Menu

Magazine Articles

Gq2Q27PWUAEpmq_-scaled

Gulf and United States Ties in 2025 Focus on Defense and AI

BY DR SOHA MAAD

Introduction

This article sheds light on 2025 Gulf and United states ties. The article overviews the Gulf United States Summit and Saudi United States investment forum held in 2025. The article assesses the global impact of the new 2025 Gulf United States ties, with particular focus on fostering Artificial Intelligence and defense. The article concludes with a proposed future research agenda and a roadmap for Arab banks to shape their future strategies in light of the global impact of the 2025 Gulf and United States ties.

The Gulf United States Summit

The 2025 Gulf United States (Gulf-US) Summit took place in Riyadh on 14 May 2025, bringing together leaders from the Gulf Cooperation Council (GCC) and the United States to discuss key regional and global issues. The summit focused on economic cooperation, security partnerships, and diplomatic strategies to strengthen ties between the Gulf nations and the US Leaders emphasized the importance of de-escalation in the Middle East, particularly in relation to the ongoing conflict in Gaza and broader regional. The US announced the lifting of sanctions on Syria, aiming to support economic recovery. Discussions focused on strengthening trade and investment ties between the Gulf Cooperation Council (GCC) and the US, with bilateral trade exceeding $180 billion in 20242.

The Saudi United States Investment Forum 2025

The Saudi United States (Saudi-US) Investment Forum 2025 took place in Riyadh on 13 May 2025, just before the Gulf-US Summit. The forum brought together major investors from Saudi Arabia and the United States to strengthen economic ties and explore new investment opportunities. The forum emphasized collaboration in clean energy, Artificial Intelligence AI, advanced manufacturing, finance, and health. Saudi Arabia reaffirmed its commitment to investing $600 billion in the US over the next four years, with President Trump pushing for an increase to $1 trillion. Several deals were signed to expand joint ventures, procure American goods, and integrate the Saudi and US economies. Discussions focused on securing global energy markets while driving the transition to renewables. Saudi Arabia and the US are advancing artificial intelligence, cloud infrastructure, cybersecurity, and quantum computing.

United States Saudi Relations

The US Saudi Investment Forum 2025 plays a crucial role in shaping the broader economic and strategic relationship between the two nations. This forum reinforces the deep financial interdependence between the US and Saudi Arabia. The agreements signed at the event ensure a steady flow of investment into infrastructure, energy, and technology, keeping both economies linked.

Saudi Arabia, under its Vision 2030 initiative, is diversifying beyond oil. By investing heavily in AI, quantum computing, cybersecurity, and green energy, the kingdom is deepening its cooperation with American tech giants and financial institutions.

With ongoing global conflicts and economic fluctuations, this forum serves as a stabilizer. The $600 billion Saudi investment pledge in the US provides confidence to markets, while American companies gain access to expanding sectors in Saudi Arabia.

While primarily economic, the forum also carries strategic weight aligning with US geopolitical priorities in the Middle East. Stronger financial bonds reinforce political ties, impacting US policies on regional security, defense collaborations, and energy markets.

By hosting top US financial leaders, Saudi Arabia is cementing Riyadh’s status as a global economic hub attracting Western investors beyond traditional oil deals and showcasing its ambitions to become a center for finance and innovation.

Key Agreements

The Saudi-US Investment Forum 2025 resulted in several major agreements aimed at strengthening economic and technological collaboration between the two nations:

  • $1 Trillion Economic Corridor by 2030: Saudi Arabia and the US outlined a roadmap for a $1 trillion investment corridor, with $300 billion in immediate deals signed during the forum.
  • AI & Technology Partnerships: Nvidia agreed to supply 18,000 AI chips to Saudi Arabia, supporting a 500-megawatt data center in collaboration with Saudi company Humane.
  • Google, Oracle, Salesforce, AMD, Uber, and Datavolt collectively committed $80 billion to joint ventures in AI and technology.
  • Elon Musk announced Saudi Arabia’s entry into the Starlink network for maritime and aviation connectivity.
  • Energy & Sustainability Deals: Saudi Arabia reaffirmed its commitment to investing $600 billion in the US over the next four years, with President Trump pushing for an increase to $1 trillion.

Agreements were signed to expand joint ventures in renewable energy and secure global energy markets.

  • Autonomous Vehicles & Smart Infrastructure: Uber confirmed that self-driving vehicles will debut in Saudi Arabia by the end of 2025 through partnerships with Aurora and Waymo. Saudi Arabia aims to become a global leader in AI development, focusing on data privacy, algorithmic bias, and ethical AI use.
  • Defense & Aerospace Investments: The US and Saudi Arabia signed agreements to enhance defense cooperation, including investments in aerospace and cybersecurity.

These agreements reflect the deepening economic and strategic ties between Saudi Arabia and the US, reinforcing their partnership across multiple sectors.

Impact on Global Tech Markets

The agreements signed will have a major impact on global tech markets by accelerating innovation, reshaping industry dynamics, and creating new opportunities for collaboration. With Nvidia supplying 18,000 AI chips for Saudi Arabia’s new data center, this deal strengthens AI infrastructure, increasing competition with China and the US in artificial intelligence development. The partnerships with Google, AMD, and Oracle signal rapid advancements in cloud computing and cybersecurity. Saudi Arabia’s $80 billion investment in AI and tech will drive breakthroughs in quantum computing, helping the region become a data hub for secure, high-speed processing. This could challenge existing cloud markets dominated by US and European firms. With Uber, Aurora, and Waymo launching autonomous vehicles in Saudi Arabia, the Middle East is becoming an early adopter of self-driving tech, which will fuel investment in smart infrastructure, AI-driven traffic systems, and electrification worldwide. New defense and aerospace agreements could alter cybersecurity dynamics, driving innovation in AI-powered threat detection, secure communications, and cyber warfare tools, potentially influencing how nations invest in digital security. These deals position Saudi Arabia as a global AI and tech powerhouse, increasing economic competition with China’s AI market and Europe’s sustainability-driven innovations.

These shifts will ripple across industries, affecting investment strategies, government policies, and global supply chains.

Focus on Defense

The US Saudi Investment Forum 2025 placed a strong emphasis on defense and aerospace collaboration, reinforcing the strategic partnership between the two nations.

Saudi Arabia and the US signed a historic $142 billion defense deal, covering advanced air force capabilities, missile defense systems, maritime security, border protection, and cybersecurity upgrades. Saudi Arabia committed $5 billion to the New Era Aerospace and Defense Technology Fund, supporting joint ventures with Lockheed Martin, Boeing, Raytheon, and Northrop Grumman. The US will provide next-generation fighter jets, drones, and missile defense systems to Saudi Arabia, enhancing regional security.

Saudi Arabia is investing in AI-driven threat detection and autonomous defense technologies, collaborating with Palantir and IBM. The forum highlighted cyber warfare preparedness, with Saudi Arabia and the US agreeing to joint cybersecurity training programs.

The defense agreements align with broader US efforts to counter regional threats, including missile proliferation and maritime security challenges. Saudi Arabia’s border security modernization will integrate AI surveillance and drone-based monitoring.

These agreements reflect the deepening military and technological cooperation between the US and Saudi Arabia, reinforcing their shared security interests.

Impact on Global Defense Markets

The defense agreements from the US Saudi Investment Forum 2025 will have significant ripple effects on global defense markets, influencing military spending, technological advancements, and geopolitical alliances.

The $142 billion US Saudi defense package will likely push other nations to increase military budgets, especially in Europe and Asia, as they seek to maintain strategic balance. Saudi Arabia’s investment in AI-powered defense systems, including autonomous drones, cybersecurity, and predictive threat analysis, will drive global competition in AI warfare, forcing other nations to fast-track AI integration into military operations. Major US defense contractors like Lockheed Martin, Boeing, Raytheon, and Northrop Grumman will see record-breaking revenues, reinforcing America’s position as the leading global arms supplier. Saudi Arabia’s next-generation fighter jets and missile defense systems will reshape regional security, potentially influencing Iran’s military strategy and Gulf defense alliances. With Saudi Arabia and the US prioritizing cyber warfare preparedness, global defense markets will expand cybersecurity budgets, leading to new AI-driven security solutions.

These developments will redefine military strategies worldwide, influencing defense policies, arms trade, and technological innovation.

Impact on Defense Sector in Saudi Arabia

The 2025 Gulf–US Summit and the US Saudi Investment Forum 2025 significantly impact Saudi Arabia’s defense sector by strengthening military cooperation, advancing technological capabilities, and reshaping regional security dynamics.

Saudi Arabia secured a historic $142 billion defense deal with the US, covering advanced fighter jets, missile defense systems, cybersecurity, and AI-driven military technology1. This agreement enhances Saudi Arabia’s military capabilities and reinforces its position as a key US ally in the region.

The forum emphasized AI-powered defense systems, with Saudi Arabia investing in autonomous drones, predictive threat analysis, and cyber warfare preparedness2. Collaborations with Palantir and IBM will strengthen Saudi Arabia’s cybersecurity infrastructure, making it more resilient against cyber threats.

Saudi Arabia’s acquisition of next-generation fighter jets and missile defense systems will reshape Gulf security dynamics, potentially influencing Iran’s military strategy and regional defense alliances3. The agreements align with broader US efforts to counter regional threats and maintain stability.

The summit and forum also focused on expanding Saudi Arabia’s domestic defense industry, with investments in aerospace, military technology, and AI-driven surveillance systems. This supports Saudi Arabia’s Vision 2030 goal of reducing reliance on foreign arms imports.

Saudi Arabia and the US agreed to joint cybersecurity training programs, ensuring military personnel are equipped to handle cyber threats. This move strengthens Saudi Arabia’s ability to defend against cyberattacks and digital espionage.

These developments position Saudi Arabia as a regional defense powerhouse, reinforcing its military capabilities while deepening its strategic partnership with the US.

Impact on Defense Sector In Lebanon

The 2025 Gulf-US Summit and the US Saudi Investment Forum 2025 have indirect but notable implications for Lebanon’s defense sector, particularly in terms of regional security dynamics, US policy shifts, and military funding.

During the summit, the US advocated for a more sovereign and economically stable Lebanon. This could lead to increased US military aid to the Lebanese Armed Forces (LAF) to strengthen state security institutions. With Saudi Arabia and the UAE securing major defense agreements, Lebanon may face new security challenges as Gulf nations enhance their military capabilities. This could impact Lebanon’s border security and maritime defense, especially concerning regional conflicts. The forum’s focus on AI-driven cybersecurity may lead to expanded intelligence-sharing agreements between the US and Lebanon, helping Lebanese security forces combat cyber threats and digital espionage. The US has historically provided military assistance to Lebanon, but shifting priorities toward Gulf defense investments could affect future aid allocations. Lebanon may need to strengthen diplomatic ties to secure continued US support.

While Gulf nations are expanding their defense industries, Lebanon’s economic crisis limits its ability to modernize its military. However, regional stability efforts from the summit could indirectly benefit Lebanon by reducing external security threats.

