How GCC, China can strengthen their trade relations

Analysis  China’s technology and manufacturing equipment can contribute to GCC’s economic transformation and create more jobs in the non-oil industry. Shutterstock
China’s technology and manufacturing equipment can contribute to GCC’s economic transformation and create more jobs in the non-oil industry. Shutterstock
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Updated 13 March 2022

How GCC, China can strengthen their trade relations

How GCC, China can strengthen their trade relations
  • China is playing a key role in the development of the region’s non-oil sectors

RIYADH: As of 2020, China replaced the EU as the Gulf Cooperation Council’s largest trading partner. Saudi Arabia was China’s top supplier of crude oil in 2021. Its neighbor, the UAE, has become an important platform for re-exporting Chinese goods into the region and Africa.

Additionally, Qatar has become an essential natural gas supplier to China.

“There is a very strong China moment in the GCC that has been built over the past 15 years of (trade) relations,” said Mohammed Al-Sudairi, head of the Asian Studies Program at King Faisal Center for Research and Islamic Studies, in an interview with Arab News.

He pointed out that the general assessment across the GCC is that relations with China are much more important than before, “as it has become a top partner at the level of the bloc.”

China is also playing a key role in the development of the region’s non-oil sectors, according to Robert Mogielnicki, asenior resident scholar at the Arab Gulf States Institute in Washington.

The researcher believes that strong complementarities exist between China and the GCC across many sectors. These include tourism, telecommunications, artificial intelligence, smart cities, and renewables, among other technology-driven industries.

Reciprocity, mutual understanding and predictability are the most important aspects of GCC-China relations, said Tang Tianbo, a research fellow at China Institutes of Contemporary International Relations, known as CICIR, in an interview with Arab News. 

‘Win-win relationship’

“GCC is vital for China’s energy security while China provides GCC with a stable market for exports. It is a win-win relationship,” he said, adding that the GCC and China never impose anything on each other.

“Both sides recognize and defend each other’s independence and own choices,” said the Chinese researcher, while calling the relationship “pragmatic, stable and ever-growing.”

“This is highly valuable in a world full of uncertainty,” Tianbo underlined.

The GCC member states also compete among each other to capture Chinese trade and investment flows into the region, explained Al-Sudairi.

While the UAE has been at the forefront of this since 2004, other GCC member states have been following the suit by linking their national development plans with China’s Belt and Road Initiative, also called BRI.

He added that they have developed Jazan in Saudi Arabia, Duqm in Oman, and the Silk City in Kuwait as key areas for Chinese companies’ operation and spread Chinese trade and investment across the Middle East and East Africa.

“China’s Digital Silk Road overlaps neatly with technology-oriented development plans across the Gulf but especially in places like Saudi Arabia, the UAE, and Qatar,” said Mogielnicki, in an interview with Arab News.

He pointed out that these governments and their state-owned entities possess significant financial resources and have been tasked with quickly growing the digital economy. “Chinese firms are willing partners, offering cost-effective, high-quality services that can be completed over short timeframes,” added Mogielnicki.

Tianbo underlined that China can bring added value to the GCC in terms of e-commerce, Industry 4.0, new energy, among many others. “China and the GCC can cooperate in fields where China has a competitive edge and the GCC, an interest.”

Economic transformation

The CICIR researcher explained that China’s technology and manufacturing equipment can contribute to GCC’s economic transformation and create more jobs in the non-oil industry. 

Sovereign wealth funds are also strengthening China-Gulf relations.

For example, Abu Dhabi’s Mubadala, China Development Bank Capital, and China’s State Administration of Foreign Exchange set up a $10 billion UAE-China Joint Investment Fund in 2015. Recently, Gulf sovereign wealth funds are increasingly allocating a larger share of their portfolios toward China.

Yet, bilateral relations still face many challenges ahead.

The GCC has failed to fully integrate into the Chinese Belt and Road Initiative.

However, Mogielnicki said, “It’s not so much that the BRI has failed to expand to the GCC, but rather that the GCC is not quite a central component or ultimate destination of the BRI’s primary economic corridors.”

