Livestream|Unveiling the Mysterious Middle East: What Opportunities Lie Beneath?

Author: Xiaoguang Zhang Jul 26, 2023 08:19 PM (GMT+8)

What lies beneath the blue ocean of the Middle East, barriers or opportunities?


On July 19, 2023, the "Globalization Salon" of EqualOcean held a live discussion with the theme "Unveiling the Mysterious Middle East: What Opportunities Lie Beneath?" This discussion sparked curiosity and longing among many viewers for the Middle Eastern market.

EqualOcean is a business information platform and think tank that focuses on serving Chinese brands in their global expansion efforts and helping overseas markets and institutions seize opportunities in China. Our platform has websites in both Chinese and English, and our English content is authorized for publication on platforms such as Bloomberg Terminal and Seeking Alpha. Our business analysts are often interviewed by internationally renowned media outlets such as The New York Times and Los Angeles Times.


For this episode, we have invited two guests. One is cici(王昕息), a well-known host of the globalized program "Going Overseas." She serves as an Urban Economist consultant at the World Bank, where she is deeply involved in various projects in different countries and regions. She is known as a "true Global Citizen" by the media. With her firsthand experience, she shares her insights and opinions on various topics related to corporate globalization.

The other guest is Tongtao, an infrastructure investor in the Asia-Pacific region at the International Finance Corporation (IFC) of the World Bank. He previously worked at Delta Partner, a Dubai-based investment bank, where he was involved in M&A activities and gained rich frontline experience in the Middle East market. He also hosts a podcast called "Natural Expansion"(自然膨胀) which is a knowledge-based podcast driven by curiosity and an objective attitude. Interested viewers can search for "Natural Expansion" on the Little Universe (小宇宙)app to listen to it.

EqualOcean: Before we officially start, let's have a brief self-introduction from our guests.

Cici (王昕息): I consider myself an old friend of EqualOcean. Back in June, I hosted a forum on the Middle East and North Africa topic, and I am the host of a podcast focused on Chinese compaies with overseas business. I also host various domestic events and forums related to going abroad. Recently, I have spent more time in Africa, which has led me to pay great attention to the Middle East as well. Today, I am excited to have the opportunity to exchange ideas and share insights with all of you. Now, I'll pass the time to Tongtao.

Tongtao: Thank you both, I am Tongtao. From 2017 to 2019, I worked in Dubai as an investment banker, engaging in transactions related to the Middle East and Africa, particularly in emerging markets. After that, I joined the World Bank's IFC, focusing on infrastructure investments in the Asia-Pacific region. My professional experience in the past few years has been centered around developing countries, with the Middle East being a prominent representative. I am delighted to exchange thoughts with everyone here today.

EqualOcean: Thank you for the introductions. When did you start paying attention to the Middle Eastern market? Was there any specific catalyst that led to your interest?

Cici (王昕息): It was over a decade ago when I first traveled abroad, and the first country I visited was in the Middle East. I attended the United Nations Climate Conference in Qatar, which sparked my interest in understanding the region. Moreover, there has always been a mysterious allure to the Middle East for me, so I continued traveling to various Middle Eastern countries, including Iran, as part of my graduation trip. During the pandemic, I received an offer to work in Abu Dhabi, but unfortunately, due to the circumstances, I couldn't take it. Nevertheless, my curiosity about the region persisted, and I've had a long-term interest and understanding of its economic, social, cultural, and political aspects.

Tongtao: In my case, it was more straightforward. My first job was at an investment bank based in Dubai, so I had direct exposure and involvement with the Middle East and other developing countries, handling financing and mergers and acquisitions for various enterprises. Hence, my work allowed me to have a close and hands-on experience with the Middle Eastern market.

EqualOcean: Tongtao, I believe you pursued your postgraduate studies in London, right? What made you decide to work in a Dubai-based investment bank afterward?

Tongtao: Yes, that's correct. There were probably two main factors. Firstly, investment banks and consulting firms in the Middle East actively recruited from UK and European universities, so it was quite common for graduates from business schools to go to work in the region. Secondly, around 2016-2017, the One Belt, One Road initiative was gaining significant attention in China. Since I had a Chinese background and an opportunity in the region, I thought it would be a worthwhile experience, and thus, I accepted the offer and moved to Dubai.

EqualOcean: Both of you seem to have an affinity for different countries in the Middle East. Could you talk about your experiences working and living there?

Cici (王昕息): For me, when it comes to traveling, I really enjoyed Iran. However, in terms of work and living experiences, I lean towards Abu Dhabi. My previous work was more macro-oriented and policy-driven. As a result, there were more opportunities to interact with institutions and work in that field in Abu Dhabi. Additionally, I have more friends who chose to live in Abu Dhabi. Though it may seem a bit dull, if I were to move back, Abu Dhabi would still be my preferred choice.