Future Research Agenda and Roadmap for Arab Banks

The 2025 Gulf-US Summit and the US Saudi Investment Forum 2025 have set the stage for several key areas of future research, including:

  • Geopolitical and Security Implications
  • Economic and Investment Trends
  • Energy and Sustainability
  • AI and Technology Advancements
  • Regional Political Dynamics

The 2025 Gulf-US Summit and the US Saudi Investment Forum 2025 will induce significant shifts in banking strategies, particularly in investment, digital transformation, and financial cooperation between Gulf nations and the US

Banks will need to increase cross-border investments, with Gulf sovereign wealth funds mobilizing capital into US infrastructure, AI, and clean energy projects. This aligns with Saudi Arabia’s $600 billion investment commitment in the US.

The forum emphasized fintech expansion, with banks focusing on AI-driven financial services, blockchain-based transactions, and digital payment systems. Gulf banks are expected to accelerate partnerships with US fintech firms to enhance financial accessibility and security.

With Saudi Arabia and the US prioritizing renewable energy and critical minerals, banks will likely increase funding for green projects, supporting solar, hydrogen, and carbon-neutral initiatives.

Banks should strengthen cybersecurity measures, integrating AI-powered fraud detection and risk management systems to protect financial transactions. The summit’s focus on cyber warfare preparedness will influence banking security strategies.

Major Gulf banks are expected to open new branches in the US, leveraging the $1 trillion economic corridor to facilitate trade financing, investment banking, and wealth management services.

These strategies will reshape financial markets, driving innovation and deeper economic integration between the Gulf and the US.

19

More Than a Hotel: The Phoenicia Standard in Shaping Hospitality Excellence and Inspiring National Confidence

An exclusive interview with Mr. Mathieu Greppo, General Manager of InterContinental Phoenicia Beirut, on leading with vision, delivering value, and reinforcing resilience amid Lebanon’s economic revival.

Editorial Introduction

In a region where hospitality is not merely a service but a reflection of national identity, few institutions hold the emblematic power of the InterContinental Phoenicia Beirut. In this exclusive interview, Banking Executive Magazine sits down with Mr. Mathieu Greppo, General Manager of InterContinental Phoenicia Beirut Hotel, to explore how this iconic hotel continues to navigate change while safeguarding its legacy. With insights shaped by a global career and a deep understanding of leadership under pressure, Mr. Greppo offers a compelling view into how Phoenicia has become more than a luxury destination—it is a symbol of resilience, continuity, and Lebanon’s enduring appeal. For decision-makers, investors, and professionals shaping the future of the Arab world, this conversation offers rare perspective on what it means to lead with purpose in a time of transformation.

The Interview

Q: Mr. Greppo, thank you for joining us. Could you begin by telling our readers about your professional journey and the key milestones that shaped your leadership approach in the hospitality sector?

A: Thank you. My hospitality journey began in 1993 in Paris at the InterContinental Le Grand, a landmark property that instilled in me a profound appreciation for excellence in service. Over the decades, I’ve worked across diverse regions, including Russia, Central Asia, Africa, Jordan, and the UAE. These experiences taught me the critical value of adaptability and cultural intelligence. Each destination presented different social and economic environments that enriched my leadership style and shaped how I navigate uncertainty.

Beirut was a particularly meaningful assignment—not only because of the iconic status of the Phoenicia Hotel, but also due to the cultural depth of Lebanon. Phoenicia isn’t just a hotel—it is a living institution. Joining it was a professional and personal privilege, and I saw in it an opportunity to contribute to something much larger than hospitality: a symbol of continuity, optimism, and national pride.

Q: How would you define the spirit or DNA of the Phoenicia Hotel? What makes it stand out in the regional and international hospitality landscape?

A: Phoenicia is undeniably unique. It is a destination in its own right. Guests often refer to it simply as “the Phoenicia,” without needing to mention the brand. That alone reflects its stature.

Established in 1961 and rejuvenated with a $100 million investment in 2000, Phoenicia has witnessed and withstood significant developments. Its presence extends beyond its physical structure—it is woven into the social, cultural, and even economic fabric of Beirut. Many describe it as a benchmark: when Phoenicia is thriving, there’s a sense that the country is on a positive path. This symbolic role comes with responsibilities that we embrace daily.

What truly defines its DNA is a combination of understated luxury, timeless elegance, and a deeply human-centered service philosophy. It’s not about opulence alone, but about how we make people feel. Our people—many of whom have been with us for decades—are the heartbeat of the hotel.

Q: Considering the legacy and high expectations surrounding Phoenicia, how do you balance its historical identity with the need for modernization and competitiveness?

A: That balance is indeed delicate. On one hand, we have loyal guests who’ve known Phoenicia for decades. On the other, we must appeal to younger, tech-savvy travelers with different expectations.

We are preparing to embark on a comprehensive renovation starting February 2026, a process that will span three to four years and encompass all three towers, including the residences and various public spaces. However, we approach this transformation with great care. The essence of Phoenicia—its architectural character, its spirit, its service culture—must be preserved.

We’re updating our design with a focus on authenticity and comfort rather than fleeting trends. It’s about enhancing the guest journey, not overwhelming it with complexity. Similarly, our food and beverage offerings are evolving to reflect new culinary expectations while celebrating our rich tradition. We aim to be more than a hotel—we want to remain a symbol of Beirut’s dynamism.

Q: In the context of technological innovation, how is Phoenicia navigating digital transformation while maintaining its signature personalized service?

A: We adhere to a philosophy I like to call “high-touch over high-tech.” While we do invest in technology, especially in areas like smart TVs, mobile integration, and Wi-Fi infrastructure, we avoid over-automation that may dilute the emotional experience.

Our guests come to Phoenicia expecting intuitive luxury. Many stay for two or three nights—hardly enough time to master overly sophisticated in-room systems. What they appreciate is seamless interaction, not digital complexity. Our renovation will include further tech upgrades, but always in support of, not in replacement for, human connection. Technology must enhance comfort, not overshadow it.

Q: Let’s shift the focus to your team. How do you cultivate a culture of loyalty and excellence among your staff, especially during challenging times?

A: Leadership in hospitality is fundamentally about people. At Phoenicia, nearly 30% of our employees have been with us since the reopening in 2000. That’s a remarkable figure, and it speaks to the sense of belonging and pride our team members feel.

We place significant emphasis on internal culture. When you join Phoenicia, your market value increases—not only because of our reputation, but because of the training, values, and experience we offer. Our staff is often described as an extension of the Phoenicia identity. They bring consistency, depth, and emotional intelligence to every guest interaction.

In a world where service can feel increasingly transactional, our people provide continuity and heart. That’s why even during difficult periods, the quality of our guest experience remains uncompromised.

Q: Phoenicia’s reopening in 2022 was considered a major signal of recovery in Lebanon. Can you elaborate on this?

A: Indeed, reopening Phoenicia sent a message of confidence—not just in hospitality, but in Lebanon’s long-term potential.

At a time when other hotels postponed their return to the market, we chose to reinvest. The decision was strategic. The moment Phoenicia is operational, international event organizers, investors, and diplomatic missions take note. It gives them a sense of stability, a reason to consider Beirut as a viable destination for business or high-level meetings.

Additionally, our large-scale banquet facilities have allowed us to host international summits and events, reinforcing Lebanon’s capacity to engage with the global community. It has a ripple effect: increased hotel bookings, restaurant activity, event planning—all sectors benefit.

Q: As Lebanon continues to reposition itself on the global tourism map, how can hotels like Phoenicia support the country’s economic resilience?

A: Hospitality is not an isolated sector—it’s a multiplier. Every traveler who comes to Lebanon generates value across industries: transport, retail, culture, and of course, banking.

Phoenicia’s operations contribute both directly and indirectly to this ecosystem. Moreover, by staying open during periods of uncertainty, we demonstrate trust and inspire others to do the same. We provide a physical and symbolic anchor in an ever-changing landscape.

However, challenges remain. Air connectivity, infrastructure quality, and accessibility need continued attention. Sustainable recovery requires coordination between the private and public sectors. Hotels can lead by example, but the environment must support this momentum.

Q: What are your views on the current supply-demand balance in Lebanon’s hotel market? And how do you see it evolving?

A: There is a notable gap between supply and demand, particularly in the capital. Beirut today does not have the hotel room availability one would expect of a capital city in the region. This limits the city’s ability to host large delegations or tourism surges.

Beyond luxury properties, it also needs a healthy expansion of mid-range hotels—three and four stars. These cater to a broader demographic and help drive volume-based tourism. The Lebanese diaspora, regional business travelers, and young explorers represent high potential. They need access to quality accommodations that are both affordable and dependable.

As the country stabilizes and visibility improves, I believe we’ll see increased investor interest. But we must align this with better transport access, regulatory facilitation, and incentives.

Q: What regional trends do you foresee influencing the MENA tourism sector over the next three to five years?

A: There’s a visible shift in traveler behavior across the region. Guests are prioritizing authentic experiences over standardized luxury. They want cultural immersion, culinary exploration, and personalized itineraries.

In the Gulf, the emphasis remains on infrastructure-driven tourism—mega-events, theme parks, futuristic resorts. Lebanon’s strength lies in its human capital and organic charm. That’s the competitive edge.

Looking forward, wellness tourism, gastronomy-led travel, and sustainability will shape market expectations. Phoenicia is adapting to this by designing programs and services that celebrate local culture while aligning with global standards.

Q: What message would you like to extend to our readers—executives, investors, and diplomats considering Lebanon as a destination?

A: I would simply say: experience it firsthand.

Lebanon is a country of contrasts, creativity, and resilience. Despite the challenges, it offers rare depth and diversity—from the Mediterranean coastline to the snowcapped mountains, from vibrant city life to serene heritage sites.

At InterContinental Phoenicia Beirut, we are more than a hotel. We are a reflection of the country’s enduring spirit. For investors, Lebanon remains a dynamic opportunity. For travelers, it offers a journey unlike any other.

Do not let external narratives define your impression. Come, see, engage—and you will understand why so many return again and again.

Editorial Conclusion:

As Mr. Greppo eloquently affirms, Phoenicia is not simply a hotel—it is a reflection of Beirut’s spirit: resilient, refined, and relentlessly forward-looking. For leaders in banking, diplomacy, and business, the insights shared here underscore the potential that lies in believing in places and people, even amid uncertainty. Lebanon remains a land of opportunity, and institutions like Phoenicia remind us that when vision meets commitment, legacy and progress can indeed go hand in hand.

UNIDO

Sustainable Industrialization in the Euro-Mediterranean Region as a catalyst for economic transformation, financial inclusion and sustainability

The integration of lower- and middle-income countries (LMICs) into global and regional value and supply chains has significantly contributed to the economic development and poverty reduction of the last 30 years. However, mere integration is insufficient – it matters what countries produce, and how they produce it.

