Build in India, finish in the UAE, localize in Saudi: India Inc.’s new Gulf playbook

Long treated by Indian conglomerates as a convenient pass-through for trade, finance, and re-exports, the UAE has taken its seat as a full-fledged operational base they can no longer ignore. But the UAE isn’t securing that role by being where Indian companies build things — it’s doing so by being where they finish, customize, and get things to customers. Each function in the value chain lands wherever its economics make sense, and that’s increasingly the UAE for logistics and customer-facing work, even as manufacturing stays in India or moves to Saudi Arabia instead.

Mumbai-based Apar Industries, India’s largest transformer-oil manufacturer, offers one clear example. It built a 30k sqm plant in Sharjah’s Hamriyah Freezone for localized blending, storage, and delivery — supporting more than 100k tons in annual sales and a reported 70% share of the GCC transformer-oil market. But its next move didn’t add more UAE refining capacity: in June, Apar partnered with Saudi Aramco’s Luberef in Yanbu to secure upstream feedstock, keeping only regional customization and sales execution in its UAE subsidiary. Apar didn’t relocate to the UAE, and it isn’t relocating to Saudi either — it split one value chain by function, tying feedstock sourcing to Saudi’s oil infrastructure while keeping blending, customization, and GCC-wide distribution in the UAE.

Why the UAE keeps winning the logistics-and-customization layer

The UAE is not necessarily the cheaper manufacturing location — India continues to hold the cards in large-scale manufacturing, labor, and supplier networks, Samriddhi Vij, associate fellow for geopolitics at Observer Research Foundation Middle East, tells us. “The UAE’s comparative advantage is about reducing the friction between production and the customer” through ports, customs infrastructure, industrial freezones, and international connectivity, Vij says. Jebel Ali alone provides direct trading links to over 150 ports globally.

“The increasingly compelling model is India plus the UAE — India’s scale of manufacturing while utilizing UAE for goods that serve regional consumers, particularly for final processing, customization, and inventory,” Vij explains.

The economics tilt toward a UAE operation on the back of shorter lead times and lower inventory requirements, even if standalone production costs are not lower, argues Abhijit Mukhopadhyay, senior economist at Chintan Research Foundation. India brings scale and depth, while the UAE brings “much more friendly arrangements” for customer proximity, logistics, and financial infrastructure, Secretary General of the Indian Business & Professional Council in Dubai Sahitya Chaturvedi tells us.

That’s the trend we’ve been tracking: Indian label iD Fresh Food — bound for a USD 1 bn IPO next year — operates a food processing facility in Ajman with its manufacturing base in India while planning a second factory in Sharjah. JSW Cement signed an agreement for a USD 39 mn cement grinding unit in Fujairah just last month to feed regional construction demand.

“The Hormuz crisis [also] hastened the process” of Indian firms expanding their operations in the UAE, Mukhopadhyay tells us. Today, India’s private sector needs the Emirates for regional market access and processes including stocking, customization, testing, after-sales service, project management, and selective manufacturing, he notes.

Where Saudi’s localization drive pulls the other way

That same freight math cuts the opposite way once a market gets big enough. ID Fresh — the same company anchoring its Gulf manufacturing in Ajman — is now building a second plant in Riyadh, with Kuwait and Bahrain set to follow. “When you have scale, it is better to manufacture locally. You can save transportation costs and inventory as well,” PC Musthafa, the company’s global CEO, told EnterpriseAM previously, pointing to a Saudi market he estimates at three to four times the size of the UAE’s. It isn’t a retreat from the UAE plan — Ajman remains the manufacturing base and the Sharjah expansion is still going ahead — it’s the same “function follows economics” logic, just applied to a market with enough scale to justify its own dedicated plant rather than serving it from next door.

