Since the turn of the century, there has been a notable shift in Middle East trade towards Asia, as demonstrated by Asia House research in 2018. According to Lord Green, Chairman of Asia House, this pivot to Asia from the Middle East “is one of the most important phenomena of our times.”
Speaking at an Asia House conference which brought together leading figures from business and policy to explore this trend and its impact on global trade, Lord Green highlighted the historic significance of the shift.
“When you think about both trade patterns and investment patterns, there is a big pivot going on,” he said. “For various reasons, there has been a shift in the gravity of [the Middle East’s] trade from the west to the east.”
In a speech that spanned two centuries of economic and geopolitical transition, and which highlighted the growing role of Asian markets in the Middle East today, Lord Green laid the foundations for a compelling and important discussion.
Watch Lord Green’s speech opening The Middle East’s Pivot to Asia conference
The Middle East’s place on the Belt and Road
In the first panel, leading figures discussed the likely implications of the Middle East’s pivot to Asia. The region’s increasing engagement with the Belt and Road Initiative (BRI) was raised by both Jinny Yang, Managing Director and Chief China Economist at ICBC, and Johnny Ojeil, Director of Arup. Both acknowledged that investment in transport and infrastructure was key to growth, however Yang highlighted how it can also lead to greater flows of people as they are drawn into the BRI labour force.
Through the pivot to Asia, Dr Giyas Gokkent, Chief MENA Economist at J.P. Morgan, suggested that the Middle East is re-entering the fray of global politics. With the US having become a huge hydrocarbon producer, the emergence of growing markets in Asia is a great opportunity for Middle Eastern countries to increase their political influence.
While trade from the Middle East to Asia is booming, the region isn’t without its geopolitical complexities. Takeshi Hajiro, Executive Vice President of Mitsui & Co. Europe, highlighted that following the recent attack on a Japanese oil tanker, Tokyo is rethinking its strategy in the region. Hajiro mentioned how Mitsui and Japan hope to assist the Middle East in diversifying away from energy dependence, especially into the tech sector.
Watch the first panel on the Middle East’s Pivot to Asia
The Middle East as a tech hub
With the Middle East looking to diversify, technology has been identified as a sector to be developed. However, given its current dependence on hydrocarbons, the Middle East faces a challenge in re-branding itself as a tech hub. Although this will be a difficult and slow process, Louis Lebbos, Founding Partner at AstroLabs, argued in the second panel session that the region definitely has the potential to make this transition.
Visar Sala, Managing Director for Middle East and Turkey at Accenture Strategy, was even more optimistic about the Middle East’s ability to develop itself as a tech hub, due to the fact that FinTech firms within the region get to profitability far quicker than anywhere else in the world. Emma Parsons, Regional Director for the UK and Ireland at the Bahrain Economic Development Board, agreed, and highlighted how Bahrain has successfully built its financial base to become a regional leader in FinTech, demonstrating an exceptionally fast pace of development.
The growth of the Middle East’s tech sector has led to an increased demand for talent. Given the region’s small population, however, Alex Perez-Fragero, Internal Markets Director at What3Words, said local talent is limited and often very expensive. Due to this, imported talent is often relied upon to fill tech jobs. Cyber security is also a key issue in the Middle East’s technology sector, as countries in the region often suffer from cyber-attacks. There is a high public demand for quality cyber-security, representing a good opportunity for the region’s emerging technology firms.
Watch the second panel on the Middle East’s Place in the Global Tech Ecosystem
Changing energy demands and the rise of renewables
The growing relationship between the Middle East and Asia is likely to lead to mutual benefit in the field of renewable energy, argued Jamie Balmer, Strategy & Implementation Director at Wood Plc., during the final panel session of the conference. With China becoming a major player in the renewable energy sector and supply chain, increased cooperation between the Middle East and Beijing is likely to help the region diversify away from reliance on hydrocarbons. Rob McNabb, Partner at Eversheds LLP, supported this argument, adding that the effectiveness of renewable products – in particular solar technologies – within the Middle East made it an appealing export destination for Asian renewable companies.
Global demand for renewable energy is set to increase in the near future, with many factors driving this change. Mike Muller, Chief Business Development Officer at Vitol, highlighted the Middle East’s geopolitical situation as a key driver behind this shift. As regional tensions drive up the price of oil, renewable energy emerges as an appealing alternative. In addition to this, Balmer highlighted how social action and public policy are important drivers behind the global shift towards renewable energy sources, with government tenders being the main force driving the development of renewable energies in the Middle East.
While global energy needs remain heavily dependent on hydrocarbons, diversifying towards greater production of renewables is in the Middle East’s vested interests. With renewable energy recently becoming the third biggest source of energy globally and the transport sector decreasingly reliant on oil, the Middle East’s efforts to diversify towards greater renewable production is well timed and necessary.
Watch the third panel session on Changing Energy Demands and the Rise of Renewables
The Middle East’s Pivot to Asia conference, held on 27 June 2019, was organised as part of the Asia House Middle East Programme – a series of events and research activity aimed at driving global engagement with the region.
For more information, please contact Cordelia Begbie, Asia House Middle East Programme Manager, at email@example.com