Countries that merely export raw materials and unprocessed commodities have seen slower paths to economic transformation,1 while those that produce and trade higher value-added goods and services – from food products to textiles to complex batteries – have seen more sustained growth rates and higher incomes per capita. UNIDO’s SDG 9 tracker shows that Morocco has almost doubled the share of high-tech manufacturing value added in just 10 years, landing far above the average for middle-income industrializing countries. Côte d’Ivoire has also made significant advances, almost doubling manufacturing value added per capita in the same period. These numbers translate into better jobs, higher wages and faster poverty reduction: Côte d’Ivoire’s extreme poverty rate fell below 10% for the first time in 2022.

At the heart of this transformation lies sustainable industrialization: the process of shifting from low-productivity, informal sectors to higher-value-added manufacturing and services. This shift is essential for long-term development, and it is central to the mandate of the United Nations Industrial Development Organization (UNIDO), which promotes Inclusive and Sustainable Industrial Development (ISID) globally.

Structural Transformation Through Regional Value Chains

Structural transformation is more than a buzzword—it is a development imperative. In many Arab and African economies, the majority of workers are employed in low-productivity sectors, often in informal or subsistence-level jobs. According to the World Bank, fewer than 20% of workers in Africa hold wage-paying jobs, and over 90% of firms are micro-enterprises with fewer than five employees. These firms often lack the scale, technology, and capital to grow.

Sustainable industrialization offers a way out of this trap. By integrating into regional and global manufacturing value chains, countries can move up the ladder of economic complexity. This means not only attracting foreign direct investment (FDI) but also ensuring that local micro, small, and medium-sized enterprises (MSMEs) are included through backward and forward linkages. When MSMEs become suppliers, service providers, or distributors within larger value chains, they gain access to markets, technology, and finance—key ingredients for growth.

Morocco and Egypt: Industrial Success Stories

Some countries in the Mediterranean have already begun to chart this path. Morocco, for instance, has emerged as a regional industrial hub, particularly in the automotive and aerospace sectors. The country’s Industrial Acceleration Plan has focused on building integrated industrial ecosystems, attracting global manufacturers, and linking them with local suppliers. Morocco’s success in renewable energy—especially solar and wind—has also enabled greener industrial growth.

Egypt, too, has made significant progress. The development of the Suez Canal Economic Zone has attracted investment in textiles, chemicals, and food processing. The government has prioritized industrial zones and infrastructure, while also working to integrate MSMEs into formal supply chains. These efforts are helping to diversify the economy and reduce reliance on volatile sectors like tourism and hydrocarbons.

UNIDO’s Role in the Mediterranean Industrial Landscape

UNIDO has been a key partner in supporting these transformations. Across the Mediterranean, the organization has implemented a range of programmes that promote sustainable industrialization, environmental stewardship, and inclusive growth.

One of the flagship initiatives is SwitchMed, a regional programme that supports the transition to circular and resource-efficient economies in eight Southern Mediterranean countries. Through its MED TEST III component, SwitchMed helps SMEs adopt cleaner production techniques, reduce waste, and improve energy efficiency. This not only lowers environmental impact but also enhances competitiveness.

Another important initiative is Creative Mediterranean, which fosters entrepreneurship and job creation in creative industries such as fashion, crafts, and design. Active in countries like Algeria, Egypt, Jordan, Lebanon, Morocco, Palestine, and Tunisia, the programme supports value chain development and market access for creative entrepreneurs.

UNIDO has also supported the development of Eco-Industrial Parks (EIPs) in the region. These parks promote industrial symbiosis, where companies share resources, energy, and infrastructure to reduce costs and environmental impact. EIPs are a practical example of how industrial development can align with sustainability goals.

In Lebanon and other countries, UNIDO’s Enterprise Development and Investment Promotion (EDIP) programme has helped build entrepreneurial ecosystems through linking financial services with non-financial support. EDIP is a package approach that provides capacity building, mentorship, and investment readiness support to MSMEs, linking them with financial institutions and investors. It also contributes to broader financial inclusion efforts, particularly through its integration with the IFETAA programme.

Financial Inclusion: Unlocking Capital for MSMEs

Despite these advances, access to finance remains a major bottleneck for MSMEs across the Mediterranean. According to the International Monetary Fund (IMF), only 20% of firms in Africa and the Arab region have access to a bank loan or line of credit. Interest rates are often prohibitively high averaging 25% in some African countries, compared to 9% in India or Vietnam.

To address this challenge, UNIDO has launched the IFETAA programme—Islamic and Arab Finance for Economic Transformation in Africa, the Arab Region and beyond. IFETAA aims to mobilize Islamic finance to support MSME growth, resilience, and competitiveness. With nearly $4 trillion in Islamic financial assets globally (expected to reach $6 trillion by 2026), there is significant untapped potential to channel this capital into the real economy.

IFETAA works by identifying and screening investment-ready projects, providing technical assistance to improve bankability, and setting up de-risking mechanisms such as guarantees and revolving funds. It also delivers capacity building to Islamic financial institutions and supports policy reforms to improve the enabling environment. The programme is implemented in partnership with the Union of Arab Banks (UAB), the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and other stakeholders.

Importantly, IFETAA is not a standalone initiative. It is closely linked with EDIP and other UNIDO programmes that build the capacity of MSMEs, enhance financial literacy, and promote inclusive entrepreneurship. Together, these efforts aim to create a self-sustaining ecosystem where MSMEs can access the capital, skills, and markets they need to thrive.

The Way Forward: A Shared Industrial Future

The Euro-Mediterranean region stands at a crossroads. On one hand, it faces shared challenges: youth unemployment, climate vulnerability, and economic fragmentation. On the other, it holds immense potential for industrial cooperation, innovation, and inclusive growth.

Sustainable industrialization—anchored in regional integration and inclusive finance—offers a pathway to unlock this potential. But it requires coordinated action. Governments must align industrial and financial policies with sustainability goals. Development partners must invest in infrastructure, skills, and innovation. And financial institutions must expand access to affordable, long-term capital for MSMEs.

CRYTO

Crypto Policy Threat to EU Sovereignty

BY DR SOHA MAAD

Introduction

The rise of cryptocurrencies and United States US-backed stablecoins, has potential impact on the European Union EU’s monetary sovereignty. The United States dollar-denominated stablecoins could challenge the euro’s dominance and financial stability.

In response, the European Central Bank (ECB) is accelerating efforts to develop the digital euro to safeguard Europe’s monetary autonomy by providing a secure, central bank-backed alternative to private and foreign digital payment solutions. The digital euro is envisioned to complement physical cash, enhance financial inclusion, and reduce transaction costs across the eurozone. There is a strategic need for the EU to maintain control over its monetary policy and reduce dependence on external digital payment systems.

This article sheds light on United States US president Trump crypto policy and its wider impact on EU, Arab countries and worldwide. The article also overviews EU crypto regulations and traces a roadmap for the EU and Arab countries to navigate the evolving global crypto landscape.

Trump Crypto Policies            

Donald Trump’s administration has introduced several crypto-related policies that reflect a pro-crypto stance. Key policies include:

  • Strategic Bitcoin Reserve: Trump signed an executive order to establish a reserve of Bitcoin seized through law enforcement proceedings. This reserve is intended to position the US as a leader in digital asset strategy.
  • US Digital Asset Stockpile: Alongside the Bitcoin reserve, a stockpile of other cryptocurrencies was formed, consisting of assets obtained through forfeiture proceedings.
  • Ban on US CBDC: The US administration has explicitly prohibited the development of a US central bank digital currency (CBDC), diverging from global trends.
  • Pro-Crypto Appointments: High-profile appointments signal a commitment to integrating digital assets into the US economy.
  • Regulatory Reforms: The US administration has repealed restrictive regulations, such as the Staff Accounting Bulletin No. 121 (SAB121), to foster a more crypto-friendly environment.

These policies aim to solidify the US position as a global leader in the crypto space.

EU Crypto currencies Regulations

The European Union is implementing the Markets in Crypto-Assets (MiCA) regulation, which establishes a unified framework for cryptocurrency activities across its member states. MiCA addresses several key areas:

  • Transparency and Disclosure: Issuers of crypto-assets must provide detailed information through a “crypto-asset White Paper” to ensure clarity for investors.
  • Authorization and Supervision: Crypto service providers, including exchanges and wallet providers, must obtain licenses and adhere to strict operational standards.
  • Stablecoin Regulation: Issuers of stablecoins are required to maintain sufficient reserves and provide clear disclosures about their backing.
  • Consumer Protection: Robust anti-money laundering (AML) and know-your-customer (KYC) protocols are mandatory to safeguard users.
  • Market Integrity: Measures to prevent insider trading and market manipulation.

MiCA aims to form a secure and transparent ecosystem while promoting innovation in the crypto space.

Impact of Trump Crypto Policy on EU Sovereignty And Economy

US president Donald Trump’s administration crypto-friendly stance, favouring the United States US dollar-backed stablecoins, underscores the geopolitical implications of digital assets in shaping global financial landscapes.

French Central Bank Governor warned that Trump’s pro-crypto stance could lead to financial instability and even a global economic crisis. It will raise geopolitical and economic tensions surrounding cryptocurrency adoption.

EU Strategy In Face of the Challenges

The EU is responding to the challenges posed by Trump’s crypto policies, particularly his endorsement of US dollar-backed stablecoins, by taking the following measures:

  • Accelerating the Digital Euro: The European Central Bank (ECB) is fast-tracking the development of a digital euro to provide a secure, central bank-backed alternative to private or foreign digital currencies.
  • Enforcing the Regulatory Frameworks: The EU has implemented the Markets in Crypto-Assets (MiCA) regulation to ensure transparency, consumer protection, and market integrity in the crypto space.
  • Adopting Strategic Autonomy: The European Stability Mechanism (ESM) emphasizes the importance of maintaining monetary sovereignty and reducing dependence on dollar-denominated stablecoins.

These measures reflect the EU’s commitment to safeguarding its economic and financial stability in the face of evolving global digital asset landscapes.

Latest Developments of Digital Euro

The European Central Bank (ECB) is making significant progress on the digital euro project, aiming to strengthen Europe’s monetary sovereignty and reducing reliance on foreign payment systems. The ECB is currently in a two-year preparation phase, which includes finalizing the digital euro’s rulebook, selecting infrastructure providers, and conducting technical testing. This phase is expected to conclude by October 2025. The digital euro is designed to complement cash, offering a secure and accessible payment solution. It aims to provide the most private digital payment option available, operated through a public-private partnership. The European Commission has proposed draft legislation to grant the digital euro legal tender status, ensuring its widespread acceptance across the euro area.

Trump Crypto Policy Impact on Arab Countries

Many Arab nations rely on the US dollar for trade and financial transactions. Trump’s policies could further entrench dollar dominance through stablecoins, potentially limiting the adoption of local or regional currencies. However, some Gulf countries, like the United Arab Emirates UAE, are exploring their own central bank digital currencies (CBDCs) to maintain financial autonomy and adapt to the evolving digital landscape.

This geopolitical shift highlights the growing influence of digital assets on global financial systems.

