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Emerging Gulf-Asia corridor grows despite headwinds

21 May 2025

 

During his state visit to Saudi Arabia, Qatar and the UAE on 13-16 May, US President Donald Trump announced mulitibillion-dollar deals to advance shared interests in both traditional industries and emerging technologies.

Saudi Arabia committed $600bn and Qatar pledged $400bn. The UAE, meanwhile, confirmed an investment of $200bn, the initial installment of a commitment to invest up to $1.4tn in the US over the next 10 years.

Most of these investments will be in defence, energy, technology and artificial intelligence (AI) – sectors in which US companies have traditionally led or tended to dominate, and which are expected to see significant future expansion, benefiting the energy and economic diversification agendas of the Gulf states.

“We’ve launched the golden age of America,” Trump said. “The golden age of the Middle East can proceed right alongside of us.”

Asia ties

These investments and trade commitments between the Gulf states and the US carry significant economic and geopolitical undertones. They are expected to generate new revenue streams, boost the global trade status of the GCC countries, and help to diversify their economies away from hydrocarbons. 

However, the Gulf-US investments do not necessarily deprioritise the strategies of the GCC states in recent years to pivot investments towards Asia – in particular to China, India and several Southeast Asian nations.

In May 2024, UAE President Mohamed Bin Zayed Al-Nahyan visited China, cementing UAE-China cooperation in several areas. Independent think tank Asia House described the visit as one of the most significant bilateral political exchanges of the year.

Asia’s economic trajectory represents a pivotal opportunity to advance Mubadala’s sustainable growth and innovation mission, while building its presence in the region as part of a broader geographic diversification strategy.

There have also been several bidirectional investments, led by the Gulf and Asia’s sovereign wealth funds – a trend that is likely to increase over the coming years.

In October, Saudi sovereign wealth vehicle the Public Investment Fund and the Hong Kong Monetary Authority signed a memorandum of understanding (MoU) to work on jointly anchoring a new investment fund with a target size of $1bn.

The fund will explore investments in manufacturing, renewables, financial technology (fintech) and healthcare, supporting the localisation in Saudi Arabia of companies connected to Hong Kong and the Greater Bay area, the latter comprising nine Chinese cities with populations of about 86 million.

In January this year, Mohammed Albadr, head of Asia for private equity at Abu Dhabi's Mubadala Investment Company, informed the UBS Greater China Conference in Shanghai of his firm’s commitment to “doubling down on investments in Asia by 2030”.

He said that Asia’s economic trajectory represents an opportunity to advance Mubadala’s sustainable growth and innovation mission, while building its presence in the region as part of a broader geographic diversification strategy.

Ramping-up activity

For those in the region with connections to Asian markets, there has been a significant uptick in activity “in both directions, throughout the Middle East-Asia corridor”, according to Tony Nicholson, a senior associate with international law firm Dentons.

He says that this buoyancy is “leading to a smorgasbord of opportunity, not only for incumbents, but also for new market participants to explore across a diverse range of countries, economies and sectors within the corridor”.

Policy shifts and investment aimed at scaling up renewable energy and low-carbon hydrogen ecosystems within the Middle East-Asia corridor continue to gain momentum, he notes, adding: “Socioeconomic dynamics are also catalysing growth in investment opportunities in transportation, logistics, digital and social infrastructure. We are seeing a lot of focus in these areas.”

Inbound investment

Chinese investments in renewable energy projects in the Gulf began nearly a decade ago. Saudi utility developer and investor Acwa Power signed an MoU with China’s state-owned Silk Road Fund in 2016 to partner on several large projects in the Middle East and North Africa power market.

The same year, the Silk Road Fund took a 7.35% equity in Dubai’s $3.4bn Hassyan independent power project (IPP), which was initially planned to use coal but was converted to natural gas. In 2018, the fund then took a 24% equity share in Noor Energy 1, the project company that won the contract to develop and operate the $3.8bn hybrid solar photovoltaic (PV) and concentrated solar power IPP, also in Dubai.

Three years later, the Silk Road Fund agreed to acquire a 49% stake in Acwa Power RenewCo, which owns existing renewable energy projects in the UAE and other countries in the Middle East and Africa.

