The gaping hole in Middle East ties

China's New Silk Road initiatives make it imperative to deepen economic ties with various regions

The world has major known strategic regions, such as North America, Europe, the Middle East and China. Of all these, the fastest growing, the most thriving economically, the most rich in vitality, and the most active in inbound and outbound capital flows are China, the Middle East and North Africa, and the Arab states that make up the Gulf Cooperation Council. But these highly active regions that have the highest potential for mutually beneficial cooperation are not working with each other as much as they should be.

Among the main reasons for this is that they have had the least cultural engagement in comparison to their respective relationships with the West - which includes the United States, Canada, Europe and Australia - and are all captives of their histories and links with the West.

There is a 200 to 300-year history of Chinatowns, some with populations into the millions, in the West, as well as more than 30 years of more than half a million overseas students and scholars in the US and Europe. But in the GCC, you will find little of both. In fact, the GCC's only Chinese community is in Dubai, which has a population of 300,000, was established less than 15 years ago, and is filled with mostly low- to middle-class traders.

What's more, the GCC's second and third generation of business and government leaders in the US and Europe have little history of in-depth and systematic mingling with China.

Small wonder that these highly active regions feel more comfortable in dealing with the West than with each other, despite the imperatives of their new needs and shifting regional exigencies.

There are also other factors that are blocking China's deeper participation - from both local governments and private and state-owned enterprises - with the GCC:

The GCC's main geopolitical ties and interests have historically and traditionally been settled with the West.

The much longer history of English-speaking Indian, Pakistani and Turkish laborers and entrepreneurs, in addition to Lebanese, Egyptians, Syrians and Persians who speak both Arabic and English and are well educated, in the GCC. These communities, rather than the Chinese, have already filled needs in GCC markets.

The higher quality, precision and management of practices in South Korea, Japan and Taiwan over the competition in the Chinese mainland are real.

The language barrier coupled by a relatively poor perception abroad of China and its international standards and business ethics and the relatively lower degree of trust that Chinese companies will implement and fulfill contractual obligations have created real discomfort.

For the best interest of the nation, outgoing Chinese delegations from both governments and enterprises will need to reflect upon and learn about the sensitivities outlined above. Moreover, the encouragement by China's central government to advance its New Silk Road initiatives calls for the need to create a much more informed, well-educated, more orderly and better managed outflow of new Chinese immigrants and visiting delegations to the GCC and Africa - nay, all along the new Silk Road.

Today, the US and Europe may provide distressed opportunities for both China and GCC outbound investments, but the active capital and the tremendous growth story is only in China, and to a lesser degree in the GCC and in the Middle East and North Africa.

In other words, the West has a vertical economy with over-stimulation and exaggerated demand, while the East has a horizontal economy with largely underdeveloped real needs.

If we look at the history of capital flow - such as the post-World War II flow from the US into Germany, Europe and Japan and China's recent outbound surge of capital investments globally - a trend called "China buys the world" is on the verge of emerging, destined to far exceed all historic capital flow movements in magnitude.

This also points to the imminent wave of GCC capital flows into China that will fill the void created by shrinking investments from the US, Europe and Japan. The reverse will also happen: Chinese investments will flow into the GCC and the Middle East and North Africa.

China provides the safest and highest returns with low-risk growth opportunities for rapidly accumulating GCC revenues. It provides a wealth management avenue for future generation funds, institutional capital, royal families and other families.

For China, the GCC and the Middle East and North Africa provide a source of vital energy and mining security and a destination for business operations, construction, contracting and exports of higher-end services and goods.

South-South Cooperation - which describes the exchange of resources and technology between developing countries - with the addition of India and Central Asia, creates balance in the global economy and prosperity and does not pose a threat to the West. Indeed, it will stimulate Western economies and allow for the participation of much more mature and advanced technologies and management practices of Western corporations in emerging markets.

But what is blocking this realization of a deep China-GCC partnership? For one, there is a shortage of communication, know-how, mutual confidence and comfort. A lack of information and understanding from both directions is another hindrance. Third, there is a divergence in systems, mindsets and habits as well as gaps in language and cultural understandings.

Moreover, there is also a lack of motivation to go beyond natural comfort zones. Lastly, there are gross misconceptions that China is not a transparent investment environment and is a country that "keeps changing its laws".

These beliefs are pervasive despite even though China has been the world's most preferred foreign direct investment destination for more than a decade, far exceeding the US, Europe and Japan.

If China is indeed such an unfavorable investment environment, why would all the global Fortune 500 companies have their business operations and investments in China but give GCC players the wrong idea that China is a doomsday story? This outlook must change for GCC China-bound investments sooner than later.

The new normal state of China's economy, at the realistic GDP figures of 6.5 to 7.5 percent that is projected to last for another two decades, together with the shift toward more economic reforms - which began with the Shanghai free trade zone trial period - must now attract GCC investment in a systematic manner.

If the mustering of China know-how, business culture, deal sourcing, due diligence, risk management, operational management controls and protections and guarantees - all of which are necessary - are the only blocking factors, then we at Future Trends have for three decades prepared the right recipe called the five Ps: platforms, partners, players, projects, players, and with the right methodological process.

It is essentially a massive, intensive network of applicable resources in China, such as resources on the national and local political levels, in the financial sector and among entrepreneurs, to create benefits for GCC players and partners. We have region-by-region and sector-by-sector detailed and specific micro-management abilities to source, analyze, select, negotiate and create sound investment processes and systems for the successful consolidation of GCC investments into China.

So what are the grand opportunities available for the GCC, as yet underutilized? China has a great deal of room for Islamic financing and banking as well as private and public equity within several distinctly diverse sectors, each of which are multitrillion-dollar growth industries such as infrastructure, city and township master development, energy and resources industries, aviation, banking and financial services, high-tech, new emerging brands, e-commerce, telecom, healthcare, media and culture and cinema and animation and agriculture.

With visionary planning for nearly three decades, we have prepared and put in place all the mechanisms and tools in hand, ready for proper utilization. These include three decades of networking, working with and assessing and selectively targeting the right mix among central government relations, brand name funds and financial institutions, management and operating partners, leading private entrepreneurs in diverse sectors and regions, as well as provincial and municipal governments.

The door is now fully open and the tools readily available for GCC private, governmental, institutional, commercial and all other investors to take full advantage in a much more in-depth and well-managed way to take advantage of the China growth story. GCC countries can now participate and benefit from this Chinese dream via the partnership with Future Trends. We can also bring China into the GCC development miracle with better controls of risk factors.

The author is president of the Future Trends Group. The views do not necessarily reflect those of China Daily.