Trade between Hong Kong, a major trading hub in Asia, and the United Arab Emirates (UAE), a gateway to European markets, as well as the Kingdom of Saudi Arabia, is set to boom following the city’s multiple initial agreements with the two Middle Eastern trade giants.

The potential collaborations covering a range of sectors, from energy and green finance to urban development and logistics were signed earlier this year when a delegation of business leaders led by senior government officials visited Saudi Arabia and the UAE. This will not only push Hong Kong’s business ties between Saudi Arabia and the UAE to a new level, but will also foster business confidence of the opportunities available in the hubs.

Opportunities for Hong Kong in the Middle East

The Middle Eastern e-commerce market is predicted to reach a market size of $28.5 billion and the UAE[1], with an estimated growth of 23% between 2018 and 2022, is considered the most advanced e-commerce market in the region.

According to the Hong Kong Trade and Development Council (HKTDC)[2], in 2022, Hong Kong exports to the UAE grew by 35.5%. The HKTDC also considered the UAE Hong Kong’s largest trading partner in the Middle East last year, accounting for nearly 70% of our total trade with the region.

We expect to see continued trade growth with the UAE with the establishment of the first Hong Kong Economic and Trade Office in Dubai in 2021, aimed at aiding companies based in the Middle East to expand their trade and business ties with Hong Kong partners and to build a presence in East Asia.

As Hong Kong strives to strengthen business connections with overseas markets, our trade with our Middle Eastern partners is more important than ever. With supply chains in flux globally, we must look to diversify our trading partners and focus on our trade segments slated for growth in the coming years. According to data from the HKTDC[3], most shipments made in 2022 to the UAE from Hong Kong are for electronics and other technological devices – an area that we have predicted to see exponential growth in the coming years.

HKTDC data also shows that tech trade accounted for 72.6% of Hong Kong’s total trade profits in 2021, with most exports counting as high-tech products.[4] With the Middle East’s high-tech market currently valued at US$ 125 billion, the region provides ample opportunities for Hong Kong to expand its high-tech trade beyond its immediate Asian neighbours.

Harnessing logistics support

In order to capitalize on these new opportunities, we must ensure that logistics infrastructure and services are able to match the volume at which we hope to trade goods – safely and efficiently. A number of trade barriers, including the lack of harmonisation of standards and complex customs administration, continue to pose a threat to trade growth in Hong Kong. Given the discrepancies in custom regulations of different countries, small and medium-sized business (SMB) often do not have sufficient knowledge to navigate and comply with complicated custom procedures and formalities that may result in disputes and delivery delay. Our recent Intra-Asia report[5] found that the total volume of Hong Kong’s trade with the rest of Asia-11[6] may decline by 41% if these barriers remain unaddressed.

With 98% of businesses in Hong Kong being SMB, many do not have the capability or bandwidth to wrestle with extensive documentation and custom rules when it comes to international trade. Most SMB and e-commerce businesses require logistics expertise to tackle customs-related questions as well as hardware tools such as time-sensitive shipping options with air capacity for high volume palletised shipments[7]. Therefore, choosing the right logistics partners could tackle challenges encountered more effectively and serve a variety of customers.

For instance, mobile phones have usually been the main products traded in the Middle Eastern market, while lithium batteries are found in these consumer electronic items. However, many businesses have no dangerous good compliance know-how, including labelling and documentation when the shipment contains lithium batteries. This is where SMBs can entrust the logistics companies because they are able to provide guidance and have trained professional teams who understand how lithium batteries shipping works, how to handle them safely and with the knowledge of all the detailed regulations that must be complied with to ship these batteries. This ensures that the product arrives on time, and intact.

Business expansion in the Middle East can allow SMBs to establish an international presence in a region where emerging technology markets are rapidly evolving. By engaging entrusted logistics companies, executives and decision makers can be freed up to negotiate instead of being weighed down by complicated customs requirements and can operate more efficiently.