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May Week 1

Al Mazaya Report: Belt & Road  Initiative exceptional chance for Gulf region to maximise investment returns

The governments of the Gulf region have, over the past years, dealt effectively and dynamically with all suggested and ongoing economic diversification plans and initiatives. International and regional companies have always been interested in the region's expanding markets, thanks to these markets’ ability to play an effective role in ensuring the success of various projects and initiatives at all times and under all circumstances. This ability has earned the economies of the region advanced positions on the global trade landscape, where they are already playing an increasingly influential economic role.

Within this context, the ongoing initiatives to revive China’s New Silk Road come at the right time and, more importantly, with the right partners as well. The countries, set to be part of the new road, share same developmental goals and stimulus plans and face a variety of common financial and economic challenges, the surviving of which will contribute to enhancing investment liquidity on key economic sectors.

Calling for ‘seizing the moment because same kind of opportunities will never come twice’, Al Mazaya Holding's weekly real estate report says that a 12,000-kilometer project running from China to London, directly impacting the economies of 65 countries across Asia, Europe and Africa, where more than four billion people are living, represents an exceptional opportunity to maximise direct and indirect investment returns. The total investment value of the mammoth project is expected to hit more than $200 billion, which will be used to achieve economic integration, increase the volume of trade exchanges and strengthen interdependence between East and West through the establishment of integrated road and sea networks, railways, oil pipelines and power lines. Therefore, the governments of the Gulf region have an exceptional opportunity to step up the movement and flow of merchandise trade and services through the infrastructure they already possess. Such huge benefits mean that the countries of the region must be involved as full-fledged and influential partners in this project, which has comprehensive strategic control plans and integrates in one way or another with the development strategies the GCC states are implementing ahead of 2030.

Commenting on the growing relations between China and GCC states which have become key trade partners of the Asian giant, the report said that many cities and sites across the region are witnessing the development and establishment of Chinese industrial cities and economic zones, with the tourism sector being the largest beneficiary of the growing influx of Chinese tourists to the region. In addition, the infrastructure sectors are as well benefiting from the growing relations with China.

According to Al Mazaya Holding, the new Silk Road will further underpin the economic and investment momentum in relations between China and the Gulf region, by stimulating port and shipping operations while stepping up oil supplies to China in particular and East Asian countries in general.

Al Mazaya Report added that the total trade volume between China and Saudi Arabia reached about $63 billion in 2018, while it stood at about $53 billion with the UAE where the bilateral trade exchanges are expected to hit $70 billion by 2020. The trade exchange with the Sultanate of Oman reached a new level of $22 billion by the end of 2018, an increase of 40% as compared to 2017.

The report noted that the Arab region is part of the proposed project, which will link China, Central Asia and West Asia, “so we must find the tools and means to make the most out of the mutual investments with China.”

Over and above, according to the report, the heightened competition between the East and West has earned the Gulf region the chance to utilise China's overseas expansion plans, specially that these plans do not require a paradigm change in domestic economic performance to approve credit facilities. Neither does China interfere in the domestic affairs of the countries it is borrowing, which gives sufficient flexibility to make more successful deals which will necessarily reflect positively on economic growth.

However, the region’s countries need to prepare for some conditions that may adversely affect the status of national workers and construction companies, as the Chinese authorities prefer their projects be carried out by Chinese companies and labourers, which will have an adverse impact on the prospects of growth in the local private sector.

The report said whatever the outcome of talks with the United States of America, China is forging ahead with tapping fresh markets and forging new partnerships with all countries of the world and is expected to make even greater strides in this regard, despite the criticism levelled by the US and Germany towards this project until the moment.

The Belt and Road Initiative seeks to establish large infrastructure projects across the world and to control more land and sea routes. Thus, the economies of the Gulf region are now in a good position to capture more investment opportunities and raise the value of FDI inflows from all around the world in order to achieve the goals of their long-term investment plans.

The report concluded by saying that that the competition between the East and the West will open hundreds of such silk roads for the benefit of  the Gulf region, which can capitalise on such opportunities only if they have the will and get ready enough to reap the dividends of such huge projects.

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  • Source-Al Qabas

    Ulke - Kuwait

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