New Middle East trade corridor offers ‘win-win’ economic growth

New Middle East trade corridor offers ‘win-win’ economic growth
The transport corridor serves to further centralize the energy-rich Gulf states within the global economy, placing them at the center of geoeconomic activity. (SPA)
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Updated 13 November 2023
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New Middle East trade corridor offers ‘win-win’ economic growth

New Middle East trade corridor offers ‘win-win’ economic growth
  • Ambitious trade and investment initiative represents an economic shift to the East and the Global South

RIYADH: On Sept. 10, Saudi Arabia’s Crown Prince Mohammed bin Salman announced the signing of a memorandum of understanding between India, the Middle East, and Europe for the construction of a new economic corridor.

The MoU was signed between India, the US, UAE, France, Germany, Italy and the EU.

The ambitious trade and investment initiative includes an eastern corridor that connects India to the UAE, Saudi Arabia, Jordan, and Israel, and a northern corridor linking those Middle Eastern countries to Europe.

Speaking during the G20 Summit in New Delhi, the crown prince said the project seeks to “strengthen economic interdependence” and common interests of the countries involved.

“The world stands at an inflection point in history,” said US President Joe Biden while addressing the India-Middle East-Europe Economic Corridor summit that was held in New Delhi on the sidelines of the G20 summit and called the agreement “historic.”

Indian Prime Minister Narendra Modi said in a recent radio address that IMEC will become the basis of world trade for hundreds of years to come.

The transport corridor serves to further centralize the energy-rich Gulf states within the global economy, placing them at the center of geoeconomic activity.

In so doing, the IMEC represents an economic shift away from the West to the East and the Global South, shifts that have been taking place since the financial crisis in 2008 and which have continued.

The corridor, through its geographical and economic positioning, is likely to accelerate that shift. 

It is clear that banks are focusing their lending activities on what is known as ‘productive lending’ such as education and other productive economic sectors.

Talat Zaki Hafez, Economic columnist and banking expert

While the IMEC is in its infancy, it is being lauded for its ability to provide alternative trade routes to thriving markets of the Middle East and Europe, extending India’s reach to North Africa and North America.

“The economic impact on Saudi Arabia and India is great, especially concerning the already strong bilateral economic and trade relationship between the two countries that dates back to 1947 and the bilateral trade between the two countries,” Talat Hafiz, a Saudi economic writer and banking expert told Arab News.

“The volume of trade exchange between Saudi Arabia and India in 2022 reached $52.4 billion and the value of Kingdom’s exports to India amounted to $41.9 billion, of which $8.14 billion are non-oil exports, while the Kingdom imports from India amounted to $10.5 billion,” he added.

In a recent column for Arab News, GCC Assistant Secretary-General for Political Affairs and Negotiation Abdel Aziz Al-Uwaisheg stated that from a Gulf standpoint “the new venture will solidify the region’s historical position as the primary trade route linking Asia, Europe and Africa.”

Al-Uwaisheg highlighted the route’s emphasis in energy trade and how it capitalizes on the region’s comparative advantage in providing cheap and reliable energy to the rest of the world.

The eight IMEC signatories – Saudi Arabia, UAE, India, France, Germany, the US, Italy and the EU – account for approximately half of the world’s economy and 40 percent of its population.

This means, states Al-Uwaisheg, that the corridor has the potential to transform global trade and development as the signatories commit to the right resources.

Talmiz Ahmad, former Indian ambassador to Saudi Arabia, the UAE and Oman, told Arab News that his country is “already a very major trade partner for all the countries of the GCC, including Saudi Arabia.”

He added: “Saudi Arabia is already our number four trade partner in the world globally and the number one supplier of petroleum to India.”

The former diplomat further added how India has substantial trade relationships with all the countries of the GCC. 

It will definitely improve and enhance the overall trade activities between Saudi Arabia and South Asia, also simply because it will shorten the trade flow time by six to three days, which in turn will improve the frequency of trade between Saudi Arabia and South Asia.

Talmiz Ahmad, former Indian ambassador to Saudi Arabia, the UAE and Oman

“It is based on the purchase of energy trade and investments. It’s already a very substantial relationship and in South Asia and the Arabian and the Arabian Peninsula are already extremely well connected,” he said.

Ahmad notes how Saudi Arabia has been speaking about having a railway project across the Arabian Peninsula for the past 10 to 15 years.

The corridor, he emphasized, offers the chance to give the Saudi-India economic partnership “new value.”

