16 April 2015
Bridging the Gulf
Business and investment in the last decade have been focused on key emerging markets in Asia, particularly the Chinese mainland. But a sometimes overlooked but equally promising market is the Middle East, the destination of a high-level Hong Kong business delegation last December. Headed by Hong Kong’s Financial Secretary John Tsang, the mission explored new investment opportunities in Riyadh, Saudi Arabia and Abu Dhabi and Dubai in the United Arab Emirates (UAE).
“In the last couple of decades, Hong Kong businesses have increasingly put more focus on doing business in China and with China given its strong economic growth,” said Oscar Chow, Executive Director of Hong Kong conglomerate Chevalier International Holdings Ltd. “But China’s fast economic growth cannot continue indefinitely. Hong Kong businesses should spend more time looking outwards. For example, the Gulf area, being the more developed part of the Middle East market, has a lot of potential.”
Mr Chow, who was among the 18 senior business leaders, mainly from Hong Kong’s financial services, infrastructure development and real estate sectors, took part in the mission in his capacity as Chevalier Executive Director and representative of the Hong Kong General Chamber of Commerce.
“The UAE and Saudi Arabia are the two major markets in that area. So going there helps to understand the latest developments there and to build networks for future development.”
While Chevalier currently doesn’t have any operations in the Middle East, it has ties to the region with Mr Chow’s father, Chevalier Chairman Chow Yei Ching, serving as Honorary Consul of the Kingdom of Bahrain in Hong Kong for over a decade.
Mr Chow said that the company is studying the potential of various business areas, including insurance and property sectors in the region.
“It seems the insurance market in that region is underdeveloped,” he said. “The penetration of insurance compared to the percentage of GDP per capita to the total economy is quite low, and potentially there could be opportunities there.”
He noted that while the UAE is thriving, there’s further scope for development in Abu Dhabi, which wants to catch up with Dubai. Riyadh, he said, will “take more time,” noting that the Saudi Arabia market at the moment isn’t as open as the UAE.
For Katherine Tsang, founder of Max Giant Ltd, the trip also served as a fact-finding visit. “The Middle East is well-poised as the next growing region for the offshore renminbi market, and hence, I would also like to know more about the views of Middle East leaders on the internationalisation of the renminbi,” said Ms Tsang.
The recently formed asset management company focuses on China and Asia. “At its current stage of development and under the current leadership, China offers unprecedented opportunities to asset management practitioners and investors,” said Ms Tsang. “Our Private Equity Fund aims to act as a ‘bridge’ for China, helping Chinese companies to globalise while bringing into China technologies and enterprises from the rest of the world, including the Middle East, which would benefit the emerging middle class and the community as a whole.
Ms Tsang said with the growing number of economic exchange and cooperation between China and the Middle East, the trip served as an opportunity to understand more about the markets there, and identify suitable projects or business partners for the company’s Fund.
“Overall, I was very impressed with their strong vision and business acumen. These are progressive and creative economies, and the changes they forge give rise to major opportunities for business partnerships with the rest of the world. I see that alternative investment is still relatively new to the Middle East albeit that the Sovereign Wealth Funds therein are global investors who are active in China. I believe there is a good level of interest that is worth pursuing.”
The Hong Kong delegation met top officials from government bodies and banks as well as business leaders in the region, including Saudi business magnate His Royal Highness Prince Alwaleed bin Talal.
The trip also saw the cementing of an agreement between the governments of Hong Kong and the UAE on the avoidance of double taxation. Apart from the deal, signed by Hong Kong’s Financial Secretary, the two sides also announced the launch of negotiations for an Investment Promotion and Protection Agreement, to further strengthen economic and trade ties between the two economies.
Mr Tsang said Hong Kong and Dubai have much in common, particularly in their strength in the finance industry, and highlighted the services that Hong Kong offers specifically tailored to Muslim investors.
“Islamic finance is among the fastest-rising segments in the international financial system, with a growing presence in both Muslim and non-Muslim communities,” Mr Tsang said. “Through the inaugural sukuk [Islamic bond] offering, we demonstrated that the legal, regulatory and taxation framework in Hong Kong can easily accommodate sukuk issuance.”
Mr Chow said that the focus on finance during this trip was timely. “Everyone views Hong Kong as a leading financial centre with its strong links to the Chinese mainland. A place like Dubai with its aggressive vision, would welcome having this exchange with Hong Kong and creating ties with this part of Asia.
And in light of the latest Central Government “One Belt, One Road” initiative, the trip, Mr Chow said, was a chance to explore investment opportunities to strengthen infrastructure and trade links with the Middle East, further reviving historic trade routes stretching from Africa to Asia via the Middle East.