THE GCC PETROCHEMICAL AND CHEMICAL INDUSTRY

1 THE GCC PETROCHEMICAL AND CHEMICAL INDUSTRY Facts and Figures 2016 CONTENTS1. 2016 GCC CHEMICAL INDUSTRY in numbers 42. Key macroeconomic indicators 53. Growth pattern 74. Feedstock overview 185. GCC growth from global perspective 206. Employment 217.

2 CHEMICAL sales revenue 258. Research and development 289. International trade 3010. Global position 374 The GCC PETROCHEMICAL and CHEMICAL INDUSTRY Facts and Figures 20162016 GCC CHEMICAL INDUSTRY IN NUMBERS*Note: GPCA member companies onlyContributed to regional GDPR egistered the highest growth in five years, reaching million tonsDirectly employed 152,100 people, posting growth rate over the past decadeEarned USD 77 billion in sales revenue, down by 3% from the year before*Export volume increased marginally by YoY to million tons, while its value dropped by 6% YoY to USD billionAnd registered 6% share in global production up from 3% in 2000 Accounted for 28% of manufacturing value added.

3 Equal to USD billionProduced a total of 102 CHEMICAL products in the regionGCC nationals made up 61% of total INDUSTRY workforce*R&D spending was reported at USD 584 million, declining by 20%GCC s share in global CHEMICAL sales remained at around 2%5 The GCC PETROCHEMICAL and CHEMICAL INDUSTRY Facts and Figures 20162. KEY MACROECONOMIC INDICATORSGCC economy: Understanding the new realitiesNon-oil growth in the GCC countries is projected to grow from almost 2% in 2016 to 3% in 20172016 was a year of volatility across many sectors and regions.

4 Most headlines were dominated by low oil prices which have dropped by about 60% since 2013, causing macro-economic instability that hinders job creation and slows down growth. The reduction in oil prices has impacted negatively public finances considering that 79% of regional governments revenues are generated by oil related sectors. Economic growth in the GCC in 2016 was the slowest in several years, reflecting the fall of global energy prices. On a country level, Saudi Arabia s GDP saw a particularly sharp decrease, with GDP growth falling to in 2016, down from in 2015.

5 Likewise, Oman s GDP dropped sharply from in 2015 to 3% in 2016. UAE s GDP growth is estimated to drop from in 2015 to 3% in 2016. In Qatar, GDP growth eased to , the slowest in several years, reflecting stagnant growth in the hydrocarbon sector in recent years largely due to a self-imposed moratorium on additional output from the giant North Field and weaker non-oil sector growth. Conversely, the economic situation in both Kuwait and Bahrain saw some positive developments, but growth was relatively modest. Growth in Kuwait accelerated to an estimated in 2016.

6 The drivers behind such positive changes were higher oil production and fiscal stimulus from the implementation of major infrastructure projects related to the Kuwait Development Plan. Bahrain, on the other hand, saw some upside economic growth thanks in no small part to stronger public investment that boosted construction sector activity and offset weakening private consumption and investor low oil price environment in 2016 provided fresh impetus for GCC countries to diversify their economies and fiscal revenue streams away from hydrocarbons.

7 In line with this objective, GCC governments have implemented key measures such as fuel subsidies reduction and rationalization of public expenditure. Additional measures to cope with the new normal of low oil prices are also in the pipeline, including plans to introduce a value-added tax (VAT) in 2018 which is aimed at reducing the spill-over impact of oil price volatility on GCC economies. As shown in the chart below, there is a strong correlation between GDP growth in the GCC and oil price : World bank, 2017 Aggregate GCC GDP growth and change in oil prices2004200620082010201220142016 Change in oil prices (rhs)Aggregate GCC GDP growth-60-40-2002040600-246810 PercentPercent6 The GCC PETROCHEMICAL and CHEMICAL INDUSTRY Facts and Figures 2016 Economic contribution of the GCC CHEMICAL industryGCC CHEMICAL INDUSTRY contributed to regional GDP and 28% to manufacturing value addedThe CHEMICAL INDUSTRY is one of the oldest industries in the GCC, which contributes significantly towards regional industrial and manufacturing growth.

8 The science based INDUSTRY serves as a building block for all downstream industries, and contributes indirectly to almost every sector in the economy. The value addition of the GCC CHEMICAL INDUSTRY is estimated at about USD billion, equal to 28% of regional manufacturing value added. Among other manufacturing sectors, this is one of the highest contribution to manufacturing value added, proving the INDUSTRY s vital role in the industrial development of the region. Of all other sectors only refining comes close this figure, accounting for about 29%.

9 Agriculture & Fishing Crude petroleum and natural Electricity and water Construction Trade, restaurants and hotels Transport, storage and communication Finance, real estate and business services Others Refining sector Petrochemicals and chemicals Other manufacturing Manufacturing GCC GDP by main economic activities, 2016 Note: GDP at 2010 constant pricesSource: GCC National Statistical Authorities, IMF, World Bank, GPCA Analysis, 2017 The CHEMICAL INDUSTRY in Oman and Qatar has the highest contribution to manufacturing value added.

10 In Qatar the INDUSTRY accounts for 44% of manufacturing value added and for about 51% in Oman. This compares to 3% and 17% respectively in 2001, marking the largest increase of chemicals value addition among all GCC states. Saudi Arabia is home to the largest CHEMICAL INDUSTRY in the region, accounting for 27% of the country s manufacturing value added. The INDUSTRY s share has increased by 3 percentage points since 2010, when it stood at 24%. Manufacturing in Kuwait and the UAE relies more on the refining sector s contribution where it represents 33% and 40% of value added respectively.