Mid­dle East a mar­ket to be tapped on the Road

So, prospec­tive Chi­nese in­vestors need to do their home­work be­fore mak­ing a foray into the Mid­dle East mar­ket.

China Daily (Latin America Weekly) - - Views - The au­thor is an as­so­ciate pro­fes­sor at the Uni­ver­sity of In­ter­na­tional Re­la­tions.

Last year, China in­vested $29.5 bil­lion in the Mid­dle East, which ac­counted for 31.9 per­cent of the re­gion’s to­tal for­eign in­vest­ment, ac­cord­ing to a re­port is­sued by the Kuwait-based Arab In­vest­ment and Ex­port Fi­nance Com­pany. That makes China the big­gest in­vestor in the Mid­dle East, fol­lowed by the United States and the United Arab Emi­rates, the re­port said.

Which makes sense given that most Western in­vestors would re­frain from ven­tur­ing into non-Arab mar­kets in the re­gion such as Iran and the Bei­jing-pro­posed Belt and Road Ini­tia­tive is driv­ing Chi­nese in­vest­ment to the oil­rich Mid­dle East, once a pivot on the an­cient Silk Road.

China has earned it­self a rep­u­ta­tion for “get­ting things done” in ma­jor in­fra­struc­ture projects at com­pet­i­tive costs and speed, as well as mak­ing the most of State-di­rected in­vest­ment. It signed 14 co­op­er­a­tive agree­ments when Saudi Ara­bian King Sal­man bin Ab­du­laziz Al Saud vis­ited China in March, in­clud­ing projects worth about $65 bil­lion, from pro­duc­tion ca­pac­ity to in­vest­ment co­op­er­a­tion. Last month, an elec­tric train project in Iran backed by Chi­nese en­ter­prises, which will con­nect Te­heran and the north­east­ern city of Mash­had, also re­ceived gov­ern­ment fund­ing.

In essence, these mega projects are re­cip­ro­cal and of course, costly. But the ap­peal­ing long-term gains are not a pie in the sky as they can be achieved through proper man­age­ment and stream­lined co­or­di­na­tion. The real risk is that de­spite the ben­e­fits and ef­fi­ciency of Chi­nese en­ter­prises-led con­struc­tion, lo­cal peo­ple may have lit­tle idea of China’s pres­ence in the Mid­dle East.

Un­like prod­ucts im­ported from the West or even the Repub­lic of Korea, peo­ple in the Arab world have lit­tle knowl­edge about Chi­nese-as­sisted in­fra­struc­ture pro­grams. Few have a clear idea of the rise of China, let alone the Chi­nese com­pa­nies that de­signed and built their tun­nels, or the Chi­nese gantry cranes used at their ports and Chi­nese en­gi­neers who work on their oil fields.

Be­sides, some Mid­dle East com­mod­ity ped­dlers buy shoddy goods from China and re­tail them in their coun­tries, deal­ing a blow to the im­age of Chi­nese prod­ucts, with which lo­cal con­sumers are not fa­mil­iar in the first place. These in­vest­ment dis­ad­van­tages, along with se­cu­rity risks, have dis­suaded many Chi­nese en­trepreneurs from look­ing to the Arab mar­kets.

Much of the un­tapped busi­ness po­ten­tial in the Mid­dle East can be ex­ploited, though, as long as one knows how to go about it. But some Chi­nese in­vestors seem to be in­flu­enced more by the sto­ries of failed ad­ven­tures of their peers, who suf­fered huge losses in their Mid­dle East ven­tures be­cause of the lack of le­gal assistance and in­vest­ment coun­sel­ing.

The fact is that Mid­dle East states have an es­tab­lished, time-tested mar­ket code of con­duct be­cause of their deal­ings with Euro­pean and US busi­ness peo­ple over the decades. So, prospec­tive Chi­nese in­vestors need to do their home­work be­fore mak­ing a foray into the Mid­dle East mar­ket.

The US fac­tor, too, should be taken into ac­count. Syria and Iran are high on the US sanc­tions list, mean­ing do­ing busi­ness with those two coun­tries can be tricky given the piv­otal role of US com­po­nents and the dol­lar in in­ter­na­tional trade.

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