WEBVTT - China, Saudi Arabia and the GCC Forge Closer Ties 0:00:02.520 --> 0:00:06.560 You're listening to Asia Centric from Bloomberg Intelligence, the podcast 0:00:06.559 --> 0:00:09.600 that pulls back the curtain on global business so you 0:00:09.600 --> 0:00:13.560 can invest better across the Asia Pacific Rim. I'm John Lee. 0:00:13.600 --> 0:00:17.720 In Hong Kong. China is forging closer economic ties with 0:00:17.800 --> 0:00:22.159 the golf countries. Already this year, Saudi Arabian companies have 0:00:22.160 --> 0:00:27.160 announced deals to acquire major stakes in Lenovo and Hengli Petrochemical. 0:00:27.800 --> 0:00:31.320 In return, Chinese companies are planning to build more factories 0:00:31.360 --> 0:00:34.440 in the region, while Chinese investors are eyeing the region's 0:00:34.479 --> 0:00:39.120 equity markets. How will closer ties between these regions create 0:00:39.280 --> 0:00:44.640 investment opportunities? Can China help Saudi Arabia transform its economy 0:00:44.920 --> 0:00:48.240 and reduce its reliance on oil through its ambitious twenty 0:00:48.360 --> 0:00:52.320 thirty vision? And how will this relationship be impacted by 0:00:52.400 --> 0:00:56.560 rising US China tensions and the Middle East Wall Here 0:00:56.600 --> 0:01:00.640 to discuss the golf region is Ziar Dud, Chief Emerging 0:01:00.680 --> 0:01:05.400 Markets economists at Bloomberg Economics and Edmund Christell, Senior financials 0:01:05.440 --> 0:01:09.759 analyst at Bloomberg Intelligence. Both are based in Dubai. Welcomes 0:01:09.760 --> 0:01:10.240 the art and. 0:01:10.319 --> 0:01:12.520 Edmund, Hello John, thank you for having us. 0:01:12.520 --> 0:01:16.560 I know John, I'm hearing a lot of anecdotal evidence 0:01:16.640 --> 0:01:19.399 that you can hear a lot of Mandarin being spoken 0:01:19.560 --> 0:01:24.720 at Dubai's International Airport. Lots of Chinese corporates and investors 0:01:24.800 --> 0:01:28.240 are heading to the region. What's driving China and the 0:01:28.319 --> 0:01:31.160 golf countries to forge closer economic ties. 0:01:31.880 --> 0:01:34.319 Well, to give you one more anecdote, John, there's been 0:01:34.360 --> 0:01:37.320 a new extension of the main mall in Dubai, which 0:01:37.319 --> 0:01:40.440 is called Dubai Mall, and that is basically called Chinatown. 0:01:41.240 --> 0:01:41.959 What is driving this? 0:01:42.080 --> 0:01:43.880 I think there's a few links between China on the 0:01:43.880 --> 0:01:46.360 one hand and the Golf region, which includes are the 0:01:46.440 --> 0:01:50.360 ABAE and for other countries. Link number one is the 0:01:50.480 --> 0:01:52.840 energy link. You know, the golf region is one of 0:01:52.880 --> 0:01:56.600 the biggest producers and exporter of energy particular ail and 0:01:56.680 --> 0:01:59.760 gas in the world, and China is the largest all 0:02:00.080 --> 0:02:03.560 porter in the world. And the golth tends to export 0:02:03.800 --> 0:02:07.080 its energy mostly to Asia and China is a big consumer. 0:02:07.120 --> 0:02:10.560 There's the energy link is one. The second link is investments. 0:02:10.600 --> 0:02:12.960 When all process are high, there's a surplus in the 0:02:12.960 --> 0:02:16.600 Golf Corporation Council the GCC, and they tend to invest 0:02:16.680 --> 0:02:19.560 that abroad and China, although the share is small, but 0:02:19.680 --> 0:02:23.320 is increasingly becoming a destination for these investments. And the 0:02:23.400 --> 0:02:27.480 third link is the security link. The GCC has traditionally 0:02:27.520 --> 0:02:31.120 and historically relied on the US for a security and 0:02:31.200 --> 0:02:36.080 for a geopolitical safety, and recently there is basically an 0:02:36.160 --> 0:02:40.359 attempt to diversify these geopolitical links, and China is one 0:02:40.639 --> 0:02:42.480 divers fire of these links. 