Tongtao: For me, it would be Dubai. During my time there, I lived and worked for over two years. Dubai stands out as the only truly international metropolis in the Middle East. The quality of life and various aspects of living are unparalleled in the region. Hence, Dubai is my favorite city in the Middle East.

EqualOcean: Indeed, both Abu Dhabi and Dubai are part of the United Arab Emirates, with Dubai being a global metropolis.

Tongtao: Exactly, and being in Dubai feels more like living in a Western or European city rather than what one might associate with the Middle East.

EqualOcean: Does cici think that Abu Dhabi has more of that traditional Middle Eastern vibe compared to Dubai?

Cici (王昕息): Not really. If we're talking about the authentic Middle Eastern experience, one might need to explore places that are less internationalized or less open, such as Saudi Arabia or some less developed areas in the Gulf region. In both Dubai and Abu Dhabi, there is a significant expat population. So, the feeling of being in a large global city might be more pronounced there, somewhat similar to living in places like Hong Kong or other major metropolises. Abu Dhabi does have its unique aspects, but it may not be distinctly "Middle Eastern" in that sense.

EqualOcean: Is Abu Dhabi the wealthiest member of the UAE?

Cici (王昕息): Previously, during some economic crises, Dubai received economic assistance from Abu Dhabi to some extent. To put it simply, it's somewhat like a relationship between a big brother and a little brother.

EqualOcean: We've heard some entrepreneurs in Southeast Asia talk about how the region emphasizes work-life balance compared to mainland China. What is the general sentiment towards work-life balance in the local job market in the Middle East? Is it more intense, or do they prioritize work-life balance?

Tongtao: It's a nuanced topic when it comes to work-life balance in the Middle East. Let's take the UAE or Dubai as an example. About 90% or nearly 90% of the population there are expats. Expat workers' routines might differ significantly from those of the locals. In my case, working in investment banking, my peers and I had an intense work environment, similar to what you'd find in investment banks elsewhere. However, the remaining 10% who are locals might have better work-life balance due to their excellent welfare benefits. Some of them have relatively easy jobs, finishing work early in the afternoon, while others may not even have to work at all. So, when we discuss work-life balance in the Middle East, it's crucial to consider the large expat population and the differing work hours between them and the locals. Work-life balance might be worse for expats.

Cici (王昕息): Both Tongtao and I have lived in Southeast Asia, and I can say that people there can be just as driven and intense when it comes to work. Globally, especially in certain industries, like consulting or, in my case, a more professional service field, the working hours in Dubai or Abu Dhabi are quite long. As Tongtao mentioned, the top class of society, the locals, have excellent welfare and may not work as hard. They might work until 2 or 3 P.M., but that's not necessarily a common practice for everyone. So, while compared to some places in China, the working hours might not seem as long, professionals in the region still work quite diligently. Additionally, there's a significant segment of the population, such as immigrants from India and Pakistan, engaged in labor-intensive work, enduring harsh conditions, especially in the high temperatures of the Middle East. For them, work-life balance is almost nonexistent. In conclusion, work-life balance can vary significantly based on different social groups within the region.

EqualOcean: So, as we can't generalize this question too much, we cannot say whether it's very intense or that kind of work-life balance state. I think this is a topic worth exploring in-depth later on.

Tongtao: Yes, I agree. One thing I find quite surprising, and that I'd like to share, is that the concept of "the Middle East" can be quite misleading. When we talk about going abroad, we might mention big geographical concepts like Southeast Asia or the Middle East. However, the Middle East is internally highly fragmented. So, when we discuss the region, we must take a very down-to-earth and specific perspective.

The Middle East comprises roughly a dozen countries, and if we include North Africa, it might be over 20 countries. Within these countries, there are distinctions, such as Gulf countries and non-Gulf countries. The Gulf countries have a higher per capita GDP, while non-Gulf countries have lower figures, and there are significant wealth disparities within each country. For example, Saudi Arabia is known for being wealthy, but it also has many poor people who live in difficult conditions. On the other hand, the situation might be different in the United Arab Emirates (UAE) because of its smaller population, and most citizens have better welfare. Moreover, there are countries like Syria and Iraq, which are also considered part of the Middle East, but they have different business environments. So, what surprised me the most before I went to the Middle East was that it is not as homogenous as we might think. Each country has its unique situation. Therefore, when we talk about going abroad to the Middle East, it's better to be specific about which country in the region we plan to visit. This will give us a clearer understanding of our plans and what to expect, and I think that's crucial.

