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On Tuesday 27 May, the GCC signed a statement to initiate negotiations for a free trade agreement (FTA) with Malaysia.
Similarly, both Indonesia and Thailand promoted an FTA with the GCC in February 2025, targeting a deal by the end of 2025, while Vietnam and the United Arab Emirates (UAE) signed a Comprehensive Economic Partnership Agreement in October 2024.
The basis for this rerouting is twofold: firstly, as a result of the uncertainty which US-related trade and supply chains creates; and secondly, relatedly, to capitalise on GCC market potential especially by highlighting cultural similarities.
Southeast Asian countries are facing mounting trade pressures from traditional Western markets. Vietnamese businesses are dealing with increased US tariff policies and faced 32 trade defence investigations in 2024 alone – nearly double the previous year.
The EU’s Carbon Border Adjustment Mechanism (CBAM), which requires exporters to disclose their carbon dioxide (CO2) during production, exacerbates complexity, raises compliance costs and complexity, and forces companies to diversify away from over-reliance on Western markets.
But these nascent Asian economies also see the GCC as a massive economic opportunity. With a combined GDP exceeding $2 trillion and a population of approximately 60 million. Trade volumes between the regions are already substantial. In 2023:
- Thailand’s trade with Gulf nations reached $36 billion
- Indonesia’s totaled $15.7 billion;
- Malaysia’s reached $22.3 billion;
- Vietnam’s totaled roughly $20.9 billion [see calculations in note].
But the GCC wants its trade with the 10-member Association of Southeast Asian Nations (ASEAN) to reach $180 billion by 2022, and in Southeast Asia, more akin consumer preferences drives this expansion.
For instance, Malaysia leads globally in halal certification, with a rigorous process recognised in 47 countries, making it a trusted supplier for the Muslim-majority Gulf region. Indonesia, home to the world’s largest Muslim population, also has cultural and religious affinity with Middle Eastern consumers. Thailand’s strong food-processing industry and strategic government support have also allowed it to grow as a leading halal exporter with more than $6 billion in shipments.
These are valuable advantages as demand for halal products – from cosmetics to food – continues growing in the GCC.
The region has also seen a rising demand for Southeast Asian electrical equipment, metal products, leather, and other manufactured goods, partly driven by boycotts of Western brands over geopolitical issues.
Yesterday, on Wednesday 28 May, the GCC, China, and ASEAN agreed to “chart a unified and collective path towards a peaceful, prosperous, and just future”, following their meeting in the Malaysian capital, Kuala Lumpur. The convergence of these factors—trade pressures from the West, massive market potential in the Gulf, the natural competitive advantages of ASEAN countries, supportive trade agreements, and evolving consumer preferences—is being recognised amongst Southeast Asian businesses as a compelling case for pivoting toward Middle Eastern markets.
Note: According to statistics from the Observatory of Economic Complexity (OEC), in 2023, bilateral trade between Vietnam and Bahrain was valued at $137.2 million; between Vietnam and Kuwait was valued at $6 billion; between Vietnam and Oman at $256.4 million; between Vietnam and Qatar at $600.3 million; between Vietnam and Saudi Arabia at $1.9 billion; and between Vietnam and the UAE at $12 billion. This puts the total Vietnamese-GCC bilateral trade valuation at roughly $20.9 billion.