“It should go beyond business into something which we would call a genuine and substantial strategic partnership,” he told Arab News, adding: “I would recommend, given Saudi Arabia’s important presence in the Gulf as well as in the Red Sea, that there is hope for maritime security cooperation between India, the Middle East and Saudi Arabia. The core partners should be India and Saudi Arabia, and they can bring in other partners as the situation warrants. I am saying this because the most important area for regional interests is the Western Indian Ocean, particularly the Arabian Sea.”

The corridor, which will comprise a 4,800-kilometer trade route linking India to the Arabian Gulf states and Europe, will include pipelines for electricity and hydrogen.

It will comprise two separate routes: an east corridor that links India to the Arabian Gulf, and a northern corridor connecting the Gulf states to Europe.

Additionally, the sea and rail route will foster the transit of goods and services as well as digital and electronic connectivity and export clean hydrogen.

The crown prince has previously said the project intends to enhance trade between the participating countries, boost the import of energy supplies, including hydrogen.

“It will definitely improve and enhance the overall trade activities between Saudi Arabia and South Asia, also simply because it will shorten the trade flow time by six to three days, which in turn will improve the frequency of trade between Saudi Arabia and South Asia,” adds Hafiz.

He further explained how the new corridor is significant for both regions “in the medium and long term, as it will not only shorten the shipping time of goods between the two regions but also save on the cost of shipping and transport.”

It also, states Hafiz, “encourages prompt businesses between the two regions.” IMEC is being established during a time when Saudi Arabia is looking to expand its trade with the world. 

“This is opening new routes of business with friendly countries such as India and other parts of the world also as a way to strengthen its economy and diversify it away from a reliance on oil,” explains Hafiz. “[IMEC] will help the Kingdom achieve its Vision 2030 objectives and improve its non-GDP and non-oil exports.”

The corridor does have geopolitical implications. One is the current war between Israel and Hamas raising a question mark on when and how the IMEC is likely to go ahead.

It is also not the first time that a massive trade route with aims to stretch across the globe has been launched.

In 2013, China announced its One Belt One Road initiative, a global infrastructure development strategy adopted by Beijing to invest in more than 150 countries and international organizations.

Yet this project, also known as the Belt and Road initiative, is facing questions over its significance amid China’s slower economic growth.

Hafiz argued that even with these concerns, as well as the boost to the US’ profile in the region given by IMEC, the presence of both projects is a potential “win-win” situation.

“There should be any geopolitical impact of IMEC compared to China’s Belt and Road Initiative, since both of them contribute positively to global trade and serve the trade and economic interest of the countries who are part of the two trade agreements,” he told Arab News, adding that the two projects offer the potential for greater synergies of integration and cooperation through economic means and a way to further expand the already growing avenues for business in the region.


Saudi Arabia sees 23.4% rise in FDI: GASTAT 

Saudi Arabia sees 23.4% rise in FDI: GASTAT 
Updated 28 min 23 sec ago
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Saudi Arabia sees 23.4% rise in FDI: GASTAT 

Saudi Arabia sees 23.4% rise in FDI: GASTAT 

RIYADH: Saudi Arabia experienced a 23.4 percent increase in foreign direct investment in the second quarter of this year compared to the previous three months, according to official data. 

The latest figures from the General Authority for Statistics revealed that net FDI flow reached SR11.7 billion ($3.12 billion) in the second quarter of 2024, up from SR9.5 billion in the first three months of the year. 

Attracting foreign investment is a key objective of Vision 2030, and Saudi Arabia aims to attract $100 billion in FDI by the end of the decade. 

This growth underscores the Kingdom’s continued appeal to international investors and reflects ongoing efforts to enhance its investment environment and foster economic development. 

GASTAT noted that the net inflow of FDI in the second quarter declined by 7.5 percent compared to the same period in 2023, when inflows amounted to SR12.6 billion.

However, the volume of inflows grew by 14.5 percent to SR19.4 billion compared to the previous quarter. 

The report indicated that outflows amounted to SR7.8 billion, marking a year-on-year increase of 14.1 percent and a quarter-on-quarter rise of 3.4 percent. 

In August, a Standard Chartered report highlighted that Saudi Arabia’s updated investment law and recent reforms could help the country achieve its goal of attracting $24 billion in FDI this year. 

The Kingdom approved an updated investment law last month to enhance FDI flows, with the Ministry of Investment stating that the law would boost transparency and simplify the investment process.

