Cairo - Decypha: Over the past decade, there have been some radical changes in the global economy and geopolitics, especially with the rise of China on the global stage. This represents a great opportunity for GCC countries as they look to diversify their economies and trade, search for investment opportunities in emerging markets, and form partnerships for regional peace and stability, according to Oxford Business Group.
Specifically since 2014, China has been the most prominent stakeholder of foreign business in the Gulf Cooperation Council (GCC) countries. The presence of Chinese business there is only growing and the reliance on it is becoming more prominent, according to The New Arab. Beijing, the capital of China, is largely investing to sustain and secure a dynamic business relationship with the countries of the gulf.
In order to facilitate the transport of cargo between the Gulf and China, in 2013, Beijing proposed to Pakistan the idea of creating an economic corridor that connects Gwadar city with Kashgar, at the cost of $46 billion. The project would include major infrastructure projects across Pakistan, brining China closer to GCC by nearly 10,000 km, reducing the number of days required for shipments from and to the gulf to reach their destination from 45 days to only 10. The new route would also hold fewer risks during the transport process.
The influx of Chinese investments throughout the GCC differ greatly from one country to the other due to several factors.
Kuwait
A large number of Chinese companies are seeking to invest in Kuwait thanks to its facilitation of the procedures to obtain licensing and its provision of incentives and guarantees to help enhance foreign investments in different economic sectors, according to Arabian Business.
The priority in foreign direct investment (FDI) in Kuwait is given to high tech companies which have the ability to generate jobs for Kuwaiti citizens and improve the country's economy.
The Director-General of the Kuwait Direct Investment Promotion Authority (KDIPA) has recently said that Kuwait was able to attract investments worth $2.3 billion from Chinese companies over the past two years. Kuwait's small and medium enterprises (SMEs) have a great potential to contribute to these investments which represent nearly 95% of the economy of Hong Kong.
Saudi Arabia
Saudi Arabia’s relations with China date back to 1990. Recently, however, Saudi Arabia has been making efforts to diversify its economy and reduce the reliance on oil, developing a strategy for growth for the country, which is greatly in line with China's desire to invest more in GCC. However, China is the largest importer of oil globally and Saudi Arabia is the largest producer, and currently, China is KSA's largest receiver of oil, with Saudi Arabia meeting about 20% of the Chinese demand of oil.
In March 2017, China and Saudi Arabia signed a memorandum of understanding (MoU) of investment cooperation worth $65 billion. The agreement between the countries aimed to enhance the joint efforts between the two countries in several fields, including energy, investment, finance, culture, and aerospace, involving nearly 35 separate projects, according to USA Today.
The agreement is considered part of Beijing's trade and investment initiative across Central Asia and the Middle East named "One Belt, One Road" (OBOR) which sees Saudi Arabia a spot full of potential.
In addition, there are mutual interests between both Saudi Arabia and China's development programs. Some of the projects to be undertaken include an oil storage facility in China build by Saudi Arabia in order to boost China's energy security. China will also construct more homes in Saudi Arabia to help solve the lack of housing issue in the kingdom, according to Oxford News.
"Security ties between the two have also grown significantly, with the Saudi air force deploying Chinese unmanned attack drones and the two militaries holding joint counter-terrorism exercises in western China. Chinese navy vessels have also visited the Saudi port of Jeddah as part of increasingly active maneuvers in the Gulf of Aden," USA Today reported.
The United Arab Emirates
China’s relations with the GCC countries have strengthened in various fields during the 21st century, and China's relations with Emirates are no exception. Back in 1984, Beijing and Abu Dhabi began a diplomatic partnership in 1984, and ever since, China and Emirates have become strong economic partners with strengthening bilateral relationships that are expected to keep growing, according to Gulf State Analytics.
China is considered Emirate's second largest importer after India. China mainly exports electronic devices and appliances, mechanical tools to Emirates; while Emirates mainly exports copper, plastic, and iron to China.
In addition, many major Chinese companies outside are starting to see great opportunities in the UAE. Moreover, about 2,400 Chinese companies are members of Dubai Chamber. The majority of these companies sell electronics, machinery, building materials, gifts, garments, and novelty items. About 1,400 Chinese companies are located in Emirates. They see the UAE as an important center that paves way for and facilitates expansion across the Middle East. Several Chinese enterprises started using the Dubai International Financial Centre as a bridge to access more and wider markets in the region. The largest petroleum company in China, Petro China, as well as the Industrial and Commercial Bank of China, have also established foundations in the UAE.
Bahrain
China is the third largest market for Bahraini exports outside of the GCC, according to Trade Arabia, and is one of the most important trading partners for Bahrain. Bahrain has also played a major role in the development of the maritime trade routes linking China to Europe on the old Silk Road. The relations between Bahrain and China started in 189, according to Middle East Institute. Today, on the 21st century's Silk Road, Bahrain is considered a center for several Chinese businesses that are seeking to enter the fast growing Gulf.
