GCC countries trying to diversify their economies need to focus their attention on further developing the heavy industry sector, says Boston Consulting Group.

The region can boost its heavy industry by concentrating on energy-intensive upstream activities and outsourcing down stream activities such as fabrication and distribution to cost effective, labour intensive markets of India and China.

'As a region rich in oil and energy, GCC countries already have access to raw materials that make it ideal for heavy industries like glass, petrochemicals, plastic, silicon, aluminium, steel and fertilizer. What they lack is affordable and skilled labour required for final production and an effective distribution system. Adopting a business model based on outsourcing such downstream activities to India and China will help to further develop the industry and make this region the leading capital of energy-intensive production of aluminium, petrochemicals, and plastics,' said Dr. Armin Schmiedeberg, senior partner and managing director, Boston Consulting Group.

Development of heavy industry in the region also demands building strong infrastructure and having access to up to date technology know-how.

'The region's heavy industry will benefit from the development of infrastructure which is already underway with projects worth nearly US$ 1 trillion. There is a clear thrust on the development of petrochemicals, plastics, glass and aluminium industry in the GCC. For instance, there is a sharp increase in investments in petrochemical plants. Ethylene capacity in the region has increased from 82 million metric tonnes in 1996 to 128 in 2007 and propylene from 51 million metric tonnes to 78 this year which shows the growing importance of this industry.'

Heavy industry is also poised to be the one of the biggest job generators in the region.

'Not only that heavy industry can bring in a surplus income for the region, the industry's upstream activities can also create much needed employment opportunities. Aluminium and steel activities can have a strong impact on job creation in the region. An investment of US$ 500 million in a steel plant can create more than 1000 jobs, 'added Schmiedeberg.

Dr. Armin Schmiedeberg who leads BCG's Middle East operations from Abu Dhabi and Dubai, is an expert for industrial goods, chemicals, aluminium and steel.