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    Interview: HSBC’s Stephen Moss discusses key trends in Gulf-Asia trade

    Published On: 10 November 2022

    Asia House’s research report, The Middle East Pivot to Asia 2022, explores key economic trends emerging between the Gulf and Asia. As part of the research, Freddie Neve, Senior Middle East Associate at Asia House, spoke to Stephen Moss, Regional Chief Executive Officer for the Middle East, North Africa and Turkey, HSBC, to learn more about how these shifting trade dynamics are shaping the business landscape.

    What opportunities exist to further develop trade and commercial ties between Asia and the Middle East?

    HSBC has a very significant business in Asia where we have strong history and heritage. We were the first bank established in several countries across Asia. Similarly, HSBC has been in the Middle East since 1889 when the Imperial Bank of Persia was founded, and we recently celebrated 75 years of doing business in the UAE – again a place where we were the first bank to open for business.

    So, we are well placed to service the business between the Middle East and Asia, and this is a core part of our strategy. Specifically, we support clients along the key trade and investment corridors that exist between the Middle East into Europe, the US, and of course Asia-Pacific.

    China is a major player in this corridor, and is the number one trading partner of the UAE in non-oil foreign trade, with a total value of AED173.9bn or 12.4 per cent of the UAE’s total non-oil trade with the world in 2020 (UAE Ministry of Economy, 2021). Asia is also heavily investing in supporting infrastructure development across the Middle East in line with the Gulf states’ various national development ‘Vision’ plans. For example, walking around Downtown Dubai, you can see Chinese and Korean companies constructing new buildings.


    “Growth in the Middle East-Asia Pacific corridor has
    been significant and we believe it will continue to show
    strong growth in the years ahead.”


    The economic diversification across the Gulf is encouraging trade. These changes are motivated by further reducing the contribution of oil and gas to the region’s economic output, and by companies across the world looking to develop renewable capabilities including in the Middle East and Asia-Pacific. The announcements of the UAE’s Comprehensive Economic Partnership Agreements (CEPA) with India, Indonesia, and Israel are also another significant development that we have seen in 2022.

    The economic outlook for the GCC region is currently positive and boosted by high oil prices. Will this slow down the Gulf’s energy transition, or will increased revenues be diverted into renewable energy projects?

    The GCC has also remained insulated from inflationary pressure. Can we expect this positive outlook for the region to continue over the next few years?

    Historically, when oil and gas prices have been high, sometimes we have seen reduced pressure to implement economic reforms. However, that’s not the case today, with a clear focus on investment in renewables region-wide. There are a couple of reasons for this. Due to deft handling by their Governments, many GCC economies were not as negatively impacted by COVID-19 as other regions and consequently, by not having increased debt to cope with the pandemic, they have not had to divert investments to fund higher borrowing.

    Another reason is that increased revenues are going into GCC sovereign wealth funds, which are investing in non-oil sectors, including renewables. Far from slackening the pace, I would say that the large energy companies here are accelerating such investments. Finally, oil and gas inflation will not affect the Middle East as much as other regions, but we are seeing other imported goods being affected by inflationary pressures.

    Will that impact the region’s economic outlook?

    If the rest of the world enters a significant recession, then that will inevitably impact the Middle East, due to falling global demand. Although the GCC economies are diversifying, oil and gas remains key, and a price shock here would negatively impact growth. But our view is that we will not see a significant global recession. Europe and the UK are projected to be more impacted than the US, as the latter’s balance sheets are more resilient, but the Middle East is more insulated because of fiscal discipline, the lower impact of COVID-19 on economies and debt, and the boost from higher oil prices. The region as a whole is very resilient and I would argue is well-positioned to weather any forthcoming economic shocks.

    We are noticing an uptick in Sovereign Wealth Fund interest in Asia. Is this a trend that you are seeing?

    It is important to understand that all SWFs are different, with different structures, targets, investment priorities and appetites. That being said, I see evidence of increased interest from Middle Eastern SWFs in Asia, be it in the form of opening new offices, exploring investment opportunities, or even just growing awareness of and interest in the region’s economies. Given our heritage and global presence, we are a trusted advisor on Asia, and SWFs are increasingly coming to us to learn more about how to do business there. I have had enquiries from SWFs about topics including the Chinese business environment, Asian capital markets, and the Asian mergers and acquisitions environment. SWFs are carefully studying the region as part of their investment plans in China and other Asia-Pacific markets and I can only see that interest growing.


    “Trade between the UAE and India is very much two-way,
    and projected to grow from US$60 billion to US$100 billion
    over the next five years.”


    A key part of our Middle East – Asia Pacific strategy is closely engaging with SWFs across the region. Now, with the positive performance of GCC economies, and the surpluses from oil and gas, SWFs are benefiting, meaning they have more capital to invest. So there is an even bigger pipeline of funding for investments, and they are looking to Asia as a potential destination for these funds.

    China and India have been driving growth in emerging Asia’s trade with the GCC. What do you think accounts for China and India’s interest in the GCC market, and vice versa, the GCC’s interest in China and India?

    Here in the UAE, the population is around 10 million, comprising an Indian diaspora of approximately 3.3 million (Embassy of India, UAE, 2022). There is considerable Indian heritage, wealth and business spread across the United Arab Emirates, increasing the UAE’s importance to India and vice versa. The UAE-India relationship is built on and deepened through trade, and India’s proximity to the Gulf is also important. Trade between the two countries is very much two-way, and projected to grow from US$60bn to US$100bn over the next five years.

    Pharmaceuticals is a sector that both countries are developing, with Indian pharmaceutical businesses looking towards the UAE as a means of diversifying their manufacturing base. The UAE is also undertaking activities to increase the value-add of establishing manufacturing hubs there, increasing interest in the UAE not just as a transitional trade hub, but also as a manufacturing hub. With China the GCC’s most significant trading partner, the focus is very much on oil and gas, but also on construction and infrastructure projects. There have been trade agreement talks between the GCC and China for some time now and a deal would clearly boost GCC-China trade further.

    Stephen Moss is Regional Chief Executive Officer for the Middle East, North Africa and Turkey. He was appointed to the role in April 2021 and has been a Group Managing Director since December 2018.

    This interview is taken from The Middle East Pivot to Asia 2022 report, which highlights key trends emerging in Gulf-Asia trade. Read the report here

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