Gulf investors turning to Asia's finance giants

Arab News

3 days ago

https://arab.news/z8fye
In recent years, there has been a noticeable shift in the investment strategies of Gulf nations, as they increasingly turn to Asia for funding. This trend marks a significant pivot in the region's economic diversification efforts, driven by both geopolitical considerations and the evolving global economic landscape. With traditional Western investment sources becoming more volatile, Asian powers — especially China, India and Japan — are fast becoming the region's go-to funding source, as the Gulf states seek financial capital and strategic partnerships to expand their global influence and secure long-term growth.
As of June, Saudi Arabia had already sought more than $2 billion in syndicated loans toward Asia-Pacific bank liquidity. This includes $1 billion for the Saudi Electricity Company, $750 million for Banque Saudi Fransi and $500 million for Al Ahli Bank of Kuwait — transactions that reflect a clear strategy to diversify funding sources beyond domestic markets.
Qatar Gas Transport Company last week secured a five-year, $1 billion syndicated loan, with Mizuho Bank acting as the sole mandated lead arranger and bookrunner. The deal follows an earlier financing arrangement with Korea Eximbank to build 25 conventional Korean-built liquefied natural gas carriers.
This wave of recent announcements, marked by a growing number of deals with Asian banks, signals a structural shift in the global geoeconomy. For decades, the US and Europe served as the key destinations for Gulf banks seeking to raise capital. These markets provided deep liquidity, investor familiarity and established frameworks for issuing debt. However, the geopolitical and financial dynamics that once characterized this east-to-west flow of capital are rapidly changing. Today, Gulf banks are increasingly looking toward markets like Singapore, Hong Kong and Taipei as viable alternatives for capital raising. Instruments such as private placements, Formosa bonds and growing interest in Panda bonds are creating new pathways to Asia's capital markets.
Central to this shift is China's Belt and Road Initiative, which aims to connect China to Asia, Africa and Europe through vast infrastructure investments. As key trade partners in oil and energy, Middle Eastern countries are increasingly engaging with China, seeking opportunities in infrastructure, finance and technology.
Energy, more than any other sector, has become the most visible gateway for global investors into the Middle East.
Zaid M. Belbagi
This pivot toward Asia is also evident in the growing diplomatic and financial exchanges between the Gulf and the East. For instance, high-profile visits by Hong Kong officials to Saudi Arabia, including the launch of a $1.2 billion Shariah-compliant exchange-traded fund tracking Hong Kong-listed companies, shows Asia's rising efforts to court Gulf wealth.
Adding to this are the increasing investment flows between the Gulf and Asia, with Saudi Arabia's Public Investment Fund alone allocating $6.6 billion to the region between 2022 and 2024. Gulf funds, such as the Abu Dhabi Investment Authority, Mubadala Investment Company and the Qatar Investment Authority, are also significantly increasing their investments in Asia.
These trends are unfolding against a backdrop of shifting global alliances. With the UAE now a member of the BRICS grouping and Saudi Arabia having been invited to join, Gulf states are clearly signaling their commitment to a more multipolar investment strategy.
Energy, more than any other sector, has become the most visible gateway for global investors into the Middle East. The high-voltage direct current 'Project Lightning,' a major initiative to power ADNOC's offshore oil operations in the UAE with electricity instead of gas, has secured $1.2 billion in committed financing, led by the Japan Bank for International Cooperation and co-financed by Korea Eximbank, the Sumitomo Mitsui Banking Corporation and Mizuho Bank. This export credit agency-backed structure, contracted by Abu Dhabi, offers both risk visibility and replicability, setting a benchmark for large-scale oil and gas decarbonization projects across the region.
In Saudi Arabia, NEOM Green Hydrogen Company closed an $8.4 billion investment package, including $6.1 billion in nonrecourse debt from 23 local and international lenders. Asian banks played a prominent role in the financing syndicate, helping secure competitive terms.
With fewer investment opportunities in Asia-Pacific, the Gulf offers a much-needed avenue for growth and diversification.
Zaid M. Belbagi
The surge in credit contracted by Gulf operators from Asia-Pacific lenders over the past year reflects the attractive terms and diverse financing options that Asian banks can provide. Central to this financing are institutions such as the Japan Bank for International Cooperation and Nippon Export and Investment Insurance, which play a crucial role in both funding and risk mitigation. These institutions provide more than just capital; they assume much of the risk, particularly during the sensitive construction and early operation phases, by providing direct loans, insurance and guarantees.
A notable example is the Warsan waste-to-energy project in Dubai, for which the Japan Bank for International Cooperation committed about $452 million in direct financing, while Nippon Export and Investment Insurance offered loan insurance covering $380 million of the commercial bank debt. By shouldering a significant share of the risk, these institutions have made it possible to move forward with large infrastructure projects.
Asian banks also often provide a complete financing package that includes, alongside capital, critical equipment and engineering, procurement and construction services from Asian companies. This package approach is common in sectors like energy and infrastructure, where specialized technologies are essential. However, this approach creates a strong dependency on the Asian suppliers throughout the project's life cycle.
For Asian investors, the Middle East has become an increasingly attractive destination for infrastructure and new energy projects. With fewer investment opportunities in Asia-Pacific, excluding Japan, and a 30 percent drop in syndicated loans in hard currencies, the region offers a much-needed avenue for growth and diversification.
In this context, the growing footprint of Asia-Pacific megabanks in the Middle East reflects a deliberate shift in both financial strategy and geopolitical alignment. Alongside financial engagements, there has been a rise in the deployment of Chinese private military companies to safeguard energy and trade routes, critical not only for China but also for Japan and Korea. The broader picture is clear: Gulf investors are increasingly turning to Asia as a key part of their diversification strategy, reducing their dependence on the West.