0:02:43.200 --> 0:02:45.600 And Edmond, there seems to be a lot of acceleration 0:02:45.720 --> 0:02:48.560 of deals happening over the last year. We had a 0:02:48.680 --> 0:02:51.720 lad which is owned by Saudi Arabia's Sovereign Wealth Fund 0:02:51.720 --> 0:02:54.919 PIF just announcing you will acquire a two billion dollar 0:02:54.960 --> 0:02:59.360 steak in technology company Lenovo. Saudia Ramcome is looking to 0:02:59.440 --> 0:03:04.000 invest in Henley Petrochemical. Do you see this relationship as 0:03:04.040 --> 0:03:06.919 more of a two way street, i e. Both countries 0:03:07.000 --> 0:03:08.160 investing into each other. 0:03:08.919 --> 0:03:11.760 Thanks John, Yes, we see the Gulf Freeeson is very 0:03:11.760 --> 0:03:15.560 well positioned to capture this growing interest from China. We 0:03:15.600 --> 0:03:18.960 see more company in China operating overseas and if you 0:03:19.000 --> 0:03:22.959 look at the FDI as a percentage of the China GDP, 0:03:23.160 --> 0:03:25.519 you can see is much lower than other Asian countries 0:03:25.760 --> 0:03:29.080 a particular career, so there is a huge potential for 0:03:29.200 --> 0:03:33.440 more FDI and company in China to operate outside their boundaries. 0:03:33.960 --> 0:03:37.560 And I think the region is in need for industrial power, 0:03:37.920 --> 0:03:41.480 a need for liquidity, and need for skills and labor 0:03:41.800 --> 0:03:46.000 to help build and support the economic transformation from all 0:03:46.000 --> 0:03:49.200 dependent economician and all dependent economy. So this is a 0:03:49.240 --> 0:03:52.200 long term partnership. It's a two way investment. I think 0:03:52.240 --> 0:03:55.000 there is misperception with some of the investors I have 0:03:55.120 --> 0:03:58.760 met is it's so one way and they think that 0:03:58.800 --> 0:04:02.240 region is flushlesslyquidity, so it's easy to bring this liquidity 0:04:02.280 --> 0:04:02.560 back to. 0:04:02.640 --> 0:04:03.960 China and invested in China. 0:04:04.240 --> 0:04:07.280 And I think from the region here, looking at Saudi 0:04:07.360 --> 0:04:10.160 Arabia and the UAE, they've been very strategic on how 0:04:10.160 --> 0:04:12.720 they are investing their money. It has to come to 0:04:12.800 --> 0:04:16.320 a return back to the domestic market and help deliver 0:04:16.560 --> 0:04:20.960 on Vision twenty thirty for the Kingdom for example and Edmond. 0:04:21.000 --> 0:04:23.719 As you alluded to, this is different from the past 0:04:23.920 --> 0:04:27.960 or prior conceptions that it's a one way street. Global 0:04:28.080 --> 0:04:31.159 companies and investors used to go to the Golf region 0:04:31.279 --> 0:04:34.880 to raise money. I think Softmak famously raised sixty billion 0:04:34.960 --> 0:04:38.800 dollars for its Vision Fund from a couple of sovereign 0:04:38.839 --> 0:04:41.720 both funds a few years back. It's different now they 0:04:41.760 --> 0:04:44.400 want investment to also be invested in the region. 0:04:45.000 --> 0:04:47.760 Yes, I mean we see also black Row invested five 0:04:47.760 --> 0:04:50.400 billion dollars to bring black Rock to the Kingdom have 0:04:50.520 --> 0:04:53.000 a headquarter here. And I think what's important, I think 0:04:53.120 --> 0:04:55.760 Zad can comment on it more is the lack of 0:04:55.880 --> 0:04:58.600 productivity of the labor. It's one of the issue the 0:04:58.680 --> 0:05:01.800 Kingdom will be facing. Think they've been tackling it by 0:05:01.839 --> 0:05:05.359 bringing headquarters of the company into the Kingdom, making sure 0:05:05.400 --> 0:05:08.600 that this company are contributing to the local economy and 0:05:08.760 --> 0:05:11.800 to the caliber and the talent and the leadership of 0:05:11.839 --> 0:05:14.920 the employment. So I think this has been a very 0:05:15.000 --> 0:05:18.719 important topic under the GENDA and Saudia in particular. 