The Middle East is in a favourable position to spur Asia’s investment boom as it has a number of emerging economies with strong international voices, as well as significant ties to the rest of Asia, according to investors with experience in both markets.

During a panel session at the Asia PE-VC Summit 2023 in Singapore, Niklas Ponnert, partner at eWTP Arabia Capital, said that existing tensions between the US and China put the Middle East in a “block-less” and “balanced” position, from which deals can flow to and from Asia.

“If we then think about this from an investment standpoint, certainly for Chinese firms—whether it’s Chinese companies, or Chinese investors or GPs—there’s a clear potential market [in the Middle East] that has been untapped,” said Ponner during the panel session titled ‘A Trillion Dollar Opportunity: Can Middle Eastern funds fuel Asia’s Investment boom?‘.

Ponnert, said that for “various reasons” the Middle East has been a “blank spot” for Chinese companies, adding that it was this gap that firms such as his are currently addressing.

eWTP Arabia Capital is backed by China’s Alibaba Group and Saudi Arabia’s Public Investment Fund (PIF) and is headquartered in Beijing, according to its LinkedIn page.

“For Chinese companies, it has become more of a strategic consideration to enter these markets to not only address the local opportunities but to potentially set up a production facility targeting Europe or Northern Africa or other markets in the region,” added Ponnert.

Speaking at the same panel, Ghada Abdelkader, senior vice president of CE-Invests, the strategic investments arm of UAE-based Crescent Enterprises, said that Middle Eastern firms are actively looking to diversify their investment strategies and Asia is sometimes a “natural” extension for their capital.

“What we’re seeing now more and more is the degree of sophistication from [Middle Eastern] investors, institutional investors, and family offices, and they are not only investing in hydrocarbons, as it used to be. And this is not only driven by the sovereign [wealth funds] but family offices, and institutional investors eyeing India and Southeast Asia as a national expansion of their existing strategies,” said Abdelkader.

“It’s [also] driven by the fundamentals of these markets, a natural kind of extension… UAE has a population of 10 million, and almost 30% of that is Indian,” she noted. Abdelkader also pointed out that there were increasingly stronger relationships between the Middle East and the rest of Asia.

One example cited by Abdelkader is the UAE’s and India’s recent pledge to increase their non-petroleum trade from $48 billion to $100 billion by 2030.

Other examples noted during the panel session were the comprehensive economic partnership agreement (CEPA) that the UAE signed with India and Indonesia in 2022, as well as the signing of several memorandums of understanding (MoUs) between Singapore and Qatar this year regarding cooperation on business digitisation, energy and more.

“What those MoUs and CEPA agreements and kind political agreements help [do] is that it provides extra comfort for private investors that the relations are going in the right direction, and you just expect more to come… it reduces the barriers for entry reduces tariffs, and kind of economically grows both of them [economies].”

Abdelkader said that she expects many more such agreements to come with the UAE and Saudi Arabia leading the charge from the GCC region. 

The panel was moderated by Michael Lints, who is a partner at Singapore-headquartered Golden Gate Ventures. Lints said that fund managers he has spoken to from the MENA region, the US, Asia and Europe have brought up concerns that a lot of capital from the Middle East have been deployed because oil prices are up, but if these prices were to fall then outgoing funding would also follow suit.

“There are concerns that things might go back to a different time where there is less liquidity, less capital to deploy, and there are also a number of mega projects happening in the region that take up a lot of capital as well,” he noted.

However, both Abdelkader and Ponnert agreed that there are the adequate assurances that such a downfall would not occur in the short to the mid-term.

Ponnert added that the countries in the Middle East are moving towards becoming increasingly institutionalised. “And that I think means that you will have capital allocated for opportunities for longer periods of time, with less volatility,” he said, adding that oil price volatility is an added incentive for players from the Middle East to diversify their investments.