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International trade

Friendshoring: A New Economic Model for a Resilient Supply Chain

Strategic Insights

— 2 min read

As global trade becomes increasingly disrupted by geopolitical conflicts and pandemics, companies are seeking more reliable and strategic supply chain arrangements. Friendshoring, where companies establish supply chain networks with countries considered political and economic allies, is becoming a crucial strategy for the Gulf Cooperation Council (GCC) nations, including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. By leveraging their geographical location between Asia, Africa, and Europe, the GCC is attracting businesses looking for more resilient alternatives to traditional supply routes. This new economic model has several benefits, including ease of access, reduced costs, logistics and infrastructure, and economic diversification.

Key Takeaways:

  • The GCC's geographical location makes it an ideal hub for trade between Asia, Africa, and Europe, with one-third of the world's population living within four hours' flight.
  • The GCC has already helped deepen ties within the region, facilitating resilient local supply chains that can withstand global disruption, with more than one-third of food produced by GCC countries being sold within the bloc.
  • The region's business environment is being enhanced through the creation of Special Economic Zones, which offer significant business incentives, including competitive corporation tax rates, duty-free access to GCC markets, and streamlined business setup processes.
  • The GCC has established strong diplomatic relationships worldwide, including with the Association of Southeast Asian Nations (ASEAN), China, and several sub-Saharan African countries, to reduce business costs and attract investment from allies.
  • The region's logistics and transport infrastructure is being upgraded to encourage the flow of trade and boost supply chain productivity, with the construction of ports, a 2,000-kilometre GCC railway, and investment in modern transport networks.
  • The GCC is undergoing an intense economic diversification strategy, targeting sectors such as tourism, financial services, and renewable energy, which are expected to bring in non-oil revenue and drive long-term growth.
  • Companies such as Mondelez International and WestPoint Home have already established manufacturing operations in Bahrain, and Indian chip producer Polymatech Electronics is following suit with an initial $16m investment.

Statistics:

  • More than one-third of food produced by GCC countries is sold within the bloc, reducing the region's dependence on external imports.
  • The GCC's GDP is expected to grow by 3.5% in 2025, according to a recent World Bank economic update.
  • The GCC railway will connect all six member states and create a seamless flow of freight and passengers.
  • The UAE has bilateral free trade agreements with 25 markets, allowing duty-free market access to 33% of the world's GDP.
  • The GCC's exports to Africa and Asia are expected to increase by 10% in 2025, driven by the region's strategic location and growing trade ties with these regions.

Sources:

  • World Economic Forum
  • World Bank economic update
  • Association of Southeast Asian Nations (ASEAN)
  • China
  • United States (US)
  • European Union (EU)
  • India
  • Bahrain International Investment Park
  • Saudi Arabia's Vision 2030
  • UAE's economic diversification strategy

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