{"id":618472,"date":"2024-04-15T00:00:00","date_gmt":"2024-04-15T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2024\/04\/15\/taking-a-long-term-view-why-prospects-for-the-gulf-asia-trade-and-investment-corridor-remain-strong\/"},"modified":"2024-04-15T00:00:00","modified_gmt":"2024-04-15T00:00:00","slug":"taking-a-long-term-view-why-prospects-for-the-gulf-asia-trade-and-investment-corridor-remain-strong","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2024\/04\/15\/taking-a-long-term-view-why-prospects-for-the-gulf-asia-trade-and-investment-corridor-remain-strong\/","title":{"rendered":"Taking a long-term view: Why prospects for the Gulf-Asia trade and investment corridor remain strong"},"content":{"rendered":"<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>The trade flows that link the Gulf to Asia along the so-called Silk Road are ancient<\/strong>, but today there is renewed focus on this linkage as goods-carrying ships in the Middle East bound for Asia face disruption and being re-routed as they pass through the Suez Canal and the Red Sea.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>The complex diplomacy and geopolitics underlying these realities affect governments<\/strong><strong> around the globe<\/strong>, which has led to some revising their optimism about the future of the Gulf-Asia trade and investment corridor.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>And yet, the longer term trends and commitments to opening up a new silk road are not&nbsp;<\/strong><strong>changing. <\/strong>Ambitious diversification plans among Gulf economies remain unchanged, and will require connectivity to high growth markets in the Asia-Pacific. The push away from hydrocarbons for example is driving governments, investors, and companies on both ends of the corridor to invest \u2014 and seek investment \u2014 in new technology and infrastructure.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Capital rich countries in the Gulf increasingly seek investment diversification<\/strong> away from traditional centers and South Asian nations have exciting consumer stories and young workforces to offer in exchange. The Asian region offers better GDP growth potential than the West, contributing over 60% of global GDP in 2023. The ASEAN-6 \u2014 comprising Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam \u2014 are forecast to grow by 4.7% in 2024, far outstripping the 1.1% expansion expected in the developed world in 2024. Asia is also a growing center in the supply chain for the transition economy.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Accordingly, GCC trade with emerging Asia will reach USD 578 bn annually<\/strong> by 2030, <a target=\"_blank\" href=\"https:\/\/asiahouse.org\/research_posts\/the-middle-east-pivot-to-asia-2022\/\" style=\"\" rel=\"noopener\">surpassing trade<\/a> with advanced economies. <\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Momentum for trade and investment agreements that aim to accelerate these trends has<\/strong><strong> been growing for some time.<\/strong> Indonesia and the UAE <a target=\"_blank\" href=\"https:\/\/www.mofaic.gov.ae\/en\/%20missions\/jakarta\/media-hub\/embassy-news\/%20cepa\" style=\"\" rel=\"noopener\">signed<\/a> a Comprehensive Economic Partnership Agreement in 2022, which aims to increase bilateral trade from USD 3 bn in 2021 to USD 10 bn by 2027. Since December 2021, Malaysia and Saudi Arabia have signed agreements on 18 industrial projects, with investments totaling nearly USD 1.7 bn and projected to create around 2,560 jobs.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Japan is also cementing ties with the Gulf states. <\/strong>Prime Minister Fumio Kishida <a target=\"_blank\" href=\"https:\/\/asia.nikkei.com\/Opinion\/Japan-should-look-beyond-energy-in-its-Middle-East-outreach\" style=\"\" rel=\"noopener\">signed an<\/a><a target=\"_blank\" href=\"https:\/\/asia.nikkei.com\/Opinion\/Japan-should-look-beyond-energy-in-its-Middle-East-outreach\" style=\"\" rel=\"noopener\"><\/a><a target=\"_blank\" href=\"https:\/\/asia.nikkei.com\/Opinion\/Japan-should-look-beyond-energy-in-its-Middle-East-outreach\" style=\"\" rel=\"noopener\">agreement<\/a> in Saudi Arabia in July 2023 to cooperate on rare-earth metals and clean hydrogen. Given Japan\u2019s strong business ties with ASEAN, there are also numerous chances to strike partnerships combining Japanese expertise and capital, and that of the Gulf, with leading local players.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>The India-Middle East-Europe Economic Corridor could be another long-term driver of<\/strong><strong> activity between the regions. <\/strong>Six months on from its announcement, consideration is understandably turning to the likely logistical and geopolitical challenges of making such a grand plan a reality. But there is good financial and political capital behind the project. Saudi Arabia has <a target=\"_blank\" href=\"https:\/\/www.axios.com\/2023\/09\/09\/us-saudi-india-uae-railway-deal-middle-east-europe\" style=\"\" rel=\"noopener\">committed<\/a> USD 20 bn to its success. US president Joe Biden called it a \u201cgame-changer.\u201d If even some of the potential of the initiative is realized \u2014 it could lead to a 40% <a target=\"_blank\" href=\"https:\/\/www2.deloitte.com\/content\/dam\/Deloitte\/xe\/Documents\/finance\/me_india-middle-east-europe-economic-corridor.pdf\" style=\"\" rel=\"noopener\">increase<\/a> in trade speed through the corridor \u2014 it could support a significant uplift in activity between Asia, the Gulf, and Europe.