GCC's Rise As A Hub For International Deals | AIX Investment
The story of the rise in prominence of the Gulf Cooperation Council (GCC) is by now well known: the region has some of the world's largest hydrocarbon reserves, and has used its massive influx of revenue to fund large-scale infrastructure development and, more recently, the governments have been employing economic diversification strategies to make their economies more sustainable. The member countries of GCC (Qatar, the UAE, Kuwait, Bahrain, Saudi Arabia, and Oman) are all expected to post robust growth figures in the coming years.
As globalization has accelerated worldwide, countries like the UAE have established themselves as major players in the international logistic supply chain by creating favorable economic policies and promoting open trade. This has resulted in an increase in cross-border deals, even during the COVID-19 pandemic. The outlook of mergers and acquisitions in the region is also witnessing a steady rise. Trade and investment between the bloc and countries that have not been traditional partners have seen an increase to around 45%, up from just 15% in 1980. The shift towards these markets has been exponential and has been led by China and India, although nascent markets in Africa and Latin American also present ample trade and investment opportunities for the GCC.
Investment firms say that the reason for the surprising resilience of the region even during the pandemic is the progressive measures carried out by countries in order to integrate domestic economies into the world market. For instance, the UAE has recently amended its foreign ownership law to allow international investors to fully own domestic companies without necessarily having a UAE citizen as a co-shareholder. Increasing normalization of relations between Israel and GCC members also points to the fact that the countries are keen to put historical tensions in the backburner in favor of enhancing economic climates. The strategic location of the region at the heart of the world with easy access to almost all locations on both sides of the hemisphere is a significant advantage that has increased the interest of investors in the region.
Although the economic forecast is encouraging, it carries a risk: growth when unplanned and unmanaged will bring detrimental side-effects such as power deficiencies and inflation, especially for food. Some GCC states are already witnessing unpredicted scarcities of electricity and gas, while water supplies are already tensed, and food insecurity is on the rise. A key issue for the Gulf in the next decade, therefore, will be to manage energy, water, and food resources to guarantee both high living standards and sustainable growth in the long term. The GCC countries will have to cooperate and put up a united front against these hurdles to retain its position as a robust business hub and investment destination.
With the GCC now focused on economic diversification with a keen eye on knowledge-based economic strategies, the region is set to grow in credibility as a well-established economic hub connecting the developed markets of Europe and North America and emerging markets of Africa and South Asia.
Source: AIX Investment Group