Another point I'd like to share is that there is a significant disconnect between the elite and the general public in the Middle East. People influnced by Chinese media might have the impression of the Middle East as being full of "Middle Eastern tycoons," and this image might be deeply rooted in people's minds. However, the elite in the Middle East are very capable. This includes members of the royal family or those having wealthy backgrounds. Many of them are highly accomplished individuals, educated at the best schools in Europe and the United States, possessing a strong international perspective and excellent work abilities. So, the elite in the Middle East are operated by a group of highly capable people; it's not as if there are many "wealthy fools" managing things, as some might think. I think this is the second point that might be a bit different from what many people believe.

A slightly negative point, which is quite notable, is that in many Middle Eastern countries, religion plays a dominant role in society. As a result, the treatment of women is not very friendly. Many of my female friends who went on business trips to Saudi Arabia, for instance, told me that women are at a considerable disadvantage there.

But this was a few years ago. In recent years, there have been significant efforts and reforms by the Saudi Crown Prince to improve the status of women, but it's still a weak position. For example, one of my friends shared that there was not a single women's restroom in the entire office building of the client she visited in Saudi Arabia. If she wanted to use a restroom, she had to walk about two or three miles to another building because Saudi Arabia has low population density, and it's relatively barren. So, she had to find a restroom, which could take her ten to twenty minutes to walk, and then walk back. This was another aspect that surprised me and challenged my preconceptions, but this situation is improving.

EqualOcean: So, when there was no women's restroom in that office building, was it because the female labor force participation rate was low in the region?

Tongtao: Yes, that's one factor. Many local women don't participate in the workforce, and even back then, women were not allowed to drive. The driving ban was lifted only in the past couple of years, and women can now learn to drive and drive themselves. So, you're absolutely right. There are significant barriers for women in terms of employment and social integration. One of my friends also shared an interesting example. When they first met with clients, they would greet them, shake hands, and the client would tilt their head upward, pretending not to see her. They had never faced this kind of situation before, where a woman approached them as an equal, greeted them, and shook hands. The client didn't know how to react but didn't want to embarrass her, so they ended up pretending not to see her, which was quite amusing.

EqualOcean: Thank you, tongtao, for your valuable insights. Cici, could you share some experiences that have challenged your perceptions?

Cici (王昕息): Generally speaking, my views align closely with tongtao's. However, the concept of the "Middle East" is not strictly a regional term, geographically, it includes parts of Western Asia and North Africa. Thus, the Middle East has an economic-geographical connotation, and people often associate it directly with the Gulf Cooperation Council (GCC) countries due to their oil production and overall economic and political stability.

The region itself exhibits significant variance, and it may not be appropriate to understand it as a unified market. We primarily focus on the GCC countries when discussing the Middle East. If we extend the concept further, Turkey and Egypt also fall within this region, and they are considered relatively attractive markets. However, there are countries in this region affected by conflict or poverty, such as Syria, Iraq, and recently Lebanon. Even though these countries share similarities in language and religion, they still differ significantly from each other.

Another point to mention is from a previous Middle East and North Africa forum, where a guest raised the notion that there seems to be a perception of "the rich being gullible" in the Middle East. This image, intentionally or unintentionally, might have been crafted by Middle Eastern governments. Regardless of the actual logic behind their investment strategies and policies, presenting an image of "the rich being gullible" could attract tourists, visitors, and investors interested in the region's tourism, aviation, hotel industries, and more. Notably, the upper classes in the Middle East often receive high-quality international education, attending prestigious institutions like New York University, Northwestern University, and others with campuses in Abu Dhabi, Qatar, and Egypt. Thus, this portrayal of "the rich being gullible" may not accurately reflect their investment style; rather, it might be a misperception arising from media or stereotypes, deviating slightly from traditional beliefs.

EqualOcean: As both of you mentioned earlier, there are considerable internal differences within the Middle East market. The Gulf Cooperation Council (GCC) countries and other affluent nations like Israel have distinct economic structures. Could cici provide some insights into the differences between these two markets?

Cici (王昕息): Indeed, Israel used to attract more attention before this recent "Middle East fever" emerged. When discussing the Middle East market or Chinese investments in the region, Israel was often the focus of media coverage. However, the increasing attention towards the broader Middle East market stems from last year's high-level interactions and the signing of cooperation frameworks between China and various countries. As a result, the relationship between the two sides has grown warmer, leading to more in-depth understanding of the broader Middle East market. Previously, the focus was more on Israel due to its expertise in areas like agriculture, technology, medicine, and its strong innovation and entrepreneurship sector, which had strong complementary aspects and learning opportunities for China.

