Growing Economic relation between Asia and Middle-East

Introduction

With the opening of the global market and globalization at full swing business
firms all over the world is recognizing the potential and are engaged in exploring and
exploiting the worldwide markets. Countries all over the globe are getting involved in
this globalization process and opening up their market and are doing a lot to attract
foreign investments in the form of trade relation, infrastructural development and
technology transfer. The intensity of participation in the globalized world can be also
viewed in terms of imports and exports which are totally governed by a countrys
competitiveness and its ability to deliver innovative goods and services which meets
consumers expectations in terms of quality, reliability and price. The unprecedented
growth in the economy of China and India and their economic influence in the Middle
East region and Africa has been a cause of concern for USA and other western
economies which have vested interested in the MENA region. (Alsatty & Sawyer,
2012)

Economic relations of GCC with Asian countries

The oil-rich Arab countries of the Gulf Cooperation Council (GCC) have
rapidly expanded their economic relations with Asian countries recently,
particularly China and India. The main reason behind this development is
that the regions complement each other in several dimensions. China and
India are the fastest-growing, oil-consuming nations in the world, while
GCC countries have the largest proven deposits of oil and gas. The GCC is
interested in China and India as reliable oil customers over the long-run
and the latter look at the GCC as reliable suppliers of oil and gas. The two
regions are also attracted to each other because both are enjoying strong
economic growth and offer many investment opportunities to the other. It
is expected that GCC economic relations with China and India will grow
stronger in the coming decades and serve as a good example of South
South economic cooperation for other developing countries.

The latest trade statistics for the United Arab

Emirates reveal that in 2011, India and China
emerged as that countrys largest trade partners.
Trade statistics for other oil-exporting
monarchies of the Arabian Peninsula (Bahrain,
Kuwait, Oman, Qatar, and Saudi Arabia) also
show a rapid expansion of trade with emerging
Asian economies, especially China and
India (together, these six oil monarchies constitute
the Gulf Cooperation Council, GCC). The
expansion of bilateral economic relations is not
limited to trade, however. Investment flows
between the GCC and China and India (which
are referred to as C&I from here forward,
whenever mentioned as a block,) have also
enjoyed a significant expansion in recent years.

The GCC countries

have benefited from the high price of crude oil
since 2000. This rapid growth in both regions
has increased their financial resources while
increasing each regions demand for the export
products of the other.

While there were strong trade relations

between East Asia and the Middle East before
the rise of European colonialism, these relations
diminished sharply after the 17th century.
Both regions were forced to reorient their trade
towards their colonial masters. After World
War II, with the decline of European colonialism,
both regions were preoccupied with modernisation
and industrialisation; but they had
little to offer each other as they were both
exporting agricultural products and raw materials
and importing industrial goods and
machinery.

GCC exports to China and India are dominated

by crude oil, whose increasing price has been
partly responsible for the increased value of
GCC exports to these countries. Another contributing
factor is the sharp increase in the
volume of crude oil that the GCC has exported
to China and India where oil demand has
increased steadily since 2000.
The total value of GCC exports to China rose
more than eight-fold from US$5.9 billion in
2000 to US$49.5 billion in 2008. GCC imports
from China grew at an even faster pace during
2000-08up 1,121 per cent, fromUS$3.8 billion
to US$42.6 billion.

Although the Indian economy is several times

smaller than Chinas, the volume of GCC
exports to India has risen faster than exports to
China in recent years; and in 2007 the GCC
exported more to India than China (a difference
of US$9.7 billion). The large community of
Indian workers and professionals in the GCC
has made a positive contribution to the growth
of bilateral trade and investment. The Indian
expatriate community in the GCC exceeds six
million and has shown a strong preference for
Indian products (Karayil 2007).

India
and China have both gained market share,
while the market shares of the USA and major
European exporters have declined. In 2010,
both India and China saw their market shares
exceed the US share.

On the other
hand, the market shares of the USA and
leading European economies have gradually
declined. Further, we see that by 2010 India
and China were importing larger shares of
GCC exports in comparison to the USA and
Europe, which had been the main importers of
GCC oil products.

Source: IMF, Direction of Trade Statistics (2010).

In the manufactured goods category, which

includes the more labour-intensive industrial
products, India and China have been able to
capture sizable market shares in the GCC
market. As shown in Figure 10, they each now
control more than 20 per cent of the GCC
market. Note that the market shares of India
and China have followed a very similar path.
Both the USA and Western Europe have lost
sizable market share to India and China since
1998.
The past decade not only saw a sharp increase
in bilateral trade between the GCC and C&I
but also significant growth in bilateral investment
among these nations as well. A large part
of these investments were intended to enhance
long-term trade and create deeper economic
interdependency, particularly in the energy
sector.

A World Bank study of survey data on FDI

outflows from Middle East and North Africa
(MENA) countries investigated why MENA
investors, dominated by GCC countries, are
attracted to China and India (World Bank
2008:56).4 The most important reasons were:
participation in industrial clusters, strong
growth potential of markets, and low production
costs. Other, less frequent, explanations
were: opportunities for joint venture partnerships,
proximity to markets, and access to technology
or innovation.

(Habibi, 2011)

Beijing has adopted a business-like approach to the Gulf region, based on trade and economic
benefits.39 Cooperation in energy is at the heart of the growing relationship between China and the Gulf.
The two sides need each other. On the one hand, China needs to secure reliable oil and natural gas
suppliers and, on the other, Gulf producers need to secure an expanding market for their hydrocarbons
resources. The Gulf region is also likely to meet Chinas growing needs for natural gas.

(Bahgat, 2005)