‘New Silk Road’ region poised for unprecedented growth and connectivity

GCC nations uniquely positioned to take advantage of new opportunities, says report


Somshankar Bandyopadhyay

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Published: Thu 16 May 2024, 7:00 AM

Last updated: Thu 16 May 2024, 3:57 PM

GCC countries including the UAE are leveraging the increasingly interwoven economies of Asia and the Middle East and North Africa (Mena) region to diversify and reshape their economies through investments in financial services, logistics, tourism, technology, and manufacturing, a report showed.

This is among the trends highlighted by ‘The New Silk Road – growth, connection, opportunity’, a report from global management consulting firm Oliver Wyman.

The New Silk Road’ extends across Asia, Middle East and North Africa, home to a population of 4.9 billion people and representing more than 40 per cent of global economy. The region is home to eight of the world’s top 20 economies and is projected to account for 48 per cent of global GDP by 2040. Connectivity is increasing, with 60 per cent of regional trade activity occurring between Silk Road economies.

One of the dynamic factors reshaping the economies of the region is the increasingly assertive role of GCC countries, which are leveraging high energy prices to diversify their economies and secure their post-oil futures through investment into financial services, logistics, tourism, technology, and manufacturing. The report cites the long-term strategic plans of Saudi Arabia and the UAE as particularly important in this regard.

The six themes covered in the report are energy transition, mobility & transport, financial services, supply chain, emerging payments, and digital disruption, with a focus on outlining specific action steps for private sector and government organisations to enable them to prosper in this evolving environment.

In support of these themes, the report investigates opportunities in China’s clean tech exports, energy transition financing platforms, supply chain relocations, a digital gaming boom, enhanced payment solutions, wealth management and private markets, among others.

Adel Alfalasi, head of the UAE at Oliver Wyman, partner in the government and public institutions practice and a co-author of the report, explains: “The countries that are part of the New Silk Road region are powering ahead with economic opportunity being driven by three major triggers: energy transition, global supply chain disruption, and geopolitical tensions and regionalisation. Each of these core shifts are reshaping and generating opportunities in a region that accounts for over 40 per cent of the global economy.”

The authors estimate that the New Silk Road will see its share of global gross domestic product (GDP) rise to 48 per cent by 2040.

Adel Alfalasi (left) and Ben Simpfendorfer
Adel Alfalasi (left) and Ben Simpfendorfer

In addition, the New Silk Road is fundamental to global supply chains, holding 86 per cent global export share for semiconductors, 65 per cent for clothing, and 40 per cent for oil, in addition to featuring some of the world’s largest export manufacturers, including China and Japan, and emerging contenders such as India and Indonesia. Connectivity is also increasing, with nearly 60 per cent of total trade activity in the region currently taking place with other modern Silk Road economies.

On a regulatory level, two of the world’s three largest regional free-trade agreements are focused on the New Silk Road region – the Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). At the same time, the number of bilateral agreements between Asia and the Middle East is rising.

The report’s authors are confident that, providing critical geopolitical and environmental issues can be navigated, the region will see greater collaboration, connectivity and capital growth. “We envisage a region where energy ties will grow tighter, clean technology will play a greater role, and where manufacturing supply chains will spread out across a wider set of countries as companies build resilience,” says Ben Simpfendorfer, Asia Pacific lead of Oliver Wyman Forum, a partner at Oliver Wyman, and a co-author of the report. “The flow of private wealth will expand, and cross-border payment solutions will improve. Investments into aviation and transport infrastructure will support the rising flows of people and goods. Finally, a young population of early adopters will drive digital disruption.”

“Companies, investors, and governments have an opportunity to capitalise on the increased connectivity, but they will need to adopt new strategies, operating models, value propositions, and mindsets,” Alfalasi adds. “To capture the opportunities, private companies should establish cross-market strategies, align with national priorities, and find the right partners. Governments, on the other hand, should deploy and leverage resources, such as sovereign wealth funds, to facilitate trade, investment, and technology flows and support private sectors.”

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