During his visit to Expo 2020 in October, India’s Commerce Minister, Piyush Goyal, announced his country’s ambition to finalise a trade agreement with the UAE by early next year. The announcement came on the same day that Indian industrial conglomerate Reliance unveiled plans for a new UAE trade hub, and in the same week that Abu Dhabi Investment Authority announced a $400 million deal with Indonesian tech firm GoTo.
These developments underline a trend that has been quickening in recent years: the forging of stronger economic relationships between the Gulf and Asia.
Research published by Asia House last month found that trade between the GCC and emerging Asian markets – including India and China – grew by 36 per cent in the decade before the pandemic, alongside a slowing of trade with advanced western economies, such as the US, UK and EU.
By 2030, GCC trade with Asian emerging markets will be worth $480 billon, the research forecasts, outstripping the region’s trade with advanced western economies for the first time.
A new narrative is emerging in geopolitical circles of a growing competition for influence in the Gulf between East and West amid rising global tensions.
For some in the West, the situation might represent cause for concern. It need not. Rather, mutual opportunities will abound as the Gulf rises further with Asia’s tide.
An obvious example lies in the investment and development opportunities that are emerging as Middle East economies diversify and prosper amid growing trade with Asia. Rapid urbanisation and infrastructure development remain key trends across the region – the population living in the Middle East’s cities more than doubled between 1960 and 2015 – with Gulf economies outlining visions for smart cities, such as Neom, centred on innovation and sustainability.
For economies such as the UK, these are visions worth sharing, given Britain’s particular strengths in frontier technologies such as AI, digital infrastructure and renewable technologies. The UK government is, I’m sure, working hard to help UK businesses engage with these projects and capture the opportunities they herald.
But perhaps the most profound benefit arising from stronger Gulf-Asia ties can be found in the most pressing issue facing us all today. As world leaders wrap up Cop26, they understand that the challenges of climate change can only be met through global co-operation. And those challenges are huge, especially as emerging economies are under pressure to balance economic development with climate action. South-East Asia’s electricity demand, for example, is the fastest-growing in the world, yet renewables accounted for just 15 per cent of the region’s energy mix in 2019.
Here, too, closer ties between the Gulf and Asia are making a positive contribution. The Gulf is leading the way on innovative solutions to meeting global energy demand while working towards reducing carbon emissions, and Asian economies are proving important partners in doing so. Last month, during the Future Investment Initiative meeting in Saudi Arabia, Saudi oil giant Aramco announced a deal with Hong Kong-based InterContinental Energy to build a green hydrogen plant. And in September 2020, Saudi Arabia sent blue ammonia to Japan in a world-first shipment of a commodity that promises to be a key transition fuel as economies shift towards renewables. With the Gulf seeking investment to further develop such technologies, moreover, the inevitable demand for green finance will offer lucrative opportunities for financial hubs both East and West.
Importantly, it is not one-way traffic. Among the most eye-catching trends in recent years has been the growing presence, quite literally, of Middle Eastern sovereign wealth funds in Asia. SWFs from across the region have opened offices in Asian hubs such as Singapore, Hong Kong, Shanghai and Beijing. The trading posts that once anchored the Silk Roads between the peoples of Eurasia are, perhaps, rising again.
Geography is, of course, important. The Middle East has always been a conduit for trade between East and West, and in a world of supply chain disruption and shipping delays, its position on global trade routes has never been more important. But the region has also been a conduit for ideas and engagement, and at a time of global tensions, this is more important still.
A Gulf that is open to both East and West can fuel the global recovery and help build a greener economy through energy innovation. The Middle East’s pivot to Asia, then, could serve as a great connector for the world and key driver of global growth in the century ahead.