Much has been said about the attempts made by Hong Kong to follow in the footsteps of Singapore to actively explore economic opportunities in the Middle East. At present, Singapore is an entrenched trading partner of the Gulf States. The Gulf Cooperation Council (GCC) Secretary-General Jasem Mohamed Al-Budaiwi recently met Singapore’s ambassador to Saudi Arabia, Wen Zhao Ming, in Riyadh to promote and strengthen multilateral trade relations. 

Al-Budaiwi stressed that the GCC countries have distinguished relations with Singapore, especially in trade and investment. In fact, the free-trade agreement between Singapore and the GCC, which was signed in 2008, was the first free-trade agreement signed by the GCC.

Unlike Singapore, which enjoys first-mover advantage in the Middle East, Hong Kong is embarking on a steep learning curve to struggle with the languages, history, institutions, government policies and business cultures of Arab countries. One of the aims of our research is to provide concise background information and in-depth analyses for local investors to help them ease into their new business adventures in the GCC markets. The following discussion will focus on the business opportunities in Saudi Arabia and the United Arab Emirates (UAE).

Under Vision 2030, Saudi Arabia actively seeks to attract investment projects that promote the development of non-oil sectors, transfer foreign technology and expertise, create new jobs for local people (the Saudization program) and increase exports. 

Hesitation will come at a great cost to Hong Kong investors because the lucrative market in Saudi Arabia is critically and strategically important. Indeed, many US and European companies are eager to invest in lucrative green-tech projects in the kingdom.

There are strong incentives for Saudi Arabia to develop its green-tech industry. Long-term estimates suggest that by 2038 Saudi Arabia will have become a net importer of oil. In other words, the kingdom must diversify its economy. The sharp drop in the price of oil in the second half of 2014 has strengthened the kingdom’s perceptions of the threat of overreliance on the export of oil.

Climate change has left Riyadh with no room to retreat from its determination to develop green technology projects. As a key supporter of greentech, Crown Prince Mohammed bin Salman has declared that his country — which is already feeling the effects of climate change in the form of droughts, extreme temperatures, and rising sea levels — will zero out its heavy carbon footprint by 2060. Hong Kong can act as a “superconnector” between greentech companies and investors from the Chinese mainland and the Middle East. It is worth noting that China is also advancing toward the “3060” dual carbon targets.

Another area of interest for Hong Kong investors is the development of smart cities in the kingdom. One megaproject is called NEOM. Envisioned as an innovative urban ecosystem in the Red Sea region, NEOM will be fully powered by sustainable and renewable energy and deployed with robotics. How smart they are will be will depend on big data analytics.

In Hong Kong, the “iAM Smart” platform aims to provide the public with more convenient one-stop digital services and improved user experience. Riding on the back of the platform and forging a strategic partnership with the Chinese mainland’s big data analytical companies, Hong Kong may expand its vision to provide technological support for the development of smart cities in Saudi Arabia.

Not to be overlooked are the opportunities offered by the financial technology sector in Saudi Arabia. Following the launch of the Fintech Saudi initiative in May 2018, the first fintech license was approved a month later to provide crowdfunding services. With a sophisticated fintech sector, the Chinese mainland is the market leader accounting for 99.2 percent of the total Asia-Pacific crowdfunding market. Hong Kong can act as a middleman between fintech companies on the Chinese mainland and in Saudi Arabia.

Finance companies in the kingdom must operate crowdfunding platforms and the issuance of Sukuk (Islamic bonds) in strict compliance with Shariah. Hong Kong’s universities need to offer more Shariah-compliance courses. We may also consider forging academic cooperation with Malaysian universities to design practical Shariah-compliance courses. Besides, Hong Kong should take active measures to promote the issuance of Islamic bonds in the city. 

Seeking cooperation with the Saudi Stock Exchange (Tadawul) should also top the list of Hong Kong investors’ Saudi Arabian investment agenda. Foreign companies are allowed to list on the Tadawul, subject to the same listing, disclosure and governance requirements as Saudi listed companies. The Hong Kong Stock Exchanges and Clearing Ltd (HKEX) should consider forging partnership with the Tadawul to explore cross-border listings and joint product development.

Turning to the investment opportunities in the UAE, Hong Kong investors have traditionally put the spotlight on Dubai, which is the most populous city in the UAE. The UAE is a high-income country with a GDP per capita of over $44,000 in 2021. In 2010, the UAE launched “Vision 2021” to build a diversified, sustainable and flexible economy. “We the UAE 2031” further builds on “Vision 2021” to continue the development path on economic diversification and improvement in the livelihoods of the Emiratis. The above development plans offer vast opportunities for Hong Kong companies and can help them establish a foothold in the UAE.

Because Dubai’s oil reserves have diminished significantly, it has made strenuous efforts to diversify its economy in the past few decades. Real estate and construction, trade, entrepot and financial services are the largest contributors to Dubai’s economy. Hong Kong investors may turn to the financial sector in Dubai as a focal point of their investment initiative because the Dubai international financial center is so well-developed. Since its opening in September 2004, the Dubai International Financial Centre (DIFC) has attracted many leading international firms. It has also set up the Nasdaq Dubai, which lists equity, derivatives, structured products, Islamic bonds and other bonds. The DIFC model is an independent risk-based regulator with a legislative system consistent with English common law. The HKEX should explore collaborative opportunities with the Dubai stock exchange.

As a latecomer, Hong Kong must work harder to explore economic opportunities in Saudi Arabia, the UAE and other Gulf states. In order to capture these opportunities, we must evaluate whether we have adequate knowledge of the languages, history, institutions, government policies and business cultures of the new markets. If not, we should fill the knowledge gap immediately. Chance favors the prepared mind.

Albert Yip Hing-fai is the principal solicitor of HF Yip & Co and director of national security education of Chinese Dream Think Tank.

Kacee Ting Wong is a barrister, part-time researcher of Shenzhen University Hong Kong and Macao Basic Law Research Center, and chairman of Chinese Dream Think Tank.

The views do not necessarily reflect those of China Daily.