UAE of­fers HK crit­i­cal trade op­por­tu­ni­ties along B&R

Dmitriy Frolovskiy writes that the United Arab Emi­rates with its great oil re­serves and tran­si­tion to a knowl­edge-based econ­omy of­fers Hong Kong great scope to do busi­ness in the re­gion

China Daily (Hong Kong) - - COMMENT -

Last month, Fi­nan­cial Sec­re­tary John Tsang Chun-wah led a trade delegation to Dubai to fos­ter closer trade and eco­nomic re­la­tions with the United Arab Emi­rates (UAE). De­spite fac­ing a bud­get deficit and over-re­liance on oil prices, the UAE en­vi­sions long-term devel­op­ment goals that of­fer po­ten­tial for Hong Kong busi­nesses. The coun­try is at a cross­roads in­volv­ing a grad­ual tran­si­tion from a petro-econ­omy to a knowl­edge-based eco­nomic model. Its am­bi­tious di­ver­si­fi­ca­tion pro­gram of­fers great op­por­tu­ni­ties to over­seas part­ners such as Hong Kong with its own proven track record of eco­nomic suc­cess.

Hong Kong stands to gain by cap­i­tal­iz­ing on its ties with the UAE, which is al­ready its largest trad­ing part­ner in the Mid­dle East and the 13th world­wide. Non-oil ex­ports surged to $15.9 bil­lion-plus last year, al­most three times the amount for 2011.

Ac­cord­ing to HKSAR data the UAE’s cur­rent share of the to­tal trade equals only 1 per­cent. In­stead of be­ing dis­cour­aged, busi­nesses on both sides should be more proac­tive by seek­ing to un­earth po­ten­tial across a spec­trum of spheres.

Striv­ing for di­ver­si­fi­ca­tion, the UAE is seek­ing a “big brother” will­ing to share its ex­per­tise for boost­ing the na­tion’s trans­for­ma­tion.

Speak­ing at the Belt and Road Sum­mit in May, Min­is­ter of Econ­omy Sul­tan bin Saeed Al Man­souri stressed the UAE’s strate­gic goals for launch­ing in­dus­tries and in­no­va­tions. On top of this, the Arab na­tion has much to do to im­prove its busi­ness ap­peal; in par­tic­u­lar the leg­is­la­tion lags be­hind while en­tre­pre­neur­ial cul­ture re­mains un­ex­plored.

This is where Hong Kong’s ex­per­tise in en­trepreneur­ship and event man­age­ment could serve as a plat­form for so­lid­i­fy­ing re­cip­ro­cal con­nec­tions via knowl­edge trans­fer.

The UAE is cur­rently fo­cus­ing on a tran­si­tion to an oil-free econ­omy with the pri­vate sec­tor and small- and medium-sized en­ter­prises (SMEs) serv­ing as cat­a­lysts for long-term growth. Hong Kong’s rich en­tre­pre­neur­ial cul­ture and com­pet­i­tive­ness could play a big role with in­ter­gov­ern­men­tal agree­ments pi­o­neer­ing co­op­er­a­tion in the area and busi- The au­thor is an in­de­pen­dent con­sul­tant with ex­pe­ri­ence in Asian and Mid­dle Eastern mar­kets. He also writes for lead­ing pub­li­ca­tions world­wide about in­ter­na­tional trade devel­op­ment and diplo­macy. nesses fol­low­ing the pat­tern.

Hong Kong’s ex­pe­ri­ence in the man­age­ment of large-scale in­ter­na­tional ex­hibits and events would prove to be in­valu­able in the prepa­ra­tion for Dubai Expo 2020 which is aimed at boost­ing the UAE’s global pres­tige and com­pet­i­tive­ness. Hong Kong’s Trade Devel­op­ment Coun­cil could con­trib­ute some of its am­ple event man­age­ment ex­per­tise, thereby en­cour­ag­ing the par­tic­i­pa­tion of Hong Kong busi­nesses across the Gulf Co­op­er­a­tion Coun­cil (GCC) states and open­ing doors to other Arab na­tions.

