Whereas China is still very competitive, rising wages are opening up opportunities for Africa and the Middle East.
The observation was made by Bassam Hage while commenting on a report released recently by global consultancy Ernst and Young.
Hage is the Middle East and North Africa Markets Leader at Ernst and Young in Dubai.
The report notes that Exports from the Middle East and Africa (MEA) are poised to grow up by 12% in the next ten years as the region is on the way to succeed China as a key manufacturing hub for low cost goods.
“Technological advancements and the process of industrialization in the MEA region will lead to metals, chemicals and other “intermediate” goods becoming an increasingly important part of their exports as they seek to position themselves in the global supply chain,” says the report.
Hage explains that “With a fast-growing labour force, they have the potential to become the next world assembler, possibly replacing China, as China specializes in higher-value added goods.
But for this to happen there will need to be an investment in infrastructure and the continued fostering of entrepreneurship.”
The report was a result of a study that identified 25 Rapid Growth Markets (RGM) which would have the potential to trigger a seismic shift in global trade patterns.
On specific trade flow forecasts, Hage said that “ Exports to Russia from the region will show significant growth of close to 12% per year from sub-Saharan Africa and 14% from the Middle East and North Africa region.”
Intra-trade among RGMs is poised to soar. The increase in the middle class in RGMs, particularly in Asia, will drive growth in consumer demand and trade flows between RGMs.
Ernst and Young took China as a specific example for forecasting, saying that “the number of households in China with a real disposable income of US$30,000 to US$ 50,000 will increase from US$1.6 Million in 2010 to an estimated US$ 26 Million in 2020.
Also, “Flows of goods from China to India are expected to grow by 22% per year over the next decade.”
Because of this shift, MEA countries will increasingly focus in their export policy on trade destinations in the East.
According to Hage, Ernst and Young stated he was optimistic for the MEA region in the medium-term, saying that “in addition to the rise in oil prices benefiting the region, non-oil activity is likely to remain strong especially with the steady labour force growth.
Government spending and the increase in trade between RGMs, will serve as significant catalysts to growth and, in turn, be hugely beneficial for companies that invest in these markets.
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