Global Impact of Trump Crypto Policy Beyond eu

Trump’s crypto policies had ripple effects globally, beyond the EU. The broader impact involves:

  • Dollar Dominance: Stablecoins pegged to the US dollar reinforce US Dollar global dominance, affecting countries that rely on alternative currencies or are exploring their own digital currencies.
  • Market Volatility: Trump’s policies have contributed to fluctuations in the cryptocurrency market, with significant losses observed during tariff announcements.
  • Trade Relations: Reciprocal tariffs introduced by Trump have indirectly influenced crypto markets, as global trade tensions heighten economic uncertainty.
  • Innovation Push: Some nations, like China and the UAE, are accelerating their digital currency initiatives to counterbalance the influence of US-backed stablecoins.

These developments highlight the interconnectedness of global financial systems and the strategic importance of digital assets in shaping economic landscapes.

Road Ahead For Arab Countries

The Union of Arab Banks suggests the following roadmap for Arab countries to navigate the challenges posed by the evolving global crypto landscape:

  • Regional Collaboration: Gulf Cooperation Council (GCC) countries, including Saudi Arabia, the UAE, and Qatar, should align their policies on cryptocurrencies to form a unified regulatory framework. This would prevent regulatory arbitrage and strengthen their collective financial stability.
  • Central Bank Digital Currencies (CBDCs): Some Arab nations, like the UAE, are exploring their own CBDCs to maintain monetary sovereignty and reduce reliance on foreign digital currencies.
  • Diversification Strategies: Arab countries should develop proactive crypto regulations to attract investments and diversify its economy away from oil dependence.
  • Balancing Risks and Opportunities: Arab countries should remain cautious due to concerns about financial security and compliance with Islamic finance principles.

These steps reflect a mix of caution and innovation as Arab countries adapt to the evolving global crypto landscape.

To address the challenges posed by the evolving global crypto landscape, both the EU and Arab countries should also consider implementing additional regulations tailored to their unique financial landscapes:

The EU should strengthen partnerships with non-EU countries to regulate the global impact of US dollar-backed stablecoins. It should also further accelerate the adoption of the digital euro by incentivizing businesses and consumers to use it over foreign stablecoins.  Introducing stricter rules for foreign stablecoins operating within the EU is also needed to ensure euro sovereignity.

Arab Countries should establish a Gulf-wide regulatory framework to prevent regulatory arbitrage and promote financial stability and develop and promote central bank digital currencies (CBDCs) to reduce reliance on the US dollar and foreign stablecoins. Arab countries should also educate citizens and businesses about the benefits of local digital currencies and the risks of foreign dominance.

These measures could help both regions maintain monetary sovereignty and adapt to the evolving global crypto landscape.

debt 1

The Debt Dilemma: A Tipping Point for the Global Economy

  • Global debt is rising—and risk is growing.

  • Developing economies face a dangerous debt trap.

  • Arab banks must lead with fiscal discipline.

Since 2020, the global economy has endured an unrelenting series of disruptions—from a global pandemic and inflationary pressures to geopolitical tensions and monetary tightening. And yet, despite these severe and successive shocks, the global economic system has, thus far, demonstrated a surprising degree of stability. However, this resilience masks a growing vulnerability that can no longer be overlooked: sovereign debt.

At the heart of the matter is a silent accumulation. According to recent global data, total debt has surged nearly 25% above its pre-pandemic peak—when it was already at an all-time high. This escalation is not merely a numerical concern. It has far-reaching implications for every economy’s capacity to respond to future crises, particularly in the face of renewed protectionism, rising tariffs, and prolonged policy uncertainty.

For financial leaders in the Arab world, where economic diversification, foreign investment, and structural reforms are top policy priorities, the consequences of unchecked debt trajectories are especially pertinent. The question is not whether debt matters—but rather how its management, sustainability, and long-term implications are factored into regional economic strategies.

Debt as Deferred Taxation: A Double-Edged Fiscal Tool

Debt, by design, enables governments to undertake long-term investments or support national incomes during periods of contraction. It is a tool—often indispensable—used in lieu of immediate taxation, allowing economies to maintain momentum in the face of external shocks. However, debt is not free capital. It is a commitment deferred—a tax invoice sent to future taxpayers.

The problem arises when the cost of borrowing consistently outpaces national income. In such a scenario, debt is no longer an instrument for development but a liability constraining growth. Taxes must rise, public investment must fall, or both. In this way, persistently high debt levels become a barrier to economic progress—not a bridge to it.

This dynamic is playing out with stark intensity in many parts of the developing world. Over the past fifteen years, emerging economies—particularly low-income nations—have taken on debt at a pace of 6% of GDP per annum. For comparison, such rates of debt accumulation have historically been associated with a 50% likelihood of triggering a financial crisis.

The Arab region is not exempt from this risk. Several states, particularly those navigating post-conflict reconstruction or managing expansive welfare and subsidy programs, face mounting debt pressures. While Gulf countries may enjoy stronger buffers due to hydrocarbons and sovereign wealth funds, the broader Arab world must contend with rising borrowing costs, limited fiscal space, and demographic pressures.

Interest Rate Shocks and the Debt-Service Trap

Compounding the debt dilemma is the reality of interest rate normalization. The world is emerging from a decade of ultra-low rates—a monetary era that encouraged governments to borrow generously. But as central banks in advanced economies recalibrate toward tightening, the cost of servicing this accumulated debt has soared.

Net interest payments in many developing economies have doubled. In 2007, such payments averaged 9% of government revenues; by 2024, they exceeded 20% in many cases. These are not abstract figures—they are fiscal constraints that divert public resources away from essential sectors like healthcare, education, and infrastructure.

This vicious cycle—where governments borrow to fund current obligations, then must cut development spending to repay those debts—is increasingly visible across the Global South. In particular, the 78 poorest countries eligible for concessional loans from the World Bank’s International Development Association (IDA) are caught in a debilitating loop. Collectively, they house a quarter of the world’s population, including hundreds of millions of youth set to enter the global workforce over the next decade.

For the Arab region, the parallels are instructive. Countries with young populations—such as Egypt, Jordan, Iraq, and Yemen—must simultaneously manage debt obligations while expanding education and employment opportunities. The trade-offs are real, and the consequences of miscalculation could be severe.

The Illusion of Liquidity and the Need for Reform

A fundamental flaw in the current international financial framework lies in its inability to distinguish between illiquidity and insolvency. Too often, low-income countries are treated as if they merely need liquidity injections—short-term loans to tide them over. But the reality is more dire: many are insolvent. They need not just bridge financing, but debt restructuring or outright relief.

Yet the institutional architecture for such restructuring is outdated. It lacks speed, coordination, and decisiveness. In the absence of a modern global mechanism for debt resolution, the process remains fragmented—slow enough to allow risks to fester and economies to falter.

Arab policymakers must be particularly attentive to this structural gap. For countries facing high debt-to-GDP ratios, timely and transparent mechanisms for restructuring are critical. Ignoring these realities or delaying reform only increases the long-term costs.

At the same time, there is an urgent need to curb the rising reliance on domestic borrowing. When governments overborrow from local creditors—especially banks—it reduces the capital available for private-sector expansion. This dynamic is detrimental to financial sector development, undermining the very investment climate needed to generate sustained economic growth.

Growth Cannot Be Assumed—It Must Be Engineered

Many global policymakers continue to pin hopes on a spontaneous return to higher growth. But growth, particularly in the current context of protectionism and geopolitical fragmentation, will not resurface on its own. It must be deliberately cultivated through well-calibrated structural and regulatory policies.

For developing economies, one of the most immediate and impactful measures would be the rationalization of tariffs. Protectionist policies, though politically convenient, rarely produce long-term economic benefits. On the contrary, tariffs raise input costs, deter foreign direct investment, and stunt export potential. A strategy of uniform tariff reductions across all trading partners could restore momentum and rebuild global confidence in emerging markets.

Arab economies stand to benefit immensely from such reforms. Streamlining trade regulations, eliminating non-tariff barriers, and fostering competitive value chains can help unlock new avenues for growth. Moreover, a transparent, investment-friendly regulatory environment can attract the private capital essential to bridging infrastructure and development gaps.

Private Capital and the Trust Deficit

One of the great ironies of the current debt environment is that while many countries are desperate for investment, private capital remains hesitant to engage. The reason is simple: investors know that in highly indebted economies, any growth gains are likely to be absorbed by future taxation. Returns are less secure, and policy predictability is weak.

Thus, for Arab states with high debt burdens, reducing sovereign liabilities is not just a fiscal imperative—it is a strategic signal. It reassures markets, bolsters credibility, and creates space for productive investment. It also helps reset the national narrative—from one of crisis management to one of long-term development.

The Case for Debt Limits and Fiscal Prudence

The international community must move toward a more disciplined approach to sovereign debt. A return to prudent benchmarks—such as capping debt-to-GDP at 40% for low-income economies and 60% for high-income ones—would reestablish much-needed fiscal norms.

This is particularly important in the Arab world, where debt sustainability varies significantly across states. Oil-exporting nations with accumulated reserves must resist the temptation to over-leverage during downturns, while oil-importing countries should prioritize fiscal consolidation and revenue mobilization.

Equally important is the political will to reform subsidy systems, improve tax collection, and ensure that public spending is both efficient and inclusive. These are not easy reforms—but they are essential for building the financial resilience needed in a more uncertain global environment.

A Call to Action for Arab Banking Leaders

At this pivotal juncture, Arab central banks and financial institutions have a critical role to play. Debt sustainability is not merely a government concern—it is a national imperative that intersects directly with financial stability, credit markets, investment trends, and public confidence.

First, banking regulators must enhance their oversight of domestic sovereign exposure, ensuring that local banks are not over-concentrated in government debt at the expense of private sector credit.

Second, Arab development banks and financial institutions should advocate for a regional debt monitoring framework that promotes transparency, benchmarks risk, and facilitates timely restructuring where needed.

Third, Arab banks must step up their role in mobilizing private capital for development. This includes strengthening ESG standards, supporting SME financing, and embracing financial instruments that share risk more equitably between public and private actors.

Finally, policymakers and financial leaders must reject the assumption that debt alone can substitute for growth. Real economic resilience requires more than borrowed time. It demands bold choices, structural reforms, and a renewed commitment to balancing fiscal discipline with inclusive development.

The era of indulgent borrowing is over. The Arab financial sector must be prepared—not just to weather the new global realities, but to shape them.

tariffs-780x470

Geopolitical Alliances in Face of New Tariffs

BY DR SOHA MAAD

Introduction

New world alliances are rising in face of Tariffs policy by United States President Donald Trump. Trump’s tariffs policy have reshaped the global trade landscape, prompting new geopolitical powers to emerge and adapt. The Samarkand Summit, held in April 2025, marked a significant milestone in European Union EU-Central Asia relations.

The broader impact of Trump tariff policy is complex. While it can generate significant revenue and potentially protect certain domestic sectors, it also bring ramifications for international trade relationships, global market stability, and ultimately, consumer prices. Trump Tariff policy will affect industries, influence the global supply chain dynamics, and reshape international trade agreements.

