SAUDI BUILDS TRADE TIES TO BOOST NON-OIL EXPORTS

Saudi Arabian trade growth is expected to remain steady over the next few years, as non-oil exports expand, even as oil exports stay stable.

Saudi Arabia is keen to lay the ground for a Pan-Arab Greater Free Trade Zone, according to assistant undersecretary of the Ministry of Finance Hussein bin Shuwaish Al-Shuwaish, as he led the kingdom's delegation to the 47th session of the follow-up committee, affiliated to the Arab Socio-Economic Council in Cairo in June.

In a statement to the Saudi Press Agency, Al-Shuwaish said the session discussed a number of issues, notably those related to the best ways to implement the free trade zone, through overcoming all hindrances facing its member states.

Saudi Arabia is also keen to forge deeper trade and investment ties with Japan, with which it already enjoys strong trade flows.

In June, the Saudi Ministry of Economy, Trade and Industry (METI) held the Third Ministerial Meeting on Saudi-Japan Vision 2030 with the participation of the minister of economy and planning and other ministers from Saudi Arabia. Both countries approved the document Saudi-Japan Vision 2030 2.0.

The forum introduced new fields such as entertainment and start-ups, in addition to the fields such as energy and infrastructure, wherein Japan and Saudi Arabia have a long history of co-operation.

Minister Seko Hiroshige said that the Saudi-Japan Vision Office in Riyadh, which was established for supporting co-operation projects between the two countries, has helped Japanese companies in more than 1,000 cases in total, and welcomed the announcement of the opening of the Saudi-Japan Vision Office in Tokyo by the Saudi Arabian side.

“Saudi-Japanese total trade volume is significant and we consider each other as very important trading partners,” said Hideki Sho, the managing director of the Riyadh offices of both the Japan External Trade Organization (JETRO) and the Saudi-Japan Vision 2030 Office. “In this free-trade world, both Japan and Saudi Arabia gain huge economic benefits from trade. I believe that export items from Saudi Arabia can be more diversified as the result of the Vision 2030 reforms.”

Japan exported goods valued at USD 20.5 billion to Saudi Arabia last year, while Saudi non-oil exports stood at USD 3.57 billion, according to the Saudi General Authority for Statistics. Saudi Arabia also accounts for a major portion of all Japanese oil imports.

Saudi Arabia is also eyeing greater trade and investment co-operation with Russia. In June, the Saudi-Russian Joint Committee on Trade, Economic and Scientific Cooperation met in Moscow.

The two countries discussed the main issues of trade and economic co-operation, including improving the regulatory framework, enhancing economic and investment ties, joint projects in the fields of energy, industry and agriculture. This was followed up with another meeting in Jeddah to expand energy trade co-operation between the two countries, including investments in energy.

Russia exported goods valued at USD 5.4 billion to the kingdom last year, while Saudi Arabia’s non-oil imports stood at USD 121.5 million, according to Saudi government statistics.

Saudi exports in the first six months of the year, stood at just over USD 501 billion, according to GSA. Exports stood at SAR 524 billion in the first six months of 2018, a 4.39% decrease, primarily on the back of higher crude oil prices. Non-oil exports were SAR 109.6 billion, compared to SAR 116 billion in the first six months of 2018, or 5.5% lower,

Oil exports stood at SAR 60 billion in June (14.76% lower than May), with non-oil exports at SAR 17 billion (3.29% lower than May).

Encouragingly, non-oil exports have been steadily raising their contributions to overall exports, and averaged around 21.9% of total exports this year.

Imports were also in decline, as Saudi Arabia pushed to source goods from domestic producers. Imports stood at just under SAR 250 billion in the first half of the year, a fraction lower compared to SAR 256.3 billion during the first half of 2018.

The International Monetary Fund expects oil exports at USD 221.3 billion this year, while non-oil reached USD 62.9 billion. By 2024, the IMF expects non-oil to rise to USD 68.1 billion while oil will reach USD 200 billion, primarily on expectations of lower crude oil prices. While oil prices will remain subject to speculation and may surprise on the upside, the steady improvement in non-oil exports is encouraging.