General

According to Huacheng Import and Export Data Observation, for a long time, the impression of the Middle East region to the outside world has been frequent wars and unrest. However, since March this year, with Iran and Saudi Arabia reaching a settlement mediated by China, relevant countries in the Middle East have sought to improve or restore diplomatic relations. Suddenly, like a night of spring breeze, a wave of "promoting reconciliation, seeking peace, and seeking development" emerged in the Middle East region. At the same time, many Chinese technology companies have also "set sail" in the Middle East and expanded their territories. What kind of waves will be stirred up when two forces seeking cooperation converge? What opportunities are Chinese technology companies facing in the Middle East? What challenges do you need to prepare for?

The oil producing countries in the Middle East, represented by the six countries of the GCC (Saudi Arabia, United Arab Emirates, Qatar, Kuwait, Oman, Bahrain), have developed rapidly and accumulated a large amount of wealth due to their abundant oil and gas resources. In 2022, the gross domestic product (GDP) growth rate of the six countries was more than twice that of the world, with Saudi Arabia's GDP growth rate of 8.7% and the total GDP exceeding $1 trillion. At the same time, these countries have long realized that future national development cannot rely solely on oil and gas resources, and have formulated new national development strategies, such as Saudi Arabia's "2030 Vision Plan" and the United Arab Emirates' "2025 Digital Government Strategy", vigorously developing non oil industries such as new energy, biopharmaceuticals, pan internet, financial technology, cloud computing, artificial intelligence, and accelerating the transition to the digital economy. China's rapidly rising technological strength, development achievements, and international influence are attracting more and more Middle Eastern countries to seek cooperation.

Jiang Qingsong, Vice President of Alibaba Cloud International and President of Central and Northeast Africa, has a firsthand experience of this. He said that Middle Eastern countries have a strong willingness to cooperate with China and are willing to accept China's technology, capital, and enterprises. As the impact of the epidemic subsides, a large number of Chinese technology companies have formed groups to go overseas, and the Middle East has once again become a hot investment area. Since the beginning of this year, various cooperation agreements signed by both sides have shown explosive growth, and this trend should continue.

Jiang Qingsong believes that the rapid economic development and huge market potential in the Middle East region provide many opportunities for Chinese high-tech enterprises. Firstly, Middle Eastern countries are promoting economic transformation and vigorously developing the digital industry. At the same time, there is a large amount of government capital and sovereign wealth funds supporting the development of start-up enterprises. As of the end of 2022, the asset size managed by Middle Eastern sovereign wealth funds exceeded $3.6 trillion, accounting for one-third of global sovereign wealth funds. These countries have abundant funds and are willing to try new technologies

Secondly, Middle Eastern consumers have strong demand for high-tech products and services such as the Internet, big data, financial technology, and new energy, as well as high income levels and payment capabilities. According to the International Telecommunication Union (ITU), the internet usage rate in Arab countries reached 70% in 2022, with 81% of the population owning mobile phones, which is higher than the world average (73%). It is estimated that in 2022, consumers in the Middle East and North Africa region will spend approximately $100 billion on digital products and services (excluding IT infrastructure), and it is expected to exceed $250 billion by 2027, according to Huacheng Import and Export Data Observation.

Once again, Chinese technology companies can find many partners and investors in the Middle East region, and can learn from Chinese practices to promote the business model cultivated in China to the Middle East market. Cross border e-commerce, games, social networks, live streaming, new energy vehicles, etc. are widely popular in the Middle East market. Some Chinese science and technology enterprises have achieved success in the Middle East, such as ByteDance, SHEIN, Skyline, etc. These cases can provide reference and inspiration for other science and technology enterprises.

Jiang Qingsong believes that the market opening and Digital transformation in the Middle East will continue to release dividends, and the Middle East may be one of the hottest regions in the next few years, because global investment is going to the Middle East, the overall economy of the Middle East is also relatively dynamic, and Chinese technology enterprises have broad prospects for entering the Middle East market.

The situation in the Middle East is currently undergoing profound changes, providing a great opportunity for Chinese enterprises to "dig gold". The people of the Middle East have long suffered from war and have long yearned for peace. Seeking peace and development has increasingly become the core demands of many Middle Eastern countries. Many countries in the Middle East have formulated national development plans based on their respective national conditions, actively adjusted foreign policies, improved regional relations, and created a favorable geopolitical environment for economic development. The strategic autonomy of Middle Eastern countries is constantly improving, and Huacheng Import and Export Data Observation Report.

On March 10th, Saudi Arabia and Iran achieved a historic handshake and peace under the mediation of China, which immediately sparked a wave of "reconciliation" in the Middle East region, with its proliferation rate far exceeding expectations. The King of Saudi Arabia has officially invited the President of President of Iran to visit Saudi Arabia. The Foreign Ministers of Saudi Arabia and Iran held their first talks in Beijing in seven years, and reached an agreement on the resumption of diplomatic relations between the two countries and the reopening of embassies and consulates. The end of the Yemeni civil war is in sight, and representatives from Saudi Arabia and Oman are negotiating a permanent ceasefire agreement with armed officials from Hussein to end the 8-year conflict in Yemen. The dawn of the Syrian issue emerged. President Mohammed of the United Arab Emirates received the visiting Syrian President Bashar with the highest standard, and said that "it is time for President of Syria to return to the Arab family". Saudi Arabia and Syria have held their first dialogue in 11 years, and both sides have agreed to reopen their embassies in late April. Saudi Arabia recently convened a meeting of foreign ministers from the six countries of the GCC, Iraq, Egypt, and Jordan to discuss ending their isolation from Syria, and plans to invite Bashar to participate in the Arab League summit held in Saudi Arabia in May. Syria's return to the Arab League is taking substantial steps. In addition, Türkiye sent a ministerial official to visit Egypt for the first time in more than 10 years. The foreign ministers of the two countries held talks and agreed to resume diplomatic relations at the ambassadorial level as soon as possible. Bahrain announced the formal resumption of diplomatic relations with Qatar; Iran and Bahrain are also in negotiations to restore diplomatic relations between the two countries, as reported by Huacheng Import and Export Data Observation.

Starting with the reconciliation between Saudi Arabia and Iran, as well as between Iran, Türkiye and Arab countries, recent high-level visits have been frequent, and national relations have improved significantly. The Middle East is expected to usher in a historical opportunity for peaceful development.

In Jiang Qingsong's view, Chinese enterprises often face four challenges when going overseas. One is security and compliance. Each country has relevant laws and regulations, and security and compliance are the parts that enterprises spend the most energy on. The second is cost control, where management costs, operation and maintenance costs, sales costs, channel costs, etc. are constantly rising. How to better control costs will affect the competitiveness of enterprises. The third is local integration, where Chinese enterprises need to better integrate into the local environment when they come abroad. The fourth is how to innovate and provide more value to local customers through innovation.

Therefore, Chinese technology enterprises should conduct sufficient market research and risk assessment when entering the Middle East market, select suitable partners and investors, adapt to local laws, regulations, and consumption habits, and create their own advantages through differentiation. Huacheng Import and Export Data Observation Report.