0:05:19.040 --> 0:05:21.400 Yeah, I'll just follow business on the productivity side, but 0:05:21.440 --> 0:05:24.720 on the investment side. So, yes, there's been some investment 0:05:24.800 --> 0:05:27.800 announcements and Johnny named a couple of them, and there 0:05:27.839 --> 0:05:30.760 has been an increasing sort of deployment of capital from 0:05:30.839 --> 0:05:33.719 the GCC towards China. But I'd say a couple of 0:05:33.760 --> 0:05:36.560 things here. The first thing is the size of that 0:05:36.640 --> 0:05:39.360 is still small. Yes, the PIF might have deployed two 0:05:39.360 --> 0:05:42.680 billion dollars to buy a Chinese company, But the PIF 0:05:42.800 --> 0:05:46.720 is a nearly one trillion dollar investment fund, so two 0:05:46.720 --> 0:05:50.839 billion relative to one trillion isn't very large. And the 0:05:50.880 --> 0:05:54.360 other thing the investment in petro chemicals. Saudi has had 0:05:54.360 --> 0:05:57.880 the strategy recently where it tries to buy refineries and 0:05:57.960 --> 0:06:01.400 petro chemical facilities and trees where it exports oil, and 0:06:01.440 --> 0:06:04.359 the idea there is you have an advantage as a 0:06:04.400 --> 0:06:07.880 seller of crude oil if you actually have you know 0:06:07.920 --> 0:06:11.880 your buyer is also have partial ownership by you. So 0:06:11.920 --> 0:06:14.680 I think, yes, there's been an increasing sort of flow 0:06:14.800 --> 0:06:18.240 of capital from the GCC towards China, but the deployment 0:06:18.400 --> 0:06:21.440 is sturblatively small, and the sectual stuff we have just 0:06:21.560 --> 0:06:23.279 looked at it in the context of the dynamics of 0:06:23.279 --> 0:06:23.960 the old market. 0:06:24.600 --> 0:06:27.640 And also if you look at the FDI, Saudi Arabia 0:06:27.720 --> 0:06:30.800 is targetting one hundred billion dollars annually. By twenty thirty 0:06:31.440 --> 0:06:34.920 and twenty twenty two, the level was only sixteen billion 0:06:35.120 --> 0:06:38.920 FDI for the Kingdom of which China FDI to Saudi 0:06:39.000 --> 0:06:43.480 Arabia was only five billion dollars, so it's very low. However, 0:06:43.720 --> 0:06:46.960 based on recent data, from Emirate and you know, China 0:06:47.080 --> 0:06:50.400 was number one greenfield FDI contributed to the Kingdom in 0:06:50.400 --> 0:06:53.960 twenty twenty three, and we expect the FDI number coming 0:06:53.960 --> 0:06:56.080 from China and to the Kingdom and the UAE to 0:06:56.120 --> 0:06:58.920 increase significantly in twenty twenty four, but still coming from 0:06:58.960 --> 0:07:02.400 a low BASEE has a higher level of FDI to 0:07:02.520 --> 0:07:04.200 China and the trade floors. 0:07:03.880 --> 0:07:09.160 Were Asia Centric is produced by Bloomberg Intelligence, where more 0:07:09.200 --> 0:07:13.240 than five hundred experienced analysts and strategists work around the 0:07:13.240 --> 0:07:17.200 clock to bring you timely, world class research. Our coverage 0:07:17.200 --> 0:07:22.200 spans two hundred market industries, currencies, commodities and industries, as 0:07:22.280 --> 0:07:25.520 well as over two thousand equities and credits. If you 0:07:25.640 --> 0:07:28.520 like what you hear, don't forget to subscribe and chirm. 0:07:29.520 --> 0:07:32.640 Continuing on that theme, Saudi Arabia really needs more foreign 0:07:32.720 --> 0:07:37.600 direct investment now through I guess the prints MBS or 0:07:37.680 --> 0:07:40.960 Muhammed Bin Salman, it has an ambitious plan to spend 0:07:41.040 --> 0:07:45.320 one trillion dollars to develop its tourism industry and to 0:07:45.400 --> 0:07:49.520 diversify away from oil. It's creating theme parks, it's creating 0:07:49.520 --> 0:07:52.680 a new high tech city, neum and its line project, 0:07:52.840 --> 0:07:56.120 which is supposedly going to house millions of people and 0:07:56.240 --> 0:08:00.840 run entirely on renewable energy. How can China help Saudi 0:08:00.840 --> 0:08:02.800 Arabia with its ambitious goals? 0:08:03.760 --> 0:08:05.440 Let me just say a few things here. 0:08:05.600 --> 0:08:08.320 One of them is hel can China help well. One 0:08:08.360 --> 0:08:11.200 of the ways in which it could help is China 0:08:11.200 --> 0:08:15.280 has expertise in building infrastructure, and Saudi will need that 0:08:15.480 --> 0:08:19.200 sort of infrastructure and can tap into China's expertise on 0:08:19.320 --> 0:08:22.960 that front. Charlie is trying to develop his tourism industry. 