There are certain projects and initiatives in the GCC that are branded as part of the BRI. But the research scholar said he is skeptical of the BRI bringing an economic windfall to the region over the coming years.

“It is important to remember that the BRI emerged within the context of growing Sino-Gulf economic ties — it wasn’t the starting point of strong economic linkages,” he added.

A lack of economic diversification continued to prevail in the Gulf, despite government efforts to do so.

In the GCC, the oil and gas sector still dominates the economy and represents a majority of countries’ revenues. This creates an indirect dependency upon China, given that it is considered a major energy consumer.

Most Gulf countries rely on different trading partners for crude oil exports. However, Oman is highly dependent on China, which purchased 83 percent of Oman’s oil shipments in the first half of 2021, according to figures provided by Mogielnicki.

He explained that strength in bilateral relations ultimately comes through diversification — primarily diversifying trade flows or foreign investments.
“Gulf Arab economies would benefit from a more diversified mix of exports — beyond hydrocarbon commodities — to China. Gulf officials and business people also want to see more Chinese investments in non-oil areas of their economies,” added Mogielnicki.

Chinese capital

Additionally, attempts to lure Chinese capital have failed to gain momentum as the Middle East managed to attract only 2 to 3 percent of Chinese investments in the last decade.

For Tianbo, the GCC is perceived as a high-end market with considerable purchasing power, a vivid desire for new products and intense competition.

“Companies have to try and provide their best products and service to succeed. Compared to Western countries, China is a latecomer in the GCC, and there is a lot to learn and adapt,” concluded the researcher.


Global alliance on green economy launched in Dubai

Global alliance on green economy launched in Dubai
Updated 04 October 2022

Global alliance on green economy launched in Dubai

Global alliance on green economy launched in Dubai
  • UAE’s Economy Ministry is setting up shop inside the immersive virtual world

DUBAI: A “Global Alliance on Green Economy” was launched at the 8th World Green Economy Summit, which concluded in Dubai.

The summit was held under the theme “Climate action leadership through collaboration: The roadmap to net-zero.” A large number of ministers, experts, decision-makers, officials, representatives of institutions, and the academic community from around the world took part in the summit.

The alliance aims to build a coalition of countries, prioritizing a green economy in the context of climate action and sustainable development, to enhance the capacity of developing countries, provide support for their green economy transition projects and exchange knowledge on implementation.

“If we want to fast-track our transition to a green economy, we must all work together, and to do so, we need one platform with one common objective. The UAE Global Alliance on Green Economy seeks to provide such a platform,” said Mariam bint Mohammed Almheiri, UAE minister of climate change and environment.

Bet on tech

The UAE, which already boasts the world’s tallest skyscraper and has launched a bold Mars mission, now hopes to become a pioneer in the depths of the metaverse.

In a project launched at Dubai’s gleaming Museum of the Future, it announced that the UAE’s Economy Ministry was setting up shop inside the immersive virtual world that is now taking shape. 

If we want to fast-track our transition to a green economy, we must all work together.

Mariam bint Mohammed Almheiri, UAE minister of climate change and environment

Those who don their virtual reality goggles or use other means to venture within will find a ministry open for business with companies and even ready to sign bilateral agreements with foreign governments, officials said.

The metaverse is an online world where users will eventually be able to game, work and study, its proponents say — although it is still in a “test” phase, the UAE’s economy minister conceded.

Abdulla bin Touq Al-Marri was speaking at the inaugural Dubai Metaverse Assembly, held at the museum whose innovative ring shape decorated with Arabic calligraphy flanks the city’s main thoroughfare.

Representatives of tech giants mingled with entrepreneurs and developers exploring the potential of the metaverse, a network of digital spaces intended as an extension of the physical world.

DFM adopts new methodology

Dubai Financial Market said on Monday it planned to adopt a new methodology for its main equities indices, which will come into effect in the fourth quarter, according to Reuters.

The Dubai bourse’s general index, Shariah index and sector indices, will be calculated by S&P Dow Jones Indices, it said in a statement.