The law also promises enhanced protections for investors, including adherence to the rule of law, fair treatment, and property rights, alongside robust safeguards for intellectual property and seamless fund transfers. 

Standard Chartered emphasized that Saudi Arabia’s future economic growth will be driven by increased FDI inflows, along with investments in public capital expenditure and the private sector. 

In August, Saudi Arabia’s Assistant Minister of Investment, Ibrahim Al-Mubarak, expressed the Kingdom’s eagerness to attract more FDI from Asia and Europe as its economic diversification efforts progress steadily. 

In July, a report released by the Saudi government revealed that the Kingdom’s FDI stock reached SR817.7 billion in the first quarter of 2024, representing a rise of 6.1 percent rise compared to the same period last year. 


Oil Updates – prices climb on fears of Middle East conflict escalation

Oil Updates – prices climb on fears of Middle East conflict escalation
Updated 30 September 2024
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Oil Updates – prices climb on fears of Middle East conflict escalation

Oil Updates – prices climb on fears of Middle East conflict escalation

SINGAPORE: Oil prices rose for a second consecutive session on Monday, with concerns escalating over potential supply disruptions in the Middle East after Israel stepped up attacks on Palestianian militant group Hamas and Iranian-backed forces in the region.

Brent crude futures for November delivery gained $1.12, up 1.56 percent to $73.10 a barrel as of 9:11 a.m. Saudi time. That contract expires on Monday, and the more-active contract for December delivery climbed $1.04, or 1.45 percent, to $72.58.

US West Texas Intermediate crude futures advanced 93 cents, or 1.36 percent, to $69.11 a barrel.

Prices also rose last Friday, though for the week, Brent fell around 3 percent and WTI fell by around 5 percent on worries about demand in China, despite fiscal stimulus measures in the world’s second-biggest economy and top oil importer.

On Monday, prices were supported by the possibility that a widening Middle East conflict may directly involve Iran, a key producer and member of OPEC, after Israel escalated attacks on the Hezbollah and Houthi militant groups that Iran backs.

While excessive supplies are a key concern for oil markets, investors broadly fear a region-wide conflict in the Middle East could affect supplies from key producing areas, said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Hamas said an Israeli strike killed its leader in Lebanon on Monday, while another Palestinian militant group said three of its leaders were killed in a strike on Beirut.

Israel on Sunday launched airstrikes against the Houthi militia in Yemen and dozens of Hezbollah targets throughout Lebanon after earlier killing the Hezbollah leader.

In the context of Israel’s decisive strike on Hezbollah, oil prices will continue to be driven by supply and demand dynamics, said Tony Sycamore, market analyst at IG.

Given the upcoming end of OPEC+’s voluntary supply cuts on Dec. 1, WTI may test its 2021 lows in the $61 to $62 a barrel range, he said.

“Additionally, despite China’s recent dovish shift, it’s unclear if this will translate into higher fuel demand, considering China’s advancements in electrifying and decarbonizing its transportation sector,” Sycamore said.

Data on Monday was not encouraging for demand, showing China’s manufacturing activity shrank for a fifth straight month and the services sector slowed sharply in September.

Later on Monday, markets will be waiting to hear from Federal Reserve Chair Jerome Powell for clues on the central bank’s pace of monetary easing. Seven other Fed policymakers are also due to speak this week, ANZ analysts said in a note.

With the Fed and other major central banks embarking on policy easing, some economic recovery could just be around the corner, said Phillip Nova’s Sachdeva.

“How well demand responds to easing rates, and how much Chinese demand revives after the major stimulus injected last week, will eventually shape oil market dynamics going forward,” she said.


Saudi unemployment rate falls to 3.3% in Q2 as job market strengthens: GASTAT

Saudi unemployment rate falls to 3.3% in Q2 as job market strengthens: GASTAT
Updated 30 September 2024
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Saudi unemployment rate falls to 3.3% in Q2 as job market strengthens: GASTAT

Saudi unemployment rate falls to 3.3% in Q2 as job market strengthens: GASTAT

RIYADH: Saudi Arabia’s overall unemployment rate fell to 3.3 percent in the second quarter of 2024, a 0.2 percentage point drop compared to the previous quarter, official data showed. 

According to data from the General Authority for Statistics, the unemployment rate also declined by 0.8 percentage points compared to the same period last year. 

The jobless rate among Saudi nationals fell to 7.1 percent, a quarterly drop of 0.5 percentage points and an annual decline of 1.4 percentage points.  

