Emerging Asia is set to become the Gulf region’s biggest trading partner by 2028, according to a new report.
Trade between the two blocs is expected to reach $578bn by 2030, says the Asia House Research team.
Having recovered from the shock of coronavirus faster than anticipated, trade between Asian and the Gulf states is predicted to surpass that between Gulf countries and advanced economies by 2028.
“Trade between the Gulf Co-operation Council (GCC) and emerging Asia, which had dipped from $320bn in 2019 to $262bn in 2020, has now recovered to levels not seen since 2014,” said the report titled, The Middle East Pivot to Asia 2022.
“We expect this trade to continue growing, reaching approximately $578bn by 2030.”
Emerging Asia refers to the IMF’s ‘emerging and developing Asia’ list of 34 Asian economies, including China, India, and most Asean members, but excludes advanced Asian economies such as Japan, Singapore, South Korea, Hong Kong, Macao, Taiwan, Australia, and New Zealand.
There are 10 Asean nations: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
GCC-China trade is driving emerging Asia’s trade with the Gulf, having doubled from $90.6bn to $180bn between 2010 and 2021.
Several milestones have been reached, the researchers said.
GCC-China trade reached a record high and surpassed GCC trade with the US and Euro Area combined for the first time in 2021, they said.
“China’s trade with Saudi Arabia stood at $81.7bn in 2021, exceeding Riyadh’s trade with the US, the UK, and euro area combined ($81.4bn).”
“We also expect the UAE’s trade with China to overtake that with western economies,” said the report.
The difference is narrowing, and now stands at about $3.4bn. In 2010, it was $28bn, it said.
Oil is central to the pivot, with global prices tracking GCC-emerging Asia growth closely.
“Asian demand for oil is still expected to increase over the next few years despite higher prices. A sustained period of increased oil prices in 2022 will facilitate the pivot,” said the report.
But ties have evolved from being primarily based on the fossil fuel trade.
The relationship is now broader, crossing multiple sectors, fulfilling strategic objectives of both regions, said the researchers.
“We expect GCC-Asia co-operation on sustainability and renewables to increase at pace, driving the pivot and encouraging Gulf economic diversification,” said the report.
Gulf economic and social reform is attracting foreign investment, expanding non-oil sectors that are benefiting from Asian expertise and investment, and encouraging Asian firms to relocate or expand into the Gulf, according to the report.
And Gulf sovereign wealth investment into Asia is growing in return.
India and Asean nations are the major beneficiaries.
“The sovereign wealth funds are opening new offices in Asia to monitor investments and seek opportunities.
“We expect greater Gulf sovereign wealth investment to encourage political exchanges to protect these investments.”
“Very promising” progress is also being made on negotiations between the UK and the Gulf Co-operation Council, according to the head of the Arab British Chamber of Commerce.
Bandar Reda, secretary general and chief executive of the ABCC, expects a free trade deal to be struck “very soon”, opening wide the doors for jobs and investment on both sides.
