Gulf nations betting big on India

There was a time in the not-so-distant past when Arabs from the Gulf would come to Mumbai just to watch the monsoon rain pelting down. They’ve come a long way since then. Oman, one of the smaller kingdoms, has just opened a giant snow park, the third and biggest in West Asia. Here, locals who want a break from the desert climate can frolic in the snow and even gaze at fake Alpine chalets.

After decades of comfortably high oil prices, it’s no exaggeration to say the Gulf nations have altered beyond recognition, using their wealth for a mega-construction spree they’re betting will turn them into a global magnet. They’re also flush with investment cash. The Abu Dhabi Investment Authority has an estimated $853 billion under management, the Saudis nearly $700 billion and the Kuwait Investment Authority $800 billion. Then, there are the Qataris who’ve assembled an eye-popping portfolio and have $475 billion to deploy.

Spreading wings

India has always been a source of manpower in the Gulf which is host to nearly nine million of our nationals who account for 65 per cent of the country’s remittances. Qatar, where eight of our naval personnel are facing execution, a story that’s unfolding, has 700,000 Indians. Now, reflecting partly a desire to diversify from traditional European and North American investment destinations, the kingdoms are finally waking up to the idea India might be a worthwhile place to put their money.

There’s talk of the UAE funnelling up to $50 billion into India that might include taking stakes in big infrastructure projects and state-owned assets. Continuing their sports run, the Saudis who will be hosting the 2029 Asian winter games despite being a desert country, are looking at pouring $5 billion into the IPL even though they’ve little idea about the game’s finer points or what makes Virat Kohli a great batsman. They’re also mulling other investments potentially in the $50-100 billion range and may open an office here with a mandate to invest in start-ups. Also, while direct investment has been modest, it’s important to recall the Gulf accounts for nearly 15 per cent of India’s global trade and we’ve started talks on a free-trade pact with the Gulf Cooperation Council which could boost future commerce.

The UAE, Saudi Arabia and the other smaller Gulf emirates have long had the goal of transforming themselves into states that don’t rely solely on oil and natural gas and it looks like they’re close to achieving that aim. The Middle East has already transformed itself into a globally well-connected airline hub though its carriers are still heavily dependent on India which supplies 30 per cent of their passengers. Dubai is establishing a new position in the oil trade also. Ever since the Russian oil sanctions, the Financial Times reckons over 12,000 oil tankers have docked at or around Fujairah. Huge urban infrastructure is also being built. Dubai South will be a city with a 1-million population.

In Saudi Arabia, an extraordinary conglomeration of four futuristic cities, is planned with the ‘Line City’. The first, Neom, expected to welcome residents by 2030, is envisaged as a city where everything will be just a hop away and cars won’t be needed.

The Gulf states are also conscious of a need for cultural facilities. The daringly modernistic Louvre Abu Dhabi is the first of a trifecta of world-class museums to open on Saadiyat Island. Building railway lines in the desert, meanwhile, can be a costly proposition. But that’s precisely what Abu Dhabi’s Etihad Rail is doing. It has already linked the 200 km between Dubai and Abu Dhabi for freight and will soon carry passengers too.

The rail links could also play a key role if ever the India-Middle East-EU trade corridor comes into being. By around 2030, Etihad aims to link up all the seven Gulf states and also neighbouring kingdoms.

What does all this mean for India? For one thing, it demonstrates that small states can become hugely rich, and that, in turn can enable them to wield power out of all proportion to their size. But the Middle East is still a notoriously unstable region which has witnessed one conflict after another in recent decades. Kuwait had to work hard to rebuild its wealth in the wake of the Saddam Hussain-led Iraqi invasion. For now, we don’t know what may be the devastating consequences of the Gaza war. Suffice to say the Gulf can only build a formidable 21st-century future, and make big-ticket Indian investments, if there’s a firm foundation of peace.