March 13, 2024
MANILA – The Middle East’s pivot to Asia accelerated significantly last year.
This is according to a 2023 report by Asia House, an independent think tank.
Advisory services that enable commercial, political and economic engagement between Asia, the Middle East and Europe.
The Gulf Cooperation Council (GCC), made up of Saudi Arabia, the United Arab Emirates, Qatar, Oman, Kuwait and Bahrain, has recorded a “remarkable surge” in trade with “emerging Asia”, the paper said.
“Emerging Asia” refers to the International Monetary Fund’s (IMF) “Emerging and Developing Asia” list, which includes 34 Asian economies, including China, India, and most ASEAN member states. However, developed Asian countries such as Japan, Singapore, South Korea, Hong Kong, Macau, and Taiwan, as well as Australia and New Zealand, are excluded.
Trade between these regions increased by 34.7 percent from USD 383 billion in 2021 to USD 516 billion in 2022, growing faster than predicted in previous reports.
Current GCC regional trade and forecast GCC regional trade in 2023 (percentage).
Source: Asia House Report 2023
If GCC-Asia trade continues to grow at the average annual growth rate achieved between 2010 and 2019 (about 4.9%), it will reach about USD 757 billion by 2030, almost doubling from 2021. is expected to increase rapidly.
Beyond oil
Much of the growth is due to higher average oil prices in 2022 compared to 2021.
But trade is not just about oil. As Gulf countries implement their economic policies,
The diversification strategy has expanded Gulf-Asia technology trade into the digital services sector, as well as sourcing Asian expertise to strengthen the Gulf’s digitalization plans and develop new growth areas.
These include AI, communications technology, cloud technology, 5G, semiconductors, health technology, fintech, and food technology.
Sustainable cooperation between the Gulf and Asia, especially China, is also increasing. Synergies between renewable energy, hydrogen, electric vehicles (EVs) and green construction facilitated this cooperation.
Soft power activities such as tourism, culture, education, and people-to-people exchanges in Gulf Asia are also seen as having the potential to contribute to strengthening this axis.
Major geoeconomic and geopolitical changes
Asia House’s report says Asia is “rapidly overtaking” the West as the Gulf’s main economic partner.
Growth in Gulf trade with Asia continues to outpace growth in trade with Western countries such as the United States, the United Kingdom, and the Eurozone (a category of countries that use the euro currency and are primarily located in Western Europe).
Gulf-Asia trade increased by approximately 34.7 percent between 2021 and 2022. In comparison, the Gulf region’s total trade with the United States, United Kingdom, and Western Europe increased by about 32 percent.
Gulf trade with developed countries was worth USD 587 billion in 2022. These economies are included in the IMF’s list of 40 countries, including traditional GCC trading partners such as the United States, the United Kingdom, and the euro area.
In addition to Australia and New Zealand, developed countries in Asia are also on the list.
However, Asia House forecasts that trade with Asia will soon exceed trade with developed countries, perhaps by 2026.
China as the ‘main driver’ of the Middle East’s pivot to Asia
The report states that bilateral trade between China and Gulf countries is “accelerating at a breakneck pace.”
Trade between the Gulf region and China has increased by about 50.6% over the past decade, roughly equal to the Gulf region’s trade with the United States, the United Kingdom, and Western Europe combined.
UAE-China trade relations are currently of paramount importance at this turning point, increasing by approximately 37 percent from an estimated USD 78 billion in 2021 to USD 107 billion in 2022.
China is the UAE’s largest global trading partner, according to Hussein bin Ibrahim Al Hammadi, UAE Ambassador to China, in an article by Yang Lan in China Daily on December 15, 2023 last year. was mentioned.
Meanwhile, the same report said the UAE is now China’s top trading partner in the Arab world and “ranks first among the top 20 Arab countries in which China invests.” .
Notably, in both years, the UAE’s trade relationship with China exceeded its trade with the US, UK, and Western Europe combined.
Saudi-China trade also surged by about 28% from USD 82.1 billion to USD 105 billion between 2021 and 2022.
According to the aforementioned Saudi state news agency SPA, Chinese President Xi Jinping’s visit to the oil-rich country in December 2022 will lead to increased investment in green energy, information technology, cloud services, transportation, construction and other sectors. It is said that 34 deals have been concluded. In an article in the Straits Times.
It was reported that the two countries signed initial agreements worth USD 30 billion during the visit.
Continued internationalization of the Renminbi (RMB) as a global trade currency could further increase China’s economic influence in the region, with its use in trade settlements tripling in the past three years are doing. It currently exceeds the euro in about 6% of global trade.
As China’s economic influence in the Gulf region expands, the world’s second most populous country is now becoming increasingly involved in regional politics. This change could reduce U.S. influence in the region.
In addition to China, bilateral relations with Gulf countries and other Asian countries are also flourishing.
For example, India’s trade with the Gulf has grown, facilitated by India’s relationship with the UAE.
The Comprehensive Economic Partnership Agreement (CEPA) was signed on February 18, 2022 and entered into force on May 1, 2022.
Additionally, the two countries signed an agreement on a trade corridor on February 14, 2024 last year, according to a report in The Straits Times. The deal aims to link Europe and India via parts of the Middle East by sea and rail, an “ambitious plan” backed by the United States and the European Union.
The GCC’s trade with Asia is catching up with developed countries.
Source: Asia House Report 2023
Trade value fell to USD 67 billion in 2020, but recovered to USD 95 billion in 2021, before rapidly rising to USD 138 billion in 2022.
Current and potential challenges
Despite the optimism, challenges remain.
Recent conflicts in the Middle East have made the region’s future even more uncertain.
If the situation escalates, energy producers and energy prices in the region could be adversely affected, and global growth could be hampered by spurring inflation and higher interest rates.
Economic growth in the Middle East will continue to slow in 2023, while Asian economies such as China will continue to recover from the coronavirus pandemic due to a sluggish real estate market, high youth unemployment, and declining confidence in the private sector. continues to make a recovery.
Tensions between the U.S. and China have also worsened over the past year, which could have a negative impact on Pivot.
Intensifying competition among Gulf countries could lead to protectionism and localization, undermining the country’s core.
rosy outlook
Despite these challenges, the Asia House report says long-term growth fundamentals for Gulf Asia trade are “robust.”
The report notes that Gulf states’ efforts to diversify their economies beyond oil into areas such as sustainability and technology will further foster cooperation.
Trade is expected to increase over the next decade as Asia’s economy, middle class population and energy demand expand.
The Gulf’s economic and social reforms, capital market expansion, and increased focus on Asia by Gulf Sovereign Wealth Funds (SWFs) are also expected to attract more investment from Asia and further drive the shift.
Overall, Asia’s growing economic importance to the Gulf region has led to increased political engagement and cooperation.
As trade and investment ties between the Gulf and Asia grow, Asian perspectives will become more important in the strategic decision-making of Gulf leaders, and Western influence will increase, according to a report by Asia House. is likely to weaken.
There is no denying that the Middle East’s pivot to Asia is one of today’s defining geopolitical and geoeconomic changes, and it deserves more attention from world business and political leaders. The report further points out:
