The Emerging Contours of Saudi-Emirati Competition in Southeast Asia

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The Emerging Contours of Saudi-Emirati Competition in Southeast Asia

The two gulf states’ growing diplomatic and economic outreach to the region is beginning to develop a competitive dynamic.

The Emerging Contours of Saudi-Emirati Competition in Southeast Asia

United Arab Emirates President Sheikh Mohammed bin Zayed Al-Nahyan, right, and Indonesian Minister of Maritime and Investment Affairs Luhut Binsar Panjaitan, watch Balinese dancers perform upon arrival at Ngurah Rai International Airport ahead of the G20 Summit in Bali, Indonesia, Nov. 14, 2022.

Credit: Ajeng Dinar Ulfiana/Pool Photo via AP

Early last month, Sheikh Mohamed bin Zayed, the president of the United Arab Emirates (UAE), met with Vietnam’s Vice President Vo Thi Anh Xuan in Abu Dhabi. The meeting was ostensibly for discussions on the upcoming COP28 Summit, which will be held in the UAE later this year, but the high-level visit comes on the heels of a newly inked bilateral agreement between the two nations that launched bilateral negotiations towards a Comprehensive Economic Partnership Agreement. If signed, the agreement would become the fourth such agreement that the UAE has established in South and Southeast Asia over the last few years, following similar agreements with Indonesia, India, and Cambodia.

At the same time, officials from Saudi Arabia have held separate bilateral meetings with their Thai, Filipino, and Indonesian counterparts over the past month, aimed at enhancing relations and expanding opportunities for wider economic engagement.

Taken together, these developments suggest that the growing Saudi-UAE strategic competition is beginning to spill over into Southeast Asia, driven by their heated competition to attract foreign investment, with both nations trading salvos of tax incentives and tariff exemptions for foreign companies in a bid to make themselves more attractive to regional and multinational corporations.

Both Saudi Arabia and the UAE are undergoing massive economic and social transformations as a part of their respective 2030 domestic reform programs. While these initiatives and reforms are mostly inward-looking, the implications of such immense changes have inherently regional consequences, pitting Saudi Arabia and the UAE against one another for economic standing in the future Middle East.

The “intense competition” between Saudi Arabia and the UAE to attract foreign investments “has reached the point where they have begun enacting laws that contravene their common GCC orientation,” Hudhaifa Ebrahim of The Jerusalem Post wrote recently, referring to the Gulf Cooperation Council, of which both nations are members.

As mentioned above, this competition has now extended to Southeast Asia. After emerging from the COVID-19 pandemic, Saudi and Emirati officials launched fast-paced campaigns to increase their diplomatic presence across the region. Among the most prominent examples were Saudi Arabia’s normalization of relations with Thailand after a 30-year freeze and its efforts to establish deeper economic connections with the region’s growing economies – a welcome, if overdue, development for many Southeast Asian states.

Gulf-Southeast Asian Ties at the Turn of the Millennium

While Southeast Asia and the Gulf states have a long history of economic and religious engagement, the dynamics of their contemporary political relations have fluctuated, from the one-way engagement of the Gulf states in the 1980s to the early overtures in establishing foundational multilateral relations that characterized the early part of the 2000s.

Following the 1979 Islamic Revolution in Iran, Indonesia and Malaysia became battlegrounds for the radical ideologies disseminated by Riyadh and Tehran, as Krithika Varagur wrote in her recent book “The Call: Inside the Global Saudi Religious Project.” Varagur’s research unpacks the enormous campaigns undertaken by Saudi Arabia, Iran, and other Gulf states to disseminate literature, fund religious scholarships, and build mosques for the sake of expanding their political influence across the archipelago. Indonesia was especially vulnerable to the acceleration of ideological competition, having hosted neo-Wahhabi elements since at least the 1960s, according to Michael Vatikiotis.

The early 2000s ostensibly marked an opening for more positive transregional engagement between the Gulf and Asia writ large, when the U.S. invasion of Iraq and changing dynamics in oil consumption pushed Gulf states to diversify their strategic partnerships away from the West. Even then, however, this engagement remained relatively tepid in the eyes of Southeast Asian leaders.

Following the ascension of King Abdullah bin Abdulaziz Al Saud to the throne of Saudi Arabia in August 2005, Saudi Arabia launched a new “Look East” policy, with rapprochement with India and China as the opening salvo of this new campaign. However, this policy mostly targeted Asia’s largest economies, skipping over Southeast Asia. In 2005, GCC exports to the 10 member states of the Association of Southeast Asian Nations (ASEAN) totaled just $39.9 billion, according to Chatham House, and rose to $76 billion in 2008. In comparison, GCC exports to India and China jumped from $23.6 billion in 2005 to $107.1 billion in 2008. While GCC-ASEAN trade was quite healthy in per capita terms, the growth of GCC trade with India and China relative to ASEAN figures has left Southeast Asia’s leaders befuddled.

This trend of underwhelming investment in Southeast Asia would continue following the ascension in 2017 of King Salman bin Abdulaziz Al Saud, whose month-long tour of Asia, designed to court investments from the fastest growing importers of Saudi oil, was mired in controversy in both Malaysia and Indonesia. The King’s visit to Kuala Lumpur was overshadowed by the ongoing 1MDB scandal, and optimistic expectations in Indonesia, whose leadership hoped to garner $25 billion in Saudi investments, but were left with an announcement of only $6.71 billion. According to The Jakarta Post, President Joko Widodo complained openly to the press about the snub: “I even held an umbrella for the king,” he was quoted as saying, “I’m a little bit disappointed, just a little.”

After COVID-19: Gulf States and the Race Across Southeast Asia

Despite a series of disappointments during 2000-2017, the economic trade winds began to shift in Southeast Asia’s favor shortly thereafter. Where previous incentives for Gulf Arab powers focused Riyadh and Abu Dhabi’s attention on Asia’s largest economies, two factors have opened the doors for expanded economic and strategic engagement between the Gulf and Southeast Asia: the threat of peak oil, which has driven Saudi Arabia especially to undertake massive reform, and growing global pressures on Gulf Arab states to diversify their strategic alliances. If Crown Prince Mohammed bin Salman, commonly known as MBS, is determined to succeed in breaking his kingdom free of the oil curse, he not only needs to maximize its economic potential at home, but also in Saudi Arabia’s engagement with markets abroad. The two issues that undermine this goal are regional instability across the Persian Gulf, and the prolongation of unnecessary international disputes.

Following the easing of the COVID-19 pandemic in early 2021, Saudi Arabia and the UAE did just that. They moved to immediately end their blockade of Qatar, and enacted other strategic policies designed to lower the regional temperature, including embracing détente with Iran and welcoming Syria back into the Arab fold. In Southeast Asia, Saudi leaders buried the hatchet with Thailand after a 30-year freeze, part of an effort to end international disputes that undercut its economic potential abroad.

In this context, strategic transregional engagement accelerated. During 2019-2022, Saudi officials held at least nine high-level engagements with their Southeast Asian counterparts, in addition to the G-20 Riyadh Summit, held virtually in 2020, the G-20 Summit in Bali in 2022, and the 2022 APEC Summit in Thailand, which MBS attended as a guest of Bangkok. From the middle of 2022 into early 2023, Saudi officials also participated in the second Saudi-Singaporean Joint Committee Meeting, hosted Malaysia’s Foreign Minister Zambry Abd Kadir for talks on the formation of a Saudi Arabia-Malaysia Coordination Council, held talks with Brunei’s Sultan Haji Hassanal Bolkiah on the sidelines of the APEC Forum Summit, reviewed bilateral relations between Saudi Arabia and the Maldives, and held talks with the president of Palau, Surangel Whipps Jr.