In 2013, the Bahraini Economic Development Board (EDB) established an office for itself in China as part of the Bahraini strategy to attract FDI into the country. The office is located at the Bahrain Embassy in Beijing but operates in Hong Kong as well. In 2015 alone, the EDB received more than 15 business delegations visiting from China.
Qatar
Chinese investments in Qatar are increasing rapidly. Direct investment from China to Qatar jumped by 77.5% in 2016 compared to the year before. While in 2015, the Industrial and Commercial Bank of China was able to launch its first Middle Eastern Chinese yuan-clearing centre in Qatar, according to South China Morning Post.
The total amount of bilateral trade between China and Qatar tripled during the period extending from 2008 o 2013, reaching $11.5 billion, according to Reuters. In 2016, Qatar was the provider of 19% of China’s imports of liquefied natural gas, making Qatar the second largest gas provider to China after Australia.
In 2015, Qatar imported goods from China worth $3.77 billion with the majority being consumer, machinery or electrical goods.
Statistics from the Central Intelligence Agency showed that China accounted for nearly 12% of Qatar’s trade in 2015. In 2014, China signed agreements to take part in establishing infrastructure projects in Qatar worth $8 billion. The projects included civil construction works, including bridges, ports and telecommunications, the Gulf Times reported.
In early 2017, Qatar National Bank (QNB), the biggest bank in the MENA region by its assets, raised a $1 billion loan in the Asia bank market, according to Reuters. and the Agricultural Bank of China played a major role in the provision of the loan.
Oman
Similarly to other Gulf countries, Oman was greatly impacted by the sharp drop in oil prices since June 2014 and sought to diversify its economy. The country obtains 79% of its revenues from oil, from which it produces only about 1 million barrels per day, according to Al-Monitor. In 2015, Chinese investments in Oman were estimated at $2 billion, and trade between China and Oman reached $17.2 billion.
In April 2017, In 10 Chinese firms signed land lease agreements to implement various with Oman worth a total of $3.06 billion. The projects include a methanol venture with a capacity to produce 10 million tonnes, which will be established by Mingyuan Holdings Group Co. Ltd. The company will utilize the natural gas provided by the Omani government as feedstock for the production of methanol, in addition, there was an agreement signed for a major project to generate 300 mw of electricity by two Chinese firms—Hebei Electric Power Design and Research and Ningxia Electric Power Design Institute. The capital expenditure for the project is worth $406 million. Moreover, a five-star hotel is planned to be established in Duqm by Ningxia Residence Construction Development (Group) Co. Ltd, according to Times of Oman.
By the end of 2015, Chinese investments in Oman exceeded $2 billion, and trade between the two countries was estimated at more than $17.2 billion, according to Al Arabiya.
Yemen
China’s diplomatic relations with Yemen started in September 1956, according to The Diplomat. China was one of the first foreign countries to take part in Yemen’s development projects. In the 1950s, Beijing participated in constructing a 266 kilometer road between Sana’a and Hodeidah. In 2012, China National Corporation for Overseas Economic Cooperation (CCOEC) made an agreement to establish three natural gas-fired power plants in Yemen. For the Chinese government, Yemen provides access to many different consumer markets that it cannot otherwise reach. The Chinese government has been encouraging Chinese companies to inject investments in Yemen. For example, the major Chinese company, Huawei, has been working in Yemen since 1999. The two countries have also taken part in several cooperative projects together, including the Chinese Yemeni steel Company Star.
"China’s stake in Yemen goes far beyond the energy and trade spheres; Beijing is determined to strengthen its role as an emerging political and diplomatic player in the Middle East. Beijing’s diplomatic and economic overtures to Yemen provide a glimpse into China’s grand strategy in the region," said the Jamestown Foundation. It added that the relations between China and Yemen are expected to continue growing and flourishing over the upcoming years. "Yemeni sources even hinted at the potential for greater security cooperation," it stated.
What experts say
"China and the GCC states are working to broaden bilateral business and cultural ties but experts say they face a number of fundamental problems, such as language barriers," said a report by The Council On Foreign Relations (CFR) about the Chinese-GCC relations. The report said that only a small number of Chinese companies have employees who speak Arabic, and vice versa. "Big investments into China from the GCC region have only started over the last ten years," said Sameer Al Ansari, the CEO of the UAE-based investment company "Dubai International Capital". He added that people are a lot familiar with the United States and Europe." New partnerships are encouraged between Chinese and Arab universities in addition to enhancement of training in language to bridge the gap between the two cultures. However, experts say, according to CFR, that there is a real issue of the lack of qualified consultants who have deep knowledge of the two regions’ respective business cultures to make the ties stronger between them; which may cause a limitation of economic expansions.
By Reem Hosam Eldein
