Asia top emerging market for GCC

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Omani tourist in Bangkok

Asia will be the most important emerging-market region for the GCC in the coming years, according to a study by the Economist Intelligence Unit on GCC trade and investment flows.

The study says that the share of trade between the two regions is rising rapidly. In 1980, just 10 per cent of the GCC’s total trade was with Asia. By 2010, this share had already risen to over 36 per cent. Growth in trade has risen by 12 per year per year since 1980, double the rate of growth in trade with the OECD. If this level of trade growth continues, Asia will be the GCC’s biggest trading partner by 2017, accounting for a greater volume of trade than the OECD. India, China and Indonesia account for more than half of the GCC’s trade with Asia.

Rising oil demand will play a major role, according to the study. It is estimated that oil consumption in Asia will grow by 4.4 per cent per year on average until 2016, while the OECD’s demand is expected to plateau. Rising consumer good consumption in Asia, fuelled partly by an expanding middle class, will produce a host of new opportunities for trade. Tourism, one of the GCC’s competitive strengths, is already benefiting from the growing Chinese middle class.

Over the next decade, Asian growth will enter a new phase with domestic demand, particularly the local consumer market, which has substantial savings to draw on, becoming increasingly important, the study says. This translates into new opportunities to export goods and services to Asia. For GCC investors, expected returns on investment in Asia compare very well with those in the OECD.

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The study mentions the most promising sectors, which are, apart from oil trade, energy investments, consumer goods trade and investments and industrial materials (notably chemicals, steel and aluminium).

The services sector will also be a crucial component of GCC-Asia economic relations. Most Asian countries have vast infrastructure development needs. This, coupled with a shortage of capital, provides ideal opportunities for the GCC to step in, the study suggests. Notable investments by GCC companies in Asia are evident in the telecommunications industry, where giants such as Etisalat and Saudi Telecom have obtained licences to operate in Indonesia, Malaysia and several smaller Asian countries.

The expansion of Asia’s  middle classes will boost tourism, which will be supported by the expansion of routes to Asia by the big three airlines in the Gulf, Emirates, Etihad and Qatar Airways.

Another field for joint operations is Islamic finance. There is some rivalry between the GCC and Asia over where the natural hub of Islamic finance should be, but more recently there has also been a trend towards co-operation between the different jurisdictions. Currently, the majority of the global sukuk issuance takes  place in Asia, primarily Malaysia, which is home to the largest sukuk market in the world. However, there is also notable interest from Asian investors for sukus issued in the GCC.

The six major ASEAN economies — Indonesia, Thailand, Malaysia, Singapore, Philippines and Vietnam — play a key role in trade between the GCC and Asia. The countries account for 35 per cent of all Asian trade with the GCC.

There are also risks to consider: The global economic downturn can hit export-oriented nations hard, as could be seen in 2008 and 2009. The risks are lesser in the GCC’s main trading partners, India, China and Indonesia, where domestic demand is more significant.

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Reading Time: 3 minutes

Omani tourist in Bangkok

Asia will be the most important emerging-market region for the GCC in the coming years, according to a study by the Economist Intelligence Unit on GCC trade and investment flows.

Reading Time: 3 minutes

omani-tourists-bangkok
Omani tourist in Bangkok

Asia will be the most important emerging-market region for the GCC in the coming years, according to a study by the Economist Intelligence Unit on GCC trade and investment flows.

The study says that the share of trade between the two regions is rising rapidly. In 1980, just 10 per cent of the GCC’s total trade was with Asia. By 2010, this share had already risen to over 36 per cent. Growth in trade has risen by 12 per year per year since 1980, double the rate of growth in trade with the OECD. If this level of trade growth continues, Asia will be the GCC’s biggest trading partner by 2017, accounting for a greater volume of trade than the OECD. India, China and Indonesia account for more than half of the GCC’s trade with Asia.

Rising oil demand will play a major role, according to the study. It is estimated that oil consumption in Asia will grow by 4.4 per cent per year on average until 2016, while the OECD’s demand is expected to plateau. Rising consumer good consumption in Asia, fuelled partly by an expanding middle class, will produce a host of new opportunities for trade. Tourism, one of the GCC’s competitive strengths, is already benefiting from the growing Chinese middle class.

Over the next decade, Asian growth will enter a new phase with domestic demand, particularly the local consumer market, which has substantial savings to draw on, becoming increasingly important, the study says. This translates into new opportunities to export goods and services to Asia. For GCC investors, expected returns on investment in Asia compare very well with those in the OECD.

Click to enlarge

The study mentions the most promising sectors, which are, apart from oil trade, energy investments, consumer goods trade and investments and industrial materials (notably chemicals, steel and aluminium).

The services sector will also be a crucial component of GCC-Asia economic relations. Most Asian countries have vast infrastructure development needs. This, coupled with a shortage of capital, provides ideal opportunities for the GCC to step in, the study suggests. Notable investments by GCC companies in Asia are evident in the telecommunications industry, where giants such as Etisalat and Saudi Telecom have obtained licences to operate in Indonesia, Malaysia and several smaller Asian countries.

The expansion of Asia’s  middle classes will boost tourism, which will be supported by the expansion of routes to Asia by the big three airlines in the Gulf, Emirates, Etihad and Qatar Airways.

Another field for joint operations is Islamic finance. There is some rivalry between the GCC and Asia over where the natural hub of Islamic finance should be, but more recently there has also been a trend towards co-operation between the different jurisdictions. Currently, the majority of the global sukuk issuance takes  place in Asia, primarily Malaysia, which is home to the largest sukuk market in the world. However, there is also notable interest from Asian investors for sukus issued in the GCC.

The six major ASEAN economies — Indonesia, Thailand, Malaysia, Singapore, Philippines and Vietnam — play a key role in trade between the GCC and Asia. The countries account for 35 per cent of all Asian trade with the GCC.

There are also risks to consider: The global economic downturn can hit export-oriented nations hard, as could be seen in 2008 and 2009. The risks are lesser in the GCC’s main trading partners, India, China and Indonesia, where domestic demand is more significant.

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