A Close Look at the Century’s Great Changes in the Middle East Economic Reform and Opportunities for China

Analyzing the Transformative Shifts in Middle East's Economic Landscape Exploring Reform and Growth Opportunities for China in the 21st Century

Author: Li Xiaotian

Editor: Liu Jingfeng

Recently, the world’s attention has once again focused on the Middle East.

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The Middle East, located at the crossroads of Europe and Asia and rich in oil resources, has always been a place where major powers contend. Its every move deeply affects the stability and changes of the world. In the past, this land has long been regarded as a mysterious region by the outside world, and outsiders’ impressions of Middle Eastern countries mostly remain in a state of “people are extremely wealthy”, “society is extremely conservative”, “industries are scarce and backward”, and so on.

However, in recent years, Middle Eastern countries, led by Saudi Arabia, have accelerated their pace of transformation: In 2016, Saudi Arabia announced its national strategic transformation plan, the “2030 Vision”, aiming to diversify its economy and reduce its reliance on the oil industry; In 2021, on the occasion of the UAE’s 50th anniversary, it launched the “Future 50-Year National Development Strategy” focusing on investment and entrepreneurship in the digital economy and advanced technology application fields; as well as Kuwait’s “Vision 2035”, Qatar’s “Vision 2030”, Oman’s “Vision 2040” and Egypt’s “Revitalization Plan”. Many Middle Eastern countries are undergoing profound changes in social culture, economic industry, and diplomatic strategy.

Big changes bring great opportunities.

In order to allow Chinese entrepreneurs who are interested in going global to deeply experience the changes and opportunities in the Middle East, from October 9th to 16th, The Twilight Company has finally launched the long-prepared Twilight SLianGuairkHub Go Abroad Inspection Project “Mining Overseas, Opportunities in the Middle East”.

This time, The Twilight Company led more than ten entrepreneurs, entrepreneurs and well-known scholars who are concerned about the Middle Eastern offshore market, visiting core cities in the Middle East, including Abu Dhabi (UAE), Dubai (UAE), and Riyadh (Saudi Arabia). They visited more than ten companies stationed in the Middle East, covering venture capital funds, technology industry parks, new energy companies, mobile social, logistics services, digital new infrastructure, web3 technology, cross-border payments, and other fields.

The Twilight SLianGuairkHub Go Abroad Inspection Project Roadmap for the Middle East

Through on-site visits and communication, we have gained a deeper and more thorough understanding of the business environment and cultural background of Middle Eastern countries. At the same time, we have effectively connected with local resources and gained more opportunities for business development and cooperation.

As an editor at The Twilight Company who has been paying attention to the Middle Eastern market for a long time, I also followed this trip and gained a more specific observation and a clearer understanding of the real situation in the Middle East and the opportunities for Chinese companies to go global. Despite the resurgence of some local conflicts, development and innovation are still the prevailing themes in the Middle East at present and in the future.

01 United Arab Emirates: The Model Country of the Middle East Accelerating Digital Transformation

As the first stop of the Xia Guang Society’s Middle East research team, we arrived in the capital city of the United Arab Emirates, Abu Dhabi.

The UAE, composed of seven emirates including Abu Dhabi, Dubai, Sharjah, Fujairah, Umm Al Quwain, Ajman, and Ras Al Khaimah, is undoubtedly the model country of the Middle East. Surveys have shown that Arab youth have ranked the UAE as the country they most want to live in and emulate for 11 consecutive years, surpassing the United States, Canada, France, and Germany.

It can be said that the success of the UAE has opened up a proven path of development for the Arab world: retaining its own cultural traditions and religious values while integrating into the global economic and trade system to achieve its own development.

While in Abu Dhabi and Dubai, I constantly experienced a very mixed feeling.