The decrease aligns with the Kingdom’s Vision 2030, which aims to enhance job opportunities for Saudis and stimulate economic expansion. The improvement in labor market indicators is expected to support long-term socio-economic development. 

In June, Saudi Arabia launched Jadarat, a unified employment platform designed to connect job seekers with positions in the public and private sectors, part of broader efforts to tackle unemployment. 

Labor force participation among Saudis slipped by 0.6 percentage points in the second quarter to 50.8 percent, though it edged up 0.1 percentage points from the same period a year earlier. 

“The employment-to-population ratio for Saudis declined by 0.3 percentage points compared to the first quarter of 2024, standing at 47.2 percent, while it increased by 0.8 percentage points annually compared to the second quarter of 2023,” stated GASTAT.  

Saudi female unemployment saw a sharp quarterly decline of 1.4 percentage points, landing at 12.8 percent. The employment-to-population ratio for women slipped by 0.1 percentage points to 30.8 percent.  

For men, the employment-to-population ratio remained steady at 63.6 percent, while labor force participation edged down by 0.1 percentage points to 66.3 percent. 

The GASTAT survey revealed that 95.5 percent of jobless Saudis are willing to take up roles in the private sector, with 81.9 percent of unemployed Saudi women and 93.8 percent of men open to working eight or more hours a day. 

The decline in unemployment underscores Saudi Arabia's progress in reshaping its labor market. As the Kingdom continues to focus on economic diversification, these positive trends signal the potential for stronger workforce participation and broader opportunities for its citizens moving forward.


ACWA Power, Badeel, and SAPCO reach $3.2bn financial close on 3 solar PV projects  

ACWA Power, Badeel, and SAPCO reach $3.2bn financial close on 3 solar PV projects  
Updated 29 September 2024
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ACWA Power, Badeel, and SAPCO reach $3.2bn financial close on 3 solar PV projects  

ACWA Power, Badeel, and SAPCO reach $3.2bn financial close on 3 solar PV projects  

RIYADH: Saudi Arabia’s upcoming solar photovoltaic projects — Haden, Muwayh, and Al Khushaybi — have reached financial close, securing a total investment of $3.2 billion.  

Spearheading these initiatives is the Kingdom’s energy transition leader, ACWA Power, along with Public Investment Fund-owned Water and Electricity Holding Co., also known as Badeel, and Saudi Aramco Power Co., an Aramco subsidiary.  

The projects will deliver a combined solar capacity of 5.5 gigawatts.  

These initiatives are part of Saudi Arabia’s National Renewable Energy Program, which is overseen by the Ministry of Energy and is reflected in PIF’s commitment to develop 70 percent of the country’s renewable energy target capacity by 2030.  

“Financial closure of the projects signals our dedication and commitment to providing clean, consistent and cost-effective energy. We are grateful to our stakeholders and our financial partners for their invaluable support in enabling us to make this vision a reality,” said Marco Arcelli, CEO of ACWA Power.  

The Haden and Muwayh plants, each with a capacity of 2 GW, are located in the Makkah region, while the Al Khushaybi plant, with a capacity of 1.5 GW, is situated in the Qassim region.  

The facilities will be jointly owned by Badeel, ACWA Power, and SAPCO, with the Saudi Power Procurement Co. serving as the procurer and off-taker for the projects.  

The $2.5 billion senior debt financing for these projects was secured through a consortium of local, regional, and international banks, including Banque Saudi Fransi, Mizuho Bank, and Riyad Bank, as well as the Saudi National Bank, Standard Chartered Bank, Emirates NBD, First Abu Dhabi Bank, and HSBC. 

“Reaching the financial close of these solar PV projects represents a major milestone in our journey to support Saudi Arabia’s rapidly growing renewable energy sector and contribute to PIF’s commitment to developing 70 percent of Saudi Arabia’s renewable energy by 2030,” Sultan Al-Nabulsi, acting CEO at Badeel, said.  

This financial close follows significant investments by PIF in the renewable energy value chain. In July, PIF announced three new joint ventures to boost local production of wind turbine and solar PV components, with the intention of leveraging the global energy transition and supporting efforts to position Saudi Arabia as a manufacturing hub for the renewables sector.  

PIF and its partners are currently developing several projects with a total capacity of 13.6 GW, representing investments of over $9 billion.  

