SINGAPORE, July 15 (UPI) -- While China and India are always touted as El-Dorado investments, Singaporean firms are increasingly encouraged to look at investing in the Middle East, with the government actively pursuing a web of free-trade agreements to encourage and facilitate business.
Last year, the Middle East accounted for only 5 percent of Singapore's total trade of $278.8 billion, with petroleum and refined-petroleum products making up more than 80 percent of that figure. Meanwhile, Singapore companies' inward investments in the region was a paltry 3 percent of the total $76 billion invested around the world,
Yet with governments in the region increasingly moving away from economic models centered on dominant public sectors -- often financed by petrodollars -- and towards a more outward-oriented market approach based on international trade and the development of the private sector, there are opportunities not to be missed.
Speaking at a business forum recently, Said Abdullah Al-Shaikh, chief economist of the National Commercial Bank of Saudi Arabia, said there was a strong desire among many countries in the Middle East to diversify into non-oil sectors by liberalizing trade and investment.
Economies from the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) still heavily rely on oil revenues (78 percent of total revenues in 2003), while their investment-to-GDP ratio was only 18 percent on average over 1997-2002, compared with 32 percent in Malaysia and 38 percent in China.
According to Al-Shaikh, a total of $116 billion will be required for financing of projects within the GCC between 2003-2007, giving many opportunities for investors.
"Saudi Arabia is modernizing its economy and I think there are many investors realizing there are opportunities here," he told United Press International on the sidelines of the conference, pointing out that although the country still has to join the World Trade Organization, he was hopeful it would happen toward the end of the year or early next year.
Once Saudi Arabia joins the WTO, it should make it easier to attract foreign investments, as joining will give the impression the country is more in line with international standards, he added.
With near-record oil revenues, healthy trade balances and a rallying stock market in the first half, 2004 is shaping up to be the best year for the Saudi Arabian economy in decades, with real GDP growth likely at 3 percent, according to Samba Financial Group.
The Singaporean government wants to encourage firms to thread this new investment frontier and its new trade policy push in the region will certainly help, businessmen said.
In May, the Lion State, always a strong proponent of free trade, signed an FTA and a bilateral investment treaty with Jordan, which covered a broad range of economic activities. At the time, senior Singapore officials said the agreement was "a milestone" in the country's engagement of the Middle East.
"What we have built is a virtual superhighway. Our private sector is encouraged to travel on it -- to leverage on the FTA and the good relationship between the two countries, and explore new opportunities in Jordan and the rest of the Middle East," Minister of State for Foreign Affairs and Trade and Industry Raymond Lim was quoted as saying.
Since then, Singaporean authorities have lost no time to make further inroads in the Middle East. This year, Prime Minister Goh Chock Tong has been on two official visits to the oil-rich region, which ranks as Singapore's 7th trading partner. In February, he spent 10 days visiting Egypt, Jordan and Bahrain and this week he was in Iran.
Minister for Trade and Industry George Yeo recently indicated the government will soon start FTA negotiations with Bahrain and plans to launch talks with Qatar, Oman and Egypt. The government is also exploring partnership opportunities with Saudi Arabia and the UAE.
And this week, Goh also announced Singapore and Iran will explore a framework which could include agreements on free trade, an investment guarantee and avoidance of double taxation. Both countries noted in a joint statement that there was "great untapped potential" for business between them.
Officials here believe moves by countries in the Middle East to develop new segments in their oil-led economies will open up new opportunities worth billions of dollars in sectors such as infrastructure, medical care and telecommunications.
"In the Singapore government we are now reviewing our policy on the Middle East and will give the region greater importance in future", Yeo said.