Lo­cated at the cross­roads of ma­jor trade routes, the UAE plays a crit­i­cal role as a re-ex­port gateway bridg­ing the Belt and Road Ini­tia­tive to the Greater Mid­dle East and Africa. Ties with the UAE will be re­warded with en­tree to other re­gional coun­tries with more than 2 bil­lion con­sumers.

The coun­try is a pri­mary re-ex­port hub with 60 per­cent of all China’s goods to the re­gion pass­ing through its ports. Through­out the “fat years” of oil wealth the gov­ern­ment in­vested ex­ten­sively in tran­sit in­fra­struc­ture and now can boast mod­ern air­ports, ports and road net­works, as well as the up­com­ing trans-GCC rail­way. These high-tech fa­cil­i­ties should in­cen­tivize Hong Kong’s trade ex­pan- sion in the re­gion.

Dis­cov­er­ing new trade hori­zons in the UAE would have a re­ju­ve­nat­ing im­pact on Hong Kong’s econ­omy via aug­ment­ing in­vest­ments and un­cov­er­ing a re­verse knowl­edge trans­fer.

In 2015 alone, the UAE in­vested $7.3 bil­lion in over­seas com­mer­cial real es­tate. This fol­lowed an ear­lier de­ci­sion to broaden its di­ver­si­fi­ca­tion ef­forts by ex­pand­ing a num­ber of as­sets of sov­er­eign wealth funds (SWFs) across de­vel­oped Asian mar­kets.

The re­sults are al­ready tan­gi­ble for the SAR’s econ­omy. Ac­cord­ing to CBRE, a real es­tate ad­vi­sory com­pany, Hong Kong is the fourth most pop­u­lar des­ti­na­tion for real es­tate in­vest­ments for SWFs from the GCC, with more than $2.38 bil­lion be­ing in­vested last year alone.

Hong Kong should con­sider ac­cru­ing more in­for­ma­tion about Is­lamic fi­nance and po­ten­tially chal­lenge Malaysia’s po­si­tion in the area. In the past, Hong Kong tried but did not suc­ceed in en­ter­ing the world of Is­lamic fi­nance: In 2014 and 2015 the SAR is­sued its first sukuk (Is­lamic bonds) but fell short of its tar­gets in reach­ing out to in­vestors world­wide.

The Hong Kong gov­ern­ment is re­ported again to be think­ing about is­su­ing an­other sukuk, while Shari­a­com­pli­ant firm Mawarid Fi­nance and Full­goal As­set Man­age­ment are plan­ning to launch an Is­lamic fund later this year. There­fore, the UAE’s fi­nan­cial ex­per­tise could play a piv­otal role in help­ing those ef­forts to suc­ceed.

Mean­while, Hong Kong’s fu­ture sukuk is­suance might be de­nom­i­nated in ren­minbi. The UAE is al­ready the most ac­tive na­tion in the Mid­dle East that uses ren­minbi for di­rect pay­ments to Hong Kong and the Chi­nese main­land. Ac­cord­ing to Reuters, more than 70 per­cent of pay­ments by value in the pre­vi­ous year were in yuan. Thanks to Bei­jing’s sup­port, Hong Kong is des­tined to play a ma­jor role in the in­ter­na­tion­al­iza­tion of ren­minbi.

Un­like the rest of the re­gion that faces tur­bu­lence, the UAE re­mains a safe coun­try due to its po­lit­i­cal sta­bil­ity and open­ness to change. As Belt and Road erases hori­zons, Hong Kong can spear­head the ini­tia­tive. Dis­cov­er­ing new des­ti­na­tions is crit­i­cal for ex­pand­ing trade, and Hong Kong can­not af­ford to miss this golden op­por­tu­nity.

Dis­cov­er­ing new trade hori­zons in the UAE would have a re­ju­ve­nat­ing im­pact on Hong Kong’s econ­omy via aug­ment­ing in­vest­ments and un­cov­er­ing a re­verse knowl­edge trans­fer.”

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