0:08:23.280 --> 0:08:26.840 China has one billion people, so you know, the flow 0:08:26.880 --> 0:08:30.360 of tourists from China to Saudi could also help. But 0:08:30.400 --> 0:08:32.680 I think also there's a cautionary thing here, which is 0:08:32.720 --> 0:08:37.880 basically Saudi needs to also be aware of not. 0:08:38.000 --> 0:08:38.920 Building too much. 0:08:39.360 --> 0:08:42.440 You need to build enough capacity that brings other people 0:08:42.520 --> 0:08:45.120 and that lifts the infrastructure quality of the country. But 0:08:45.120 --> 0:08:49.160 you also need to be worry of not building excessive 0:08:49.400 --> 0:08:53.120 infrastructure that's not going to be used. And maybe also 0:08:53.240 --> 0:08:57.080 China can tell Saudi where things probably are needed. And 0:08:57.120 --> 0:09:01.200 given Chinese also historical experience with building cities and infrastructure, 0:09:01.280 --> 0:09:03.360 some of it was usedful, some of it wasn't. So 0:09:03.360 --> 0:09:07.720 also to basically give a warning when things things are excessive. 0:09:09.320 --> 0:09:14.120 How real are the intentions of Saudi authorities to spend 0:09:14.200 --> 0:09:17.480 in these grand projects like NEOM and the Line project. 0:09:17.559 --> 0:09:20.640 Can you explain to the investors that don't really follow 0:09:20.760 --> 0:09:23.000 the region very much what this project is. 0:09:24.559 --> 0:09:29.679 So NEUM is a new futuristic city in the northwest 0:09:29.720 --> 0:09:33.280 of Saudi Arabia. The Line, which is a linear city 0:09:33.520 --> 0:09:36.920 that goes perpendicular to the sea and to the sort 0:09:36.960 --> 0:09:40.200 of the inland of Saudi Arabia, is a part. When 0:09:40.240 --> 0:09:43.520 the project was announced, I think in twenty seventeen, the 0:09:43.600 --> 0:09:47.000 budget for that was something like half a trillion dollars, 0:09:47.800 --> 0:09:51.360 but probably with all infrastructure projects, particularly in the Gulf, 0:09:51.559 --> 0:09:55.640 the budget is starting to overrun. So that's basically the idea. 0:09:55.679 --> 0:09:58.079 The idea is create a futuristic city, to make it 0:09:58.320 --> 0:10:01.400 attractive for people to live there, to be run by robots, 0:10:01.400 --> 0:10:04.840 to have the highest number of mission unstyled restaurants per 0:10:04.920 --> 0:10:08.320 capita in the world, all the futuristic elements that you 0:10:08.400 --> 0:10:11.840 can think of. Now, the Coutiari side of that is, 0:10:12.240 --> 0:10:17.320 are the costs justified and can Sadia afford this? I 0:10:17.320 --> 0:10:19.800 think what we've seen recently and in particular in twenty 0:10:19.800 --> 0:10:22.880 twenty four that there were a lot of ambitious announcements 0:10:22.880 --> 0:10:26.200 from Saudi Arabia about building and spending and large budgets, 0:10:26.600 --> 0:10:29.760 but there has been a scaling down of some of 0:10:29.800 --> 0:10:32.760 these targets. So I've seen the Minister of Finance coming 0:10:32.800 --> 0:10:35.640 out and saying some of the projects areb dated Division 0:10:35.720 --> 0:10:38.640 twenty thirty, some of them are likely to be delayed, 0:10:38.679 --> 0:10:40.480 some of them are like to be spaced out over 0:10:40.520 --> 0:10:42.720 a longer period of time, some of them might be shelved. 0:10:43.400 --> 0:10:46.480 We've seen, for example, Saudi had an ambitious target to 0:10:46.640 --> 0:10:50.640 double or triple the population of his capital Cityriald by 0:10:50.679 --> 0:10:54.000 twenty thirty, and that ambition has been scaled down. And 0:10:54.040 --> 0:10:57.160 I've also seen news that the line which is supposedly 0:10:57.240 --> 0:11:02.800 one hundred miles long linear city to house millions of people. Again, 0:11:03.280 --> 0:11:06.520 the plans now seems to be smaller and scaled back, 0:11:06.840 --> 0:11:09.400 and by twenty thirty only a small fraction of that 0:11:09.640 --> 0:11:10.760 will be built. 