A key improvement among the changes is a limit on the weighting of a listed company to 10 percent from 20 percent, which should result in a larger representation of companies on the DFM’s benchmarks, it said.

The Dubai bourse said the index calculation will be based on actual free float adjusted market capitalization, and that the indices will be rebalanced on a quarterly basis, from semi-annually currently.

The bourse plans to align its sectors with an industry classification standard which is followed by institutional clients, it said.

DFM will have seven sectors: Financials, industrials, real estate, utilities, communication services, materials and consumer staples.

The bourse has invited market participants for consultations on the index methodology ahead of possible changes, with the revised indexes to be launched in Q4, it said.


Egyptian pound weakens the most in four months

Egyptian pound weakens the most in four months
Updated 03 October 2022

Egyptian pound weakens the most in four months

Egyptian pound weakens the most in four months
  • Foreign currency has dried up in Egypt over the last six months, forcing banks and importers to scramble to find dollars to pay for imports and putting pressure on the central bank to let its value weaken

CAIRO: Egypt weakened its currency on Monday by the most in more than four months, with the Egyptian pound falling by more than 0.10 pounds to the dollar, according to Refinitiv data.

The pound was trading at 19.62 to the dollar at 1337 GMT, down from 19.49 at the open.

Foreign currency has dried up in Egypt over the last six months, forcing banks and importers to scramble to find dollars to pay for imports and putting pressure on the central bank to let its value weaken.

Dollars have disappeared in part because of the higher cost of imported commodities, a drop in Russian and Ukrainian tourists and a flight of dollars from Egyptian treasury markets.

The last time the central bank allowed the currency to weaken so quickly was from May 22 to May 25, when it fell by 0.34 pounds against the dollar in three days.

The pound weakened to a record low on Dec. 21, 2016, when it traded at 19.80 pounds per dollar during intraday trade, according to Refinitiv. But in subsequent years it rebounded.

Egypt since March has been negotiating a financial support package from the IMF, which has long been urging it to allow greater exchange rate variability.


Oil jumps $3 as OPEC+ weighs biggest output cut since 2020

Oil jumps $3 as OPEC+ weighs biggest output cut since 2020
Updated 03 October 2022

Oil jumps $3 as OPEC+ weighs biggest output cut since 2020

Oil jumps $3 as OPEC+ weighs biggest output cut since 2020

RIYADH: Oil prices jumped $3 a barrel on Monday as the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, considered reducing output by more than 1 million barrels per day to buttress prices with what would be its biggest cut since the start of the COVID-19 pandemic.

Brent crude futures for December delivery rose $2.99 to $88.13 a barrel, a 3.5 percent gain, by 12:50 p.m. ET (1650 GMT). US West Texas Intermediate crude rose $3.33, or 4.2 percent, to $82.82 a barrel.

Citing OPEC+ sources, Reuters reported that the organization is planning an output cut of more than 1 million bpd ahead of its meeting in Vienna on Oct.05 to decide on the next phase of the production policy. 

It should be also noted that the upcoming meeting on Wednesday will be the first in-person meeting of OPEC ministers since 2020, which clearly indicates its significance. 

If the meeting agrees to the output cut, it will be the organization’s second consecutive monthly cut after reducing output by 100,000 bpd last month.

“If OPEC+ does decide to cut output in the near term, the resultant increase in OPEC+ spare capacity will likely put more downward pressure on long-dated prices,” energy consultancy FGE said in a note, as reported by Reuters. 

Meanwhile, Goldman Sachs, on Sept. 28 had cut its 2023 oil price forecast due to expectations of weaker demand and a stronger US dollar. 

Analysts at Goldman Sachs now see Brent crude averaging $100 a barrel from October to December and $108 a barrel in 2023, down from the previous prediction of $125 for both time periods. 

Post the Ukraine conflict, oil prices had rallied to over $120 a barrel, as the western allies led by the US and EU weaned themselves from Russian oil imports. 

Oil prices, however, have been tumbling since July, as the pandemic lockdown in China negatively impacted the demand, along with a surging US dollar weighed on global financial markets. 

