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The next big thing in China-US trade war

(Image credit: Sam Blatteis)

As Chinese multinational companies (MNCs) are expanding into new markets following the trade war with the US, the Middle East is the next frontier, a region with north of 200m users now, larger than the whole population of Russia, said a global public policy firm.

Sam Blatteis, chief executive of The Mena Catalysts, which advises technology multinationals on Middle Eastern government affairs and top international governments on public policy, told TechRadar Middle East, that the global high tech sector is facing rocky times in many parts of the world from the US to Europe to Africa.

“However, the Middle East has emerged as the one region of the world that is unambiguously welcoming and embracing Chinese tech multinationals, and particularly Saudi Arabia and the UAE — two of the engines of the Middle East’s digital economy — as well as Kuwait,” Blatteis explained.

Of all the sectors that the US-China trade war is hitting, the chief executive of the government relations firm said that the high-tech industry has become the epicentre of the geo-economic competition. 

“Chinese apps are soaring in popularity in Saudi Arabia, the UAE and Kuwait where the largest revenue-generating ones are now largely Chinese, and Korean. 

“The three things the Gulf needs of technology, experts and capital, China has deep reservoirs of and they’re just getting started,” he observed.

UAE: An excellent gateway to Middle East

“In other words,” Blatteis said that the China-US trade row shows “how government relations are increasingly more important than business in shaping market outcomes.”

Given the geopolitical situation, Jyoti Lalchandani, Group Vice-President and Regional Managing Director of research firm International Data Corporation Middle East, Turkey and Africa, said that Chinese have started looking at the Mideast markets and expect a lot of growth to come from the region.

“The UAE is interesting for them because it is an excellent gateway to the region.  The Chinese companies are investing in infrastructure and large-scale trade agreements. The bilateral trade between the UAE and China is growing every year,” he said.

The bilateral trade between UAE and China increased 16.2 per cent year on year to $11.2 billion in the first quarter of this year while China is UAE’s leading trade partner in terms of non-oil commodities, accounting for 9.7 per cent of its total non-oil trade in 2018, valued at over $43 billion.

Moreover, the high tech public policy firm said that the trade row objectively expands incentives for Chinese tech companies to pursue a white space, and new markets in the Middle East.

According to international consultancy firm Colliers, 1.3 million Chinese tourists arrived in the UAE in 2017.

Digital pantheon

Blatteis said that Saudi Arabia has the highest revenue per internet user in the region and the rise of ‘Generation Y’ leaders are making big bets on the Saudi digital economy.

Looking at the UAE, he said the country is 20 to 30 years ahead of its neighbours.

Most of the tech MNCs has put their tech headquarters in the UAE as an entry point into the region, he said and added that Abu Dhabi by itself has one-third of the currency reserves of China but only 1/1000th of its population.

“UAE is headed for the digital pantheon by establishing robotics clubs and NASA space agency. Companies that do business here are implementing a digital strategy for the whole region. The UAE has the power to scale and it is built to scale,” he said.

The Gulf is also home to four of the ten most active sovereign wealth funds in technology, which are Mubadala, Kuwait Investment Authority, Saudi’s Public Investment Fund and Qatar Investment Authority.

Blatteis said that 70% of the Kuwaiti population is under 30 years of age and very big on clould adoption.

“The country is strategically positioned as an epicentre for ICT infrastructure and more broadband cables are going to come through Kuwait. Kuwait’s Vision 2035 is to move away from hydrocarbon culture to a knowledge economy, spearheaded by Nasser Bin Sabah [son of the Kuwaiti Emir].”

“The Kuwaiti merchant families are forward-thinking. When looking at the high tech companies emerging out of Kuwait, the country has harvested some of the region’s most successful exits from online food delivery platforms Talabat to another one Carriage for $100m,” the CEO of The MENA Catalysts said.

Furthermore, Blatteis said that successful Chinese tech multinationals are coming across the region, enabling Chinese tech giants to rethink how they approach the Gulf in strategic terms.  Western high-tech companies, he said, should wake up and “see the tectonic plates shifting beneath their feet.”