The United Arab Emirates — Hong Kong’s largest trading partner in the Middle East — is tipped to be the next key market for Hong Kong, riding on the momentum of Chief Executive John Lee Ka-chiu’s recent Middle East mission. A UAE-Hong Kong free trade agreement is expected to be the “logical next step”, according to the city’s leader.

Statistics show that non-oil trade between the UAE and Hong Kong hit the $6 billion mark in the first half of 2022, a growth of 16.2 percent compared to the same period in 2021. In 2021, Hong Kong opened its first economic and trade office in Dubai, followed by an announcement from the Dubai Chamber of Commerce at the recent UAE-Hong Kong Business Forum that the chamber had established its international office in Hong Kong.

As UAE-Hong Kong business ties continue to grow, what are the opportunities and challenges for Hong Kong to tap into the UAE’s multibillion-dollar market?

Traditionally Hong Kong is a high-growth export market for the UAE. According to a business intelligence report by the Dubai Chamber of Commerce, Hong Kong is the market with the highest untapped potential for jewelry exports. In 2021, Hong Kong imported an estimated $1.1 billion worth of jewelry from the UAE. Other products with high potential for export include beauty products, cosmetics and skincare preparations. Since both the UAE and Hong Kong are yet to be part of the Regional Comprehensive Economic Partnership, a free trade agreement between the two economies will give Hong Kong an edge in doing business with the UAE.

Hong Kong’s role as a logistics hub connecting the Chinese mainland and the Persian Gulf could be another game changer. At the World Economic Forum in 2020, Dubai launched the World Logistics Passport with the goal to help developing countries overcome barriers to trade and to leverage Dubai’s expertise in logistics services. This initiative is also in line with China’s 21st Century Maritime Silk Road, which focuses on maritime connectivity within Eurasia. Given its world-class aviation and maritime transport infrastructure, Hong Kong can play a bigger role in creating synergy between the two initiatives.

The UAE is not only Hong Kong’s closest trading partner in the Middle East — the two business and financial hubs have so much to learn from each other’s successes. While Hong Kong is still experimenting with Islamic finance with several landmark sukuk (Islamic financial certificates that comply with Islamic religious law commonly known as Shariah) listed on the Hong Kong stock exchange, and a few Islamic financial products and services in the market, the UAE has one of the highest scores globally in the latest Islamic Finance Development Indicator. Despite being one of the world’s leading financial hubs, Hong Kong can still learn from the best practices of the UAE and other Middle Eastern counterparts, especially in Islamic finance.

Meanwhile, Hong Kong’s abundant pool of local talents and its world-class education, with five tertiary institutes as part of the top 100 universities in the Times Higher Education World University Rankings 2023, can help with the UAE’s upskilling of its local workforce. Built on the success of several educational partnerships, such as the HKUST-Saudi Aramco Master of Business Administration program (Saudi Arabia) and the HKUST-SKOLKOVO (Russia) Executive Master of Business Administration program, Hong Kong universities can help the Persian Gulf cultivate its future talents.

Obviously, Hong Kong is not the only economy in Asia that eyes the UAE opportunity. As early as 2019, Singapore and the UAE signed a comprehensive partnership agreement covering trade and investment, defense and security, and sustainable development. The UAE is also Singapore’s closest trading partner in the Middle East, with an estimated $15.7 billion bilateral trade in 2021, way ahead of Hong Kong. This indicates Hong Kong needs to redouble its efforts in building closer business ties with the UAE.

The ripple effects of Sino-US tensions are spreading across Asia and the globe, shifting the dynamics for trade and investment. The rapid growth of the Persian Gulf in the past decades makes this an exciting region with ample business opportunities to exploit. Hence, there is no better time than now for Hong Kong to explore more aggressively new and innovative partnerships and replicate best practices from one region to another.

The author is a co-founder of Brandstorm Communications and a former consultant for the Global Business Forum ASEAN at Expo 2020 Dubai.

The views do not necessarily reflect those of China Daily.