In hotels, office buildings, and even shopping malls, portraits of the founding president, current president, and vice president and ruler of Dubai can be seen. The last time I had this omnipresent feeling of monarch authority was in Thailand, during the mourning period after the passing of the late Thai King Bhumibol Adulyadej. The subway was playing videos about the king’s diligent governance and love for the people, and even the T-shirts in the mall had portraits of the king and queen printed on them.

Portraits of the UAE’s presidents can be seen everywhere

These details convey one fact – the UAE is a country that has achieved development under authoritarian rule and the iron fist of monarchy.

Of course, many Middle Eastern countries also hope to replicate the Dubai model because it is a development model that can adapt to their own political and cultural environment.

Abu Dhabi: When The City of Oil is No Longer Low-Key

As the capital of the UAE, Abu Dhabi is not as renowned as Dubai in the Arab world, but it owns almost all of the country’s oil and natural gas reserves, as well as 87% of the land. In 2009, Dubai was severely hit by the global financial crisis and needed a $10 billion bailout from Abu Dhabi. This money also led to the renaming of the tallest building in the world – Burj Khalifa. The tower was originally named Dubai Tower but was later renamed Burj Khalifa in honor of the ruler of Abu Dhabi and the former president of the UAE, Sheikh Khalifa (deceased in 2022).

Burj Khalifa

According to data released by the Abu Dhabi Statistics Bureau on May 8th, 2022, Abu Dhabi’s GDP grew by 9.3% compared to 2021, making it the fastest growing economy in the Middle East and North Africa region. In the wave of the digital economy, Abu Dhabi is also accelerating its efforts to attract innovative companies and foreign investment. Its competitors include not only Dubai, another emirate of the United Arab Emirates, but also Saudi Arabia, which is rapidly developing in the reform and opening up wave.

In Abu Dhabi, we first visited the China-Arab Industrial Park located in the Khalifa Industrial Zone Free Trade Zone. The “Looking East” diplomatic strategy in the Middle East is now integrated with China’s “Belt and Road” initiative, and the diplomatic honeymoon has greatly driven the two countries’ industrial cooperation.

The focus of China-Arab industrial capacity cooperation is on developing new energy, machinery manufacturing, metal processing, biopharmaceuticals, fine chemicals, and oil equipment industries.

Although the types of industries in the Middle East are not fully diversified and there is no supporting advantage in developing manufacturing industry, there are no tariffs and value-added tax within the free trade zone. It can also effectively cope with the restrictions of the United States’ anti-dumping and anti-subsidy investigations. There are also advantages in terms of water, electricity, and labor costs. As more and more Chinese companies gather here, the supporting services for industries will become more sound. This is also one of the cases where China’s supply chain network spills over to emerging markets and then reaches the world market.

Thanks to such a foundation, Chinese tech companies have also seen the opportunity for industrial upgrading in Abu Dhabi. In March of this year, Chinese autonomous driving technology company Uisee Technology settled in the China-Arab Industrial Park and obtained a license for autonomous driving road tests in July. This is also the first national-level license for autonomous driving road tests in the Middle East and even the world, and has provided nearly 20,000 orders for robot taxis in the local area.

Xiaguang Society Middle East Research Team at the China-Arab Industrial Park in Abu Dhabi

When attending the Abu Dhabi Investment Office, the person in charge explained that Abu Dhabi’s advantage lies in its ability to serve as a regional economic center, driving companies to cover neighboring GCC countries. Also, the UAE has a very stable economic environment. Companies can have 100% ownership, funds can be freely transferred, and there are subsidies and preferential treatment for innovative technological companies in fields such as health care, smart agriculture, ICT, digital infrastructure, and intelligent manufacturing.

