RIYADH: Reforms across logistics, governance and business environment could see trade more than double between the Gulf Cooperation Council and the Caucasus and Central Asia regions.
A report published by the International Monetary Fund, and supported by experts speaking to Arab News, set out that while while current trade and investment flows between the two regions remain limited, there are major complementarities in energy, capital, and diversification strategies.
Substantial gains in trade, foreign direct investment, and resilience amid global fragmentation could be unlocked by reforms.
“Improving policies to the level of top 25 percent of global performers in the areas of logistics and governance could boost CCA trade in goods by about 150 and 120 percent, respectively,” said the IMF.
The IMF further said that comprehensive structural reforms are projected to raise FDI inflows by about 0.7 percent of gross domestic product in the CCA and 0.14 percent of GDP in the GCC.
Commenting on the IMF report, Daipayan Adhikari, head of integrated logistics, United Warehouse Co. said that the priority should be harmonizing customs procedures and accelerating digital trade facilitation between the two regions to enhance ties.
“Governments should focus on implementing single-window customs platforms, mutual recognition of certifications, standardized documentation, electronic Bills of Lading, digital certificates of origin, and pre-arrival customs clearance,” said Adhikari.
He added that public-private partnerships should be encouraged to create common logistics platforms.
Marc Busch, Karl F. Landegger professor of international business diplomacy at the Edmund A. Walsh School of Foreign Service at Georgetown University, said that the first step to increase trade ties between the two regions should be through the implementation of modern trade agreements that go well beyond tariff reductions.
“Bilateral agreements, GCC-wide arrangements, or CEPAs should cover services, investment, digital trade, customs procedures, competition, technical standards, and dispute settlement,” said Busch.
He added: “The goal should not be to eliminate legitimate health and safety rules, but to ensure that they are transparent, proportionate, and no more burdensome than necessary.”
Acwa playing a key role
Saudi utility giant Acwa has established a significant and growing footprint in the CCA region, particularly in the renewable energy sector.
In Uzbekistan, the company has committed substantial investments, including approximately $1.2 billion for a power plant in the Syrdarya region and $1.3 billion for major wind farms in Bukhara and Navoi, with additional projects underway in Karakalpakstan.
These initiatives form part of Central Asia’s largest wind and energy storage complexes under power purchase agreements.
Acwa is also active in Kazakhstan, contributing to clean energy development as part of broader multi-billion-dollar pledges in the region’s renewables sector.
Its operations focus on utility-scale wind and solar projects, supporting CCA countries’ green transition, energy security, and diversification goals while leveraging Saudi expertise in large-scale power infrastructure.
The IMF further said that both regions maintain comparative advantages in hydrocarbons and natural resources, but diversification policies have steadily reduced dependence on these sectors.
Non-hydrocarbon trade in goods and services shows growing diversification, with the GCC often aligning closer to advanced economy standards.
Services offer further synergies through shared capabilities in transport, travel, and construction, alongside distinct strengths in areas such as insurance for the GCC and telecommunications for the CCA.
Paolo Carlomagno, partner at Arthur D Little, told Arab News that GCC contributes globally connected logistics ecosystems, investment capital, industrial expertise and access to international markets, while the CCA offers strategic geography, agricultural production, natural resources and growing industrial potential.
He further said that Kazakhstan and Uzbekistan account for most of the region’s economy and population, while the South Caucasus plays a critical role in connecting Central Asia with the Gulf and European markets.
“The CCA can strengthen the GCC’s ambitions in areas such as food security, critical minerals and industrial development, while the GCC can accelerate the CCA’s integration into global markets through investment, logistics capabilities and industrial know-how,” said Carlomagno.
He added that success should not be measured by the volume of goods traded, but by the value created around those flows.
Rayhan Aleem, CEO and co-founder of AI-powered corporate tax software firm Tax Star, said that renewable energy, transport and logistics, digital services, manufacturing and agrifood are some of the top sectors that offer strong potential to enhance trade ties between both regions.
“The GCC can bring capital, trade networks and project experience, and CCA markets can offer resources, skilled talent and access to new trade routes,” said Aleem.
IMF added that financial dynamics complement each other effectively. The GCC serves as a net capital exporter, supported by sovereign wealth funds and current account surpluses, while the CCA acts as a net capital importer with reliance on FDI inflows.
Recent developments, including high-level diplomatic engagements, infrastructure financing, and eased connectivity measures, indicate building momentum for stronger ties.
Nevertheless, bilateral non-hydrocarbon trade stays relatively low and concentrated, frequently routed through the UAE as a key hub. Intra-regional trade shares also trail those of more integrated economic blocs, pointing to ample room for expansion.
Carlomagno said that the strongest opportunities lie in sectors where the two regions are genuinely complementary and aid in economic diversification efforts, with food systems a “natural priority.”
He added: “Critical minerals represent another strategic opportunity, particularly through downstream processing and industrial development rather than raw material exports alone.”
Strategic imperative in a fragmented world
Andreas Hassellof, CEO of technology company Ombori, said that the greatest opportunity lies in building cross-border value chains more than strengthening bilateral trade, as the world is witnessing an era of geopolitical fragmentation.
He said: “Saudi Arabia’s Vision 2030 and Central Asia’s industrial and resource strengths are highly complementary. Governments should enable investment through regulatory alignment and connectivity, while the private sector builds competitive industries.”
The IMF paper added that while challenges remain, the payoffs from enhanced economic cooperation are significant.
Policymakers should prioritize governance and business climate enhancements, infrastructure and logistics investments, trade facilitation, and financial integration, tailoring approaches to country-specific contexts and development levels.
Building on existing cooperation examples, these steps can help forge a more dynamic and resilient partnership suited to today’s global environment.
Raj M. Desai, professor of international development at Walsh School of Foreign Service Georgetown University told Arab News the priorities diverge between the two regions.
He added: “For the GCC, the higher-return reforms are in governance, the business environment, and fiscal policy, namely, toward transparent regulation, faster licensing, more credible dispute resolution, more efficient bankruptcy and exit frameworks, competition neutrality, more predictable treatment of foreign firms and skilled workers, and public finances that are less dependent on oil-price cycles.”