The GCC countries relied heavily on oil and gas exports, making their economies highly dependent on these industries. However, countries like Saudi Arabia have begun diversifying their economy through initiatives like "Vision 2030." Nonetheless, their economic transformation started a bit later than Israel's efforts. There are differences in economic structure and resource endowment between the GCC countries and Israel, alongside religious and diplomatic policies that have led to some conflicts and frictions. Consequently, these two regions were not necessarily grouped together in the minds of investors earlier, despite both being located in the broader Middle East region. As we discussed earlier, there are indeed significant internal differences within the Middle East market, and each region has its distinctive features and strengths. However, in recent years, some Gulf countries have experienced improved relations and cooperation with Israel, particularly in technology, energy, and security sectors. Under themes related to sustainable development and economic diversification, there are numerous opportunities for collaboration.

EqualOcean: So, it seems that the recent "Middle East fever" is more focused on Gulf countries due to their economic diversification visions aligning with China's development needs. Am I correct in saying that this wave of interest is centered on the Gulf region?

Cici (王昕息): Exactly. The renewed focus on the Gulf region and countries like Saudi Arabia has been facilitated by last year's high-level visits, such as the interactions between China and Saudi Arabia. These visits have further strengthened the bilateral relationship and resulted in cooperation frameworks, fostering warmer ties between the two sides. Additionally, Saudi Arabia has undertaken significant reforms in recent years, including major changes in sectors like tourism, which was previously restricted to business visas only. These reforms have allowed foreign women to obtain tourist visas, leading to a broader push for the tourism industry in Saudi Arabia.

Consequently, there is a mutual desire for enhanced cooperation, with both sides looking to strengthen their ties. This newfound interest in the broader Middle East market is also influenced by various themes like capital-driven collaboration with China, particularly in areas like industrial capacity cooperation. Nonetheless, the relationship with Israel has been established over a longer period, especially in the areas of cutting-edge technology, making it another key focal point for investors during this "Middle East fever."

EqualOcean: Cici mentioned that in the past two years, there has been both a pulling force and a pushing force driving cooperation between China and the Middle East. Consequently, there has been a significant increase in Chinese companies expanding into the Middle East during this period. Could you both share your observations on where Chinese companies typically focus their efforts in the Middle East, or where they usually establish their first foothold? Let's hear tongtao's perspective first.

Tongtao: The location for Chinese companies' expansion in the Middle East generally depends on the specific industry they are involved in. For resource-driven enterprises, the decision often revolves around where the resources are located. However, for more ToC companies, those closer to the market, the primary destinations are usually the United Arab Emirates (UAE) or Saudi Arabia. These choices are driven by commercial logic.

The UAE acts as a regional economic and trade hub in the Middle East. Not only Chinese companies but also European and American enterprises tend to establish their regional headquarters in the UAE. The business environment and living conditions in the UAE are relatively favorable, making it an attractive location for companies to set up their headquarters.

From an operational perspective, Saudi Arabia is often a top choice. With a population of approximately 40 million, it is one of the largest countries in the Middle East. The average consumer spending power or ARPU (Average Revenue Per User) in Saudi Arabia is relatively high within the region, making it an appealing market with considerable scale. Egypt is also a destination that many companies consider due to its large population of around 100 million, although its per capita spending might not be as high as in Saudi Arabia or other Gulf countries. Nevertheless, its significant population makes it a promising market.

To sum up, I have observed that companies tend to establish their headquarters in the UAE, but some companies directly target markets like Saudi Arabia and Egypt for their business operations, with Saudi Arabia often accounting for a larger share of their revenue.

Cici (王昕息): My view aligns closely with tongtao's. The location for expansion depends to a great extent on whether the enterprise leans towards traditional manufacturing and infrastructure, or if it's more involved in the sectors like IT. In the case of IT, companies prefer local software engineering talent outsourcing industries in countries like Egypt and Turkey, which offer lower costs compared to the GCC countries. For instance, Egyptian programmers' monthly salaries can be nearly half of what their Indian counterparts earn. Abundant local talent in the internet sector enables some companies, particularly those involved in e-commerce, social entertainment, or Fintech, to establish a presence in these regions. Therefore, the choice of expansion destination significantly depends on the industry and the specific "going global" model adopted by the company. Additionally, specific investment policies and incentives offered by different regions also play a role. For example, Saudi Arabia attracts Chinese companies, whether for capacity cooperation or other investments, through logic similar to China's domestic investment incentives. They encourage more manufacturing layout in the region by providing government procurement benefits, energy price discounts, and subsidies.

So, I believe that the destination is determined by various factors. Relatively, we may see more companies targeting the core cities or regions, such as the UAE, Saudi Arabia, and Egypt. Other countries like Kuwait and Qatar might be less frequently chosen as the first destination for Chinese companies' expansion, unless they have specific industry or business requirements in those regions.

