How to survive in the Middle East when the epidemic situation overlaps and oil exports decline sharply?

 How to survive in the Middle East when the epidemic situation overlaps and oil exports decline sharply?

EIU said in the report that signs of recovery in manufacturing output, transportation flow and trade volume have been seen in both the world and the Middle East, which is largely driven by the reopening of major Asian economies and the huge global stimulus package.

The report said that due to the impact of the epidemic, enterprises in the Middle East are re establishing supply chain problems, hoping to build supply chain flexibility by shortening and diversifying supply lines while protecting contacts with important international suppliers and customers. At the same time, enterprises in the region are also trying to strengthen their position as international trade hubs and continue to promote trade infrastructure and digitization There is a lot of investment in transformation.

In recent days, the rebound of the new epidemic situation in the Middle East has intensified. Israel has announced the extension of the closure measures, and the United Arab Emirates has repeatedly set the highest record of newly diagnosed cases in a single day.

Middle East companies reassess supply chain

According to the latest forecast of the World Bank (hereinafter referred to as the world bank), due to the epidemic situation and the development of crude oil market, economic activities in central and northeast Africa are expected to shrink by 4.2%, which is significantly lower than the 2.4% growth forecast released by the World Bank in January this year.

The reason is that with the sharp decline of global oil demand, the sharp drop of oil price and the outbreak of the epidemic in the Middle East, the economy of oil exporting countries has slowed down in an all-round way. Although inflation is generally contained in the region and policy space is set aside for large economies to lower interest rates, the financial sector in the region has been adversely affected by the low interest of international investors in emerging markets. The impact is that stock indexes in the Middle East and North Africa region have generally declined sharply.

In oil exporting economies, economic activity is expected to contract as low oil prices reduce economic activity, such as 4.1% in GCC member countries, and low oil prices and the uncertainty of the epidemic will further affect non oil activities, the world bank said. GCC members include the United Arab Emirates, Oman, Bahrain, Qatar, Kuwait, Saudi Arabia and Yemen.

EIU also pointed out that factors such as the second shock from the epidemic, sluggish long-term economic growth and the implementation of new trade restrictions are the main downward risks in the Middle East, which may distort the prospects of V-shaped recovery in the region and make the situation of the Middle East and global value chains more disturbing in 2020 and 2021. Companies in the Middle East want to reduce the risks brought about by turbulence and uncertainty, and think about how to establish global business operation flexibility.

For example, due to the decline of international production and logistics capacity, the uncertainty of foreign delivery is becoming higher and higher, and the cost is also higher and higher, which creates new bottlenecks for Middle East enterprises in the supply of raw materials, intermediate products and final products.

According to EIU, companies in the Middle East are now considering ways to shorten and diversify their supply chains in order to build greater supply chain security and resilience.

Among them, EIU found that in the future, companies in the Middle East may want to shorten their supply chain and focus as much as possible on local production. However, such a choice will also be limited by local production skills and capabilities, available investment funds and willingness to invest, and how to maintain close ties with suppliers and customers in Asian, European and American markets if the supply chain is shortened. Therefore, the final choice for enterprises in the Middle East will be to adjust the supply chain rather than revolutionary change.

According to the EIUs business environment ranking (BER) model, the Middle East market will continue to make progress in improving its business environment in 2020-2024, despite the epidemic challenges, and will be more obvious in countries with high scores in infrastructure (including technology) and ongoing reforms. The best performing countries are the United Arab Emirates and Israel.

Good infrastructure can enable the Middle East countries to maintain their status as active participants in the global value chain. Saudi Arabia, the United Arab Emirates, Egypt and Turkey, for example, have sound international logistics infrastructure and are investing heavily to promote regional and international connectivity.

The EIU estimates that the total investment in the ongoing construction and transportation projects of GCC Member States is about 1 trillion US dollars. In the future, GCC member states have also made a plan of 1.2 trillion US dollars of development projects for its long-term transformation, focusing on economic diversification, transportation and further transfer to higher value-added industries. However, although new industrial development may contribute to the offshore development of the supply chain, the relatively high local labor costs, the lingering shortage of skills and the shortage of supply chain will still be the main constraints.

At the same time, the Middle East is also seeking business digitization and supply chain digital transformation, aiming to improve data accuracy and transparency, help enterprises predict risks and prevent losses, and improve supply chain efficiency.

In recent years, the energy industry in the Middle East has embarked on digital transformation. The EIU believes that this momentum will continue given the importance of the industry to the Middle East and the impact of the outbreak on key supply and demand.

According to the comprehensive data, the cumulative number of confirmed cases updated by some Middle East countries on October 1 was 461044 in Iran, 335097 in Saudi Arabia, 320070 in Turkey, 126044 in Morocco, 125959 in Qatar, 105676 in Kuwait, 103317 in Egypt, 71374 in Bahrain, 51690 in Algeria, 51062 in Palestine, 35208 in Libya, 13653 in Sudan and 13101 in Jordan 2039 cases in Yemen.

According to EIU, Saudi Arabia and the UAE are catching up with the trend in bird technologies (blockchain or distributed ledger technology, Internet of things, robotic process automation and Data Science), which together with 5g networks provide great potential for the region.

The purpose of this exercise is to reduce the cost of transportation, insurance agency and insurance companies in the Middle East by reducing the cost of their transport, insurance companies and insurance companies in the area of transport, insurance, insurance, etc Transportation time.