These projects include Sudair, Shuaibah 2, Ar Rass 2, Al Kahfah, and Saad 2 and are intended to support local private sector development through increased domestic supply chain participation.  

“We are pleased to extend our partnership with ACWA Power and Badeel, providing further impetus for the Kingdom’s rapidly growing renewables sector. Together, we are taking our renewables portfolio to the next level, advancing the energy transition to meet the rising demand for power with fewer emissions,” the Senior VP of New Energies at Saudi Aramco, Waleed Al-Saif, said.  

With the addition of these three new projects, ACWA Power’s solar portfolio in Saudi Arabia now includes 14 projects, totaling more than 17.8 GW of combined PV capacity. This brings ACWA Power’s total renewable capacity portfolio to 35 GW. 


Fourth Milling eyes growth, regional expansion post-IPO to boost Saudi food security: CEO

Fourth Milling eyes growth, regional expansion post-IPO to boost Saudi food security: CEO
Updated 29 September 2024
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Fourth Milling eyes growth, regional expansion post-IPO to boost Saudi food security: CEO

Fourth Milling eyes growth, regional expansion post-IPO to boost Saudi food security: CEO

RIYADH: As Fourth Milling Co. charts its path forward following a successful initial public offering, the company is positioning itself for significant growth, signaling a new era of industry leadership. 

Key to the firm’s plans is expanding production capacity and enhancing operational efficiencies. These efforts aim to strengthen leadership in Saudi Arabia’s milling industry while supporting the Kingdom’s food security needs, a crucial element of the country’s Vision 2030, Khalid Al-Maktary, the company’s CEO told Arab News in an interview. 

As one of Saudi Arabia’s leading producers of flour, wheat derivatives, and animal feed, Fourth Milling Co. is helping ensure a stable and reliable supply of essential staples. 

Khalid Al-Maktary, CEO of Fourth Milling Co. Supplied

“Our core business focuses on producing high-quality flour and related products for both industrial and consumer segments,” the executive said.  

Its flagship brand, FOOM, dominates the local market, holding over 31 percent of the consumer segment by volume, the highest among regional and international competitors.  

This strong market position enables the company to serve over 80 percent of the Kingdom’s population efficiently. 

Fourth Milling Co. holds a 21 percent share of Saudi Arabia’s overall flour market, making it one of the top players in the industry, Al-Maktary noted. 

Its ability to maintain this market dominance is attributed to several factors: its production facilities, efficient distribution network, and strong customer loyalty, the CEO underlined, adding that these strengths were key drivers behind the successful IPO, which saw the company’s shares oversubscribed by 119 times during the institutional book-building process. 

“The institutional book-building generated an order book of approximately SR102.2 billion ($27.26 billion),” the CEO said.  

The strong demand reflects confidence in Fourth Milling Co.’s role in the growing milling sector and its alignment with Saudi Vision 2030, which emphasizes food security as a national priority. The final offer price of SR5.30 per share gives the company a market capitalization of SR2.86 billion. 

Following the IPO, the firm will continue to focus on strategic expansion to meet the rising demand for flour and wheat products. “Post-IPO, our immediate priorities are focused on expanding production capacity, optimizing operational efficiencies, diversifying our product portfolio, and enhancing brand equity,” Al-Mastery said.  

By increasing capacity in high-growth regions, Fourth Milling Co. aims to maintain its leadership position and ensure a reliable supply of essential products as demand increases. 

As part of its broader five-year growth strategy, the body is investing in product innovation, particularly in the development of value-added products such as functional flours, which cater to the growing demand for health-conscious food options. 

The company also plans to diversify its product portfolio, focusing on high-growth areas and meeting shifting consumer preferences. “Fostering innovation through the development of value-added products will be a key focus in the coming years,” the CEO said, recognizing the potential of health-conscious and premium products in the evolving market. 

While its current focus remains on Saudi Arabia, the company is eyeing potential expansion into neighboring Gulf Cooperation Council markets, Al-Mastery added. 

With a well-established foothold in the domestic market, the firm sees regional expansion as a natural next step. “We are actively exploring opportunities to expand our presence into neighboring GCC markets in the near future,” he said, indicating a broader vision for growth beyond Saudi borders. 

The company’s efforts to expand capacity, optimize efficiency, and maintain a strong market presence directly support Saudi Arabia’s food security agenda, which is essential for the nation’s growing population. 

“As the Kingdom’s population continues to grow, our focus remains on maintaining high production standards and contributing to long-term food sustainability,” the CEO said.