Business Prospects in the GCC-Asia Trade and Investment Corridor

Trade between the GCC region and Emerging Asia reached around 35 percent between 2021 and 2022, supported by the rapid development, expanding energy needs, large populations, growing consumer power, and high-tech capabilities in key Asian markets. High-profile state visits and trade deals have sought to capitalize on these emerging trade and investment corridors between Gulf and Asian countries and attracted the attention of prominent sovereign wealth funds.

By Melissa Cyrill

Trade and investment dynamics between countries in the Gulf Cooperation Council (GCC) and Asia are undergoing a remarkable transformation, marked by an impressive surge in bilateral flows of goods, services, and capital in recent years.

GCC-Asia trade and investment dynamics

According to research conducted by the London-based think tank Asia House, trade between the GCC region and Emerging Asia has experienced a staggering 34.7 percent growth between 2021 and 2022 alone. This is slightly higher than the Gulf’s combined trade with the US, UK, and Western Europe during the same period at 32 percent.

Per the Asia House report, trade between the Gulf and Emerging Asia increased from US$383 billion in 2021 to US$516 billion in 2022 and is projected to reach US$757 billion by 2030. This trajectory suggests that trade between the GCC and Emerging Asia could potentially surpass that with Advanced Economies by 2026. The numbers are quite indicative – in 2010, the gap between Gulf-Asia trade and that between the Gulf and Advanced Economies was at around US$191 billion, which then dropped to US$71 billion by 2022.

Emerging Asia comprises the IMF’s ‘Emerging and Developing Asia’ list of 34 Asian economies, which includes 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. The Advanced Economies category refers to the IMF’s list of 40 economies, including traditional GCC trading partners such as the US, UK, and the Eurozone. Some Asian economies are included in this list, including Japan, Singapore, South Korea, Hong Kong, Macao, Taiwan, Australia, and New Zealand.

Growth drivers

Various factors are propelling the trade growth between GCC economies and Emerging Asia markets. For one, Asia’s increasing reliance on oil imports, especially in the wake of the United States achieving oil self-sufficiency, plays a significant role. Additionally, the GCC’s substantial food imports, combined with India’s status as the world’s second-largest food producer, contribute to the burgeoning trade relations. Moreover, investments from the GCC’s sovereign wealth funds (SWFs) into Asia further fuel this momentum.

Aligned with the above dynamics is the ongoing commitment of the GCC to transition into a diversified, global economy, which has driven the conscious efforts to expand trade and investment networks globally. Beyond being renowned oil exporters, certain GCC countries have emerged as prominent global investors and key hubs for transportation and logistics. Further, the long-term and substantial presence of Asian expatriates across the GCC underscores the deep economic ties between the two regions.

Highlighting key Gulf-Asia trade and investment networks

Between 2021 and 2022, the UAE concluded Comprehensive Economic Partnership Agreements (CEPAs) with India, Indonesia, South Korea, and Cambodia. These agreements removed or reduced tariffs, lowered other barriers to trade, enhanced market access for merchandise and service exports, and harmonized digital trade with some of the most dynamic markets in the world. Given Asia’s status as among the world’s principal manufacturing hubs and an important center of innovation, the UAE expects a significant movement of products via its ports and freezones, to markets right across the world. Multiple opportunities exist for UAE exporters in tapping the consumer spending power of the emerging middle class in Southeast Asia and India.

“Our CEPA with Indonesia only came into force on September 1, 2023, so we don’t yet have sufficient data on which to draw, although we are projecting that bilateral non-oil trade will reach US$10 billion by 2030. In terms of India, our second-largest trade partner, we can see that the CEPA has helped to maintain the upswing in bilateral trade amid a general downturn in global trade volumes.” – HE Dr Thani Al Zeyoudi, Asia House report, November 2023

In terms of Saudi Arabia’s relations with Emerging Asian markets, what stands out is the trade surge between the kingdom and China, which doubled from approximately US$54 billion in 2010 to US$105 billion in 2022. More than 30 deals were signed during the state visit from Chinese President Xi Jinping to Riyadh in 2022, including a strategic partnership agreement and committing to high-level visits every 2 years. China is considered a key partner for delivering on Saudi Arabia’s Vision 2030 goals. Sector beneficiaries of greater Saudi-China engagement include the digital economy, gaming, telecommunications, manufacturing, and logistics.

China, India the Gulf’s largest trade partners

UAE-China trade relations have also prospered, growing six-fold at an approximate average annual growth rate of 21 percent between 2010 and 2022. Non-oil trade between the two countries rose by 18 percent to reach US$72 billion in 2022. The UAE views China as a key development and sustainability partner and has negotiated deals across multiple sectors, including nuclear, electric vehicles, oil, technology, and freezones.

Read: China’s Tax, Investment, and Trade Agreements with Countries in the Middle East

Trade between the UAE and India has also experienced rapid expansion – propelled by the CEPA deal, the facilitation of cross-border transactions using their respective currencies, and a series of economic cooperation agreements. In February 2024, India and the UAE concluded seven agreements, including a bilateral investment treaty (BIT), International Framework Agreement on the India-Middle East-Europe Economic Corridor (IMEC), and memorandum of understanding (MoU) on port infrastructure development, power trade, linking digital payment platforms like UPI, credit and debit cards, among others (access our article here for more information).

Similarly, trade between Saudi Arabia and India is also on a steep upward trajectory, witnessing a remarkable 48.5 percent growth from US$35 billion to US$52 billion between 2021 and 2022. Furthermore, India’s ascent to becoming the world’s most populous nation in 2023, coupled with the anticipated growth of its middle class demanding digital and other services, positions India as an enticing investment destination for Gulf companies and SWFs.

Where business prospects lie

Strengthening bonds between regions rich in talent, energy resources, knowledge, and food reservoirs yields mutual benefits and unlocks myriad opportunities. The surge in trade fosters demand for servicing and building logistics infrastructure, while the growth of e-commerce necessitates efficient last-mile delivery solutions. Moreover, heightened demand can spur the establishment of manufacturing facilities in the GCC, and the flourishing tourism sector presents prospects in hospitality, aviation, and travel services, among others. These developments exemplify the multifaceted advantages arising from the deepening GCC-Asia trade and investment corridor.

Besides these traditional areas of industrial, tourism, and trade facilitation, the GCC countries are becoming more ambitious about advancing technology capabilities, reaching sustainability goals and lowering greenhouse gas emissions, and investing in frontier sectors. This is also responsible for the so-called ‘Asia pivot’ – with Gulf-Asia cooperation emerging in key sectors like communications, networks, and cloud computing; semiconductors; artificial intelligence (AI); pharmaceutical and health technology; food technology; renewable technology; critical minerals, EVs; hydrogen production; fintech and digital assets; and advanced manufacturing and logistics.

Outlook

The evolving trade and investment landscape between the GCC and Asia presents exciting prospects for businesses seeking growth and diversification. As highlighted by recent research, the surge in trade between the GCC and Emerging Asia markets, surpassing even traditional partners like the US and Europe, signifies a significant shift in global economic dynamics.

This makes it an opportune time to establish strategic partnerships with local players in target markets to enhance market penetration and navigate regulatory complexities effectively. Collaborative ventures can accelerate market entry and expansion efforts.

Should you require further insights or assistance in navigating this evolving landscape, feel free to reach out to us at dubai@dezshira.com

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