Asia's Free Market Economy: Trade Between The GCC and Emerging Asia is Expected to Reach $578 billion By 2030; India's Contribution
The trade between Gulf Cooperation Council(GCC) and Asia will continue to grow momentum and pivot to touch bilateral trade of $578 billion by the end of 2030.
The bilateral trade between GCC and emerging Asian economies, especially India, China, and other South-eastern countries, will expand by 6% on the average annual growth rate, surpassing the Gulf Cooperation Council's trade value with advanced economies by 2028 - this is the latest report published by the UK-based think tank Asia House.
According to the report released at an event organized by Abu Dhabi-based private equity company Gulf Capital, emerging Asia will account for about 36.41% of GCC's total trade in the region by 2030, up from the current 30.83%.
According to the report released Wednesday by the London-based think tank Asia House, the trade between six GCC countries: Saudi Arabia, Bahrain, United Arab Emirates, Oman, Qatar, and Kuwait and 34 emerging Asian countries, including India and Chia, has rebounded quickly and reached the worth of $366 billion in 2021 in quick succession after the fallout of Covid in 2020.
The GCC countries want to diversify their economies away from oil and natural gas and towards knowledge-based, renewable, and other resource-based economies as soon as possible. After realizing the importance of food security and other supplies in the aftermath of the eastern European conflict, these countries are attempting to move quickly in that direction.
The Gulf nations are also realizing that the world and Asian markets are shifting away from oil-based economies and towards lithium-based and green hydrogen-based economies. And the transition has already begun, with the move expected to accelerate following India's discovery of lithium in the Jammu and Kashmir region.
The GCC is attempting to engage more with emerging Asia while keeping the growth forecast in mind. Asia will grow at a rate of 4.7% this year, up from 3.8% last year, making it by far the most dynamic of the world's major regions and a bright spot in a slowing global economy.
The region's economic "dynamism" is also being driven by Asia's emerging and developing economies, which are expected to grow by 5.3% this year. This year, China and India are expected to account for more than half of global growth, with the rest of Asia accounting for an additional quarter.
The Asian market is also shaping in a new way because of the discovery of technological marvels those used to come from western society and are now flowing from educational institutes in Asia, primarily Indian and China. Emerging Asia is also the world's largest market with billions of pollution. All of these factors are now encouraging GCC countries to engage with emerging Asian countries more.
Therefore, the GCC countries are mending relationships with their near and distant Asian neighbors. Saudi Arabia and Thailand have re-established diplomatic relations, with Thai Prime Minister Prayuth Chan-ocha visiting the Saudi capital Riyadh for the first time in three decades in January.
Meanwhile, India signed a comprehensive economic partnership agreement (CEPA) with the UAE, its third-largest trading partner, in February last year. The UAE is also pursuing bilateral talks with the Philippines to reach a similar agreement.
India is playing a vital role in mending the relationship between Gulf countries and other nations in the region. This region used to be a constant battleground due to the Israel-Palestine conflict, but some Gulf nations have made peace and built relationships with Israel. New groups like I2U2 have formed, which include Israel, UAE, USA, and India.
After United Arab Emirates' economic partnership agreement with India, the Gulf Cooperation Council is also trying to reach a similar agreement. Saudi Arabia has taken the initiative primarily because it does not want to be left behind by other partners in the group.
During 2020-21, India imported goods worth $110.73 billion from the six GCC Nations. India's merchandise export to these nations is valued at $44 billion.
Aside from trade, Gulf countries have a sizable Indian population. Nearly 32 million non-resident Indians live outside of India, with nearly half of them working in Gulf countries in fields such as information technology, finance, ports, logistics, infrastructure, digitalization, fintech, and digital assets.
India receives approximately $100 billion in remittances, with nearly 60% of this value coming from Gulf nations. This is a significant contribution to India's forex reserves.
Therefore, India contributes to the economies of the Gulf nations, while the Gulf nations contribute to the development of the Indian economy by exporting 60% of India's crude oil demand.
Saudi Arabia: In the previous fiscal year, Saudi Arabia was India's fourth-largest trading partner. Total bilateral trade between Saudi Arabia and India increased from $22 billion in the last fiscal to $43 billion in 2021.
Kuwait: In the previous fiscal year, Kuwait was India's 27th largest trading partner. In 2021, bilateral trade between India and Kuwait will increase from $6.2 billion to $12.6 billion.
Qatar: India imports 8.5 million tonnes of LNG from Qatar and exports food items and other essential items. Bilateral trade between India and Qatar rose to $15 billion from $9.1 billion last year.
United Arab Emirates: The UAE is India's fourth-largest trading partner and the GCC's largest trading partner. After signing a free trade agreement, India's trade with the UAE increased from $43.3 billion to around $72.6 billion last year, and bilateral trade is expected to reach $100 billion by 2025. Trade between the UAE and India has increased by 10% in the year since the treaty was signed, paving the way for greater cooperation with other Asian economies.
Oman: The bilateral trade between Oman and India reached $10 billion in 2021 in comparison to $5.5 billion in 2020.
Bahrain: The trade between Bahrain and India reached $1.65 billion last year from $1 billion the previous year.
Therefore, India will be critical in increasing GCC trade with Asia to $578 billion by 2030.
According to the report, the interest of GCC sovereign wealth funds (SWFs) in Asian investments will also grow and will be a key trend defining the Middle East's pivot to Asia over the next decade.
Gulf SWF assets are estimated to be worth more than $2.5 trillion, and changes in their investment strategies have the potential to have a significant impact on global finance. The state funds are looking for ways to diversify their holdings in Asian markets.
According to the report, they were involved in $28.6 billion in acquisitions outside the Middle East and Africa as of July, 45 percent more than in 2021, with investments aimed at China, India, and Singapore.
Despite global economic uncertainties, the Middle East Pivot to Asia has outperformed expectations in the last year and is expected to accelerate over the next decade, ushering in a profound shift in global trade and cross-border investments that will impact growth, business, and geopolitics.