GCC transformers market Is the region still an attractive market for manufacturers?
GCC market has been having its ups and downs in the last few years. What used to be one of the most attractive T&D equipment markets might be losing its high place in the eyes of international manufacturers. A big part of it has to do with the region’s dependency on oil revenues, which have not been stable in the last few years owing to lower oil prices. Infrastructure consumption has reduced significantly over the years with austerity measures in place. In addition to this, the overall geopolitical situation in the Middle East region has taken its toll on the GCC markets, making it difficult for international manufacturers to do business in the rest of the region using GCC countries as a regional base.
Changes in the regional market
The situation is expected to ease up a little with infrastructure projects coming back online again in lieu of the mega projects in the region. Against the backdrop of these developments, it is important to note that GCC market has been undergoing the following changes.
Local content requirements
Countries in the GCC, especially Saudi Arabia, are trying to encourage foreign companies to participate actively in the local economy. Frameworks like Saudization, vision 2030 local content, and UAE’s ADLC / ICV have been in place encouraging local production.
Local distribution transformer suppliers are leading the market, whereas, due to limited power transformer manufacturing, foreign players with no local manufacturing hold a higher share of the market
Manufacturers operating in the region now need to have local production, local partnerships, and local workforce to be able to do business in the region. And this is true not only for utilities but also for the state-owned oil and gas companies like Saudi Aramco, ADNOC, and Kuwait Petroleum, which are also large buyers of transformers. These programs do not necessarily mean that foreign businesses with no local presence cannot do business in these countries. It means they have a disadvantage in bid evaluations ranging from 10 % upwards in the score.
Companies must rethink their approach in terms of local content if they want to continue having a presence in the region. Today it practically means that in the transformers business, local distribution transformer suppliers are leading the market, whereas, due to limited power transformer manufacturing, foreign players with no local manufacturing have a higher share of the market as well.
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