The trade potential of Middle Eastern countries
The impact of the 2014 oil price plunge is still reverberating in the Middle East. The decade of affluence at the time of high oil prices has been replaced by a two-year fiscal crisis, and the pain continues in this region. For example, in the oil-rich Gulf countries, economic growth this year is expected to slow to 0.9%, compared with 2% in 2016, because oil exporting countries cut production to support sluggish oil prices.
However, economists are seeing signs of hopeful recovery. In its latest outlook for the Middle East, the International Monetary Fund (IMF) predicts that non-oil growth in the Gulf region will increase from 2% last year to 3% in 2017. Saudi Arabia and the United Arab Emirates especially hope to boost growth by strengthening trade with the United States and China. As the largest economy in the region, Saudi Arabia desperately needs a round of recovery after two years of spending cuts to bridge a growing budget deficit. The Saudi private sector has always been too dependent on government spending, and now the country is keen to open up new channels for investment and trade.
In May, Donald Trump chose Saudi Arabia as the destination for his first overseas trip since he took office. The two sides reached an agreement worth up to 380 billion U.S. dollars, including an arms agreement worth 110 billion U.S. dollars.
According to these agreements, Saudi Arabia will purchase U.S. goods (including purchases for its own petroleum industry) and invest $20 billion in a U.S. infrastructure fund managed by Blackstone. Saudi Arabia is also seeking capital to flow into the country's economy. These transactions include a $6 billion pledge to assemble 150 Lockheed Martin Blackhawk helicopters in Saudi Arabia.
During Trump's visit to Saudi Arabia, Saudi Oil Minister Khalid al-Falih said: "Both governments will open their doors." He also said that Saudi Arabia is known as the "Vision 2030" ( The economic and social reform process of 2030 Vision will promote capital inflows and facilitate foreign investors to do business.
In the process of trying to diversify its domestic economic base and get rid of its traditional dependence on Western allies, Saudi Arabia is also turning to the east.
In March of this year, when King Salman bin Abdul Aziz al-Saud visited China, the two sides signed an agreement worth 65 billion US dollars, including the construction of oil refining Plant and petrochemical plant plan. As an increasingly important export destination for Saudi crude oil, China maintains a balance of its own interests amid the intricate conflicts in the Middle East and maintains a close relationship with Saudi Arabia’s enemy Iran.
There are also other Gulf countries that are closely following the Saudi King’s visit to China (this trip to Asia also includes Japan and Indonesia), and these countries are also exploring the development of deeper trade relations with China. In the UAE, Dubai’s largest trading partner is China (accounting for 13% of trade), followed by India with 7.4% and the United States with 6.7%.
Dubai is looking towards China, hoping to facilitate new trade routes from the world’s second largest economy to Europe via Asia, the Middle East and Africa. Dubai's successful "free zone"-which provides preferential conditions for companies setting up business here-has attracted companies ranging from industry to media and technology.
“We are rapidly moving towards a'post-oil UAE',” Sheikh Hamdan bin Mohammed al-Maktoum, Crown Prince of Dubai, said recently. “We are making further progress. Diversify the economy and attract more investment."
Dubai’s financial “free zone”-Dubai International Financial Centre (DIFC) seeks to position itself as the center of the so-called South-South Trade Corridor, which consists of emerging economies that trade with each other (rather than with Western countries).
According to the Dubai International Financial Center, the number of active registered companies here has increased from 1,445 in 2015 to 1,648 in 2016. Among them, the number of regulated financial companies increased by 10%.
Among the companies that have settled in the Dubai International Financial Center, approximately 11% are from Asia, and this proportion is expected to increase. Last year, about 60% of the center's growth came from emerging market institutions.
“Many of the ever-increasing trade routes entering the Arab world via Dubai are driven by China, and China is also providing financing for large-scale infrastructure projects in the vast Middle East, Africa and South Asia,” said the Governor of Dubai International Financial Center. Essa Kazim said, “Facilitating trade and investment in the South-South Corridor remains the priority task of the Dubai International Financial Center.”
Qazim said that in general, the UAE is interested in gaining potential benefits from China's "One Belt, One Road" initiative. The Belt and Road Initiative aims to rebuild the historical land and sea trade routes from China through Asia and Africa to Europe.
Dubai World Port intends to integrate with "One Belt One Road"
Sultan Ahmed Bin Sulayem, chief executive of DP World, has no such concerns. He sees China's massive reshaping of the ancient Silk Road trade route as a business opportunity that may help alleviate the effects of the slowdown in global economic growth. "China's horizons are changing," Bin Sulayem said. He is one of the highest-ranking officials in Dubai.
For example, Dubai World Ports has just launched the first direct freight train from the UK to China. In April of this year, the train departed from the London Gateway of Dubai World Ports at the mouth of the Thames, loaded with British products ranging from whiskey to medicines, and arrived in the eastern Chinese city of Yiwu in three weeks.
Dubai World Ports strives to connect its global transportation network with China’s estimated US$900 billion investment in the “Belt and Road” project. "We will work with the Chinese to get our ports ready," Bin Sulayem said. "They need to build thousands of kilometers of railway network to make the entire network work."
Dubai World Ports, which has four joint ventures in China, said that wage costs in China are rising by 20% every year. This rising cost has caused Beijing to place export-oriented manufacturing in lower-cost domestic cities (such as Urumqi in northwestern China), and even Myanmar, Indonesia, and Cambodia abroad.
"These areas are developing rapidly like bamboo shoots after a rain, and they will produce goods for Europe and the West," Bin Sulayem said.