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Gulf sovereign wealth funds have been making tangible steps<\/strong> to seize the chance too. The Abu Dhabi Investment Authority has been a <a target=\"_blank\" href=\"https:\/\/www.gotocompany.com\/en\/news\/press\/adia-lead-goto-preipo-fundraising\" style=\"\" rel=\"noopener\">major investor<\/a> in Indonesian ride-hailing and e-commerce group GoTo since before its 2022 IPO. The emirate\u2019s renewable power company Masdar also made a <a target=\"_blank\" href=\"https:\/\/www.swfinstitute.org\/news\/95934\/indonesia-investment-authority-and-masdar-participate-in-ipo-of-pertamina-geothermal-energy\" style=\"\" rel=\"noopener\">strategic investment<\/a> in Indonesian Pertamina Geothermal Energy\u2019s IPO. Mubadala sought exposure to Asian demographics with its <a target=\"_blank\" href=\"https:\/\/www.cubehighwaystrust.com\/NewsRoom\/1\" style=\"\" rel=\"noopener\">investment<\/a> in India\u2019s Cube Highways Trust, and has now doubled down on the region with the <a target=\"_blank\" href=\"https:\/\/www.agbi.com\/articles\/mubadalas-beijing-office-to-deepen-uae-china-ties\/\" style=\"\" rel=\"noopener\">formal opening<\/a> of a Beijing office. Meanwhile, Saudi Arabia\u2019s Public Investment Fund (PIF) plans to build on the 2022 <a target=\"_blank\" href=\"https:\/\/www.chinamoneynetwork.com\/2023\/12\/13\/saudi-public-investment-fund-pif-reveals-plans-to-open-new-offices-in-china\" style=\"\" rel=\"noopener\">opening<\/a> of its Hong Kong office with a larger presence in mainland China. <\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Direct cooperation between both regions\u2019 sovereign wealth funds is further driving the&nbsp;<\/strong><strong>chance <\/strong><strong>for increased flows through the corridor. <\/strong>The UAE has <a target=\"_blank\" href=\"https:\/\/www.bi.go.id\/en\/publikasi\/ruang-media\/news-release\/Pages\/sp_256123.aspx\" style=\"\" rel=\"noopener\">committed<\/a> USD 20 bn to the newly established Indonesian Investment Authority, and the forthcoming Maharlika Investment Fund in the Philippines is drawing the attention of the Gulf\u2019s more established counterparts. Both funds take a catalytic role, seeking to attract co-investment into their countries in infrastructure and other key areas. That\u2019s a natural alignment for Gulf money \u2014 long-term, reliable in distribution, and anchored to demographics that are attractive even compared to growing home economies.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Other structures, such as a Middle East-China cooperation fund jointly established by the&nbsp;<\/strong><strong>city of Shenzhen and Saudi Arabia\u2019s PIF to stimulate post-pandemic growth<\/strong>, are taking targeted approaches, with similar initiatives involving other mainland Chinese cities, and potentially other sovereign funds, expected to follow.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>It is far from one-way traffic. <\/strong>A growing investor base in Asia is increasingly seeking access to potential investments in the Gulf. A mark of this was the launch in November 2023 of Asia\u2019s first ETF tracking the performance of Saudi Arabian equities. The Hong Kong listing attracted over USD 1 bn in assets under management at launch. We also believe that Japanese companies will be welcome partners to invest in the Gulf, bringing international experience and industrial expertise.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>The net zero transition will be a huge catalyst of activity through the new silk road.&nbsp;<\/strong>Enormous renewable energy and infrastructure development projects across the Gulf are opening the door for Asia-based contractors, and for the export of emission reducing technologies. For example, Saudi Arabia\u2019s ACWA Power signed <a target=\"_blank\" href=\"https:\/\/www.acwapower.com\/news\/acwa-power-signs-strategic-agreements-with-nine-chinese-entities\/\" style=\"\" rel=\"noopener\">agreements<\/a> with nine Chinese entities in 2022, laying the ground for financing, investment, and construction of ACWA Power\u2019s global clean and renewable energy projects.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>Transition-focused international agreements also inevitably relate to the high population<\/strong>, high growth, higher emitting markets along this corridor. At COP28 in December, the UAE announced the <a target=\"_blank\" href=\"https:\/\/gcfc.com\/\" style=\"\" rel=\"noopener\">launch<\/a> of its Global Climate Finance Centre. Based in Abu Dhabi, it will support local and international players in unlocking capital for transition in markets laying largely along the Silk Road. COP28 also saw the launch of the Capacity-Building Alliance of Sustainable Investment, focused on addressing the bottleneck in emerging and developing markets around technical capacity to access private and public capital for the transition. <\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\"><strong>When delegates met at HSBC\u2019s inaugural Global Investment Summit in Hong Kong on 8<\/strong><strong>April, they discussed how these types of new networks are changing the global economy. <\/strong>Making precise predictions might be ill-advised, but the deep and growing connectivity between Asia and the Gulf, backed by active diplomacy, cooperation, and investment is too compelling, and makes too much sense to be derailed. It suggests the beginning of a generational shift that will have far-ranging implications for international trade, business, and societies.<\/p>\n<p style=\"padding:0;margin:0;line-height:1.15;orphans:2;widows:2;text-align:left\">Greg Guyett is CEO of HSBC Global Banking &amp; Markets. This Message from HSBC was originally published in Nikkei Asia.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>GCC trade with emerging Asia will reach USD 578 bn annually by 2030, surpassing trade with advanced 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