0:11:11.080 --> 0:11:13.120 And do you think the decision to scale back was 0:11:13.280 --> 0:11:17.720 partly influenced by the development of the Israel Hamas War. 0:11:18.520 --> 0:11:21.160 Other fics related to the regional geopolitics, So I think 0:11:21.280 --> 0:11:23.520 this is a financial decision. So you have Saudi Arabia, 0:11:23.559 --> 0:11:27.040 which basically gets most of this revenue, at least externally 0:11:27.120 --> 0:11:31.880 from oil sales abroad. That's all dominates Saudi exports, and 0:11:31.920 --> 0:11:33.760 it tends to spend on these projects. And in the 0:11:33.760 --> 0:11:37.480 context where even on all prices were relatively high last 0:11:37.559 --> 0:11:40.280 year at eighty three dollars per barrel, Saudi Arabia was 0:11:40.320 --> 0:11:43.880 running a budget deficit, so I think even in that environment, 0:11:43.920 --> 0:11:47.880 we're always high. Tadema felt that it was overstretching itself 0:11:48.600 --> 0:11:51.400 and some of these projects may not return or yield 0:11:51.400 --> 0:11:53.920 the return that it had hoped before, and therefore there 0:11:53.960 --> 0:11:55.960 was an element of scale impact. The Minister of Finance 0:11:55.960 --> 0:11:59.360 actually in May he gave another justification, which is basically 0:11:59.520 --> 0:12:02.880 saying we're scaling back because if you build too much 0:12:02.880 --> 0:12:04.800 and you don't have the capacity to absorb it, you 0:12:04.920 --> 0:12:06.800 end up importing too much and that's not good for 0:12:06.840 --> 0:12:09.120 the economy, so you get a lot of leakages. And 0:12:09.200 --> 0:12:12.200 therefore the slowing the spending pattern down so that they 0:12:12.520 --> 0:12:16.360 reduce the leakages in the form of imports. 0:12:16.440 --> 0:12:20.600 And just to pursue this idea of Saudi Arabia becoming 0:12:20.640 --> 0:12:24.560 a tourist destination, some people view this as a very 0:12:24.640 --> 0:12:28.520 high ask. It's still a very conservative country. You know, 0:12:28.559 --> 0:12:32.199 females are only allowed to drive. Recently, alcohol is banned 0:12:32.280 --> 0:12:35.840 in many parts. Do you personally think that they're making 0:12:35.920 --> 0:12:38.920 the right path here in terms of transforming its economy. 0:12:40.320 --> 0:12:42.760 Well, let's look at the numbers, especially in twenty thirty. 0:12:42.840 --> 0:12:45.880 Was announced in twenty sixteen, and the targets are for 0:12:46.000 --> 0:12:49.960 twenty thirty, so we're more than halfway through that. What 0:12:50.080 --> 0:12:52.280 has gone right? A few things have gone right. So 0:12:52.480 --> 0:12:55.480 the government has increased it non oil revenue, the revenue 0:12:55.480 --> 0:12:59.560 it gets from oil. It has increased uman participation in 0:12:59.600 --> 0:13:04.000 the that has nearly doubled, partly because women are actually 0:13:04.000 --> 0:13:07.400 participating in party. There's a statistical sort of change of methodology. 0:13:08.559 --> 0:13:12.320 But I think there are things that having gone quite 0:13:12.600 --> 0:13:16.280 according to targets and plants. One of them is that 0:13:16.440 --> 0:13:19.960 exports are absolutely dominated oil oil. If you look at 0:13:19.960 --> 0:13:22.320 oil and related products, we're talking about eighty to ninety 0:13:22.320 --> 0:13:26.640 percent of that is oil plus related products. And if 0:13:26.640 --> 0:13:29.160 you look at the government's spending, for example, it has 0:13:29.280 --> 0:13:33.680 basically run so SADY might have increased normal revenue, but 0:13:33.760 --> 0:13:37.800 the spending has actually outpaced that. So the dependence on 0:13:37.840 --> 0:13:42.080 oil has over time increased, and we estimate that basically 0:13:42.800 --> 0:13:45.679 Saudi Araba needs if you look at the central government alone, 0:13:45.800 --> 0:13:48.400 it needs all price in the region of ninety one 0:13:48.480 --> 0:13:51.320 dollars per barrel to balance his budget. If you include 0:13:51.320 --> 0:13:54.199 also domestic investments by the Sovereign Wealth Fund, because a 0:13:54.280 --> 0:13:57.600 lot of the domestic investments has gone is now executed 0:13:57.600 --> 0:13:59.520 by the Sovereign Wealth Fund instead of the central governments. 