A recent spate of foreign direct investment in the region begs the question of whether we are witnessing market recovery or a harbinger of rising competition
Not every sign of growth and development is necessarily a sign of market recovery — especially in a region like the Gulf, where many companies still hark back to the halcyon years leading up to the economic crisis of 2008.
All things are relative, and a foreign capital injection from a beleaguered market, like China — where growth opportunities are stymied — is no sure indicator that the region is experiencing growth; it could be very long-term investment.
The CIMC Vehicle Group announcement of plans to invest in a Bahrain manufacturing facility for refrigerated trailers — for export to the wider Middle East — should probably worry rather than excite local trailer manufacturers.
The CIMC group is worth almost $8bn, has a workforce of 60,000 people and describes itself as the largest container manufacturer globally since 1996. It entered the trailer business in 2002, and since claims to have risen to become the world’s largest trailer manufacturer as well.
The news is good for Bahrain, no doubt, and credit where credit is due: the Bahrain Economic Development Board has done well to lure the giant to invest in the Kingdom.
Indeed, Bahrain’s manufacturing sector has grown by 20% over the past five years, and now accounts for over 14.6% of its real GDP. It is also the second largest contributor to the economy in the country’s non-oil sector.
However, the initial phase of CIMC’s facility in Bahrain will deliver only 20 local jobs.
This does not represent a full commitment for a company of CIMC’s size. Instead, it could suggest reticence about the growth prospects in the short-term at least, and a pilot endeavour for anticipated market recovery and growth in the medium- and long-term. In other words, it means nothing now, but competition in future.
In Jordan too, Emirates Motor Company (EMC), the Mercedes-Benz distributor for Abu Dhabi and the flagship company of Al Fahim Group, has partnered with Jordan’s Elba House, a prominent bus maker, to build custom luxury coaches based on a Mercedes-Benz chassis.
There are two things that should worry the market about this deal. The first is that UAE companies now see fit to invest outside of the country even for products being manufactured for the GCC market. The first bus produced under the new collaboration was already dispatched from Amman to Abu Dhabi and handed over to EMC, on 16 August, 2016.
The second is that EMC, despite being a provider of one of the most prominent and significant commercial vehicles in the region, is focusing its investment not on this segment, but on the luxury service industry segment.
In another instance, UAE engineering and project management company, Chemie-Tech, plans to invest $62m in a plant to recycle used automotive industry in Oltenita, Romania.
The factory will have the capacity to recycle 73,000 tonnes of used oil annually. The plant is the first investment of this kind in Romania, as well as Eastern Europe. Yet again, the contract sees a local firm focused outside the region.
There is little doubt that in the PMV industry in the Gulf region, things are looking a little better now than they did six months ago when the oil price was floundering. But equally, it would be a mistake to assume that recovery in the oil price is a magic bullet for business.
On the contrary, if we look at the flow of investment within the industry, both into the region and away from it, the picture looks bleak. It might be that the region, and the industry, is in for a prolonged slump — and it may require companies to hone their competitive edge.
Recovery or rivalry? Tracking trends in FDI
A recent spate of foreign direct investment in the region begs the question of whether we are witnessing market recovery or a harbinger of rising competition
Not every sign of growth and development is necessarily a sign of market recovery — especially in a region like the Gulf, where many companies still hark back to the halcyon years leading up to the economic crisis of 2008.
All things are relative, and a foreign capital injection from a beleaguered market, like China — where growth opportunities are stymied — is no sure indicator that the region is experiencing growth; it could be very long-term investment.
The CIMC Vehicle Group announcement of plans to invest in a Bahrain manufacturing facility for refrigerated trailers — for export to the wider Middle East — should probably worry rather than excite local trailer manufacturers.
The CIMC group is worth almost $8bn, has a workforce of 60,000 people and describes itself as the largest container manufacturer globally since 1996. It entered the trailer business in 2002, and since claims to have risen to become the world’s largest trailer manufacturer as well.
The news is good for Bahrain, no doubt, and credit where credit is due: the Bahrain Economic Development Board has done well to lure the giant to invest in the Kingdom.
Indeed, Bahrain’s manufacturing sector has grown by 20% over the past five years, and now accounts for over 14.6% of its real GDP. It is also the second largest contributor to the economy in the country’s non-oil sector.
However, the initial phase of CIMC’s facility in Bahrain will deliver only 20 local jobs.
This does not represent a full commitment for a company of CIMC’s size. Instead, it could suggest reticence about the growth prospects in the short-term at least, and a pilot endeavour for anticipated market recovery and growth in the medium- and long-term. In other words, it means nothing now, but competition in future.
In Jordan too, Emirates Motor Company (EMC), the Mercedes-Benz distributor for Abu Dhabi and the flagship company of Al Fahim Group, has partnered with Jordan’s Elba House, a prominent bus maker, to build custom luxury coaches based on a Mercedes-Benz chassis.
There are two things that should worry the market about this deal. The first is that UAE companies now see fit to invest outside of the country even for products being manufactured for the GCC market. The first bus produced under the new collaboration was already dispatched from Amman to Abu Dhabi and handed over to EMC, on 16 August, 2016.
The second is that EMC, despite being a provider of one of the most prominent and significant commercial vehicles in the region, is focusing its investment not on this segment, but on the luxury service industry segment.
In another instance, UAE engineering and project management company, Chemie-Tech, plans to invest $62m in a plant to recycle used automotive industry in Oltenita, Romania.
The factory will have the capacity to recycle 73,000 tonnes of used oil annually. The plant is the first investment of this kind in Romania, as well as Eastern Europe. Yet again, the contract sees a local firm focused outside the region.
There is little doubt that in the PMV industry in the Gulf region, things are looking a little better now than they did six months ago when the oil price was floundering. But equally, it would be a mistake to assume that recovery in the oil price is a magic bullet for business.
On the contrary, if we look at the flow of investment within the industry, both into the region and away from it, the picture looks bleak. It might be that the region, and the industry, is in for a prolonged slump — and it may require companies to hone their competitive edge.
Ritchie Bros acquires Mascus machinery listings
Ford targets fully autonomous vehicle by 2021