EqualOcean: Indeed, the focus on expansion seems to be on familiar territories such as the UAE, Saudi Arabia, and Egypt, with their larger populations and higher GDPs. Half a month ago, there was a notable event when NIO, the electric vehicle manufacturer, secured an investment from Abu Dhabi in the Middle East. Many wonder why the Middle East, which is known for its abundant oil resources, would venture into the development of new energy vehicles, potentially reducing its own market for oil consumption. How do you both view this issue?

Tongtao: I believe this matter can be viewed from several perspectives.

Firstly, on a global level, carbon neutrality has become a consensus worldwide. Therefore, we can see that all countries and regions are formulating their own strategies for carbon neutrality, and the Middle Eastern countries are no exception. From a practical standpoint, it is becoming increasingly difficult for traditional oil and gas industries to secure financing, which is a realistic situation. The World Bank International Finance Corporation (IFC) have already stopped investing in projects and companies related to oil and gas, so we may be slightly ahead of the market in this regard. Many more commercial banks and private equity firms will also have concerns in the oil and gas industry in the future, making it even more challenging to sustain the business logic. Of course, the government has ample funds to develop its own oil and gas industry, but not being able to attract international capital is something that needs to be considered.

Therefore, against this backdrop, we can see that countries in the Middle East have developed clear energy transition plans. I don't know if you are familiar with Saudi Arabia's strategy called Vision 2030. This vision encompasses various aspects of the country's overall strategic planning, including a clear focus on energy. For example, they aim to generate 50% of their electricity from renewable energy sources by 2030, which is a representative strategy. Not only Saudi Arabia, but other Middle Eastern countries such as the UAE, Oman, and Jordan also have their own energy transition plans. Hence, this regional trend is aligned with the international trend, with all Middle Eastern countries undergoing energy transitions. Considering this context, investing in new energy vehicles is not surprising because it aligns with the national strategy. Besides NIO, several Middle Eastern governments have signed agreements with Chinese or American electric vehicle manufacturers, either for establishing manufacturing plants or for cooperation agreements, indicating their explorations in this area.

This is a significant trend, and the Middle East is no exception. Although the Middle East was previously reliant on oil and gas for their economic success, everyone knows that the future is moving towards carbon neutrality and renewables. Therefore, the Middle East cannot escape this overall trend. In addition, I believe this investment has some financial considerations as well. After conducting due diligence, they found this to be a good opportunity from a financial investment perspective. Therefore, I think a comprehensive approach was taken to consider both factors and make this investment.

Cici (王昕息): First of all, the reason is simple. You can't rely on resources indefinitely. Therefore, these countries have been aware of the need for energy transformation for a long time. For example, when I first went to the Middle East over ten years ago to participate in the UN climate conference, Middle Eastern countries were already planning for the risk of running out of traditional energy sources like oil.

This year's UN climate conference will be held in the UAE in November. In the past few years, especially for the UAE, they have been pushing forward their ambition and leadership in the field of climate change through various policies. On the one hand, it is a long-term strategy for their own economic development. On the other hand, they hope to increase their influence in this field of climate diplomacy. For example, Saudi Arabia's 2030 vision has set clear goals for electric vehicles. By 2030, they hope that at least 30% of vehicles in the capital city of Riyadh will be electric and the entire country will use more clean energy sources such as solar, hydrogen, and wind power.

In addition, there is a specialized department under the UN related to renewable energy, and its headquarters are in Abu Dhabi. These countries are working hard to promote economic and energy structure transformation. I have observed a growing interest in the field of new energy vehicles, particularly in relation to recent developments such as NIO's investments and the collaboration between another company called Human Horizons and Saudi capital. Apart from the reasons mentioned by tongtao earlier, there are two key factors behind these developments.

Firstly, the continuous warming of relations between the Middle East and China has contributed to this trend. Secondly, Middle Eastern countries have shown interest in China's relatively mature new energy industry chain. Additionally, the traditional automotive sector has established certain barriers. For Middle Eastern investors and industrialists, investing in emerging industries like new energy vehicles provides them with greater opportunities to participate in the construction of the entire industry.

This trend is not limited to the Middle East but is also evident globally. Even regions that may be perceived as economically less developed, such as East Africa and West Africa, are actively developing new energy solutions. They are actively cooperating with China's entire industry chain, although their collaborations may focus more on two-wheeled electric vehicles or bicycles rather than automobiles. Hence, we can observe a global trend towards globalization in the new energy sector. However, due to the availability of abundant capital in the Middle East, certain actions may receive higher exposure in the media and greater attention within the industry.