Goldman Sachs said a production cut under consideration by OPEC+ was justified by the sharp decline in oil prices from recent highs and supported its bullish view.

“We reiterate both our bullish oil view as well as our preference for long crude timespread positions into year-end,” the bank’s commodities research division wrote in note on Monday.

Despite one of the tightest markets in recorded history, Goldman said the cut could be justified by the 40 percent decline in prices from their June peak and enabled by the lack of supply elasticity, given slowing shale activity and exhausted spare capacity.

“The collapse in investor participation, driving liquidity and prices lower, is also a likely strong catalyst for such a cut, as it would increase the carry in oil and start to claw back investors who have instead turned to USD cash allocation following the aggressive Fed hikes.”


Strong growth primarily driven by economic reforms, says Saudi finance minister


Strong growth primarily driven by economic reforms, says Saudi finance minister

Updated 03 October 2022

Strong growth primarily driven by economic reforms, says Saudi finance minister


Strong growth primarily driven by economic reforms, says Saudi finance minister

  • Al-Jadaan lays emphasis on establishing a Gulf common market for the benefit of citizens

RIYADH: Leaders of the Gulf Cooperation Council are keen to see the group achieve “the highest levels of economic integration,” said Saudi Finance Minister Mohammed Al-Jadaan.

He was speaking at the 117th Meeting of the GCC Financial and Economic Cooperation Committee in Riyadh on Monday. 

Al-Jadaan stressed the importance of establishing a Gulf common market for the benefit of the GCC citizens.

He said the economies of the GCC countries are not immune from the effects of the economic crises the world is going through but they tackle such issues by adopting a proactive approach. 

“Yes, we are benefiting from higher oil prices, but the strong growth we are seeing is primarily driven by the reforms we have implemented,” he said. 

The Saudi finance minister said the global economy is facing major headwinds, while the effects of the epidemic remain, supply chain issues persist, energy and food markets are in turmoil, with inflation rising to its highest levels in several years. 

He stressed the need for tightening monetary and financial conditions.

Saudi Arabia is expecting its budget surplus in 2022 to hit SR90 billion ($24 billion), and another SR9 billion next year, the Ministry of Finance announced last week.

Looking at the full year 2022 projections, the real gross domestic product is expected to grow by 8 percent, while the inflation in 2022 may record about 2.6 percent.


MENA Project Tracker — Egypt starts new gas project; Oman requests bids for port

MENA Project Tracker — Egypt starts new gas project; Oman requests bids for port
Updated 03 October 2022

MENA Project Tracker — Egypt starts new gas project; Oman requests bids for port

MENA Project Tracker — Egypt starts new gas project; Oman requests bids for port

RIYADH: The offshore arm of Abu Dhabi National Oil Co. has received a commercial bid from a Saipem-led team on its $1 billion Umm Sheriff Gas Cap condensate development project, reported MEED.

ADNOC Offshore has single-sourced bids from the Italian-based consortium — which also includes China Petroleum Engineering & Construction Co.— to speed up the highly delayed engineering, procurement, and construction phase.

Egypt to begin work on a new gas project

Egypt’s Minister of Petroleum and Mineral Resources Tarek El-Molla has announced the approval of a project to connect the Raven offshore gas field to the El-Amriya onshore processing plant, reported MEED.

The project will include many different phases, and act as a link between the Raven field and the butane extraction plant, which is operated by the Egyptian Natural Gas Co.

After its completion, the butane plant will receive 100 million cubic feet a day of gas from the Raven field — reaching its maximum capacity, according to Gasco Chairman Yasser Salah El-Din.

Oman requesting bids on development of new port

Oman has requested bids for the development and operations of its Dhalkut Port in the Southern Dhofar Governorate as part of plans to grow its maritime trade, according to Zawya.  

The project will be tendered under a “develop, manage and operate” contract, where both local and foreign firms will be given a chance to bid.

The deadline for the project bids is Oct. 16.

“Bids must be submitted by local and international companies which have experience in port operation and management,” the statement said.