Ben Harburg, Managing Partner of MSA Capital and Rafik Nayed, Group Chief Executive Officer of Al Salam Bank Bahrain speak with Geoff Cutmore, anchor of CNBC on Day 3 of CNBC East Tech West at LN Garden Hotel Nansha Guangzhou on November 20, 2019 in Nansha, Guangzhou, China.
Zhong Zhi | Getty Images
The ongoing U.S.-China trade war may be prematurely pushing the world’s second largest economy toward greater self-sufficiency, but that could prove a win for the country as it seeks to make inroads into some of the world’s biggest untapped markets.
Ben Harburg, managing partner of Beijing-based venture capital firm MSA Capital, told CNBC the “decoupling” of China from its largest trade partner has forced Chinese businesses to innovate and diversify beyond their preferred timeline. However, he added that that has also served to accelerate their already planned push into the Middle East and Africa.
“This forced self-sufficiency and forced decoupling has yielded them a really attractive market,” Harburg said of Chinese companies — most notably those in tech — at CNBC’s East Tech West conference in the Nansha district of Guangzhou, China.
“The chip industry here would have loved another five years to get its feet underneath it. Operating systems locally would have preferred more time for maturation,” he continued during a panel hosted by CNBC’s Geoff Cutmore entitled “Beyond One Belt, One Road.”
“But it’s kind of the necessity of innovation at this moment to survive. It’s pushing these companies to emerging technology markets and what they’re finding there are incredibly attractive conditions.”
Harburg highlighted particular opportunities in the e-commerce and banking sectors, within which many of the regions’ markets have a penetration rate of less than 10%.
“China (has) an e-commerce penetration rate of around 30%. In the Middle East today it’s 2%,” said Harburg. “(It’s) hugely attractive to walk millions of people online and find them a place in e-commerce that’s obviously mobile-first.
Ben Harburg, Managing Partner of MSA Capital speaks with Rafik Nayed, Group Chief Executive Officer of Al Salam Bank Bahrain and Geoff Cutmore, anchor of CNBC on Day 3 of CNBC East Tech West at LN Garden Hotel Nansha Guangzhou on November 20, 2019 in Nansha, Guangzhou, China.
Zhong Zhi | Getty Images
Rafik Nayed, CEO of Bahrain’s Al Salam Bank and fellow panelist, seconded Harburg’s remarks, noting that Chinese companies have been attracted to the region by “organic” market opportunities and “shared geopolitical structures” which unite the regions.
“Chinese technology is genuinely interested in opening up new markets of half a billion people, $1.5 trillion economy in the region,” said Nayed.
However, he noted that recent shifts in U.S. policy toward the Middle East have created a “vacuum” that has enabled China to curry favor in the region and demonstrate its business capabilities.
“In that pivot, we’ve discovered that on the tech side it’s actually a lot more advanced than what we were used to in the West,” he said.
To leverage off those opportunities, Nayed revealed at the conference that Al Salam Bank has partnered with MSA Capital to establish a $50 million fund to assist with the Middle East expansion of Chinese companies, as well as to help create new regional businesses based on “proven Chinese business models.”
When asked by Cutmore about possible security concerns surrounding Chinese technology companies’ entrance into the region, Nayed said: “I have not felt there is a lack of trust in China tech … I’m not feeling it.”