This article sheds light on Trump Tariff policy and its global impact at markets, industries, and consumer goods levels. The article also analyses the reaction of various countries with particular focus on Arab countries and the EU, and the outcome of EU-Central Asia Samarkand Summit. The article concludes with a roadmap and strategies for Arab countries to address challenges ahead from the long-term impact of Trump Tariff policy.

Donald Trump Tariff Policy

US President Donald Trump has placed 125% tariffs on goods imported from China, leading Beijing to respond with an 84% tax on American products. Trump had also brought high tariffs on dozens of other countries but these have been suspended for 90 days. He argues that tariffs will boost US manufacturing and protect jobs, but the world economy has been thrown into chaos and prices are expected to rise for consumers.

At its core, the rationale behind employing tariffs is to rebalance trade by levying taxes on imported goods, ideally encouraging domestic production and counteracting what is seen as unfair foreign trade practices. However, economists warn that these taxes also tend to raise consumer prices, contribute to supply chain disruptions, and may trigger retaliatory measures from affected countries. While Trump Tariffs are portrayed as a way to force negotiations and protect American industries, they also risked deepening global economic uncertainties and setting the stage for a broader trade confrontation, particularly with China, whose targeted tariff increase underscores the severity of bilateral tensions.

Historical Tariff Policies In The US

Historically, US tariff policies have swung between protectionism and free trade, depending on the economic and political climate. Since the mid-20th century, the US shifted towards trade liberalization, with agreements like the General Agreement on Tariffs and Trade (GATT) and the establishment of the World Trade Organization (WTO) reducing global tariffs. Trump’s tariffs, by contrast, represent a significant departure from this trend, aiming to renegotiate trade deals and address perceived imbalances, particularly with China.

While historical tariffs were often sector-specific, Trump’s policies have targeted a broader range of goods and countries, causing widespread economic uncertainty. This approach has drawn comparisons to the protectionist policies of the early 20th century but with a modern twist of using tariffs as a negotiation tool.

Worldwide Impact Of Trump Tariff Policy

Trump’s tariffs have sent shockwaves through the global economy, disrupting trade relationships and sparking retaliatory measures. Countries like China have imposed steep counter-tariffs, while others, such as the European Union, have approved measures targeting US exports. These actions have led to increased costs for businesses and consumers worldwide, with some industries struggling to adapt to the new trade landscape.

The tariffs have also contributed to market volatility, with significant losses in global equity value and fears of a potential recession. While some nations are negotiating exemptions or reduced tariffs, the overall impact has been a mix of economic strain and strategic recalibration.

The ripple effects are reshaping international trade dynamics, with countries reassessing their economic policies and alliances.

World Industries Hit By Trump Tariff

Trump’s tariffs hit several industries hard, both in the US and globally. Key sectors affected include:

  • Automotive: Tariffs on steel and aluminum have increased production costs for car manufacturers, impacting both domestic and international markets.
  • Technology: Electronics and machinery, heavily reliant on imports from China, have faced higher costs due to steep tariffs.
  • Agriculture: Farmers have struggled with retaliatory tariffs from other countries, reducing export opportunities for crops like soybeans and corn.
  • Construction: Materials like lumber, steel, and concrete have become more expensive, exacerbating housing affordability issues.
  • Consumer Goods: Items like clothing, appliances, and smartphones have seen price hikes, affecting everyday consumers.

Trump tariffs have disrupted supply chains, raised costs, and led to retaliatory measures from trading partners. The ripple effects are reshaping global trade dynamics and forcing industries to adapt.

Impact On US Industries

US industries have felt a broad range of effects from Trump tariffs, with impacts rippling across raw material costs, supply chains, and production strategies.

Cost Increases and Supply Chain Disruptions:  Tariffs were designed to make imported goods more expensive and thereby promote domestic production. However, for many US industries this has translated into significantly higher costs for input materials. The steel and aluminum sectors provide clear examples of how tariffs can unpredictably alter industry dynamics. Although tariffs were meant to protect domestic production by curbing cheap imports, many manufacturers have struggled with supply chain adjustments and higher raw material prices. In some cases, domestic production capacity did not kept pace with demand, forcing companies to continue sourcing at costly rates despite the protective measures.

Beyond individual sectors, the cumulative impact of increased production costs is contributing to broader economic pressures. With tariffs elevating raw material prices across the board, manufacturers find themselves squeezed by thinner profit margins. In turn, higher costs can ultimately cascade to consumers through increased prices, potentially dampening demand in a competitive global market.

The complex interplay of these factors means that while some industries might adjust through innovations or new sourcing strategies, others, especially those with less domestic capacity or in highly competitive markets, experience significant business uncertainties. This situation has led to an environment where US industries must continuously balance the goals of protecting domestic jobs and maintaining international competitiveness.

Markets Hit By Trump Tariff

Trump’s tariffs have deep impact on global financial markets, triggering swift and severe bouts of volatility. When the tariffs were first announced and then adjusted, most notably with the decision to impose a steep 125% rate on Chinese goods and a baseline 10% rate on a host of other countries, markets reacted sharply. In the immediate aftermath, the stock market experienced record losses; some reports noted that trillions of dollars in equity value evaporated over just a few trading sessions, marking one of the worst periods in market history.

This sudden market shock was driven by mounting uncertainty. Investors quickly re-evaluated risk exposures amid fears of a prolonged trade war and disrupted supply chains, leading to a flight toward safer assets such as government bonds. This rebalancing disrupted not only equity markets but also bond markets and commodities, as market participants recalibrated their portfolios for a more volatile environment.

Moreover, the initial panic forced central banks and policymakers to consider emergency measures. Although a 90-day pause was later announced for most trading partners (except China), the damage in sentiment had already been done. The uncertainty surrounding future policy moves compounded the challenges, as markets grappled with the dual pressures of geopolitical tensions and economic slowdown prospects.

Trump’s tariffs have acted as a catalyst for widespread market disruption. They have redefined risk perceptions globally, forced companies to rethink supply chains and investment strategies, and spurred policymakers to consider unprecedented interventions to restore market stability.

Impact On Consumer Goods

The recent tariffs imposed by Donald Trump have significantly impacted a wide range of goods:

  • Automobiles: Imported cars and vehicles with foreign parts are facing higher costs due to a 25% tariff on auto imports.
  • Clothing and Shoes: With 97% of apparel and footwear in the US being imported, tariffs on countries like China, Vietnam, and Bangladesh are driving up prices.
  • Electronics: Items like computers and phones, heavily imported from China, are seeing price hikes due to a 125% tariff on Chinese goods.
  • Steel and Aluminum: Tariffs on these materials are affecting industries reliant on metal imports.
  • Pharmaceuticals: Previously exempt, these products are now subject to new tariffs, potentially disrupting supply chains.

These measures have caused ripple effects across global markets, with businesses and consumers bracing for higher costs.

Long Term Impact

The long-term impact of Trump’s tariffs has been profound, reshaping global trade dynamics and economic strategies. While the tariffs aimed to protect American industries and reduce trade deficits, they have had mixed outcomes. The tariffs increased costs for US businesses reliant on imported goods, leading to higher consumer prices and reduced disposable income. This has contributed to slower Gross Domestic Product GDP growth and inflationary pressures.

Companies have restructured supply chains, moving production to countries like Vietnam, India, and Mexico to avoid tariffs. This has permanently altered global manufacturing and trade patterns.

Countries like China and the EU imposed counter-tariffs, affecting US exports and creating trade tensions that persist today.

The tariffs accelerated a move towards protectionism and strained US relations with key trading partners, reshaping alliances and trade agreements.

These effects highlight the complexity of using tariffs as a policy tool, with both intended and unintended consequences.

Impact On EU

Trump’s tariffs have had significant repercussions for the European Union (EU), affecting trade, industries, and diplomatic relations. The EU has faced a 20% tariff on most goods exported to the US, along with 25% tariffs on steel, aluminum, and automobiles. These measures have increased costs for EU exporters, making their products less competitive in the US market.

In response, the EU has implemented retaliatory tariffs of 25% on a range of US goods, including agricultural products, motorcycles, and beauty items. This has escalated trade tensions and caused uncertainty for businesses on both sides. Additionally, industries like pharmaceuticals and food and beverage in EU countries such as Ireland have been particularly hard-hit, with reduced competitiveness and potential job losses.

The broader impact includes strained diplomatic ties and a reevaluation of trade strategies within the EU. The EU is exploring ways to mitigate these effects, such as diversifying trade partnerships and negotiating exemptions.

Impact On Arab Countries

Trump’s tariffs have had varied impacts on Arab countries. Saudi Arabia, the United Arab Emirates UAE, and Qatar, faced a 10% tariff on their exports to the US, which is relatively low compared to other regions. However, countries like Syria, Iraq, and Algeria were hit with much higher tariffs, ranging from 30% to 41%, due to perceived trade imbalances.

For Gulf Cooperation Council GCC countries, the exemption of oil and gas exports from tariffs provided relief, as these sectors are critical to their economies. However, non-energy sectors like electronics, automobiles, and consumer goods have faced increased costs, potentially reducing competitiveness. In contrast, countries with higher tariffs, such as Jordan and Tunisia, have struggled with rising inflation and slower economic growth.

The broader impact includes strained trade relations and a reevaluation of economic strategies across the region. Arab countries are exploring ways to diversify trade partnerships and strengthen ties with unaffected regions to mitigate these challenges.

World Response To Trump’s Tariffs

Countries have reacted to Trump’s tariffs in varied ways, ranging from retaliation to negotiation. For instance, China has implemented retaliatory tariffs of up to 34% on US imports, while the European Union has approved countermeasures targeting $23.2 billion worth of US exports. Meanwhile, nations like Japan and India are seeking to negotiate exemptions or reduce their own tariffs in response to Trump’s reciprocal tariff policy. Some countries, like Australia, have opted against retaliation, emphasizing the importance of avoiding economic escalation. These responses highlight the global ripple effects of Trump’s trade policies, with nations balancing economic interests and diplomatic strategies.

Arab Countries Response To Trump Tariff

Arab countries have responded to Trump’s tariffs with a mix of negotiation and strategic adaptation. Gulf Cooperation Council (GCC) nations, including Saudi Arabia and the UAE, faced relatively low tariffs of 10% on their exports to the US, which minimized direct economic impact. However, these countries have focused on maintaining strong trade ties with the US, leveraging their oil and gas exports, which were exempt from tariffs. Other Arab nations, such as Jordan and Tunisia, faced higher tariffs, up to 28%, on certain goods, leading to economic strain and inflationary pressures. These countries have explored diversifying trade partnerships and strengthening regional cooperation to mitigate the effects. Overall, the response has been pragmatic, with Arab countries balancing economic interests and diplomatic relations.

