Hello from Riyadh: Strategic opportunities in the Middle East
Daniel Shin
The Middle East presents a land of opportunities. The region used to hold a large portion of the world's proven oil and natural gas reserves, creating economic opportunities for extraction, refining and related industries. Some Middle Eastern countries like the United Arab Emirates (UAE) and Saudi Arabia are actively diversifying their economies, creating opportunities in sectors like tourism, finance and technology.
The two nations have forged significant cultural ties with Korea. People in the Gulf Cooperation Council (GCC) do know that Korea is home to great electronic devices, but now it is more than that. They believe in Korea's influential role in the world, and appreciate and respect what Korea as a nation has gone through for major economic reforms and development plans.
Korean culture fits well into mainstream Arab societies. Cultural factors play an important role in the Arab world, as Arabs and Koreans stand upon the common ground of social habits and customs such as family bonds, friendship and altruism. The regional obsession with Korea goes beyond fandom, which creates a huge demand for K-beauty and even K-fashion.
Both the UAE and Saudi Arabia's retail sectors are poised for continued growth despite economic uncertainties in global markets. Saudi Arabia's retail sector is poised to become a cornerstone of the region's broader economic transformation as the UAE has proved to be. With a population of over 37 million and a growing middle class, the demand for retail has been on the rise. Saudi Arabia's Vision 2030 program is creating new opportunities for the future of both global and local retailers in the country. High retail staff turnover and value-added tax create challenges, but Saudi Arabia is willing to change this.
The UAE retail sector is expected to experience steady growth, with a projected compound annual growth rate of around 5.7 percent. This indicates a thriving and diverse retail market in the UAE, establishing it as a regional hub for shopping and commerce. Dubai Mall alone received 111 million visitors in 2024. Dubai and Abu Dhabi are considered major hubs for new riches thanks to low tax rates, favorable regulatory environments and luxurious lifestyles. It is no surprise that Dubai has become home to 72,500 people with at least $1 million or more, making it one of the wealthiest cities in the world.
While Saudi Arabia and the UAE compete to be the new regional economic leader, Korea can be a very special strategic partner to both nations. Yet, the UAE stands as the forerunner and sole Middle Eastern nation to have a strategic partnership with Korea, joining a very select group of countries. Korea and the UAE signed a bilateral comprehensive economic partnership agreement in May 2024.
The Kingdom of Saudi Arabia and the Republic of Korea have also maintained a long-standing relationship that spans over 60 years. There are a lot of things happening behind the scenes beyond the traditional sectors of construction and petrochemicals. Korea has also expanded its presence in Saudi Arabian technology and its defense sectors.
Naver Corp., the nation’s top internet company, has taken a significant step toward contributing to establishing smart cities in Saudi Arabia. A Korean-owned German luxury brand, MCM, has also recently opened its door at Solitaire, Riyadh's newest luxury lifestyle destination. Saudi Arabia’s Crown Prince Mohammed bin Salman's Vision 2030, an effort to reduce the country's reliance on oil, would open up new opportunities for Korea.
Soft power is a great way to build positive international relationships. It helps attract and persuade others through cultural exchange, diplomacy and positive perceptions, essentially by gaining goodwill and cooperation through appealing values and actions instead of threats or hard-boiled power plays. Korea's soft power serves as an important component in maintaining its economic ties and delicate political relations in the Middle East.
Soft power is also a powerful driver of economic growth as well. Joseph Nye, an American political scientist and Clinton-era authority, said that the development of adequate soft power capabilities can take a long time for a country, making soft power even more difficult to achieve.
Korea has great momentum for that. The GCC boasts one of the youngest and fastest-growing populations in the world, which is expected to reach approximately 580 million people by 2030, coupled with high spending power. Hence, Korea should not ruin this tandem.
Daniel Shin is a venture capitalist and senior luxury fashion executive, overseeing corporate development at MCM, a German luxury brand. He also teaches at Korea University.