EqualOcean: Apart from electric vehicles that we discussed earlier, in which other industries are these active Chinese companies in the Middle East? Can you share some impressive examples of what they have done well?

Tongtao: I came to the Middle East in 2017, and it has been about six or seven years since then. During this period, there have been some changes. So, at this point in time, I think we can focus on Chinese companies in the Middle East that are involved in digital infrastructure. You can look at a recent deal by an organization called eWTP Arabia, which involves Alibaba Cloud, a telecommunication operator in Saudi Arabia, and PAF. This deal is a reflection of what Chinese companies are doing in digital infrastructure in the region. It can objectively be said that China's capabilities and technology in data centers and other digital infrastructure are globally leading, and the Middle East has a significant need for such capabilities. Personally, I have also been involved in many digital infrastructure deals. Therefore, I suggest paying attention to the digital infrastructure sector, including facilities like data centers and fiber optics.

In addition to digital infrastructure, Chinese AI companies have been quite successful in the Middle East. Represented by SenseTime, several Chinese AI unicorns have had several years of development in the Middle East. Recently, with the emergence of large models, the topic of AI has gained popularity. However, even before this, Chinese companies had established deep collaborations with enterprises and governments in the Middle East in mature AI solutions such as facial recognition. So, this can also be considered quite successful.

Furthermore, there is a sector worth mentioning, which is mobile gaming. This may not be well-known to everyone because many people in the Middle East really enjoy playing games, especially war and fighting-themed mobile games. If you look at the iOS game rankings, the top positions are mostly occupied by Chinese mobile game developers. I remember the top-ranked game developer at that time was not a large company; it was actually a very small studio. Their mobile game dominated the rankings in Saudi Arabia for several weeks and generated substantial revenue. I think gaming, in terms of going global, is relatively easy due to its lightweight nature and the relatively straightforward internationalization process.

To summarize, we have digital infrastructure, which requires significant investment in assets, followed by AI that demands advanced technology, and finally, the gaming industry. These are some of the successful cases I have observed in the Middle East.

Cici (王昕息): Following up on what Tongtao just mentioned, I would like to add some insights. The discussion about digital infrastructure was quite comprehensive. In addition to eWTP Arabia, we can also look at MSA Capital, both of which have been strategically positioned in the Middle East for around six or seven years. By examining their portfolio, we can gain a better understanding of the Chinese companies they are focusing on, particularly those involved in internet and digital infrastructure. This can be considered quite representative. Their investments encompass various sectors such as gaming, social media, e-commerce, and the related infrastructure supporting e-commerce. For example, J&T Express expanded rapidly in the Saudi Arabian region.

Another aspect involves cooperation between China and the Middle East in traditional infrastructure, an area we might be more familiar with. Taking Saudi Arabia as an example, the Saudi government plans to invest nearly $4 trillion in infrastructure and real estate development over the next decade. If you follow the news, you may have seen some ambitious infrastructure projects initiated by the Saudi government and others that seem quite imaginative, such as "the line," a linear city concept. China has extensive experience in collaborating with the Middle East in areas such as infrastructure, manufacturing, and capacity transfer. The extensive expansion of China's infrastructure prowess aligns closely with local demands.

In terms of industrial manufacturing, using Saudi Arabia as an example, it being the largest market in the Middle East, there is a clear emphasis on localizing industries. When the Saudi government issues significant orders, they often require the establishment of manufacturing plants locally. Additionally, the consideration of localization in government procurement is increasing. Therefore, to a certain extent, these relatively focused investments, especially by Chinese companies expanding their manufacturing capacities overseas, aim to fulfill ambitious plans for infrastructure and real estate development.

Over the past few years, as Saudi Arabia gradually relaxes restrictions, there have been rumors that the country may gradually open up its real estate market to foreign investment this year. With an increasing number of people visiting Saudi Arabia for tourism or business purposes, which was non-existent in the past, there will be a demand for hotels and related infrastructure. This can be regarded as part of the real estate sector. Chinese companies, particularly those focusing on manufacturing and infrastructure-related capacities, are well-positioned to tap into these trends or have already set precedents. For example, Chint Group has been involved in smart energy development and operations in Saudi Arabia for several decades. Their local establishment of manufacturing facilities and supply chains related to capacity and infrastructure manufacturing is a typical example.

EqualOcean: In summary, modern digital infrastructure, artificial intelligence, mobile gaming, as well as industries related to mobile internet such as social media and e-commerce, along with the construction of surrounding digital infrastructure, are thriving in the Middle East. On the other hand, as mentioned by cici, there are also ongoing traditional infrastructure projects that can be summarized as "simultaneous development of old and new" infrastructure.