Rise Of New World Geopolitics And Global Powers

Trump’s tariffs have significantly altered the global geopolitical landscape, triggering shifts in power dynamics and trade alliances. The tariffs have disrupted traditional trade relationships, forcing countries to reassess their economic strategies and partnerships.

Nations like Vietnam, India, and Mexico have gained prominence as alternative trade hubs, attracting investments and diversifying supply chains away from tariff-affected regions like China. Meanwhile, Russia has positioned itself as a potential beneficiary, leveraging its exemption from certain tariffs to strengthen its geopolitical influence.

The tariffs have strained US relations with key allies, including the European Union and Japan, leading to retaliatory measures and a re-evaluation of trade agreements. The EU, for instance, has explored counter-tariffs and new trade partnerships to mitigate the impact. The disruption has accelerated a shift towards regional trade agreements and localized supply chains. This trend challenges the traditional model of globalization and emphasizes strategic decoupling from major powers like the US and China.

Countries and regions are forming strategic collaborations to counter the impact of Trump’s tariffs. For example, South Korea, Japan, and Taiwan are exploring a joint venture in the US Alaska liquefied natural gas (LNG) project. This initiative aims to strengthen economic ties with the US while reducing trade imbalances.

Additionally, regional partnerships like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are gaining traction. Nations are leveraging such agreements to expand markets and mitigate the effects of tariffs. These efforts highlight the importance of unity and innovation in navigating the challenges posed by aggressive trade policies.

Strategic Eu Alliances To Face Trump Tariff

The European Union (EU) has adopted a strategic and unified approach to counter Trump’s tariffs, emphasizing collaboration and resilience. One key initiative is the development of the Anti-Coercion Instrument, which allows the EU to impose retaliatory measures such as export controls, restrictions on intellectual property rights, and duties on digital platforms. This tool is part of the EU’s broader strategy of “open strategic autonomy,” aimed at deterring economic coercion and protecting its interests.

Additionally, EU trade ministers have convened extraordinary meetings to finalize countermeasures, focusing on unity and solidarity among member states. These discussions have highlighted the importance of recalibrating trade policies to navigate the paradigm shift in international commerce.

The EU’s response also includes leveraging existing frameworks like the Enforcement Regulation to address trade imbalances and ensure fair practices. These measures reflect the EU commitment to maintaining a balanced and measured approach while safeguarding its economic model.

New Alliances At Samarkand Summit

The Samarkand Summit, held on 3 to 4 April 2025, marked new alliances between European Union EU and Central Asia. Hosted in Uzbekistan, the summit brought together leaders from the EU and five Central Asian countries, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. The summit focused on strengthening strategic ties, with discussions on green economy, digital transformation, connectivity, and security.

One of the key outcomes was the announcement of a €12 billion investment package under the EU’s Global Gateway initiative, aimed at improving sustainable transport infrastructure, critical raw materials, and green energy projects in Central Asia. The summit also emphasized regional cooperation, rule of law, and civil society, formalized in a Joint Declaration.

The event highlighted Central Asia’s growing strategic importance for the EU, particularly in diversifying supply chains and reducing reliance on major powers like China and Russia. It also addressed pressing issues such as climate challenges and regional stability.

The Samarkand Summit laid the groundwork for strategic partnerships aimed at addressing not only economic challenges but also broader geopolitical risks. Key areas of collaboration include: 

  • Infrastructure and Connectivity: A major focus was on developing robust transport corridors, such as the Trans-Caspian Transport Corridor, to enhance trade routes and reduce transit times between Europe and Central Asia. This effort is part of broader initiatives to diversify the EU’s supply chains and mitigate risks from global disruptions like those triggered by aggressive tariff policies.
  • Investment in Sustainable Sectors: The summit featured announcements of large-scale investments, including a €12 billion Global Gateway Investment Package. This package is earmarked for projects in clean energy, digital connectivity, and the development of critical raw material sectors (key areas that underpin the EU’s green and digital transformation).
  • Political and Security Dialogue: Beyond the economic dimensions, the summit underscored the importance of fostering regular high-level political dialogue and security cooperation. This collaboration aims to address shared challenges such as terrorism, cyber threats, and disinformation, reinforcing a multilateral approach to regional stability.

The collaborative efforts at Samarkand represent a deliberate pivot by the EU toward building resilience amid global trade uncertainties and geopolitical tensions, especially in the wake of policies like Trump’s tariffs. By deepening engagement with Central Asia, the EU not only secures alternative pathways for critical goods and raw materials but also furthers its goal of “open strategic autonomy”.

The Samarkand Summit has set the stage for a new era in EU-Central Asia relations, with tangible plans for joint investments and initiatives that span transport, energy, digital transformation, and security. This multi-faceted collaboration is poised to reshape regional dynamics and bolster the collective capacity to navigate an evolving global landscape.

Roadmap for Arab Countries To Face Trump Tariff

Facing Trump’s tariffs requires a mix of strategic adjustments and proactive measures. Key strategies to address the challenge include:

  • Diversifying Supply Chains: Companies must shift their sourcing away from heavily tariffed regions like China to alternative markets in Southeast Asia, Eastern Europe, and Latin America. This reduces dependency on a single region and mitigates risks.
  • Nearshoring and Onshoring: Businesses should relocate production closer to home or within their own countries. This approach shortens supply chains, lowers transportation costs, and improves regulatory compliance.
  • Cost Management: Companies should explore ways to absorb or offset increased costs. This includes reclassifying products to qualify for lower tariffs, passing costs to consumers when possible, or using financial instruments to hedge against price spikes.
  • Negotiating Trade Agreements: Arab countries should engage in bilateral negotiations to secure exemptions or reduce tariff rates. This diplomatic approach helps maintain trade relationships while minimizing economic impact.
  • Investing in Domestic Production: Some industries are ramping up domestic manufacturing to reduce reliance on imports. This not only avoids tariffs but also supports local economies.
  • Exploring New Markets: Businesses should expand into untapped markets to compensate for losses in tariff-affected regions. This diversification helps maintain revenue streams.

These strategies highlight the importance of adaptability and innovation in navigating the challenges posed by Trump tariffs.

The-Future-of-Global-Trade-in-a-Multipolar-World

Fragmentation of Globalization: The New Era of Economic Blocs and Supply Chain Realignment

The intricate fabric of globalization, woven tightly over decades, is now unraveling at an accelerated pace. While globalization once promised interconnected markets, open trade, and reduced barriers, recent geopolitical shocks and economic realignments have given rise to distinct economic blocs, reshaped supply chains, and recalibrated financial flows. For Arab banking leaders, policymakers, and executives, understanding these dynamics is crucial to securing regional interests in a rapidly evolving global economy.

Understanding the Drivers Behind Fragmentation

The fragmentation we see today has roots in recent global disruptions, including the COVID-19 pandemic and the Russia-Ukraine conflict. These crises exposed deep vulnerabilities in global supply chains, prompting countries to reassess their reliance on distant markets. Additionally, rising strategic tensions, notably the U.S.-China rivalry, have exacerbated protectionist tendencies, reshaping global trade dynamics as nations seek greater economic security and autonomy.

This shift towards economic nationalism isn’t merely reactionary but reflects a strategic pivot where governments increasingly favor localized or regionalized supply chains to mitigate risk. Consequently, the global economy, once heavily reliant on long supply chains stretching across continents, is transitioning towards regional clusters characterized by shorter, more resilient links.

The New Economic Blocs: Strategic Alignments

Today’s world is increasingly segmented into distinct economic blocs, each defined by strategic interests, shared values, or pragmatic economic alignments. Prominent among these is the Western bloc led by the United States and the European Union. This alliance focuses on strategic self-sufficiency, technological leadership, and stringent controls over critical sectors such as semiconductors and pharmaceuticals.

In parallel, an Eastern bloc spearheaded by China and supported by Russia seeks alternative frameworks, notably through the BRICS+ grouping, which recently expanded its membership. The bloc promotes greater financial autonomy, including reducing dependency on the U.S. dollar through alternative trade settlement currencies, notably the yuan.

A third, increasingly influential category consists of nations adopting non-aligned or multi-aligned strategies. Notably, India, Saudi Arabia, and the UAE exemplify this approach, maximizing economic and diplomatic advantages without committing exclusively to one camp. The Arab region, particularly Gulf Cooperation Council (GCC) states, finds itself strategically positioned to leverage relationships across these emerging blocs.

The Economic Logic of Reshoring: Opportunities and Risks

Reshoring, or the return of manufacturing and supply chains closer to domestic markets, is one of the defining economic themes today. The primary incentives include enhanced security, shorter lead times, reduced geopolitical risks, and greater control over vital sectors. For instance, the semiconductor industry has witnessed massive investment inflows, especially in the U.S. and Europe, driven by policies like America’s CHIPS Act and the EU’s Green Deal Industrial Plan.

However, reshoring isn’t devoid of challenges. Increased local production costs, higher inflationary pressures, shortages of skilled labor, and elevated investment requirements pose significant economic considerations. These factors could substantially alter cost-benefit analyses, compelling firms and governments to balance economic efficiency with strategic necessity carefully.

Reshaped Supply Chains: A Structural Shift in Global Trade

The shift from globalization toward fragmented, regionalized supply chains marks a significant structural evolution in global trade. Companies are increasingly embracing nearshoring—a strategy of relocating supply chains closer to home markets but within economically efficient regions. For instance, North American firms have intensified investments in Mexico, while European corporations increasingly source components from Eastern European and North African partners.

This realignment also significantly impacts the Middle East and North Africa (MENA), which enjoys geographic proximity to Europe and Asia. Countries like Morocco, Egypt, and the UAE have already experienced increased FDI inflows as regional hubs for logistics and manufacturing, benefiting from the reshoring trend. Thus, Arab nations have tangible opportunities to integrate further into European and Asian supply chains, offering a strategic buffer for Western markets.

Impact on Global Financial and Trade Flows

Financial institutions and trade financiers are closely monitoring these developments. Fragmentation is reshaping patterns of Foreign Direct Investment (FDI), with a noticeable pivot away from traditional global centers toward regional manufacturing hubs. Trade volumes, previously driven by globally dispersed supply chains, are now concentrated within regional blocs. Consequently, Arab banks must adapt, positioning themselves strategically within new regional corridors and trade finance dynamics.

For financial institutions across the Arab world, understanding and adapting to these new realities is essential. Banks must enhance their expertise in financing reshored operations, establish strong regional partnerships, and actively participate in emerging regional trade corridors. Banks in countries such as Saudi Arabia, UAE, Egypt, and Morocco can leverage their strategic locations and existing economic infrastructure to capitalize on shifting global trade dynamics.

Strategic Implications and Recommendations for Arab Banks and Policymakers

As the global economy transitions to regionalized trade blocs and reshored supply chains, Arab banks and policymakers are uniquely positioned to exploit arising opportunities and mitigate inherent risks. It is essential that regional financial institutions remain proactive rather than reactive.

Firstly, banks should deepen their capabilities in regional trade financing, infrastructure investment, and logistics-related sectors. Enhancing sector-specific expertise in manufacturing, technology, and logistics will position Arab banks as vital partners in regional economic development.