In the past, it was common for enterprises intending to layout the Middle East market to first come to Dubai or Abu Dhabi, and then expand to other Gulf countries such as Saudi Arabia. However, now the competition between Saudi Arabia and the UAE as economic leaders in the Gulf region is becoming increasingly fierce. In 2021, Saudi Arabia, which has accelerated its reform and opening up, announced the “Regional Headquarters” plan. It stated that if companies want to continue doing business with the Saudi government or its owned enterprises, institutions, funds, etc. after 2024, they need to consider establishing regional headquarters in Saudi Arabia. This policy has attracted more than 80 multinational companies, such as Deloitte, PepsiCo, and Baker Hughes, to relocate their Middle East regional centers to Riyadh.

To enhance the competitiveness of foreign investment and foreign enterprises, Abu Dhabi has also introduced some preferential policies. First, Abu Dhabi has established industrial parks to attract different types of companies. For example, industrial enterprises are best suited to set up in the Kizad Industrial Zone, while financial technology companies are best suited to set up in the Abu Dhabi Global Market. Secondly, the investment office provides subsidies based on evaluation criteria such as attracting high-tech talents, contribution to the local GDP, and whether it is a regional center. The office conducts quarterly KPI assessments and provides subsidies of up to 45% of the local investment amount. Currently, more than 60 companies have received subsidies, including two Chinese companies. In addition, compared to the Islamic law principles currently implemented in Saudi Arabia, the Abu Dhabi industrial parks operate under English Common Law, and a relatively neutral arbitration institution is in place to assist the local management system, providing businesses with a greater sense of security.

During my visit to the Abu Dhabi Investment Office and the local startup incubator Hub71, I strongly felt that the UAE is indeed a country with a high degree of openness and a vibrant atmosphere for innovation and entrepreneurship. Here, you can see workplace professionals from different countries and races, as well as entrepreneurs who want to venture into various emerging fields.

Visiting Hub71, the startup incubator in Abu Dhabi, with the Xia Guang Society’s Middle East research team.

Dubai: Two Hot Tracks – Metaverse and New Energy

This atmosphere is even stronger in Dubai.

Due to a lack of oil resources, Dubai has been forced to achieve economic diversification decades ahead of other emirates in the UAE. Today, this Middle Eastern financial capital is filled with towering skyscrapers and striking postmodernist architecture. You can no longer see women covered in black abayas here – capital logic has replaced traditional norms.

It is also a city with strict class divisions. Every skyscraper is filled with globally renowned citizens and South Asian laborers making coffee or cleaning in some corner – among the UAE’s 10.17 million population, foreigners account for 88%, with the majority coming from South Asian countries like India, Pakistan, and Bangladesh.

I think of David Harvey’s description of Paris, which also applies to Dubai: each district in Paris has its own patterns, which can reveal who you are, your occupation, your background, and your goals. The tangible distance used to separate classes is understood as a moral distance that has been made concrete and sanctified, and it is this moral distance that creates class divisions.

Dubai Street Scene

The Middle East region, with Dubai as its representative, has shown a strong interest and enthusiasm for new concepts such as the metaverse and blockchain in this wave of digital economy.

In 2019, the Dubai government released the “Dubai Blockchain Strategy 2020”, aiming to apply blockchain technology to various industries, including finance, real estate, supply chain, and government services; in 2022, Dubai released the Virtual Asset Law and established the Virtual Asset Authority, becoming the first government agency to enter the metaverse; the same year, Dubai launched a five-year strategy for the metaverse, aiming to create a “metaverse capital” and become one of the top ten XR and metaverse markets globally.

To achieve this goal, Dubai is increasing its investment in metaverse-related technology research and development, cultivating metaverse-related talent, and attracting global technology companies to settle in, including AR/VR/MR/XR, digital twins, 5G, edge computing, and other technology companies. The goal is to create 40,000 metaverse-related jobs and bring in $4 billion in annual economic growth within 5 years.

Furthermore, Dubai has initiated a “digital nomad visa program” for remote workers and entrepreneurs, allowing foreign citizens with a certain level of monthly income to work and live in Dubai for one to two years.