Previously, EqualOcean conducted an analysis and found that investment institutions in the Middle East are particularly interested in cutting-edge technology companies both domestically and internationally. Tongtao, as someone who worked in investment banking in the Middle East, could you please share with us what types of projects were the focus of your investments at that time? Are there any successful cases you could share?

Tongtao: During my time in investment bank, I primarily worked on two types of projects. One of them was in digital infrastructure, where I provided services to a joint venture company involving Alibaba Cloud and helped them attract strategic investors. I also worked on a buyout deal for a local satellite company, acting as their financial advisor. In addition to that, I served various companies in the new economy sector, including e-commerce, ride-hailing, and video streaming platforms. So, my experience suggested a balanced development trend, with all these industries showing robust growth.

As for a successful case, I would like to mention a ride-hailing company called Careem, which was later acquired by Uber. I was involved in Careem's last funding round before the Uber acquisition. It was a significant deal at that time, likely one of the largest financing rounds in the Middle East. Currently, they are venturing into becoming a super app, obtaining a banking license, delving into Fintech, and expanding beyond mobile transportation into logistics and more, similar to the strategy adopted by many companies in China. I had the opportunity to work with some prominent companies like Careem back then. Nowadays, my focus is mainly on Southeast Asia, but I believe there are still plenty of opportunities in the Middle East, be it in digital infrastructure or upper-layer applications.

Cici (王昕息):  I'd like to add something to what Tongtao just mentioned. I have noticed that the capital in the Middle East collaborates closely with other Muslim countries connected by Islamic faith, such as in Southeast Asia, especially in Indonesia and Malaysia, two of the most populous countries in the region. Even some Muslim countries in Africa have established tight partnerships. For instance, I think it was either Indonesia or Malaysia's sovereign fund that received assistance from the Abu Dhabi Investment Authority during its establishment. If there are projects related to products targeting the Muslim consumer base, following these connections might be beneficial for exploring other markets. The Middle Eastern capital is bound together by a strong religious network.

EqualOcean: This is a rare perspective where religious connections lead to economic connections. It's quite intriguing. In this context, during the process of economic diversification and urban infrastructure development in some countries, what are the visions and imaginations of future city construction that both of you have experienced in the Middle East?

Tongtao: One of the most representative examples of futuristic city planning in the Middle East is NEOM in Saudi Arabia. It is an immensely massive project where they are building an entire city from scratch in a barren land. Their vision is to create the most advanced, modern city on a global scale. They are scouring the world for cutting-edge technologies to incorporate into this city, trying out every possible innovation. I'm not sure about the current progress and whether it is open for residency or visitation, but everyone should keep an eye on this project. It stands as the epitome of their ambition to construct the newest, biggest, and most visionary city.

Aside from this iconic example, there are already landmarks like the Burj Khalifa in the UAE, the tallest tower globally, and I believe either Qatar or Saudi Arabia is constructing an even taller one. The Middle East has a penchant for striving to be number one, aiming for the tallest and largest structures. The largest shopping mall is also in the UAE, and they are actively incorporating various cutting-edge technologies into it. So, when it comes to city construction, they are ambitious and strive to make their cities the first in many aspects.

EqualOcean: This does fit the perception of tycoons often associated with Middle Eastern wealth.

Cici (王昕息): I don't think it's solely about showcasing Middle Eastern wealth. On one hand, they possess the financial capability, especially with rising global energy prices over the past few years, accumulating significant wealth. On the other hand, city planning and architecture are a reflection of their political philosophy. The governments in the entire Middle East region have the financial strength and the vision or ambition. I participated in another project involving Elon Musk's Hyperloop, a visionary project for a super high-speed train. I conducted research for them on various regions. They eventually selected Dubai, though I'm not sure if they executed it later. The plan was to construct a vacuum-sealed maglev tunnel under the sea for container shipments. Instead of unloading the cargo near the port, they would send the containers through the vacuum-sealed maglev tunnel in the middle of the sea at speeds of around 600-700 kilometers per hour, delivering them to the shore. They combined this futuristic infrastructure with DP World, Dubai's third or fourth-largest port operator, and integrated it with land-based multimodal transportation. This venture demonstrated their willingness to support ambitious and infrastructure-related initiatives, which seem rather futuristic. This was mainly represented by Saudi Arabia and the UAE governments, both displaying a lot of ambition in various infrastructure projects.

In the Middle East, a significant portion of the consulting industry's large orders comes from the governments' policies or planning. When implementing these projects, the governments have high requirements for them. It's a powerful combination of financial resources, vision, and execution capabilities. So, for suppliers that can meet their demands throughout the entire infrastructure value chain, it might be a promising market opportunity.