0:13:59.520 --> 0:14:01.400 So you need to take that into account when calculatd 0:14:01.480 --> 0:14:04.199 the dependence on oil. If you take that into account 0:14:04.200 --> 0:14:06.440 and incorporate it into you're spending, the Saudi Arabia needs 0:14:06.480 --> 0:14:09.160 oil prices of one hundred and eight dollars per barrel 0:14:09.320 --> 0:14:12.960 to meet these spendings. So ninety one or one hundred 0:14:13.000 --> 0:14:15.640 and eight dollars per barrel is high. It's hard that 0:14:15.720 --> 0:14:17.679 it was in the past, and it's harder than the 0:14:17.720 --> 0:14:21.440 current market price. So the dependence on oil has, if anything, 0:14:21.560 --> 0:14:22.600 increased over time. 0:14:23.920 --> 0:14:27.080 Edmund, we joked about how there's so much Mandarin being 0:14:27.240 --> 0:14:30.560 heard at Dubai International Airport. I know that you traveled 0:14:30.600 --> 0:14:35.160 to China, you traveled to Beijing, Shanghai and Hong Kong. 0:14:35.320 --> 0:14:39.240 You met hundreds of investors. How real is the interest 0:14:39.840 --> 0:14:43.600 is of Chinese investors looking to deploy money in the 0:14:43.640 --> 0:14:44.280 Gulf region. 0:14:45.560 --> 0:14:48.960 Yes, definitely there is significant interests given the headwind in 0:14:49.000 --> 0:14:51.320 the domestic market and the low return on the equity 0:14:51.360 --> 0:14:53.440 market in China, so they are looking at a way 0:14:53.480 --> 0:14:57.120 to diversify and generate higher return. The region, as we 0:14:57.160 --> 0:15:00.640 all know, at higher oil prices is generating higher liquidity, 0:15:00.720 --> 0:15:04.040 more opportunities and the transformation gender that's happening either in 0:15:04.080 --> 0:15:08.120 the Saudi or we have also strategy spending happening in 0:15:08.200 --> 0:15:12.680 the UAE, and specific sector like cybersecurity, semiconductor and food 0:15:12.720 --> 0:15:17.320 securities are upgraading infrastructure is creating opportunity for Chinese investors 0:15:17.360 --> 0:15:19.400 to look at the region. I think the challenge they 0:15:19.400 --> 0:15:21.840 face is they look at the region as one dynamic, 0:15:21.880 --> 0:15:24.840 which is not things the AD explained that Saudi is 0:15:24.880 --> 0:15:27.640 spending more, is learning more of the cash they need 0:15:27.720 --> 0:15:31.800 higher oil prices, so more liquidity into Saudi is very 0:15:31.840 --> 0:15:36.080 important than deploying liquidity outside of Saudi. For the UAE 0:15:36.480 --> 0:15:39.000 and KATAR, I think we do have liquidity looking at 0:15:39.040 --> 0:15:43.040 opportunity to deploy liquidity outside the UAE and the strategic 0:15:43.080 --> 0:15:46.360 sector that you bring specific technology to the UAE, that 0:15:46.800 --> 0:15:50.280 strategic sector technology that will be an important area to 0:15:50.280 --> 0:15:50.840 focus on. 0:15:51.240 --> 0:15:53.160 So I think the interest is there. 0:15:53.280 --> 0:15:56.480 The clarity on where the opportunity is is yet to 0:15:56.520 --> 0:16:00.520 be established. You know, investors are looking at what sector 0:16:00.600 --> 0:16:03.360 they should focus on, where the opportunity is. If we 0:16:03.400 --> 0:16:06.320 look at the UE, for example, the hospitality sector has 0:16:06.360 --> 0:16:09.080 already been established, so the UAE in the next five 0:16:09.160 --> 0:16:12.320 year is not spending on the hospitality yet. The UAE 0:16:12.600 --> 0:16:16.040 is spending on housing because the population is growing, spending 0:16:16.040 --> 0:16:20.520 on upgrading infrastructure and railway, so this is important, and 0:16:20.560 --> 0:16:24.160 also the semicontactor and the industrial part of the economy. 0:16:24.400 --> 0:16:27.480 If we look at Saoudi, Saudi doesn't have hospitality sector. 0:16:27.600 --> 0:16:31.080 It's spending significantly on the hospitality sector in the near term, 0:16:31.320 --> 0:16:34.560 plus transportation and what we call it mixed use development 0:16:34.800 --> 0:16:38.760 that will be recreational asset and commercial offices. So I 0:16:38.800 --> 0:16:41.360 think this is where the discussion has been very interesting 0:16:41.400 --> 0:16:44.520 to understand the different dynamic between the UE and Saudi. 