Games, social media, live streaming, and other digital entertainment applications are deeply penetrating the Middle East with the concept of the metaverse, becoming fully localized in terms of capital, research and development, and operations. Snapchat, with the use of AR technology and its disappearing messages, has also risen in popularity, and many crypto companies have moved to Dubai to avoid policy risks.

Snapchat is a popular social media app in the Middle East

From the perspective of international expansion, the Middle East is a market with high demands for localization. The success of “Middle East’s Tencent” Yalla is attributed to its localization and customization of products from the beginning, deploying talents specifically for the target market, and transplanting the offline gathering culture of majis, a form of non-material cultural heritage in the Arab region, to the online world. Chinese companies that have grown in the era of the digital economy are undergoing a pattern iteration from “global expansion” to “localization model, and then globalization.”

Another hot track in the UAE is renewable energy. Perhaps seeing the crisis of relying on oil economies, Middle Eastern countries are actively undergoing an energy transition. The UAE will host this year’s Global Climate Summit (COP28) and hopes to play a dual role as an oil-exporting country and a green energy powerhouse. Chinese new energy vehicle companies, with their technological and product advantages, are also accelerating their entry into the Middle Eastern market. In June this year, NIO signed a stock subscription agreement with Abu Dhabi’s investment institution; the UAE’s sovereign fund Mubadala has also announced cooperation with WestGrid Dynamics and Beijing Electric Vehicle Co., Ltd. (BAIC BluePark).

Next time, when you see Middle Eastern investors investing in Chinese car companies, don’t be surprised anymore.

Xiaguang Society’s Middle East exploration team at the Abu Dhabi investment office

Admittedly, the United Arab Emirates is open and active enough, with a mature business environment, but its inherent limitation is that the market size is too small. Of the more than 10 million people in the country, only just over 1 million citizens have enough purchasing power. Next door, Saudi Arabia is trying to replicate the Dubai model and rise. The Saudi capital of Riyadh is competing with Dubai for the position of a regional international commercial and talent center.

Does Saudi Arabia have enough strength to compete with the UAE? On the fourth day of the trip, the Xiaguang Society Middle East exploration team flew from Dubai to Riyadh to see firsthand how this country has changed.

02 Saudi Arabia: Reform and opening up bring century-long changes

Before the trip, I applied for a Saudi visa in advance on their official website. Just a second after submitting the application, when I refreshed the page, it showed that the visa had been granted.

This really shocked me. You see, up until September 2019, Saudi Arabia was still a secret country in the world. For a long time, Saudi visas were only open to foreign workers, businessmen, and pilgrims going to Mecca and other holy sites. The approval process was complex and took a long time. However, starting from September 28th, 2019, Saudi Arabia officially opened the tourism visa application to citizens of 49 countries, including China, and proposed the ambitious vision of attracting 100 million tourists and making the tourism industry account for 10% of the national GDP by 2030.

The instant approval of the visa showed the sincerity and determination of this country, which had been isolated from the world for many years, to show its true face to the world.

Riyadh cityscape

Saudi Arabia’s great changes were already set in motion 8 years ago. From 2014 to 2016, global oil prices experienced a continuous decline, coupled with the global trend of energy transformation, which forced Saudi Arabia to make changes. In April 2016, Saudi Arabia issued the “Saudi Vision 2030,” with “Vibrant Society,” “Thriving Economy,” and “Ambitious Nation” as the three main themes, establishing the development goals for the next 15 years. This earth-shattering transformation is seen as Saudi Arabia’s version of “reform and opening up.”

One of the major changes: the empowerment of women, unleashing new economic vitality

When I arrived in Riyadh, although I was mentally prepared, I was still culturally shocked when I saw female customs officers covered in a black cloak, leaving only a slit for their eyes.