The pull isn’t limited to manufacturing, either. “Saudi Arabia’s localization push could pull some Indian manufacturing into the Kingdom, particularly where the customer is Saudi Aramco, a Saudi ministry, or a major Saudi infrastructure program,” says Vij. UAE facilities tend to serve the broader GCC, African, and Asian markets, while Saudi facilities serve domestic demand. “The optimal location follows the economics of the value chain, not national boundaries,” Vij argues — a petrochemical input tied to Saudi feedstock favors Jubail, while machinery or electrical equipment for multiple GCC and African markets favors the UAE.

VA Tech WABAG shows that the pull reaches engineering and services work too. The Chennai-based water tech firm — which operates a Dubai Airport Freezone branch and projects spanning Ajman, Yanbu, Bahrain, and Kuwait — has established its regional hub in Riyadh rather than the UAE, Rohan Mittal, the firm’s head of strategy and business growth for GCC, tells us. The move is part of the company’s “strategy to progressively localize [its] capabilities and services in the GCC,” he says.

The scale argument applies here too. Of the five projects Mittal named to us, three are in Saudi Arabia (a 300 MLD desalination plant in Yanbu, a 50 MLD brackish-water facility in Al Jouf, and the Hadda wastewater treatment plant) against one each in the UAE and Kuwait. “Saudi Arabia will remain our largest focus market, supported by Vision 2030, and one of the world’s most ambitious water investment programs,” Mittal tells us.

Footprint ≠ factory

Saudi and UAE operations can be complementary, taking up different roles within a firm’s regional strategies, Chaturvedi says. Vij sees the UAE even retaining an advantage for regional headquarters, trading, and multi-market inventory management, simply because of its geographical advantage.

In the UAE’s favor: The UAE’s population centers, ports, and freezones sit clustered on a single stretch of coastline, with Jebel Ali, Dubai’s airports, and Dubai Airport Freezone (Dafz) all within a short drive of each other. On the other hand, Saudi Arabia, at roughly 25 times the UAE’s land area, has its commercial and political center in Riyadh sitting hundreds of kilometers inland from either coast. A regional base in the UAE can reach the rest of the GCC, East Africa, and South Asia without the longer overland legs a Saudi-based hub would need. That compactness is what lets a single UAE presence double as warehouse, assembly point, and distribution base for a dozen different markets at once.

That compact footprint doesn’t have to mean a factory. “When the point of export is India, there is always a concern about whether products will be delivered on time. Even under normal operating conditions, delivery commitments from Indian ports, cities, and suppliers can be an area of concern,” Chaturvedi points out. For large projects, shipping directly from India can create uncertainty around arrival times, making regional inventory and local delivery capabilities valuable, he notes — capabilities grounded in warehousing and logistics contracts rather than production lines.

The challenge

A UAE footprint does not automatically mean resilience. A factory that relies on imported inputs moving through vulnerable maritime routes simply relocates the bottleneck, argues Vij. The next phase for Indian manufacturers will be less about adding capacity and more about building capabilities around: “critical-input inventories, multiple suppliers, alternative ports, and viable overland routes,” Vij says.

The UAE is already moving that way itself. The country’s “Zero Hormuz” plan aims to cut reliance on the Strait of Hormuz — where movement has slumped to a trickle since the regional war began — by expanding its east coast infrastructure and overland routes. The plan includes expanding the eastern ports of Fujairah, Khor Fakkan, and Dibba, building at least one new harbor and a container and multipurpose terminal at Fujairah. Etihad Rail has also launched a direct freight line connecting Abu Dhabi to the port — and new road links are meant to stitch the east coast into a single overland corridor that never has to touch the strait.

That infrastructure will take years to fully mature — but the reasons Indian companies keep choosing the UAE in the first place don’t depend on the strait staying open. Proximity to customers, faster inventory cycles, and easier regional coordination are advantages that Saudi’s localization pull hasn’t displaced and Hormuz disruptions haven’t erased. That’s why the Gulf country looks set to stay central to how Indian industry organizes across the Gulf, regardless of which function sits where.