EqualOcean: So, the last topic we'd like to discuss with both of you is a broader one. So far, it's evident that the Middle East is a blue ocean in this wave of the region's boom. Looking to the future, what other opportunities do you think exist for companies seeking to expand into the Middle East? What are the crucial factors they need to consider when venturing into this region?

Tongtao: Yes, considering your current resources and background, opportunities in the Middle East may vary. For instance, if you are an established institution looking to expand into new markets, you might want to explore areas like new energy, digital infrastructure, and supply chain optimization. These three sectors are worth researching and considering for Chinese companies. As for early-stage entrepreneurs, they could explore the gaming and esports industry. Countries like Saudi Arabia are heavily supporting this industry due to the large number of young gamers. Recently, there have been investments by Saudi Arabia in Chinese domestic esports operators, which is worth keeping an eye on.

Additionally, we haven't discussed this earlier, but for those interested in the Middle East, they could consider blockchain and cryptocurrency. In terms of regulations, especially in Dubai, they are more favorable towards such enterprises, making it an attractive destination for setting up offices, among other opportunities.

Cici (王昕息): Allow me to add a few points to pay attention to. The Middle East region has diverse political systems and religious cultures, which can significantly differ from other regions. For example, in several Middle Eastern countries, the royal family and the political structure play a vital role, leading to distinct social governance logics. Understanding and interpreting macro policies is crucial as this region has seen various policy initiatives following high-level mutual visits, making it a hot destination for China's "go-global" strategy.

However, if we discuss the larger Middle East region, including the Gulf Cooperation Council (GCC) countries and other relatively underdeveloped countries in Western Asia and North Africa, it becomes essential to comprehend the political stability and the complexity of their socio-economic systems. For instance, many countries in the region adopt Islamic financial systems, which require more time and attention to grasp. So, it's important to focus on policy developments, as the Middle East is a place with intense competition between various political forces, including the US, China, and Europe. Therefore, understanding the overall situation and policies is of great significance.

Furthermore, apart from the commonly discussed localization, I think it's crucial to have patience when it comes to the Middle East and even North Africa and other emerging markets. Though it may sound like a broad concept, the opportunities for valuation growth outside of China in the next few years might not be as frequent.

So, while there might be ample capital in these regions, rushing to make quick money or expecting to easily benefit from "foolish wealthy" tycoons might not be realistic. Therefore, even though it's a common topic, having patience and being willing to deeply cultivate the market will be more important. Over the past few years, especially for the Middle East, they have faced numerous GPs seeking money from them or people seeking business opportunities there. Hence, they will be more cautious in selecting partners, preferring those who have patience and a willingness to establish long-term cooperation. Although this might be more of a macro-level advice, especially for those venturing into local markets, it's still crucial to consider these significant factors.

Tongtao: Yes, I'd like to echo Cici's point here. As Chinese entrepreneurs, we often assume that other regions are also large markets because we are accustomed to the vastness of the Chinese market, which is arguably one of the best globally. However, that's not the case for every region. The United States could be considered a relatively unified large market, and even India lacks a business environment as favorable as China's, let alone the Middle East.

When entering the Middle East market, we need to swiftly change our mindset. As we mentioned earlier, the Middle East is primarily a political and military concept, not purely an economic and market concept. I'll illustrate this with a deal I was involved in, where I worked with Careem, which achieved unicorn status in valuation before financing. To attain this status, they exerted tremendous efforts, far beyond what Chinese entrepreneurs can imagine. Careem operated in over a dozen Middle Eastern markets, primarily in the UAE and Saudi Arabia, but also in Egypt, Qatar, Oman, Jordan, and others.

The challenges they faced for market entry, regulatory compliance, localization, and educating the local market were several orders of magnitude greater than what Didi had to go through in China or Uber in the United States to achieve unicorn status. Over the years, the Middle East has only produced a few scattered unicorns. Apart from Careem, there might be some in the e-commerce sector, but that's about it. Therefore, when venturing into the Middle East, as Cici mentioned, patience is essential because finding a market as vast as China abroad is genuinely difficult. The Middle East is fragmented, comprising small markets loosely bound by religious and cultural factors. When conducting business, these weak cultural and religious ties are less significant, and the market entry process reverts to dealing with individual countries from scratch. This creates a manifold increase in difficulty.

EqualOcean: That's indeed a concrete manifestation of the need for patience, as Cici mentioned earlier. And with that, we must bid farewell to our audience today. Many thanks to both of our guests for their insightful sharing, which has provided us with a wealth of new perspectives. For those interested in the complete content of today's live broadcast, you can follow us on EqualOcean's video platform, WeChat public account, and website. We conduct live broadcasts every Wednesday on our video platform. Once again, thank you both for participating today, and see you next time!