Gulf’s pivot to Asia set to keep on rolling in 2024

Saudi Press Agency/Handout via Reuters

• Trade with emerging Asia soars
• GCC looks east for growth
• Links with China deepen

2023 has been the year of the comprehensive economic partnership agreement, better known as the Cepa, as the UAE seeks to increase non-oil trade to $1.1 trillion (AED4 trillion) by 2031.

The Emirates has seven deals in the bag and several more in the pipeline – and like many of its Gulf neighbours, it is increasingly looking east for growth.

The UAE has finalised Cepas with India, South Korea, Indonesia and Cambodia. Talks are continuing with Thailand, Vietnam, the Philippines and Malaysia.

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Experts on the region expect this figure to reach $757 billion by 2030 and to overtake trade with the IMF’s list of 40 advanced economies (which includes the US, UK and Europe, as well as Japan and South Korea) in 2026.

The GCC’s trade with emerging and developing Asia – an IMF grouping for 34 countries including China and India – surged by 34.7 percent to $516 billion in 2022, according to think tank Asia House. 

Stephen Moss, regional CEO for the Middle East, North Africa and Turkey at HSBC, said the bank believes there is $178 billion of untapped export potential between China and the Middle East in 2022-27.

“What lies ahead for trade between the Gulf and Asia promises to be even more exciting,” he said.

ANI via Reuters Connect

The UAE-China relationship is the most significant in the pivot to the east by GCC economies, but Saudi-China trade jumped by around 28 percent to $106 billion last year. It is expected to grow further in 2024.

Deals worth more than $25 billion were signed at the Saudi-China Investment Conference held in Beijing in early December. They covered sectors including energy, agriculture, tourism, mining, financial services, logistics, infrastructure, technology and healthcare.

China’s clean energy firms are also looking to Saudi Arabia to globalise their manufacturing bases as companies come under unprecedented margin pressure at home and trade relationships with the US and its allies deteriorate.

China is already the biggest trading partner for five of the six GCC economies (the exception is Bahrain, which has Saudi at No 1). GCC-China trade surpassed the GCC’s trade with the US and Europe combined for the first time in 2021. 

Gulf-China trade rose to about $250 billion in 2022, according to Asia House.

While much of this growth is down to higher average oil prices in 2022, there have been significant increases in non-oil sectors, particularly in technologies that are vital to the Gulf’s economic diversification and digitalisation, the think tank said.

There may also be a slowdown in Gulf-Asia trade growth in 2023 as oil prices dip from their 2022 high, but the long-term fundamentals are “strong”, according to Asia House.

Moss said: “Trade between the Gulf and Asia is accelerating, re-energising one of the world’s oldest business corridors.”

The Gulf’s relations with established Asian economies are also improving, most notably with Japan and South Korea. 

Gulf-Japan trade expanded by 38 percent to $119 billion in 2022. The UAE and Saudi Arabia account for about 85 percent of the total. 

Ties with South Korea are flourishing after state visits to Abu Dhabi and Riyadh by President Yoon Suk-yeol. Gulf-South Korea trade rose 56 percent to $78 billion in 2022 and is forecast to increase further this year. 

Freddie Neve, senior Middle East associate at Asia House, described the Middle East's pivot to Asia as “one of the defining geopolitical and geo-economic shifts of our time”.

“It warrants greater attention and focus from global business and political leaders to capitalise on this growing opportunity."