Secondly, policymakers and banking leaders should foster stronger economic ties with strategically important markets within Europe, Asia, and Africa. Strengthening economic diplomacy, coupled with targeted trade agreements, can attract investments from companies realigning their supply chains.

Lastly, investments in technology-driven financial products, robust digital platforms, and advanced analytics will be paramount. This will not only improve the banks’ competitiveness but also address increased demands for transparency, efficiency, and security in regional financial transactions.

In conclusion, the fragmentation of globalization presents substantial economic opportunities and complex strategic considerations for the Arab banking sector. Financial institutions and policymakers must cultivate flexibility, strategic foresight, and robust regional alliances to thrive within this evolving economic landscape. Through thoughtful adaptation and proactive engagement, Arab banks can ensure their pivotal role in this emerging economic order, safeguarding regional interests while promoting sustained economic prosperity.

9869840a-5a0c-4a88-8072-cb99557a1693

De-dollarization: The Global Shift Towards Alternative Currencies

Introduction

For nearly eight decades, the U.S. dollar has served as the bedrock of international trade and finance, a position fortified by post-World War II economic structures and geopolitical alignments. Today, however, there is an accelerating shift away from dollar-centric transactions, driven by geopolitical realignments, economic considerations, and technological advancements. This phenomenon, known as de-dollarization, presents profound implications for global finance, including strategic challenges and opportunities for banks and central banks across the Arab region.

Historical Context: How Did the Dollar Achieve Dominance?

The supremacy of the dollar can be traced back to the Bretton Woods Conference of 1944, establishing the dollar as the world’s primary reserve currency linked directly to gold. When President Nixon severed the dollar’s convertibility to gold in 1971, the petrodollar system emerged, with Middle Eastern oil producers, led by Saudi Arabia, pricing oil exclusively in dollars. This reinforced global reliance on the U.S. currency, embedding it deeply into the infrastructure of international trade and finance.

Arab nations played a pivotal role in solidifying dollar dominance, especially through extensive oil exports denominated in dollars, providing enormous liquidity and demand for the currency globally. For decades, this alignment benefited the region, providing financial stability, liquidity management simplicity, and substantial investment opportunities.

The Current Wave of De-dollarization: Drivers and Motivations

The shift away from the dollar has intensified in recent years due to several converging factors. Geopolitical tensions, particularly the conflict between Russia and Ukraine and subsequent Western sanctions, highlighted the vulnerabilities of dependence on the U.S. dollar. Countries subject to sanctions, or fearing potential exposure, began actively seeking alternatives to insulate their economies from dollar-related risks.

Simultaneously, the economic influence of emerging blocs, notably the BRICS nations (Brazil, Russia, India, China, and South Africa), has sparked renewed debate about adopting alternative international reserve currencies. The recent expansion of BRICS to include Saudi Arabia and the UAE underscores this trend’s particular resonance within the Arab world. The prospect of using currencies like the Chinese yuan in oil trade between the Gulf Cooperation Council (GCC) nations and China has raised considerable interest.

Emerging Alternatives to the Dollar                   

Among the leading contenders challenging dollar dominance is the Chinese yuan. Beijing has actively promoted yuan-denominated trade, particularly through bilateral agreements with trading partners across Asia, Latin America, and increasingly the Arab region. Saudi Arabia and the UAE have already begun exploring yuan-based oil transactions, driven by strategic economic diversification policies and strengthened bilateral ties with China.

Additionally, BRICS nations are evaluating the possibility of a common currency designed explicitly to reduce dependence on the dollar. Although practical challenges around liquidity and governance remain substantial, the concept signals a significant symbolic shift in the global monetary landscape.

The proliferation of Central Bank Digital Currencies (CBDCs) is also significant. These digital currencies offer efficient, secure cross-border payments, facilitating easier transitions away from traditional dollar-centric mechanisms. The UAE and Saudi Arabia’s joint “Aber” project, alongside participation in the mBridge initiative, exemplifies regional leadership in exploring practical, technology-driven financial alternatives.

Implications of De-dollarization for the Arab World

The Arab banking sector finds itself at the center of global monetary shifts, facing both risks and opportunities. Gulf countries, historically intertwined with dollar-based financial systems, are re-evaluating their strategic economic alignments. Saudi Arabia and the UAE, as active participants in the evolving landscape, are diversifying their currency exposures through strategic foreign reserve management and bilateral trade agreements in non-dollar currencies, primarily the yuan.

For central banks in the region, this shift necessitates adjustments in monetary policy frameworks, reserve management strategies, and enhanced financial infrastructure to accommodate a more diversified currency environment. Sovereign wealth funds (SWFs) across the Gulf region, such as Saudi Arabia’s Public Investment Fund (PIF) and the UAE’s Mubadala and Abu Dhabi Investment Authority (ADIA), have increasingly sought diversification beyond traditional dollar-denominated assets, signaling broader strategic shifts.

Challenges and Constraints of De-dollarization

Despite momentum towards alternative currencies, significant barriers remain. The liquidity, convertibility, and deep capital markets that underpin the dollar’s dominance are unmatched by other currencies. The yuan, despite its growth, still faces restrictions on convertibility and global acceptance, limiting its immediate potential to fully replace the dollar.

For Arab banks and financial institutions, transitioning away from a predominantly dollar-based system introduces complexities around managing foreign exchange risks, payment settlement processes, and liquidity management. Additionally, confidence in alternative currencies, especially under conditions of economic stress or geopolitical uncertainty, remains tentative.

Case Studies: Lessons for Arab Banks and Economies

Russia’s recent experiences provide valuable insights. Following sanctions, Russia increased its yuan-based transactions, reducing exposure to Western financial systems. Similarly, India’s rupee-based transactions with Russia illustrate practical adaptations to geopolitical pressures.

Within the region, Saudi Arabia’s early exploration of yuan-denominated oil contracts offers preliminary lessons about managing foreign exchange risks and leveraging strategic alliances. Conversely, economies heavily dependent on external borrowing and dollar-based debt, such as Egypt, highlight vulnerabilities and underscore the urgency of economic diversification and currency risk management.

Strategic Recommendations for Arab Banks and Policymakers

Arab financial institutions and policymakers must approach de-dollarization proactively and strategically. Central banks should enhance their financial infrastructure to facilitate multi-currency transactions seamlessly. Strengthening bilateral financial agreements and building capabilities in handling alternative currencies, particularly the yuan, will be critical.

Diversifying foreign reserves through strategic allocations to multiple major currencies and digital assets, including CBDCs, is essential for maintaining financial stability and flexibility. Furthermore, Arab banks should cultivate expertise in currency risk management and invest in robust technological infrastructure to support digital currency initiatives and facilitate cross-border payments beyond the dollar.

Policymakers must foster regional collaboration among central banks, enabling coordinated responses to global monetary shifts. A collective regional strategy will enhance the Arab world’s negotiating power and resilience against currency volatility.

Conclusion

The global financial landscape is experiencing fundamental shifts as reliance on the U.S. dollar begins to wane under geopolitical, economic, and technological influences. For the Arab banking sector, this shift represents both a strategic challenge and an opportunity to assert greater financial autonomy and economic influence. Arab banks, central banks, and policymakers should embrace proactive measures, carefully weighing the benefits of currency diversification and innovation against the complexities of navigating unfamiliar financial waters.

Ultimately, adopting a measured and strategic approach to the shifting global monetary order will ensure Arab economies remain resilient and influential in an increasingly multipolar financial environment.

debt-erase

The Debt Time Bomb: How Rising Global Debt Threatens Financial Stability

Introduction: The Growing Shadow of Debt

In 2024, the global economy faced unprecedented challenges as total global debt reaches an alarming $318 trillion, equating to roughly 333% of the world’s GDP. This dramatic increase, documented by the Institute of International Finance (IIF), reveals a troubling escalation that threatens economic stability worldwide. For policymakers, bankers, and financial experts in the Arab region, comprehending this phenomenon and its potential implications is crucial.

Global Debt at a Glance: The Numbers Speak

Recent data from the International Monetary Fund (IMF) indicates that global public debt alone stands at nearly $100 trillion, representing approximately 93% of global GDP. The escalation of public debt has been accelerated by extensive government stimulus during the COVID-19 pandemic, prolonged conflicts such as the war in Ukraine, and rising geopolitical tensions that have necessitated greater military and defense expenditure.

Corporate and private debt further compound the problem. Global corporate debt reached approximately $89 trillion in 2024, up significantly from previous years, driven largely by prolonged periods of low-interest rates and aggressive borrowing by multinational corporations. Households, too, have contributed to the rising debt levels, particularly in advanced economies where easy credit has inflated housing markets and consumer spending.

Key Drivers Behind the Debt Crisis

Several structural and cyclical factors underpin this dramatic increase in global indebtedness. Historically low-interest rates maintained by central banks worldwide post-2008 financial crisis encouraged extensive borrowing across all sectors. However, recent monetary tightening to combat persistent inflation has made servicing this debt significantly more expensive.

Moreover, governments’ expansive fiscal responses to mitigate economic disruptions from the COVID-19 pandemic have greatly inflated national debt levels. The IMF estimates that pandemic-related fiscal stimulus exceeded $17 trillion globally, significantly straining public budgets.

Geopolitical instability has also played a significant role. Conflicts and tensions worldwide, from Europe and Asia to the Middle East, have led to increased defense spending, refugee support, and disruptions in global trade, further exacerbating fiscal pressures.

The Risks of Rising Debt

High debt levels pose substantial risks to global economic stability. Increased debt servicing costs limit governments’ fiscal space, hindering their capacity to respond effectively to economic downturns or invest adequately in infrastructure, education, and innovation. According to the IMF, nearly 60% of low-income countries are already experiencing debt distress or are at high risk of it, highlighting a precarious global situation.

Moreover, excessive borrowing can crowd out private sector investments, stifling productivity growth and economic dynamism. Financial stability concerns also rise as heavily indebted economies become vulnerable to market shocks, credit downgrades, and capital flight. A crisis of confidence among investors in sovereign debt markets could precipitate widespread economic instability.

The Arab Region’s Debt Dilemma

The debt landscape across Arab nations is diverse. The Gulf Cooperation Council (GCC) countries generally maintain robust fiscal positions due to their substantial hydrocarbon reserves and sizeable sovereign wealth funds. For instance, Saudi Arabia’s public debt remains relatively modest at approximately 26.2% of GDP, reflecting prudent fiscal management and robust oil revenues. Similarly, Kuwait and Qatar maintain manageable debt levels at around 3% and 43% of GDP, respectively.

However, the situation in non-GCC countries is significantly more challenging. Egypt’s public debt has risen sharply to nearly 96% of GDP, driven by ambitious economic reforms, infrastructure spending, and the impacts of inflation and currency depreciation. Lebanon represents an even more dire scenario, with public debt surpassing 195% of GDP amid an ongoing economic collapse that has severely diminished living standards and financial stability.

