The Gulf must harness the potential of new economic blocs

CFOTO/Sipa USA via Reuters Connect

As global trade patterns shift, it is imperative that nations recognise the importance of fast-developing commerce blocs. Middle East governments now have an opportunity to secure their positions in the global marketplace and propel growth.

The spectre of “perma-crisis” – characterised by prolonged conflicts, geopolitical tensions, looming recessions and the threat of new pandemics – casts a long shadow over governments. 

Dealing with uncertainty, embracing transformation, fostering agility and forging strong partnerships with the private sector are no longer optional, but essential paths to resilience.

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Fortunately, the evolving trade landscape offers fertile ground for such collaboration. Projects such as China’s New Silk Road – aka the Belt and Road Initiative – and the India-Middle East-Europe Economic Corridor create powerful platforms for regional co-operation and strategic partnerships.

Countries such as the UAE and Saudi Arabia are ideally positioned at the intersection of continents and can leverage their resources, geography and strategic advantages to solidify their roles as pivotal nodes in these networks.

A new report by Oliver Wyman outlines three potential scenarios for how trading blocs could evolve: a regionalised economic bloc characterised by high integration and rapid transformation; a scenario with medium integration and high de-carbonisation; and a third scenario characterised by moderate integration and a focus on innovation. 

Regardless of the path taken, the report highlights the Middle East’s strategic importance in this new trade order.

Resource-rich countries are well-positioned to capitalise. During international crises, their ability to stabilise global supply chains can position them as reliable partners, not just beneficiaries, within the global economic engine. 

This is especially important in the climate crisis, which is making supply chains highly vulnerable to extreme weather events, according to the World Economic Forum’s Global Risk Report 2024.

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However, navigating this landscape requires more than just a favourable geographic location. 

Proactive leadership and strategic positioning are paramount. The Global Risk Report identified livelihood crises as the second most likely global risk, highlighting the need for economic diversification and job creation within the GCC, which can be facilitated by trade agreements and regional collaboration. 

Regional governments must actively engage in trade negotiations, foster partnerships within and beyond existing blocs, and implement policies that support seamless integration, according to the report. Participation in blocs and networks such as Brics can amplify the influence of GCC countries on the global stage, particularly with respect to trade.

The impact of GCC countries’ participation in these trade constellations extends far beyond their borders. Their decisions influence investment flows, resource allocation and, ultimately, the prosperity of nations across the globe.

Under the “regionalised economic bloc” scenario, intra-regional trade within the Silk Road could rise to 70 percent of total trade, demonstrating the significant impact these emerging blocs can have on global trade flows. 

In addition, the Middle East, Africa and Asia will propel global trade from $21 trillion to $32.6 trillion by 2030, according to research from Standard Chartered Africa and Middle East.

So, shaping the future of trade is intertwined with shaping the future of governments – in other words, we are moving from a situation where markets shape politics to a situation where politics shape markets. 

By embracing proactive leadership, strategic partnerships and a commitment to regional and global collaboration, GCC countries can ensure their own economic success while also contributing to a more stable, interconnected and prosperous world. 

Adel Alfalasi is head of UAE and partner in the government and public institutions practice at Oliver Wyman