Outbound investments

Since then, both Acwa Power and UAE-based Abu Dhabi Future Energy Company (Masdar) have invested or explored investments in renewable energy projects in China, and in emerging Southeast Asian markets such as Indonesia, Vietnam and the Philippines.

In March 2025, Acwa Power said that it aims to invest up to $30bn in China, in line with its plans to triple overall assets under management to about $250bn globally.

Masdar established the 145MW Cirata floating PV power plant in Indonesia in 2023, which is planned to be expanded to 500MW. It is also exploring the development of other floating solar projects in the country, and has made a strategic investment in Pertamina Geothermal Energy.

Also in 2023, Masdar signed an agreement with the Malaysian Investment Development Authority to develop up to 10GW of renewable energy projects in the Southeast Asian country.

This year, it has signed an agreement to develop up to 1GW of clean energy projects in the Philippines by 2030, including solar, wind and battery storage schemes.

“Our partnerships with industry leaders across the region’s energy sector not only deliver clean power, but also create local jobs and support national economic growth,” Abdulaziz Alobaidli, Masdar's chief operating officer, tells MEED. “Our investments in the region are set to grow, supporting the transformation of the energy system and driving progress against the governments’ renewable energy goals.”

Other sectors

In addition to renewable energy projects, inbound Middle East investments include the real estate, mining, fintech and AI sectors. The broadening and deepening of activity by Asian banks, financial institutions, private credit and funds is also a key theme, says Dentons' Nicholson.

In November 2024, for instance, Singapore's First APAC Fund VCC signed an MoU to invest up to AED5bn ($1.3bn) in Dubai-based AMIS Development, which will use the investment to “further expand its growth, both locally and internationally by growing its land bank, project pipeline, global brand partnerships, project team and investments in technology”.

Earlier in May, Abu Dhabi-based agri-food and technology company Silal and Shouguang Vegetable Industry Group (SVG), a Chinese company specialising in vegetable seed breeding and counter-seasonal production, signed a strategic partnership agreement enabling SVG to invest over AED120m in the development of a 100,000 square-metre agricultural technology joint venture in Al-Ain.

Asia-based banks are also providing support or lending to local banks, or to local branches of international banks, to boost the liquidity of the lenders amid the GCC's real estate and construction boom – particularly in Saudi Arabia.

While it is not unusual for banks to lend to one another, the scale of the project financing needed is significant, according to a senior financial adviser specialising in Saudi projects. Indeed, it is "so staggering that it is impossible to assume that local banks will not have to face liquidity issues going forward", he says.

He adds that some in the kingdom are looking at bringing back export credit agency financing to help de-risk major infrastructure projects and assets, noting that liquidity injection by international banks, including those headquartered in Asia, will help support the delivery of Saudi Arabia's Vision 2030 projects.

Trade trends

According to Asia House, the economic diversification programmes of Gulf countries are driving non-oil growth, creating opportunities for Asian firms in the areas of construction, infrastructure, technology, sustainability and financial services.

"The Gulf states’ economic and social reforms continue at pace, attracting Asian investment, firms and talent," the think tank says.

"New air routes between the Gulf and Asia will boost tourism and business connectivity," it continues. "For these reasons, Gulf-emerging Asia trade will keep growing and is on track to reach $682bn by 2030 if it continues at the 7.1% average annual growth rate seen between 2010 and 2023."

A 2023 dip in trade affected key Gulf-Asia bilateral partnerships. Saudi-China trade fell 7.6%, while UAE-China trade fell by 15.5% in 2022-23. Nonetheless, both countries’ relationships with China have deepened and grown more strategic.

In 2023, Saudi Arabia and the UAE were invited to join the Brics group of emerging economies, which originally comprised Brazil, Russia, India, China and South Africa, bringing them closer to Chinese decision-making at a global level.

Shared prosperity

The recent deals that Trump signed in Riyadh, Doha and Abu Dhabi have complicated predictions about when Gulf-Asia investments coud equal or surpass those with the US or broader West.

However, by spreading their investments across key geographies and sectors in recent years, the Gulf states have been able to secure steady returns, sustain growth and make progress on their sustainability goals.

Asian nations and sovereign funds are now adopting a similar approach – albeit on a varying scale – to pursue the same objectives.

https://image.digitalinsightresearch.in/uploads/NewsArticle/13911866/main2341.jpg
Jennifer Aguinaldo

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