A woman wearing a black robe in Riyadh

From head to toe, wrapped in a tight black robe, it is the Islamic fundamentalist requirement for women’s attire. As early as 1928, a Lebanese Muslim female scholar, Nazira Zayn al-Din, boldly pointed out in her work “Remove the Robe” that removing the robe does not prevent women from being loyal to their faith. In her book, she said that there are four layers of “robe” above the land of Lebanon: one layer covers the bodies of Lebanese women, one layer covers wisdom, one layer covers upright conscience, and one layer covers progressive spirit.

For Saudi Arabia, which is making every effort to promote social change, secularization is an important reform goal for this theocratic monarchy. Loosening women’s rights is an important measure to promote the secularization process of Saudi society. In March 2018, Crown Prince Salman, who leads Saudi reform and opening up, publicly stated that there is no legal requirement for Islamic women to wear robes and face masks; that same year, Saudi Arabia allowed women to drive and allowed women to enter sports venues to watch games; In August 2019, Saudi Arabia issued a new cabinet decree, allowing adult women to travel and apply for passports without the consent of male guardians; in addition, the decree also gave women the right to register for marriage, divorce, and child birth.

In the “2030 Vision,” a landmark document for Saudi reform and opening up, it is explicitly stated that the female labor force participation rate should be increased, and by 2030, the proportion of women in the labor force should be increased from 22% in 2017 to 30% by 2030. This goal has been achieved rapidly, and in the first quarter of this year, the female employment rate in Saudi Arabia reached 31%.

Opening up to women is also opening up the vitality of the entire country.

Women working at the Saudi Games Exhibition

Although most local women in Riyadh still wear black robes that are long to the ankles, they can be seen participating in public life more and more in various places. In shopping malls and hotels, there are many female salespersons and receptionists. At the Ignite Saudi local gaming exhibition, female game designers are qualified to tell male audiences about their understanding and vision of the global market. In Diriyah, which has now become a tourist destination in Saudi Arabia, you can see groups of girlfriends traveling together without their husbands, enjoying themselves along the way.

There are even more magical scenes that impress me: a woman in a black robe playing e-sports, experiencing various games in an indoor amusement park, and trying out VR/AR wearable devices. These scenes vividly demonstrate that Saudi Arabia’s conservative ideology is transforming into a more flexible and inclusive moderate Islamic thought.

With more and more economically independent women emerging, there will definitely be new growth opportunities in the Middle East in gaming, social networking, e-commerce, and other sectors. According to data released by the Saudi Ministry of Communications and Information Technology, 48% of gamers in the country are women. With the support of a series of government policies, Saudi Arabia has also held some eSports competitions specifically for female gamers, aiming to empower women players and create more employment opportunities. At the Saudi Games Expo, I also saw the emergence of dress-up games similar to “Love Nikki,” which undoubtedly presents an opportunity for Chinese game developers to enter the market.

A Saudi woman experiencing VR equipment

The Second Great Transformation: “Saudi Tycoons” are also joining in

Another initiative in the secular transformation of Saudi Arabia is to promote employment among its citizens. Prior to the reforms and opening up, Saudi Arabia had long been in a state of being a “rentier state,” with the national finance heavily reliant on rental income from the main petroleum industry. Externally, it exchanged oil exports to the United States for political and military protection; internally, it distributed the rents obtained from selling oil to the people as welfare expenditures, forming an implicit agreement between the citizens and the state, where they refrain from participating in politics in exchange for welfare, ensuring the long-term rule of the current ruling Ibn Saud family.

In the past, Saudis rarely worked. Saudi citizens were accustomed to a comfortable life with high subsidies and benefits, and the level of education and innovation capabilities were generally low. Many people never worked and relied on government subsidies to get by. Since the 1970s, Saudi Arabia has attracted a large number of foreign workers to fill job vacancies. Saudi policies stipulate that each foreign worker must have a Saudi sponsor/guarantor, allowing the ordinary Saudi population to receive benefits without the need for employment.

