Krischa’s move to set up a manufacturing facility in the Middle East is shaping up to be quite an interesting puzzle. As I dug into potential locations, I stumbled upon some surprising details about trade agreements and regional dynamics.
You might find it interesting that two GCC (Gulf Cooperation Council) countries have had Free Trade Agreements (FTAs) with the U.S. since 2006. Yet, trade volumes with these nations remain surprisingly low. So, what’s behind this?
Bahrain: Bahrain is home to the U.S. Navy’s 5th Fleet, which oversees naval operations in the Persian Gulf, Red Sea, Arabian Sea, and Indian Ocean. It’s also a key logistics hub for missions in Iraq, Afghanistan, and Syria. While this makes Bahrain a significant strategic partner, it also means navigating a complex web of regulations if you want to set up a manufacturing plant there.
Oman: Oman’s location near the Strait of Hormuz is another crucial factor. This strait is a major chokepoint for about 20% of global oil and gas shipments, offering direct access to the Indian Ocean. This strategic position makes Oman important for monitoring regional oil flows and potentially isolating Iran if necessary. But, as with Bahrain, its strategic importance brings a host of regulatory hurdles & long standing approval processes.
So, that leaves us with the UAE, Kuwait, and Saudi Arabia as potential alternatives. The UAE stands out for being the most business-friendly, but there’s a catch. Former President Trump has hinted that if re-elected, he might impose a 25% tariff on steel and steel products from all non-FTA countries, which would include the UAE too.
This future tariff could make exporting from the UAE a challenge in future.
For Krischa, picking the right location is crucial. If they can establish a presence in Bahrain or Oman, they could potentially see significant sales up to ₹500 crore within a year, thanks to the U.S. FTA, along with FTA with Singapore and direct access to the broader GCC market.
If Bahrain or Oman doesn’t pan out, they would still have access to local markets but might face the potential 25% tariff on steel if they’re in the UAE.
In the end, Krischa’s choice of location will be key to their success and efficiency in the Middle East.
Let’s see !!! This is just my opinion, I am no expert on Middle East, Always open for a healthy discussion.
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