Jordan and Tunisia also confront challenging debt dynamics, heavily reliant on international financial institutions for fiscal stabilization. These countries face difficult choices balancing austerity, growth, and public welfare amid constrained fiscal space.

Strategic Responses for Arab Countries

In response to rising debt threats, Arab economies must adopt comprehensive strategies to enhance fiscal sustainability and financial resilience. Strengthening domestic revenue collection mechanisms through better tax administration and expanding the tax base can reduce dependence on external financing and create fiscal breathing room.

Developing robust domestic capital markets offers another avenue to manage debt sustainably. By increasing local currency financing options, governments can mitigate the risks associated with foreign currency borrowing and reduce vulnerability to external market shocks. This approach requires investment in regulatory frameworks, market transparency, and financial literacy to build investor confidence.

Economic diversification remains critical, particularly for GCC countries heavily reliant on hydrocarbon revenues. Initiatives like Saudi Arabia’s Vision 2030, aimed at diversifying economic activities and reducing oil dependency, exemplify strategic foresight. Similar approaches, focused on renewable energy, technology, and infrastructure investment, can help buffer against external shocks and foster sustainable growth.

Opportunities Within the Crisis

Despite the challenges posed by rising global debt, there are opportunities for strategic economic advancement. Green and sustainability-linked financial instruments, including bonds and sukuk, present viable alternatives for financing critical investments in renewable energy and sustainable infrastructure. These innovative instruments align well with global trends toward environmental, social, and governance (ESG) investing, attracting international capital and promoting sustainable economic development.

Moreover, debt restructuring initiatives, such as debt-for-nature swaps or debt-for-reform agreements, can enable heavily indebted Arab countries to alleviate immediate fiscal pressures while committing to meaningful governance and economic reforms.

Regional cooperation is also essential. Enhanced collaboration through multilateral Arab financial institutions, such as the Arab Monetary Fund (AMF) and the Islamic Development Bank (IsDB), can provide targeted financial support, technical assistance, and coordinated economic policies. Such regional frameworks can effectively address shared economic challenges and leverage collective financial strength.

Conclusion: Charting a Sustainable Path Forward

The escalating global debt crisis presents profound risks but also strategic opportunities for the Arab region. Addressing this challenge requires decisive, coordinated action from policymakers, financial institutions, and economic leaders across the region. Arab banks must advocate strongly for fiscal discipline, transparency, and strategic investment priorities that align debt issuance with sustainable economic development.

By leveraging regional cooperation, embracing innovative financial instruments, and committing to structural reforms, Arab economies can strengthen their resilience against global financial shocks. The road ahead demands prudence, strategic foresight, and a commitment to sustainability, ensuring that debt serves as a catalyst for growth rather than a burden on future generations.

large_52

MUBARAK AL-KABEER PORT – THE WIDER IMPACT ON GROWTH AND SUSTAINABILITY IN ARAB COUNTRIES

BY DR SOHA MAAD

INTRODUCTION

The Mubarak Al-Kabeer Port is a significant infrastructure project located on Bubiyan Island in Kuwait. It is part of Kuwait’s Vision 2035 and China’s Belt and Road Initiative. The port aims to enhance regional trade and transportation, contributing to Kuwait’s economic diversification by reducing its reliance on oil.

The port’s development is divided into phases, with the first phase completed in 2021. The entire project is expected to be operational by 2026. Once completed, it will play a pivotal role in boosting Kuwait’s Gross Domestic Product GDP and fostering economic growth in the region. We present a complete overview of this major infrastructure project covering its various benefits, wider impact, and future prospect.

EXPECTED ECONOMIC BENEFITS AND STRATEGIC IMPORTANCE

The Mubarak Al-Kabeer Port is expected to bring significant economic benefits to Kuwait. The port will reduce Kuwait’s reliance on oil by boosting trade and commerce, aligning with the country’s Vision 2035. It aims to position Kuwait as a key transit point for regional trade, enhancing its role in global commerce. The development and operation of the port will open numerous job opportunities, supporting local employment.

The Mubarak Al-Kabeer Port holds immense strategic importance for Kuwait and the region. Positioned on Bubiyan Island, the port aims to connect Central and East Asia, becoming a key link in the revival of the Silk Road. The project enhances Kuwait’s transportation and logistics capabilities, strengthening its role in global commerce. It is expected to attract significant foreign investments while maximizing local economic growth.

CONNECTION TO BELT AND ROAD INITIATIVE

The Mubarak Al-Kabeer Port is closely tied to China’s Belt and Road Initiative (BRI), reflecting a strategic partnership between Kuwait and China. The port is a key component of the BRI, serving as a vital link in the Silk Road’s maritime route. It facilitates trade between East and West, enhancing connectivity. Kuwait and China have signed agreements to align the port’s development with the BRI, fostering mutual economic growth and investment opportunities. Positioned on Bubiyan Island, the port strengthens China’s trade network in the Gulf region, making it a critical hub for regional and international commerce. The project includes advanced facilities and logistics, supporting the broader goals of the BRI to improve global trade infrastructure.

KUWAIT’S VISION 2035 AND ITS REGIONAL TRADE DYNAMICS

Kuwait’s Vision 2035, also known as “New Kuwait,” is a strategic development plan aimed at transforming Kuwait into a global financial and trade hub. It focuses on economic diversification, reducing reliance on oil, and fostering a competitive private sector. The plan includes major infrastructure projects like the Mubarak Al-Kabeer Port, which enhances Kuwait’s regional trade dynamics. Kuwait’s membership in the Gulf Cooperation Council (GCC) facilitates regional trade through agreements and a unified customs union. Kuwait has signed multiple bilateral and regional trade agreements, boosting its economic ties with countries like China, the European Union (EU), and the United States (US). The focus on non-oil sectors and infrastructure development strengthens Kuwait’s role in regional commerce.

BENEFITS TO INDUSTRIES

The Mubarak Al-Kabeer Port is set to significantly benefit various industries in Kuwait. The port’s advanced facilities will streamline cargo handling and improve supply chain efficiency, boosting the logistics sector. By becoming a regional trade hub, the port will enhance import and export activities, benefiting businesses across multiple sectors. The development of industrial zones around the port will support manufacturing and light industries, fostering economic growth. The integration of power plants and substations will support energy-intensive industries and infrastructure projects.

NEW JOBS FROM MUBARAK AL-KABEER PORT DEVELOPMENT

The development of the Mubarak Al-Kabeer Port is expected to open a wide range of job opportunities across various sectors:

  • Construction and Engineering: Jobs in infrastructure development, including civil engineering, project management, and skilled labor for construction.
  • Logistics and Transportation: Roles in cargo handling, shipping, warehousing, and supply chain management.
  • Port Operations: Positions such as dock workers, crane operators, and administrative staff for port management.
  • Industrial and Manufacturing: Employment in light industries and manufacturing zones planned around the port.
  • Tourism and Hospitality: Opportunities in tourism-related services as Bubiyan Island develops into a tourist destination.
  • Environmental Management: Roles focused on ensuring the port’s operations align with sustainability goals.

REGIONAL IMPORTANCE

The Mubarak Al-Kabeer Port stands out among regional ports due to its strategic location, advanced infrastructure, and ambitious goals. Mubarak Al-Kabeer Port boasts the deepest berths among Kuwait’s ports, surpassing Shuwaikh, Doha, and Shuiba. It is designed to handle larger vessels and higher cargo volumes, making it a key player in regional trade. Unlike many other ports, it is closely tied to China’s Belt and Road Initiative, enhancing its role in international trade networks. The port’s planned expansion to include industrial zones, free trade areas, and enhanced connectivity through the Gulf Railway project sets it apart as a comprehensive trade and logistics hub. Its proximity to Iraq’s Grand Faw Port and Iran’s ports fosters a competitive dynamic, influencing regional trade strategies.

BENEFITS TO VARIOUS COUNTRIES

Mubarak Al-Kabeer Port will bring benefits to various countries including:

  • Kuwait: As the host country, Kuwait benefits directly from the port’s economic and strategic advantages, aligning with its Vision 2035.
  • Iraq: The port’s proximity to Iraq’s Grand Faw Port has sparked competition, influencing Iraq’s trade and infrastructure strategies.
  • Iran: The port enhances regional trade routes, potentially affecting Iran’s maritime commerce.
  • China: As part of the Belt and Road Initiative, the port strengthens China’s trade network and its influence in the region.
  • Central Asian Countries: The port’s location makes it a key gateway for trade with Central Asia, boosting connectivity and commerce.

MUBARAK AL-KABEER PORT INFRASTRUCTURE

The Mubarak Al-Kabeer Port is a major infrastructure project located on Bubiyan Island, Kuwait. The port’s construction is divided into multiple phases. The first phase, completed in 2021, included the development of four berths. The entire project is expected to be operational by 2026. The port features state-of-the-art facilities for cargo handling, logistics, and transportation, making it a critical hub for regional and international trade. Bubiyan Island, where the port is located, includes power plants and substations to support the port’s operations. A 5,000-megawatt power plant has already been constructed in Subiya. The port is designed to be environmentally sustainable, aligning with modern infrastructure standards. The port is part of the Gulf Railway project, which aims to connect all six Gulf Cooperation Council (GCC) member states, enhancing regional connectivity.

FINANCE OF MUBARAK AL-KABEER PORT

The Mubarak Al-Kabeer Port is financed through a collaboration between Kuwait and China. The Kuwaiti government has allocated financial resources for the port’s development, emphasizing its strategic importance for the country’s economic diversification. China State Construction and Communications Corporation Limited (CSCC) is a key partner, providing expertise, design, and pre-implementation services. This partnership is supported by agreements between the governments of Kuwait and China. This collaboration highlights the mutual benefits for both nations, with Kuwait gaining advanced infrastructure and China expanding its trade network.

IMPACT ON REGIONAL GEOPOLITICS

The Mubarak Al-Kabeer Port has significant implications for regional geopolitics. Situated on Bubiyan Island, the port strengthens Kuwait’s position as a key player in the Gulf region, enhancing its influence in regional trade and transportation. By becoming a major trade hub, the port increases Kuwait’s economic leverage in the region, fostering stronger ties with neighboring countries and global partners. The port’s development aligns with Kuwait’s efforts to promote stability and cooperation within the Gulf Cooperation Council (GCC) and beyond. The port’s integration into this initiative highlights its global significance, connecting Kuwait to broader international trade networks.

FUTURE HORIZON OF MUBARAK AL-KABEER PORT

The future of the Mubarak Al-Kabeer Port is promising, with plans to significantly expand its capacity and influence. The port’s area is set to increase tenfold, reaching approximately 116 million square meters. This includes zones for maritime navigation, port services, free trade, light industries, and regional road and railway connections. The port is expected to be fully operational by the end of 2026, marking a major milestone in Kuwait’s Vision 2035. The expansion aims to attract local and foreign investments, diversify Kuwait’s economy, and create thousands of job opportunities.

The port is poised to become a cornerstone of regional trade, enhancing Kuwait’s role in global commerce.

Load More