According to data from the Saudi Arabian Statistics Authority, in 2019, Saudi nationals accounted for only 24% of the total employed population. The United Nations’ Human Development Report also shows that Saudi Arabia’s innovation index in 2022 is 33.4, placing it at a disadvantage among countries with comparable per capita income levels, indicating a lag in development. As a result, Saudi citizens have become known in the public eye as “rich and idle” tycoons.

It wasn’t until March 14, 2021, that the Saudi Ministry of Human Resources and Social Development announced the formal abolition of the system requiring a Saudi sponsor for foreign workers, which had been in place for over seventy years. Currently, the Saudi Labor Law explicitly requires companies to employ a certain percentage of Saudi workers, and the percentage of Saudi workers stipulated in different industries is referred to as the “Saudization rate.” Companies that fail to comply with this requirement will face severe punishment, including potential exclusion from government contracts and loans, or suspension of visas and work permits for foreign employees.

However, the “Saudiization rate” varies in different industries. For example, in the financial industry, the Saudiization rate reaches as high as 85%, which means that 9 out of 10 employees must be Saudi locals. In contrast, the logistics and distribution industry only requires a Saudiization rate of 10%, with the majority of workers being foreign laborers.

Driven by these policies, there are now a considerable number of Saudi citizens working in ordinary service industry positions in Saudi Arabia. In Abu Dhabi and Dubai, on the other hand, service industry workers are mostly of South Asian descent. From my observation, most taxi drivers in Riyadh are from Pakistan, but when booking an Uber, the drivers are mostly locals. Pakistani drivers are usually humorous and talkative, often emphasizing “We are friends” when encountering Chinese passengers. Local drivers, on the other hand, tend to be more reserved and cold, with limited English skills. They remain silent throughout the journey or have Arabic phone conversations with their friends. Perhaps they haven’t yet fully adapted to the rapid social changes.

A local driver encountered while using Uber in Riyadh

The third big change: The solid ideology is loosening

The most significant transformation in the secularization process is the changes in city landscapes and lifestyles. Today, Riyadh seems like a large construction site, with construction sites appearing every few kilometers and some eye-catching and impressive buildings similar to those in Dubai.

In Riyadh’s imitation of New York’s Times Square, even late at night, the lights are still shining, with bustling crowds and enthusiastic DJs mixing Islamic music with electronic music. Though lacking the presence of alcohol, people are still excited. In Riyadh’s central shopping destination – Riyadh Lianguaik Shopping Mall, it remains brightly lit at 2 a.m., while for many years, most areas of this mall were not open to foreigners.

The DJ spinning at Riyadh’s Times Square

Game and esports arenas seem to be everywhere here.

In malls and pedestrian streets, game consoles and arcades are found everywhere. “To make Saudi Arabia the global center of the gaming and esports industry by 2030” is a strategic goal explicitly stated in Saudi Arabia’s “Vision 2030”. It’s worth mentioning that just a few years ago, Saudi Arabia’s Islamic electronic gaming regulatory system was issuing bans on many video games.

Women experience esports games

Riyadh is becoming a vibrant city full of human touch.

The young people on the streets greet us friendly with “hello”; in the snack streets or dining areas similar to “Fine Food”, you can also find food that blends Middle Eastern flavors from all over the world; the internet-famous coffee %Arabica from Kyoto, Japan has opened an offline store here, where girls meet with their friends to chat and hang out.

“Riyadh will become the commercial and cultural center of the Middle East and a rising star in the Gulf region, with a population increase of about double its current size, attracting more businesses to relocate their headquarters to Riyadh.” – This is the ambition Saudi Arabia has for Riyadh in its “Vision 2030”.

The internet-famous coffee %Arabica from Kyoto, Japan opens an offline store in Riyadh

During my few days in Riyadh, there was a little incident. Before entering the Times Square, men and women need to go through separate security checks. I was wearing a knee-length dress, and the local female security guard thought it was too short to enter a public place. I tried to explain and argue for a bit, while thinking maybe I should ask a friend to go to the HM store across the street and buy me a long skirt, then I can just find a restroom to change into it. Unexpectedly, the female security guard let me in first, shook hands with me, and even smiled, as if her serious face just now was just a joke.

