Arab nations seek Chinese investment as Saudis take centre stage

Resource-rich region with $3.5tr aggregate economy is an attractive investment destination

Saudi Arabia's Minister of Energy Prince Abdulaziz bin Salman speaks during the 10th Arab-China Business Conference in Riyadh. Reuters

The Arab world is ready for increased Chinese investment with Saudi Arabia taking centre stage as it looks to solidify its position as a bridge between the Middle East and the world’s second-largest economy.

Resource-rich Arab nations are looking for investment partners that share their vision to be part of their growth story by not only developing mega projects but also by increasing local consumption in the region, Khalid Al Falih, Saudi Arabia’s Minister of Investment, said on Sunday.

“We will make sure China has a big part of this market,” he told delegates at the 10th Arab-China Business Conference in Riyadh.

“What we also need in the next development phase is real Chinese investment that adds value – not only receiving our natural resources but also adding value through industrialisation, logistics services and connecting the region … and its surrounding in Africa, Europe and of course China.”

In recent times, Chinese companies, whether private or government, and investment funds in the country have adopted a strategy of mixing their export of goods and services with the export of investments, he said.

This not only bodes well for Saudi Arabia, the Arab world’s biggest economy, but also for the rest of the Middle East, he added.

“What is coming to Saudi Arabia [in terms of Chinese investment] is good for the rest of the Arab countries,” Mr Al Falih said.

“We believe that the economic strength of Saudi Arabia is an integral part of the economic integration of the bigger Arab world.”

While the Arab world will benefit from deeper trade and investment relations with China, Chinese investors also stand to gain from partnering with the regional economies, the minister said.

He was speaking to more than 3,500 delegates comprising Chinese, Saudi and other Arab policymakers, government officials, investors and executives from top companies who have gathered for the two-day event.

The region has a population of 500 million, mostly young people, and its aggregate gross domestic product stands at $3.5 trillion, which makes it a substantial market for investments.

Saudi Arabia accounts for a third of the region’s cumulative GDP.

The region, especially the six-member economic bloc of GCC, is rich in hydrocarbon wealth and is looking to transform its economic landscape through radical reforms to cut reliance on oil.

Saudi Arabia, Opec’s largest crude exporter, the UAE, the Arab World’s second-largest economy and other countries in the broader Middle East and North Africa are trying to broaden their trading relationships with partners across the globe.

Arab nations have set ambitious foreign direct investment targets to expand their industrial base and develop non-oil sectors including mining and minerals, tourism and leisure to increase local consumption, create jobs and develop alternative revenue streams.

These countries are offering attractive incentives to foreign investors including those from China. The Chinese government and private sector companies have been aggressively investing over the past decade in countries along the old silk road through Belt and Road initiatives.

Rania Al Mashat, Egypt’s Minister of International Co-operation, said the pace of foreign investment in Egypt, which fell during the pandemic, has picked up again. There is renewed interest for investments in the Suez Canal, renewable energy, conventional energy and ports projects.

The Arab world’s most populous nation is open to innovative financing structures and public-private partnerships with Chinese investors and there are a multitude of opportunities available, she said.

Companies in Oman and the Omani government are also keen to partner with Chinese investors in the industrial sector and Oman’s ports, including Duqm, said Abdulsalam Al Murshidi, president of Oman's Investment Authority, at a panel discussion on Sunday.

China's overall outward direct investment reached $146.5 billion in 2022, up 0.9 per cent year-on-year.

Non-financial investment climbed 2.8 per cent on an annual basis to reach $116.9 billion, while the Belt and Road non-financial outward investments increased 3.3 per cent annually to $21 billion, according to EY estimates.

The number of Chinese companies setting up base in Saudi Arabia is also increasing rapidly as the kingdom launched four special economic zones at the end of last month – the King Abdullah Economic City, Jazan, Ras Al Khair and Cloud Computing in the King Abdulaziz City for Science and Technology.

These zones have already attracted $12.6 billion from investors across the maritime, mining, manufacturing, logistics and tech sectors. The investment pipeline has grown to $31 billion as interest continues to grow to set up base in the zones that also offer tax rebates for businesses.

Saudi Arabia is also keen to work with China on renewable energy as well as the mid-stream oil and gas sector, Energy Minister Prince Abdulaziz bin Salman told delegates.

Asked about criticism of the growing Saudi Arabia-China relationship, the minister said: “I ignore it”.

There have been several co-operation deals announced between the kingdom and China and "I wouldn’t be surprised if you will hear more announcements soon”.

He said the kingdom does not pick and choose and will work with partners where it sees the opportunity.

“We are involved in transactional activity and it is not a pot that you divide between countries,” he said.

“You go where the opportunity is and you go where partners want to invest.”

There are so many things that Saudi Arabia intends to do with China and “equally they want to do with us”, he said.

There are also synergies between what the Belt and Road initiative and what the kingdom wants to achieve out of its Vision 2030 programme, he added.

China is also keen to deepen trade ties with GCC countries and is seeking a free-trade agreement with the economic bloc.

However, the interests of emerging industries in the Gulf region and Saudi Arabia should be protected in the proposed agreement, Mr Al Falih said.

“We need to enable and empower our industries to export, so we hope all countries that negotiate with us for free trade deals know we need to protect our new, emerging industries,” he said.

The minister said he hoped the agreement, which is currently being negotiated, will be finalised soon.

“We have come a long way. The leadership from both sides is showing willingness,” he said.