Five Keys To Building A Post-Pandemic Mideast Industrial Powerhouse – OpEd

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By Tarek Ayntrazi*

In the past two months, the world has passed through two diametrically opposite phases of dealing with the coronavirus challenge. The first phase was denial as the world thought of it as a Chinese problem, and ignored any serious measures to cope with the threat. The second phase is panic and over-reaction, which is what we are currently facing.

The current stage of complete economic and border shutdown will end as soon as humanity finds a medical defense against the virus. Another sounding bell for ending the current stage is when the economic cost of the shutdown becomes unaffordable for governments and unbearable for ordinary people living on weekly or monthly incomes.

No economic modeling has been done for such a situation. Economists and policymakers, as well as industry and business leaders, are all in uncharted waters.

Amid this virus madness, the new post-crisis economic realities and lessons for the 21st century are slowly emerging from think tanks in the West. As in every crisis, economies and businesses that are not paralyzed by fear, and which move fast enough to capture opportunities, will emerge as the winners for the coming economic cycle that may last for decades.

The major headline is that diversifying supply away from China is no longer a luxury but an urgent necessity. Total dependency on China (as on any other source) as the de facto global factory is simply not sustainable and proved to be a hugely overlooked risk.

One of the first rules I learned in business was not to allow any client to represent more than 10 percent of income simply because losing the business will swing the operation from profit to loss in one go.

The same applies to supply chains. A supply/manufacturing disruption such as the current pandemic is a wake-up call for businesses and governments. China produces 100 percent of face masks and 95 percent of ventilators. Up to 95 percent of antibiotics imported to the US are made in China, as well as iPhones, and the list goes on. Hence, new manufacturing centers must be established.

The region has five strategic pillars that allows us to capture a significant share of the global manufacturing base.

1. Labor: We enjoy one of the youngest and fairly educated populations in the world. Nothing prevents a young Saudi, Egyptian, Tunisian or Lebanese from competing with the manufacturing engineers of China Vietnam, Thailand, or Taiwan. With some education planning and vocational training, we can within two or three years years create a formidable workforce capable of offering the world high quality products at extremely competitive prices.

2. Power: We can benefit from cheap power generation and more importantly the possibility of leading the world in solar based renewable energy usage. We have 330 days of sunshine plus the possibility of the cheapest oil and petrochemical products in the world. KSA and UAE investments in solar energy are exemplary in this domain and must be expedited

3. Location: The region sits at the heart of the world, at the doorsteps of Europe and not too far from North America. Equally important, we have world-class infrastructure in JAFZA, KIZAD and Jubail, and easily upgradable facilities in other Middle Eastern markets such as Egypt and Lebanon.

4. Reliability: Oil has proved that Saudi Arabia, the UAE and other members of the Organization of the Petroleum Exporting Countries in the region are reliable economic partners with the rest of the world. Middle East and North African countries (except those under the Iranian spell) are on good terms with global partners. With the exception of Libya, Syria and Iraq, the Arab world is stable, with leadership focused on the long-term wellbeing of their people.

5. Access to capital: The region is capital rich and there are hundreds of billions of dollars available for deployment in industrial projects. The logistics, tourism and real estate industries are all strong. However, job creation and sustainable economic growth require a diversified economy founded on solid industrial base.

In sum, this crisis will pass as others have. The most important thing is to realize the opportunity it represents. Our business and economic leaders must start planning to emerge from it stronger and better equipped to propel our people and economies to join the global economic elites.

Creating 30 million industry-related jobs will transform the region into an economic powerhouse and add a trillion dollars to regional economies. We could simply double regional gross domestic product in one decade and rid future generations from unemployment and poverty and all the malaise associated with them.

• Tarek Ayntrazi is founder and CEO of Generation C.

Arab News

Arab News is Saudi Arabia's first English-language newspaper. It was founded in 1975 by Hisham and Mohammed Ali Hafiz. Today, it is one of 29 publications produced by Saudi Research & Publishing Company (SRPC), a subsidiary of Saudi Research & Marketing Group (SRMG).

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