Trade between the GCC and the Association of SouthEast Asian Nations (ASEAN) has grown considerably in recent years as economies in both regions seek to capitalise on mutually beneficial opportunities, and diversify their trade and investment partners.
Indeed, trade between the GCC and Asian countries classified as emerging and developing by the IMF increased 34.7% year-on-year to reach $516bn in 2022, up from $383bn in 2021, according to data from UK-based think tank Asia House. Trade between the two regions is projected to reach $757bn by 2030, nearly double its 2021 value, according to a 2023 report by Asia House. The same analysis indicates that trade between the two regions could surpass trade between the GCC and advanced economies – which reached $587bn in 2022 – as soon as 2026.
Strengthening Ties
The inaugural ASEAN-GCC Summit in Riyadh in October 2023 indicates growing cooperation between the two regions. This summit marked the first top-level ASEAN-GCC meeting since the organisations established relations in 1990. The summit launched the ASEAN-GCC Framework of Cooperation for 2024-28, paving the way for a new era of inter-regional cooperation in the years ahead. The joint statement following the summit indicates a mutual desire to bolster trade and investment flows. Stakeholders identified standout opportunities in a range of sectors, particularly agriculture, digital connectivity, digitalisation, health care, logistics, manufacturing, petrochemicals, renewable energy, smart cities, sustainable infrastructure and tourism.
Efforts to secure inter-regional trade and investment agreements to unlock long-term opportunities have been ongoing for some time. For instance, in July 2022 Indonesia and the UAE signed a Comprehensive Economic Partnership Agreement. The deal seeks to grow bilateral trade from $3bn in 2021 to $10bn by 2027.
Strategic Foundation
Trade between the GCC and ASEAN has been relatively steady, inching up from $77.9bn in 2010 to $85.2bn in 2021 – accounting for around one-fifth of trade between the GCC, and developing and emerging Asia during the latter year.
As the US and Europe shift away from Middle Eastern oil in favour of renewable energy sources, ASEAN and East Asia have stepped in as important destinations for Gulf hydrocarbons. Energy demand in ASEAN looks likely to grow alongside its manufacturing sector. Meanwhile, both regions are expected to feel the impact of climate change. This may drive the development of low-carbon technologies, with GCC countries seeking a first-mover advantage in subsectors such as green hydrogen. The Gulf is also working to attract foreign investment and talent by easing visa restrictions and modernising labour practices. With respect to capital markets, dual-listing opportunities are garnering interest from companies in both Asia and the Gulf.
Trade in agricultural products presents another opportunity, given the abundant production of rice, soybeans and tropical fruits in ASEAN, alongside climate-related food production challenges in the GCC. Collaboration and knowledge sharing in priority segments could also deepen their relationship. For instance, GCC financial technology regulators could take cues from progressive ASEAN counterparts like Singapore. Together, they could train halal auditors to pave the way for trade in a broader range of halal products, from food to pharmaceuticals.
Future Direction
The inaugural ASEAN-GCC Summit in 2023 is a testament to the strengthening relationship between the two blocs and the potential to accelerate trade and investment. While the major economies in each bloc may dominate the investment landscape, other countries such as Bahrain, Oman, the Philippines and Vietnam are nonetheless positioned to reap the benefits from inter-regional and intra-regional cooperation. Looking ahead, closer collaboration – at the multilateral and bilateral level – is poised to bolster growth prospects for both regions in the years ahead.
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