The Regional Market

Saudi Arabia is part of the Gulf Cooperation Council (GCC) which also includes Qatar, Oman, Kuwait, Bahrain, and the United Arab Emirates.

UNPACKING REGIONAL POTENTIAL

Dubai, UAE, ranks high globally in per capita spending, fortifying its status as the GCC's shopping hub. Surging oil prices and robust economic growth in recent years have boosted luxury expenditure, outperforming global trends and driving revenue for luxury brands.

In 2021, the GCC's luxury fashion spending reached $9.7 billion, with Saudi Arabia's 19% growth promising a bright future for the regional luxury industry. The Kingdom is predicted to drive this sector, targeting $11 billion by 2030. Notably, limited-edition purchases and Middle Eastern collections are particularly popular among Saudi luxury consumers.

The rise of professional women has fueled momentum in the Middle East's luxury ready-to-wear fashion.

Local designs are expected to constitute 30% of this segment by 2025, reflecting a desire for modest, culturally relevant fashion.

The e-commerce boom, with 32% growth in the GCC since 2015, highlights untapped potential in this space. Even as e-commerce's retail share has risen to 8% in the region, it still lags behind the US's 20.4% in 2021, indicating significant room for growth.

Manufacturing Value Add in the GCC

World Bank's 2022 data reveals that Bahrain leads the GCC in clothing and textiles' contribution to total country MVA at 5.3%, surpassing the UAE's 3.61%. However, in absolute terms, Saudi Arabia dominates with a clothing and textiles MVA of US$2.3 billion, outstripping the UAE's US$1.3 billion and Bahrain's US$315 million.

An examination of the GCC's trade data from 2017 to 2021 reveals a significant dependence on imported knitted, woven, synthetic, and natural textiles. This suggests limited regional capacity to produce these types of textiles. That said, there seems to be some expertise in the realm of synthetic textiles. In 2021, the UAE exported synthetic textiles worth $873 million, while Saudi Arabia's exports stood at $265.6 million.

However, these two countries exhibit contrasting trends. UAE's exports of synthetic textiles have taken a downward turn, dropping by 28% over the period. Conversely, Saudi Arabia has ramped up its exports impressively, with a rise of 132%.

Raw Materials in the GCC

When it comes to the key raw materials for apparel, the GCC is flush with oil, which made up about a third of the world's production in 2020.

This points to a potential edge for the region in terms of synthetic textile production.

However, it seems to be a different story for cotton, another key ingredient in the fashion value chain, as there is scant evidence of substantial cotton production in the region. A closer look at the region's cotton trade balances suggests a hefty dependence on imports.

As for raw hides, skins, and leather trade – stark differences are prevalent across the GCC. In this arena, Saudi Arabia is a stand-out performer, boasting the largest trade surplus among all GCC economies and taking the lead in regional exports.

Shifts in the region's economic strategies have been recognized as catalysts for the growth of the fashion industry.

Both Dubai and Abu Dhabi have rolled out the red carpet for foreign companies, allowing them to have full ownership of their local operations. This means they can take the reins of their stores and operations, integrating them seamlessly into their worldwide operations.

While this has facilitated more effective trade, it has also linked the region more tightly into GVCs and their established global production networks, which are dominated by large scale producers in the East (China, India and Bangladesh), and niche specialists with advanced production capabilities in places like France, Italy, the United Kingdom and Turkey.

This highlights a potential comparative advantage in respect of synthetic textiles production. However, there is limited evidence of cotton production, which is the other staple material input into the fashion value chain. A review of cotton trade balances for the region indicate a strong reliance on imports. KSA is the stand-out performer in this category, with the largest trade surplus of all GCC economies and the dominant contributor to regional exports.

Enabling Environment

Shifts in the region's economic strategies have been recognized as catalysts for the growth of the fashion industry. Both Dubai and Abu Dhabi have rolled out the red carpet for foreign companies, allowing them to have full ownership of their local operations. This means they can take the reins of their stores and operations, integrating them seamlessly into their worldwide operations.

While this has facilitated more effective trade, it has also linked the region more tightly into GVCs and their established global production networks, which are dominated by large scale producers in the East (China, India and Bangladesh), and niche specialists with advanced production capabilities in places like France, Italy, the United Kingdom and Turkey.

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