The Middle East and in particular the GCC nations – have a big opportunity in further developing a robust shipbuilding industry, which could eventually be worth $40 billion over the next decade, according to analysis by Strategy&.
This growth projection for the shipbuilding industry is underpinned by the region’s increasing importance in global trade, strategic geographic location, substantial defense spending, and growing demand for tourism and luxury yachting.
Most of the GCC’s trade already moves by sea – and with global shipbuilding growing fast, the GCC has a chance to build its own capabilities. Indeed, further developing this sector would fit with the GCC’s ongoing efforts to diversify local economies away from oil and gas, which has already led to huge growth in sectors like tourism, finance, and manufacturing, among others.
For nearly a century, East Asia has dominated shipbuilding. China has grown their capabilities enormously in the past two decades, though Japan and South Korea still hold significant market shares. But with adequate policies in place, the GCC countries could compete with China and lift themselves to the ranks of leading global shipbuilders.
Localization of the industry in the GCC could help address an estimated annual value leakage of $1.1 billion currently spent on imported ships and related services. The Strategy& report estimates it could also create between 50,000 and 70,000 direct and indirect jobs across the region.
Key market drivers
The estimated $40 billion opportunity is driven by several factors. Firstly, the GCC region has become a global logistics hub. A total of 3.4% of global total trade in goods in 2023 went through the region, putting it sixth worldwide in terms of trade volume. This activity, heavily supported by energy exports, fuels continuous demand for tankers and offshore support vessels.
There is also the strategic location of the GCC countries. They are positioned along critical maritime corridors, in particular the Red Sea, where vessel traffic is projected to increase from about 28,000 vessels in 2025 to nearly 48,000 by 2040. This growth will continue to create opportunities for maintenance, repair, and overhaul (MRO) services.
An uptick in defense spending is another factor: The GCC nations are spending big on defense, with Saudi Arabia ranking as the seventh-largest defense spender globally in 2025. Saudi Vision 2030 aims to localize 50% of its military spending, creating substantial demand for naval vessels.
Growth in the leisure segment is another major factor. The GCC is emerging as a luxury tourism hub, especially in cities like Dubai and Abu Dhabi. That has been fueling demand for high-end pleasure sailing experiences. The yacht charter market in the GCC is forecast to grow at an annual rate of 7.6% from 2024 to 2034.
The current regional shipbuilding supply chain is largely dependent on imports. Taking a closer look at shipbuilding costs reveals that 60% overall shipbuilding costs are related to direct materials, equipment, and consumables, making them a priority for localization efforts.
Industry activation requirements
Capitalizing on this potential requires clear government direction and a robust framework encompassing oversight, drivers of change, and ecosystem enablers, according to the Strategy& report.
That could include securing long-term demand through mandatory offtake agreements, developing critical infrastructure such as specialized economic zones and shipyards, providing financial incentives like subsidies and tax breaks, and localizing the supply chain.
Success hinges on addressing critical challenges, such as building a skilled workforce, reducing reliance on imports, and fostering private-sector involvement through incentives and partnerships,” said Georgie Saad, partner at Strategy&.
“Strategic collaboration with global players, coupled with a relentless focus on innovation and sustainability, will be essential in overcoming these hurdles and achieving long-term growth. This forward-looking approach not only enhances GCC countries’ economic resilience but also positions the region as a hub for maritime excellence, creating new opportunities for growth, innovation, and employment.”