This incident might be an example that proves Saudi Arabia is no longer rigid in social norms and behavior rules. Some things that used to be firm are now loosening up. But when it comes to individual freedom, it still requires individuals to fight for and negotiate. And sometimes, this negotiation is very easy.

03 The New Middle East is rising

Another aspect of the Saudi reform and opening up is to reduce dependence on the single economic pillar of energy exports and promote the privatization reform process of the Saudi economy, while using sovereign wealth funds to invest and promote diversified development of the domestic economy. From the sports gaming industry, digital economy to renewable energy, the Saudi government is making multifaceted bets and driving the transformation.

We visited Aliyun, Geetest, and Eedaa Capital, which received investment from the Saudi sovereign wealth fund (PIF), in Riyadh.

The offices of Aliyun and Eedaa Capital are both located in the King Abdullah Financial District in the center of Riyadh. The skyscrapers here are lined up, and being amidst them, it suddenly feels like I’m back in Dubai two days ago.

The person in charge of Aliyun in Saudi Arabia told us that the office space in Riyadh is now in high demand, with rent already tripled in two years. The hotels are completely booked, foreign investors and entrepreneurs are coming in constant streams to investigate the market, and the whole country is accelerating into a hot atmosphere of modernization and digitization.

Riyadh Street View

Through visiting companies and communicating, I found that although Saudi Arabia is a large emerging market in terms of consumption capacity, it is also difficult and has high barriers. The companies that can establish themselves in this market must have a mature business model and strong localization capabilities.

Huang Shuozi, Managing Partner of Easy Capital, shared with us that Saudi Arabia is a typical B2B and B2G market, and many overseas companies’ primary clients are local governments, state-owned enterprises, and banks. Saudi Arabia lacks local talent and industrial foundation, and the existing business environment is greatly influenced by European and American companies. The business rules and customs in this market are very different from China. Locals are accustomed to purchasing the best solutions and products at a high premium. The establishment of foreign investment and foreign enterprises only began to form new systems after the market truly opened up, but this requires the company to invest a certain amount of time.

For Chinese companies wishing to enter Saudi Arabia, they should be aware that compared to European and American companies that have been operating here for decades, Chinese companies do not have a first-mover advantage, so they need to find market breakthroughs. The Easy Capital team spent a lot of time conducting frontline market research in Saudi Arabia and finally concluded that Chinese companies’ comparative advantages lie in the digital economy and intelligent manufacturing, the new energy track, digital new infrastructure, and supply chain solutions for consumer products are the three main tracks for B2B and B2G. For example, Alibaba Cloud offers digital infrastructure in Saudi Arabia, and Jitu Logistics drives Saudi Arabia’s domestic logistics digitalization. Both companies quickly established a foothold in the market after landing.

Xiaguang Society’s Middle East Tour visits Easy Capital

However, the Saudi market still has certain barriers due to its closed nature, social and cultural environment, and the adaptability of national policies.

Today’s Kingdom of Saudi Arabia was established in 1932 by Ibn Saud as an absolute monarchy. Hajj and nomadism are still the main sources of income, and it still operates on a tribal and acquaintanceship basis. Local-to-local is still the fastest and most convenient way to achieve landing and promote business. For Chinese capital and enterprises, establishing joint ventures with local companies is the main way to enter this market.

Alibaba Cloud is a typical case. In June 2022, Alibaba Cloud, together with Saudi Telecom Company (STC), Easy Capital, Saudi AI Company, and Saudi Information Technology Company, established a joint venture called Saudi Cloud Computing Company (SCCC) to provide high-performance public cloud services to Saudi Arabia. According to the global cloud vendor overall capability assessment report released by international authority Gartner, Alibaba Cloud surpassed Microsoft and Amazon in the four core evaluations of computing, storage, network, and security, achieving the highest score and becoming the world’s number one cloud vendor for IaaS infrastructure capability. However, Chinese cloud vendors still lag behind European and American cloud vendors in global market share.

