ASEAN looks to the Middle East

The trade relationship between ASEAN and MENA (Gulf Cooperation Council (GCC) member countries and Egypt) gained our attention when the Red Sea disruptions started. In our previous note, we concluded that there has been a limit ed impact on ASEAN’s trade so far, although certain products are more vulnerable than others.

Similar to China-MENA trade, ASEAN-MENA trade, which totaled over USD126bn in 2023, is rather uneven. While ASEAN’s exports to MENA have enjoyed double-digit growth since 2024, the absolute level of exports is only a third of its imports. Undoubtedly, ASEAN has consistently seen a wide trade deficit with MENA, topping over USD5bn per month, which only briefly shrank right after the first wave of the pandemic when the oil prices collapsed.

Look elsewhere

In a time when economies have been seeking diversification, ASEAN and the Middle East (MENA) are in a good position. Both regions are among the fast growers and, more importantly, their economic complementariness is hard to ignore. The former has a growing appetite for energy and finance, while the latter has increasing needs for consumer and industrial products amid an economic transformation.

Uneven trade

The bedrock of the ASEAN-MENA corridor lies in trade, which totalled more than USD126bn in 2023. That said, trade remains rather uneven. ASEAN’s imports from MENA, which are largely concentrated in the energy space, were three times of its exports to the region. Despite limit ed exposure, for now, certain exports, including Thailand’s auto and Malaysia’s palm oil shipments, have a higher exposure to the Middle East. In addition, both region’s recent efforts to push for trade liberalisation offers new opportunities for unrealised trade potential to be tapped.

Diversified investments

In addition to trade, ASEAN has been gaining popularity among MENA investors. For investment, portfolio investment takes the lead, with strong inflows into Malaysia, Indonesia and Singapore. Despite limit ed scale, FDI inflows from MENA tend to be diversified, favouring ASEAN’s property, finance and mining sectors.

Travel destination

ASEAN’s popularity is not only limit ed to investors but also has attracted more tourists from the Middle East. Take Thailand for example, as the country has been seeking to diversify its tourism source, it aims to attract more high-end travelers. While MENA tourists only accounted for 2% of Thailand’s tourist portfolio, the recovery rate is the fastest, exceeding pre-pandemic levels by an astonishing 50% – an acute reflection of increasing connectivity between the two regions.