Patrick W. Ryan | SUSRIS
When King Salman talks with President Barack Obama this week in his first White House visit as ruler, much of the attention will be on critical questions of regional security crisis management and bilateral defense issues. How to deal with conflicts besetting Yemen, Iraq and Syria, and emergence of post-nuclear deal Iran will top the leaders’ agenda.
No less visible will be the importance of the historic business relationship between the Kingdom and America as demonstrated by a high-powered, day-long investment forum on Friday. The importance of the symposium is exemplified by the opening panel lineup: Ministers of Finance, Commerce and Industry, and Health and the Governor of the Saudi Arabian General Investment Authority. Saudi Arabia is clearly open for business and working hard to expand American trade and investment.
President Obama met King Salman in Riyadh in January. (SPA)
The top-level attention to business ties comes at a time of increasing pressure on economies as the global energy market remains in the doldrums amid over-production and key consumers’ slowdowns.
The decades old business partnership between Riyadh and Washington has been a cornerstone to the relationship but the composition of the trade pattern is at a juncture according to Richard Wilson, President of the Saudi-U.S. Trade Group. He said, “We’re seeing a significant change in the trade balance and flow between the U.S. and Saudi Arabia,” adding, “Specifically, U.S. commodity imports, primarily oil, are down 60% this year.”
The trade surplus, typically favoring the Saudi ledger, has slipped with January to June 2015 numbers at just over $2 billion down from $19 billion for the same period in 2014. The shakeup in the oil market matters in more than just the US-Saudi trade balance. “As the decline in oil revenue bites into the Saudi budget you’ll have further examination of spending such as major projects and plans,” said Wilson. “There will be more focus on the private sector to pick up speed and offset some of the government spending reductions.” Those shifts, he said, will result in greater diversification, emphasis on small and medium enterprises and increased emphasis on foreign investment.
U.S. Trade in Goods with Saudi Arabia (Jan 2013-Jun 2015) (Source: Census.gov)
The role of SMEs is an area where many business people are placing bets for a boost in trade prospects. Ford Fraker, former U.S. Ambassador to the Kingdom and a veteran financial services expert in the Gulf market, said, “The governments need to do more to promote trade by directly reaching out to companies, primarily SMEs.” He said American companies quickly learn about the tremendous business openings in Saudi Arabia once they spend time in the Kingdom, noting, “The challenge is to get them on an airplane, but it can be awfully hard to get American companies to make that effort.” Fraker said, “The Middle East is a long way off; culturally it’s very different; and you still get incredibly alarming travel advisory warnings from the State Department.” Connecting business people is key and he said more can be done, “You want people to go back and forth and have a chance to establish personal relationships where things begin to happen but traditionally it’s been underfunded.”
The building business bridges aspect of boosting trade was echoed by David Hamod, National US-Arab Chamber of Commerce President, who said, “The potential for relations between U.S. and Saudi SMEs is immense.” However, he noted American companies, particularly small and medium businesses were at a disadvantage, “Other governments will frequently subsidize delegations to go to the Arab world. This is not a luxury that American SMEs enjoy.”
Trade and investment proponents remain upbeat about the bilateral business picture. Hamod said, “For the foreseeable future the economy of Saudi Arabia will remain the powerhouse in the region and we are very encouraged about recent developments in the Saudi stock market. “ He added, “I am also very encouraged by the degree to which Saudi institutions like SABIC are looking to the U.S. market and investments there as a way of strengthening the relationship.”
The work of the Investment Authority in Riyadh has been an essential component of trade and investment expansion. “Under the leadership of Abdullatif Al-Othman, there’s been a focus on technology transfer, manufacturing in the Kingdom and use of Saudi manpower in the work force,” said Wilson. He noted, “These are admirable steps but they need to work hand in glove with the economic diversification inside the Kingdom that’s ongoing – a number of these threads will play out over the next five years.”
Saudi-US Trade Group’s Wilson also pointed to the “transformative commercial” opportunity that is the hundreds of thousands of young Saudis graduating from American universities under the King Abdullah Scholarship Program. “It will benefit the U.S.-Saudi business relationship for generations, because these students coming out of U.S. colleges will have developed affinities with U.S. technology, with U.S. brands, and they will have established relationships with American counterparts that are simply invaluable.”
Patrick W. Ryan is an independent analyst on Gulf affairs. His editorial consulting firm produces the SUSRIS.com project that chronicles developments in Saudi-US relations.
Previously published in Al-Arabiya on September 3, 2015.
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