From the perspective of the trend of going overseas, cloud providers like Alibaba Cloud have evolved from serving Chinese internet companies in overseas markets to establishing localized teams and providing localized services. Due to geopolitical relationships, it is difficult for them to enter the markets of developed countries in Europe and America, so Southeast Asia and the Middle East have become the key focus for Chinese cloud providers. In comparison, Southeast Asian countries and the UAE have already developed relatively mature cloud services. Saudi Arabia, a newly emerging country that has recently opened up and implemented reforms, has become another major emerging market for Chinese cloud development.

The most representative embodiment of Saudi Arabia’s “ambitious nation” vision is undoubtedly the future city NEOM and its core city The Line. During our visit, we also went to the experience hall of The Line to see it for ourselves. As soon as we entered, the electronic screen was playing a video about The Line, which originated from a dream of Crown Prince Mohammed bin Salman. Indeed, it is like a futuristic city concept that has become a reality – The Line will be a truly linear city, nearly 170 kilometers long and only 200 meters wide, with buildings over 500 meters high, capable of accommodating approximately 9 million residents.

Architects involved in The Line construction

NEOM, which encompasses The Line and covers an area of ​​26,500 square kilometers, is an even grander concept. Located at the junction of Saudi Arabia, Jordan, and Egypt, NEOM focuses on the development of energy, water, biotechnology, food, high-end manufacturing, and entertainment industries. It will become Saudi Arabia’s first international business zone, where independent laws and regulations will be implemented to attract more foreign talent and investment, making NEOM a world center linking Asia, Europe, and Africa.

The “Saudi Dream” sounds beautiful but also distant. However, this may be an effective way for the country’s international public relations to showcase future visions and gain sustained international attention.

Crown Prince Mohammed bin Salman, the leader behind Saudi Arabia’s “Vision 2030”

Saudi Arabia and the UAE, these two Middle Eastern giants, together account for over 75% of the population of the Gulf Cooperation Council (GCC) and 70% of the GDP. They actively promote economic diversification and strive to participate in the reform of the global economic and trade system even in the post-oil era, leading the transformation of the Gulf region and the entire Middle East. UAE political scientist Abdulkhaleq Abdulla refers to this transformation as the “Gulf Moment.”

A few days before our departure, the Israeli-Palestinian conflict broke out again. For many years, this land has been shrouded in geopolitical and ethnic-religious disputes: the US invasion of Iraq in 2003, followed by color revolutions in the Arab world, leading to countries either reverting to dictatorship or plunging into civil war. As a result, when many people think of the Middle East, they naturally associate it with ongoing conflicts and unrest.

But now, the changes in the Middle East are also wide-ranging and far-reaching. More women are starting to work in the Gulf region, global tourists are flocking to Dubai, the non-oil economy of the entire region is growing at a healthy rate of 4% per year, cross-border investments are increasing, and digital transformation is happening rapidly. The feedback from the capital markets is the quickest and most sensitive: Goldman Sachs estimates that the proportion of foreign holdings of Middle Eastern stocks has increased from 2% in 2017 to 10% last year, and it is expected that the weight of the Middle East in emerging market indices will increase from the current 7% to 10% in the coming years.

Despite some local conflicts, stability, peace, openness, and development are still the future themes of the Middle East. Middle Eastern countries that actively embrace advanced digital technologies such as artificial intelligence, big data, 5G, cloud computing, and the Internet of Things are reshaping the global political and economic landscape. And China’s strong digital infrastructure capabilities will also find opportunities for cooperation in multiple fields in this wave of digital transformation in the Middle East.

Xiaguang Society’s “Prospecting Overseas, Encountering the Middle East” inspection team

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