9 ASIAN LEGAL BUSINESS – AUGUST 2023 WWW.LEGALBUSINESSONLINE.COM BRI EFS Image: Nook Hok/ With geopolitical tensions roiling economic exchanges between China and Western markets, more companies in both the mainland and Hong Kong are turning to the Middle East for overseas investment opportunities. This also comes at an ideal time for Gulf states, which are currently looking to diversify their oil-dependent economies, as well as international law firms seeking to unlock new areas of growth as dealmaking activities slow down due to the high inflation and tightening credit conditions in the United States and Europe. “There is more interest in the Middle East than ever before. The Middle East and the Gulf Cooperation Council (GCC) is experiencing growth in key economic and industrial sectors,” says Gregor Pryor, Europe and Middle East managing partner at U.S. firm Reed Smith. “As the Middle East’s economy continues to diversify, emerging industries will require guidance to navigate the laws and regulations under which they are operating. Ensuring these new businesses have access to commercially proficient legal services will be essential to their long-term success, and again provide opportunities for law firms,” Pryor adds. The investment capital of these Middle East sovereign funds is forecast to swell by 150 percent and reach $10 trillion by 2030, with HKEX head Nicolas Aguzin predicting that 10 to 20 percent of this will go to China. In particular, Saudi Crown Prince Mohammed bin Salman has been spearheading a charm offensive to court investments from Asia, especially China – the Kingdom’s top trading partner. The two states recently sealed more than 30 deals with a total price tag of $10 billion at the Arab-China Business Conference in June, spanning strategic sectors including technology, renewables, agriculture, minerals, supply chains and health care. “For trade and investment between the Middle East and Asia, Hong Kong is a natural choice to centre that activity – as seen by Saudi Arabia’s 2022 decision to open a regional office of its $776 billion Public Investment Fund in the city alongside new offices in New York and London,” explains Tommy Tong, a Hong Kong corporate partner at UK firm Herbert Smith Freehills. HSF recently became one of the first international law firms to practice independently in Saudi Arabia after the Kingdom relaxed its professional service regulations in March, and Stuart Paterson, HSF’s Middle East managing partner, says the opening in Riyadh marks a step change in the firm’s services in and for the region. “Initially, the office will focus primarily on energy, infrastructure, M&A, projects and project and structured finance. But there are deeper opportunities; Riyadh, Dubai, and other MENA markets sit at the centre of growing investment corridors to and from the UK, Europe and the U.S., Africa, Asia and Australia,” says Paterson. Tong highlights inbound and outbound investments and private capital as areas where he foresees continued trade and investment momentum between China and the Middle East. He adds that he expects to see increasing opportunities for energy and infrastructure work, and the many project aspects of such investments, from initial financing to international arbitration of construction and investment disputes, particularly as the “Middle East diversifies into new energies, industries and sectors.” With offices in Abu Dhabi and Dubai, Reed Smith expects to see an uptick in demand for cross-border corporate, finance and related regulatory work between Middle East and the Greater China region. Hong Kong, Asia’s financial hub roaring back to life after three years of COVID restrictions, is poised to play a key role. “Hong Kong is a growing conduit for investment, trade and development for the Middle East. Following the signing of a memorandum of understanding between the Tadawul stock exchange and the HKEX, sovereign wealth funds from Saudi Arabia and the United Arab Emirates (UAE) are set to establish Hong Kong-based vehicles to invest in the ongoing expansion of the Greater Bay Area economy, and access mainland China and Asia-Pacific markets,” notes Denise Jong, a Hong Kong corporate partner at Reed Smith. “The agreement allows the two exchanges to explore cooperation in areas of cross listings, fintech and ESG. It also allows working on a framework of cross listing providing easier access to investors in both exchanges,” she adds. Sachin Kerur, managing partner at Reed Smith’s Middle East offices, notes the synergies with energy, construction and Web3 developments between Middle East and Asia thanks to the establishment of the Virtual Assets Regulatory Authority (VARA) in Dubai last year. In addition, “The UAE is seeing exponential growth in legislative reform which is expanding our areas of practice. We have been significantly investing in talent in the region for several years now and are aligned with the diversification strategy of the key markets in the region,” Kerur adds. FROM EAST TO MIDDLE EAST: CHINA, HONG KONG EYE GULF OPPORTUNITIES