A Collective Sigh of Relief - Deloitte

Trade patterns of the future: Waking up and smelling the coffee
As economies in Sub-Saharan Africa and the
Middle East develop and open up to trade, links
between Asia, the Middle East, and Africa are
expected to flourish.
NAFTA (8.9 percent), revealing a more diversified export
basket. Statistics reveal that Gulf exports to Asia, particularly
China, cover a range of products like plastics, electronic
equipment, and vehicles, while exports to the United
States predominantly comprise oil and oil products.
The strategic partnering of the GCC countries with China,
India, and other economies focuses on building manufacturing
bases in order to produce a wide array of products
of varying complexity and to develop skills in critical areas
such as water desalination, digital infrastructure, and
education. The GCC has engaged China to assist with
setting up telecom networks and developing knowledgebased
economies. The investment in these areas has the
potential to transform the Gulf into a preferred destination
of global supply chains that offer world-class infrastructure
as well as access to talent and domestic consumer
markets. A robust and well-diversified manufacturing base
will be critical in driving prosperity of this region. The key
enabler for this transformation could potentially be the
policy reforms that facilitate economic integration and
lower barriers for businesses. Another important influencer
of strategic investments is the GCC’s deployment
of sovereign wealth funds, which stand at $1.1 trillion.
The GCC governments are committed to developing
their strengths in areas like energy and services while
enhancing allied sectors. This trend is likely to continue
as the GCC governments proactively seek and incentivize
foreign business.
Emerging trade hubs
As economies in Sub-Saharan Africa and the Middle East
develop and open up to trade, links between Asia, the
Middle East, and Africa are expected to flourish. Economic
integration between these regions and the emergence
of South-South trade will likely result in the formation
of influential trade hubs. The trade of the future will be
determined by the availability of cheap resources and the
destination of final demand itself. Some firms in developed
economies have already begun to question whether the
challenges of outsourcing their production processes
outweigh the benefits of producing locally.
In this respect, Africa and the Middle East offer both
low-cost production capabilities as well as a rapidly
growing domestic market. While there are political and
economic risks, a burgeoning consumer base will likely
induce foreign business to navigate these markets and
leverage locally available resources in a more cost-effective
way. Supply chain disruptions following the earthquake
in Japan also have highlighted the challenges of extreme
specialization and reliance on a few economies. Another
advantage that the Middle East and Africa offer is the
close proximity to European markets. Thus, the emergence
of Africa and the Middle East as new trade hubs is likely
to play a pivotal role in connecting people, products,
and technology.
Topics
References and research
sources:
OECD, “Going for Growth,”
2012.
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