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Asia-Middle East Corridor

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Revisiting the Southern Silk Road

  • Economic connectivity between Asia and the Middle East is set to soar in coming years, expanding well beyond energy trade
  • Annual two-way goods trade is projected to more than double from around USD950bn in 2022 to over USD1.9trn by 2035
  • Two-way investment, led by the China-Saudi and India-UAE corridors, could surge to USD36bn annually by 2035

Beyond energy. The Gulf countries and Egypt sit on over a quarter of global crude oil reserves, while Asia is home to the world’s largest oil importer and a growing giant in India. Besides energy, the two regions also complement each other in many areas of trade, investment, and people exchange. And perhaps most importantly, the major economies on both sides are still committed to opening to the world. The Asia–Middle East trade, investment, and travel corridor, in other words, is set to thrive.

Trade integration. Asia is a critical export market for the Middle East. Over half of Qatari and Saudi exports, mostly crude oil and LNG, went to Asia in 2022. Although energy is the foundation of Asia–Middle East trade, many other products—from Saudi plastics to Indian pharmaceuticals—are rapidly gaining. More trade deals between the Gulf Cooperation Council and Asian partners—such as China, India, and Japan—would further bolster inter-regional trade. Asia–Middle East goods trade totalled cUSD954bn in 2022 and our projections suggest this figure could balloon to USD1.9trn by 2035. For reference, US-China trade in 2022 only totalled around USD750bn.

USD 954bn
Approximate Asia–Middle East goods trade total in 2022
USD 1.9trn
Estimated Asia–Middle East goods trade total in 2035

Investment integration. Northeast Asian investors are increasingly pouring funds into the Middle East, with flows in the opposite direction also rising. A key corridor is also emerging between the UAE and India, which recorded USD6bn of FDI in 2022 that we estimate could rise to USD14bn annually by 2035. Indian digital services are an especially promising sector for UAE investors. More broadly, cumulative FDI flows between Asia and the Middle East are expected to total over USD270bn over the next 10 years, up from less than USD140bn the previous decade. For China, renewing momentum in BRI projects in the Middle East region and further RMB internationalisation will require strong Saudi support. Meanwhile, Middle East investment projects in ASEAN are quietly expanding to cover a wide range of sectors.

People integration. Inter-regional tourism took a significant hit during the Covid-19 pandemic, but travel is slowly recovering. Boosting Chinese and Indian visitor numbers will be critical for the Middle East’s tourism industry, while Southeast Asian tourism markets—such as Thailand, Indonesia, and Malaysia—look for the return of high-income Saudi and UAE visitors. Overseas remittances are another important aspect of people integration, particularly for Bangladesh, Sri Lanka, and the Philippines.

Our conclusion? Economic connectivity between Asia and the Middle East is set to soar in coming years, expanding well beyond energy to encompass other forms of goods trade, financial investment, and people-to-people exchange. It has the potential to be a beacon of connectivity even as protectionist arguments grow louder in other parts of the world.

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