PESTEL Analysis of Petrochemical Gulf Markets

GCC countries are almost representing the best miscellaneous prudent wealth among the Middle East countries with more stability at their political situation and homogenized society. This is in addition to relaxed position within their neighborhood countries. However, the main social problem is that its citizens are representing less that 50% of the total population of the country.

Further, GCC countries are enjoying a political stable regime; moreover, there are not such unexpectedly shifting in business regulations and procedures within GCC countries. In addition, there are some other threats around the Middle East but it has not affected seriously at GCC countries business such as the conflict between Palestinians and Zionists and the war in Iraq. However, there is some risk from Iran, because it attends to acquire nuclear weapons. This is besides the illegally occupying of Iran into three islands of the UAE (Abu Musa, the greater and the lesser Tunbas).

Economy:

The Gulf Co-operation Council (GCC) is an oil-based region by the largest persistent oil reserves in the globe; 483.7 billion barrels, 40.2 percent of the world’s total crude oil reserves, OPEC accounts at 78 percent of the world’s total proved oil reserves. Nonetheless, this area ranks as the biggest producer as well as an exporter of petroleum and plays a key role in the world generally along with the OPEC in particular. Thus, the six countries of the GCC region are taking pleasure in a remarkable economic growth that is expected to remain in excess of the medium-term. However, the GCC economy is anticipated to continue through $1 trillion within the year of 2010, making an almost three-fold raise in just five years. However, four GCC countries which are the portion of the OPEC together with KSA, UAE, Kuwait, as well as Qatar account for 51 percent of the total OPEC reserves and 46 percent of the total OPEC crude oil production for the states of GCC area, oil as well as gas represents just about 73 percent of the total export earnings. Furthermore, oil along with gas sector accounts for lots 63 percent of government’s revenues and 41 percent of its GDP.

In addition, here, we have to say that the district is continuing its economic adjustment program additionally currently its focus is to attract domestically, regionally, as well as foreign private sector investment involved in oil as well as gas, power generation, telecommunications, along with real-estate sectors. The rush ahead in oil prices, the rising up of fiscal along with external; balance of payments positions, moreover improvements toward the business atmosphere have combined to produce an impressive infrastructure improvement. Therefore, in June 2010, there was practically $2 trillion worth of GCC projects announced, planned or else underway, mostly related in the rule of construction, oil, gas as well as petrochemicals sectors.

The Gulf Co-operation Council (GCC) area’s economy has doubled in size during 2004 to 2009. Moreover, a combined official GDP of the area grew by the rate of 12.5 percent within 2009 toward $812.95 billion measured into a growth rate of 17.3 percent to $722.49 billion in 2008. On the other hand, the strong economic performance is endorsed to secure global oil demand; better geopolitical situation; acceleration of growth measures; powerful boost in privatization activities; growth of assets of central banks along with the strength of the GCC corporate sector. For that reason, nominal GDP is expected to grow powerfully through a 25.8 percent toward $1022.62billion within the year 2009 and is the project to develop at an 8.8 percent to $1112.08 billion in 2010. In original terms, the economy of the area grew via 5.5 percent in 2008 compared near a rate of 5.8 percent in the year of 2009. Moreover, it is expected to grow at the rates of 5.8 percent and 6.5 percent in 2010 as well as 2011 respectively.

Social:

The Societies in the GCC countries are combining of the conservative as well as advanced another attractive than in several of the further countries in the Middle East region. Conceivably due in the piece to the widespread level of development that has been accomplished along with the success of the GCC countries in integrating up to date technology keen on their society with no considerable disruptions.

The state religion of the GCC countries is Islam. However, there are people of other religions in the GCC countries such as Hindus, Christians and others. Anyone who wants to continue along with setting up a business in GCC countries should follow the Islamic rules. The official language of the GCC countries is Arabic but English is the language of business.

On the other hand, the Arab Gulf states all have substantial revenues from oil and gas and have remarkably little local citizens. This has grown their related per capita incomes to greater than those of their neighbors consist. To join the labor shortages they provide significant quantities of temporary non-citizen economic migrants mainly from South Asia as well as South East Asia, chiefly the Philippines in addition to Indians. In the earlier stage, there were additional remarkable numbers of immigrants coming from Jordan (mainly of Palestinian origin) as well as Egypt.

Technology:

The GCC countries are one of the ideal locations to market products and services to Middle East and Asia. The users of Information Technology cover all aspects of society, private, consumer businesses, and governments, military in addition to educational facilities. The field has been used primarily through the Internet for business purposes.

The governments in the GCC countries act as a matchmaker, to assist businesses and private users to take advantages of the information technology revolution.

GCC countries are enjoying the highest advances in communications technology comprise considerably widened the range of services carried through the network. Satellites, besides microwave radio, as well optical cable links, besides digital switching in addition to transmission, offer a potential for the enhancement of quality and for the expansion of right to apply to the most remote areas. The world is presently a perfectly integrated information network.

Environment:

The GCC countries face a quantity of environmental problems, driven through people pressure, particularly in the cities where metropolitan growth has taken situate. Property degradation, especially, appropriate to desertification in several parts of the district is becoming progressively more critical. Nevertheless, the most severe problem is that of the fast turn down in fresh water accessibility.

On the other hand, it is widely known that oil continues to control the world’s energy supply as well as the region’s energy sector. GCC oil exports expansion in addition to contribute to advanced incidents of oil spills from offshore extraction along with transportation, foremost to elevated hydrocarbon concentrations in the waters of the Arabian Gulf that negatively have an effect on the desalination production progression, as well human health, in addition to the environment.

Legislation:

Although legislation are almost similar at the GCC countries, as we find most of them were driven out of Islamic Sharia. On the other hand, for the civil laws, there were two sources at the GCC countries, the first one from the Egyptian laws, which were initially driven out from the France laws. The other source of the GCC countries was the Jordanian laws, where they were driven out from the British laws.

SWOT Analysis:

Strengths:

The GCC countries economy has many positive points that make GCC countries economy strong and we can summarize these points in the following:

GCC countries are applying the open economy policy in most of its states.

The mighty prestigious location for GCC countries between Asia and Africa continents

GCC countries advance ranked among countries that export oil.

Policies and procedures that the governments apply ought to support the economy.

GCC countries Provide different facilities for investors (local and foreign), like: no restrictions on the foreign currencies, competitive import fees (4%), no taxes on the personal and companies’ income (except oil companies and the branches of foreign banks) and other facilities.

The GCC countries governments offer many investment opportunities for investors in all sectors in most of its countries.

The GCC countries governments build many industrial cities and free zones in different places in GCC countries that have all the services that need.

Weakness:

The GCC countries economy weaknesses are summarized in these points:

Financial Frauds in some GCC countries economy from transferring money and no restrictions in loans (UAE and Bahrain).

GCC countries currencies are linked with the US dollar and this cause a change in the value of the GCC countries local currencies as the change in the US dollar.

Legal system in GCC countries tie to the ruling elite

Opportunities:

The GCC countries economy has many opportunities, because it is now in the growth period. We can summarize the opportunities in these points:

The GCC countries have the opportunity to change from depending on oil as a main source of funds to other sources (non-oil sectors).

The GCC countries have enough funds to improve all the sectors.

There are many facilities to export GCC countries products to other countries especially Middle East countries.

Threats:

The inflation fluctuation within GCC countries is representing high threats to their economies.

The continuous changing in oil prices which is affecting badly the budgets of GCC countries.

Political environment in the neighborhood area might effect on the foreign investments.