0:16:44.840 --> 0:16:47.560 It's not one region to target in terms of products, 0:16:47.600 --> 0:16:50.640 offering or any value proposition. You are coming to investor 0:16:50.680 --> 0:16:52.800 in the region to buy and I think for Saudi 0:16:52.840 --> 0:16:55.320 I truly believe it's more of a long term partnership 0:16:55.360 --> 0:16:59.560 to build and that is a risk of any geopolitics 0:16:59.600 --> 0:17:03.480 plus U as China tensions, that could be an issue 0:17:03.520 --> 0:17:06.199 of trust between the two regions to deploy capital for 0:17:06.240 --> 0:17:07.359 the long term. 0:17:07.720 --> 0:17:10.280 And Edmund, you know one of the Chinese ETF issues 0:17:10.280 --> 0:17:14.200 with CESAP mont. It's first Saudi Arabia ETF in Hong Kong, 0:17:14.359 --> 0:17:16.840 which gives access to vessis in this part of the 0:17:16.840 --> 0:17:20.240 world to Saudi Arabian equities. Is this just the start 0:17:20.240 --> 0:17:21.080 of a growing trend. 0:17:22.520 --> 0:17:24.960 This is a great collaboration and work between the PIF, 0:17:25.080 --> 0:17:27.880 the Saudis of Rafun and Sea Soap. For the first 0:17:27.920 --> 0:17:30.520 listing in Hong Kong, we believe there will be another 0:17:30.640 --> 0:17:32.520 listing happening in the mainland China. 0:17:32.640 --> 0:17:33.560 And this is very very. 0:17:33.520 --> 0:17:36.560 Important for Saudi to get the scale because Hong Kong 0:17:36.560 --> 0:17:38.960 would not be sufficient in terms of the flow that 0:17:39.040 --> 0:17:41.760 comes into underlying as the ATF, so they need to 0:17:41.800 --> 0:17:44.479 list it in mailand China and maybe other countries. So 0:17:44.520 --> 0:17:46.480 probably we're going to see the Saudi ETF listed in 0:17:46.560 --> 0:17:50.760 different countries across all Asia and the opposite you're going 0:17:50.800 --> 0:17:54.440 to see where UAE and Krattar could be potential candidate 0:17:54.640 --> 0:17:57.719 for similar listing of their ETF and Hong Kong and 0:17:57.800 --> 0:18:00.960 China later on, which could all of this paved the 0:18:01.000 --> 0:18:03.720 way for a cross listing of equity in the future, 0:18:03.920 --> 0:18:06.040 which will take more time in terms of the regulation 0:18:06.119 --> 0:18:07.800 has to be set up and the framework with term 0:18:07.840 --> 0:18:10.920 of the countroparty risks, et cetera. But this is very exciting. 0:18:10.960 --> 0:18:13.359 But if you look at the start the ATF and 0:18:13.400 --> 0:18:17.240 Hong Kong was listed since November last year and the 0:18:17.320 --> 0:18:19.840 fund and flow still low is around the nine million 0:18:19.920 --> 0:18:23.119 dollars since inception, so a lot of work need to 0:18:23.119 --> 0:18:26.600 be done. Clearly, investors are interested as I seen from 0:18:26.600 --> 0:18:29.600 my trip to Meland China, but in terms of the 0:18:29.600 --> 0:18:32.120 investment in flow into the fund it's still low level, 0:18:32.680 --> 0:18:35.080 so execution need to be done. And also you do 0:18:35.200 --> 0:18:38.040 have the what I learned during my trip, there is 0:18:38.119 --> 0:18:41.480 overseas quota share on how much you can invest. So 0:18:41.600 --> 0:18:44.000 also this doesn't make it challenging for the money to 0:18:44.000 --> 0:18:44.440 get out. 0:18:45.480 --> 0:18:48.399 Edmund after making these hundreds of investors, what's your sense 0:18:48.480 --> 0:18:50.639 how knowledgeable are they in the region. 0:18:51.560 --> 0:18:55.679 I think they are in the exploration phase trying to understand. First, 0:18:55.880 --> 0:18:59.119 their main concern is geopolitics the world that's happening between 0:18:59.240 --> 0:19:01.880 Israel and Hamma, how this is impacting the region, how 0:19:01.920 --> 0:19:05.080 this is impacting the tourism industry in the Kingdom. They 0:19:05.119 --> 0:19:08.280 see more risks of this war impacting the rect sea projects, 0:19:08.840 --> 0:19:12.520 and during my trip, the complex was back and forth, 0:19:13.119 --> 0:19:15.560 so you can see that there is a lot of 0:19:15.640 --> 0:19:18.280 uncertainty on how they don't see there is a clear 0:19:18.359 --> 0:19:20.760 path of how this war will end up or how 0:19:20.800 --> 0:19:23.879 it will phase out, and