Not to be outdone, the UAE fought to build on its economic advantages in the region by expanding free trade agreements. In 2022, the UAE inked a Comprehensive Economic Partnership Agreement (CEPA) with Indonesia, the first-ever agreement of its type between Indonesia and a Gulf Arab nation, which built on a wider GCC-Singapore Free Trade Agreement signed in 2008. On June 8 of this year, the Emirati Minister of State for Foreign Trade Thani bin Ahmed Al Zeyoudi and Cambodia’s Minister of Commerce Pan Sorasak signed the latest CEPA, bringing Abu Dhabi’s total number of bilateral trade agreements to five. More than 10 more are under negotiation, and talks with Malaysia, Thailand, and Vietnam have kicked off in the last four months.

This renewed outreach doesn’t just involve Saudi Arabia and the UAE thickening their diplomatic ties across Southeast Asia, but also on expanding regional economic integration along a variety of avenues, including in energy cooperation, the expansion of digital infrastructure, defense industry cooperation, and expanded investment opportunities.

Competition: Fact or Fiction?

While some analysts may argue that accelerated campaigns to expand a nation’s strategic footprint in Southeast Asia are not inherently competitive, a more rigorous analysis of the tools and approaches employed by Riyadh and Abu Dhabi shows the early contours of emerging strategic competition.

Dr. Jonathan Fulton, assistant professor of political science at Zayed University in Abu Dhabi and a senior non-resident fellow at The Atlantic Council, said that competition was “a valid description” of the current dynamic.  “The UAE has a reputation for drawing in a lot of FDI, a lot of tourism, a lot of business in finance and logistics, and until recently the Kingdom didn’t seem to be seriously engaged in those areas.  With [Saudi Vision 2030] that has changed, and they are stepping up their game.”

He added, “You can see an action-reaction dynamic between the two, and for international companies, expat citizens, and investors it is positive – more choice is always good.”

Riyadh’s outreach from 2017-2023 prioritized bilateral engagements over participation in multilateral forums, unless those forums benefited the Kingdom advance its local economic standing or increased its global reputation. For instance, the Saudi-based Digital Cooperation Organization, a supposedly multinational body that now boasts observer status at the United Nations, was founded in 2020 “to promote common interest, advocate for advanced cooperation, build regulatory framework and business environments, and ensure the inclusive and trustworthy nature of the digital economy at local, regional, and global levels,” according to Nada Alturki. While Saudi Arabia invited Indonesia to become a founding member, as of 2023 the UAE was not a member, despite its strengths in the digital sphere.

The UAE also sought to forego the type of cooperative policies with Saudi Arabia that it adopted in the wake of the Arab Spring and instead chose to prioritize unilateral outreach or engagement in multilateral organizations that upped its standing in transregional forums.

Capitalizing on its economic advantage over Saudi Arabia, Abu Dhabi prioritized the signing of bilateral economic agreements with states like Indonesia and Singapore, while initiating negotiations with the Philippines, Cambodia, Vietnam, and Thailand. Emirati leaders also joined, or expanded their engagement with, numerous multilateral forums such as the I2U2 Group, the Indian Ocean Rim Association, APEC, and the pan-Asian Asia Cooperation Dialogue forum.

Neither the UAE nor Saudi Arabia sought to expand its defense cooperation with ASEAN states except in the case of the Indonesian and Malaysian defense industries, but both states did leverage increasing levels of foreign direct investment into targeted economic sectors that are deemed “win-win,” such as energy, digitalization, healthcare, tourism, and artificial intelligence.

The positive news for Southeast Asian leaders is that while Gulf Arab competition across the region is accelerating, it is neither destructive nor zero-sum, and is likely to remain that way so long as the wider Saudi-Emirati relationship remains amiable. Indeed, officials across ASEAN should seize this opportunity to exploit Gulf states’ interest in expanded economic engagement, and use this leverage to shape future outreach in line with their own interests.

Disclaimer: The views/statements of fact, opinion, or analysis expressed in this article are strictly my own and do not reflect the official policy or position of the U.S. Air Force, Department of Defense (DoD), or the U.S. Government.  Review of the material does not imply DoD or U.S. Government endorsement of facts, accuracy or opinion.