/span><span style=\"font-weight:400;\">, the report says. Diversifying from oil and gas exports to green energy can also help GCC countries develop localized industries for competitive products like green steel, ammonia, glass manufacturing, according to Strategy&. By capitalizing on the GCC\u2019s expected hydrogen production is predicted to attract USD 200 bn in FDI by 2030, with USD 45 bn potentially coming from ammonia consumption, and USD 155 bn from steel consumption.<\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">More potentially attractive industries for GCC countries <\/span><span>include<\/span><span style=\"font-weight:400;\">synthetic pesticides, steel automotive parts, cotton yarn, carbon fiber, alternative proteins, titanium aerostructures, graphene, polysilicon, recycled plastics and silicon wafers. All of these industries are energy-intensive \u2014 making the oil-rich GCC countries a suitable candidate \u2014 and have their raw materials readily available across the GCC, according to the report. Attracting companies to produce these products can create 150k jobs across the GCC and generate USD 300 bn in FDI, and unlock USD 25 bn in non-oil exports.<\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">More public-private sector and government-to-government collaboration across the GCC is also more important: <\/span><span>GCC countries need to enhance government-to-government collaboration<\/span><span style=\"font-weight:400;\">by benefiting from each country\u2019s competitive advantages, where one could supply the energy and another could supply labor, the report says. Cooperation with the private sector is also important in order to identify priority sectors and develop financial incentives \u2014 like grants and subsidies \u2014 to help them grow, the report adds.<\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">GCC governments also need to create an agile and consistent regulatory framework<\/span><span style=\"font-weight:400;\"> that will facilitate business, drive growth and innovation, and reduce risk, the report says. Flexible regulation should also be implemented in priority industries and sectors in which GCC have competitive advantages. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">Implementing a public-private supply chain control tower<\/span><span style=\"font-weight:700\">could also help generate accurate forecasts for critical products in the GCC<\/span><span style=\"font-weight:400;\">, and measure the resiliency of product channels, the report says. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">Building and training talents is also key: <\/span><span style=\"font-weight:400;\">The report also highlights the importance of training and providing skilling and reskilling programs for workers in the priority export-focused sectors in which they wish to develop resilient GVCs. For example, oil and gas laborers could be upskilled and acquire knowledge in renewable energy and green hydrogen fields instead, the report adds. <\/span><\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><span style=\"font-weight:700\">The role of sovereign wealth funds is also vital for creating an attractive environment for resilient GVCs<\/span><span>, by investing in companies and sectors that help complement the priority sectors identified by the government, the report explains. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>GCC countries could leverage the reconfiguration of global value chains \u2014 but they need to act fast: Global value chains (GVCs) across the globe are shifting away from being cost focused, and being reconfigured to be more resilient, agile, and sustainable. Consultancy firm Strategy&#038;\u2019s Reconfiguring Global Value Chains report (pdf) looks at how the GCC [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":71157,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[255],"tags":[17,40,27,25,66,254,32],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-71156","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-macro-picture","tag-enterprise-logistics","tag-exports","tag-gcc","tag-logistics","tag-supply-chain","tag-the-macro-picture","tag-trade","wpautop","entry"],"acf":{"mongo_id":"f9f803ad-a830-49f7-b4f1-6843b41eb18d","is_powered_by":false,"story_type":"1","photo_url":"https:\/\/ent.news\/2023\/5\/1144.jpg","photo_position":"above","homepage_title":"","full_issue_title":"The GCC can become the new \u201cvanguard of the global economy\u201d by strengthening + diversifying its supply chains","related_issue":[71145],"teaser":"","voice_url":"https:\/\/s3.us-east-1.amazonaws.com\/ent.news\/audio\/2023\/5\/.2888caab-2e22-48cc-8b94-80062f84e8e0.mp3"},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.1 (Yoast SEO v27.1.1) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>The GCC can become the new \u201cvanguard of the global economy\u201d by strengthening + diversifying its supply chains - Logistics<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterpriseam.com\/logistics\/2023\/05\/31\/the-gcc-can-become-the-new-vanguard-of-the-global-economy-by-strengthening-diversifying-its-supply-chains\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The GCC can become the new \u201cvanguard of the global economy\u201d by strengthening + diversifying its supply chains\" \/>\n<meta property=\"og:description\" content=\"GCC countries could leverage the reconfiguration of global value chains \u2014 but they need to act fast: Global value chains (GVCs) across the globe are shifting away from being cost focused, and being reconfigured to be more resilient, agile, and sustainable. 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