what the spell over impact 0:19:23.880 --> 0:19:28.120 will be on Saudi if something wrong happened. The other 0:19:28.200 --> 0:19:30.719 thing is the tension between the US and China has 0:19:30.760 --> 0:19:32.920 been brought a few times in terms of the long 0:19:33.000 --> 0:19:35.360 term relationship. To build a long term relationship, you need 0:19:35.359 --> 0:19:38.359 to have a trust, and deploying capital into the region 0:19:39.000 --> 0:19:42.120 and then having issue later on in terms of US 0:19:42.200 --> 0:19:45.159 and the Reesian relationship could be something that they have 0:19:45.240 --> 0:19:48.439 to think about it twice before deploying a larger motor capital. 0:19:49.760 --> 0:19:52.960 With these geopolitical tensions, the US is imposing a lot 0:19:52.960 --> 0:19:56.320 of sanctions on Chinese companies, especially in the technology field. 0:19:56.560 --> 0:19:59.840 So it's quite interesting that this PIF led in the 0:20:00.520 --> 0:20:03.760 was to a Chinese technology company Lenovo. Do you think 0:20:03.800 --> 0:20:07.600 these sanctions and geopolitical tensions will influence what type of 0:20:07.680 --> 0:20:10.520 industries companies they will invest into China? 0:20:11.760 --> 0:20:15.400 Well, I'll say this for the GCC, the US has 0:20:15.480 --> 0:20:21.360 traditionally been the main political sort of backer, main security backer, 0:20:21.960 --> 0:20:26.639 and main seller of arms. But the GCC also China 0:20:26.760 --> 0:20:29.800 is the biggest commercial market. They export a lot of 0:20:29.840 --> 0:20:34.240 their oil that goes east tours China. So in the 0:20:34.280 --> 0:20:37.600 world now, I think there are three geopolitical hotspots. There's 0:20:37.680 --> 0:20:40.639 Russia Ukraine, which is sort of the GCC is immune 0:20:40.680 --> 0:20:43.080 from that. If anything, some pockets in the GCC, like 0:20:43.160 --> 0:20:46.160 Dubai is benefiting by having an influent population that's coming 0:20:46.200 --> 0:20:49.800 from Russia Ukraine into the GCC with their money. There 0:20:49.880 --> 0:20:53.800 is the Middle East conflict in Gaza, which is closer 0:20:53.800 --> 0:20:56.880 to the GCC, but it hasn't quite influenced it yet 0:20:57.480 --> 0:21:00.840 in the sense that oil is still flowing and ails 0:21:00.880 --> 0:21:06.040 the lifeblock the economy here and are still flowing uninterrupted 0:21:06.320 --> 0:21:09.320 to different parts of the world. And then there's the 0:21:09.359 --> 0:21:12.560 sort of China US tensions, the two great powers. And 0:21:12.640 --> 0:21:15.640 I think the gccit wants neutrality. What it doesn't want 0:21:15.680 --> 0:21:18.200 to take in size in this conflict. As I said, 0:21:18.320 --> 0:21:21.080 one of them is the historical ally and one of 0:21:21.119 --> 0:21:24.880 them is the commercial partner. And there has been explicit 0:21:25.119 --> 0:21:29.160 but also implicit statements from GCC officials saying we don't 0:21:29.160 --> 0:21:31.359 want to make a choice here. But of course, if 0:21:31.359 --> 0:21:34.480 things escalate between the US and China, if more sanctions 0:21:34.480 --> 0:21:39.120 are imposed on Chinese companies, then that might make life 0:21:39.160 --> 0:21:40.600 a little difficult for the GCC. 0:21:42.000 --> 0:21:45.160 And what I mean since is most of this investment 0:21:45.200 --> 0:21:47.800 has been in the hardware, not the software, and the 0:21:47.840 --> 0:21:51.040 sanction become more crucial when it comes to the software 0:21:51.080 --> 0:21:54.359 development than the hardware. So we know that as you 0:21:54.440 --> 0:21:58.760 explained before, PIF already invested an ex surveillance company Dahua. 0:21:58.880 --> 0:22:02.520 I believe spend it correctly, and this is what's sanctioned 0:22:02.560 --> 0:22:05.240 by the US. But they are developing hardware and Lenovo 0:22:05.400 --> 0:22:08.720 is focusing on the hardware side of the business. So 0:22:08.800 --> 0:22:12.280 I think Saudi is aiming to manufacture at the hardware level, 0:22:12.320 --> 0:22:15.960 one that could not create any threat relationship. 0:22:16.240 --> 0:22:19.680