COUNTRY MARKET STUDY: SAUDI ARABIA Compiled by: Directorate International Trade Sub-directorate: Europe, Russia and Middle East Department of Agriculture, Forestry and Fisheries March 2010 Authors: Mr Gert van Rensburg ([email protected]) and Ms Joyce Letswalo ([email protected]) Disclaimer The Department of Agriculture, Forestry and Fisheries take no responsibility for any action taken from this study. This is a desktop study and own research must be undertaken, before decisions is made based on this study. SUMMARY1 This country market study of Saudi Arabia examines the trade flows between South Africa (SA) and Saudi Arabia. The major objective of the study is to identify agricultural products that have the potential to be exported to Saudi Arabia. First the study gives a historical background about Saudi Arabia, looks at some country facts, give an economic overview and look at the regional and international relations of Saudi Arabia. Then it examines the trade policy of Saudi Arabia, looks at bilateral agreements between SA and Saudi Arabia and at total trade between these two countries. From here on there is focused on agricultural trade, inter alia taking into account the following: the most important products imported and exported and the trade balance. An analysis is done to determine posible exports to Saudi Arabia. Finally it looks at some trade barriers and a conclusion and some comments are made on trade with Saudi Arabia. The Kingdom of Saudi Arabia (Saudi Arabia) is a Middle Eastern Country, occupying about 80 percent of the Arabian Peninsula. The economy of Saudi Arabia is oil-based and there is strong government controls over major economic activities. It possesses more than 20% of the world's proven petroleum reserves and ranks as the largest exporter of petroleum in the world. Saudi Arabia is a member of the Gulf Co-operation Council (GCC) and a leading member of Organisation of the Petroleum Exporters Countries (OPEC). More than half of Saudi Arabia's GDP is managed by the government. Mineral products constitute about 90% of Saudi Arabia's exports and foodstuffs are about 14% of Saudi Arabia's total imports. The hot, harsh weather and limited water supply of Saudi Arabia, results in the climate not being suitable for agriculture. Exports of agricultural products from SA to Saudi Arabia were R 523.1 million in 2008, while imports of agricultural products were R 26.5 million. Edible fruits, cigarettes and chocolate were the major agricultural exports, while waters and dates were the major agricultural imports (the import of waters was small in 2009). A trade potential index (TPI) was drawn up and it was noted that there are opportunities for deepening trade with Saudi Arabia. The “trade chilling” analysis was also done. The results are in Table 12 and 13, respectively. The market for certain product groupings in Saudi Arabia were analyzed and include inter alia some citrus; food preparations; cigarettes; sauces and preparations, tomato sauces; juices; maize; preparations for infant use; milk and milk powder; frozen boneless bovine cuts; maize seeds; refined sugar and chocolates. It is noted that tariffs for SA‟s exports to Saudi Arabia are relative low and there was a further decrease in some tariffs in June 2009. Finally, we look at the trade barriers, as well as the trade related infrastructure, conclusion and some comments are made. 1 Acknowledgements: Various sources were used during the composition of this document, which are acknowledged under paragraph headings, footnotes or in the text. 2 INDEX 1. INTRODUCTION ............................................................................................................................. 5 1.1 Historical background ................................................................................................................... 5 1.2 Country facts .................................................................................................................................. 6 1.3 Economic overview ....................................................................................................................... 6 2. TRADE RELATIONS ....................................................................................................................... 8 2.1 Trade policy .................................................................................................................................... 8 2.3 Total Trade between South Africa and Saudi Arabia ..................................................................10 3. AGRICULTURAL TRADE ..............................................................................................................11 3.1 Profile ............................................................................................................................................11 3.2 Forecast of consumer expenditure ..............................................................................................12 3.3 Agricultural trade between South Africa and Saudi Arabia .......................................................14 3.4 Analysis to determine posible exports to Saudi Arabia .............................................................15 3.4.1 Trade potential index ......................................................................................................................15 3.4.2 "Trade chilling concept” ...................................................................................................................18 3.4.3 Discussion of products identified by the TPI and trade chilling ........................................................21 3.4.3.1 Oranges, mandarins/clementines/wilkings and similar citrus, and fresh or dried lemons and limes ......................................................................................................................................21 3.4.3.2 Food preparations ..................................................................................................................22 3.4.3.3 Cigarettes ...............................................................................................................................23 3.4.3.4 Tomato ketchup and other tomato sauces, and sauces, preparations mixed condiments & seasoning ...............................................................................................................................23 3.4.3.4.1 Consumer market for sauces, dressings and condiments in Saudi Arabia .............................24 3.4.3.5 Juices……. .............................................................................................................................25 3.4.3.5.1 Consumer market for fruit and vegetable juices in Saudi Arabia .............................................26 3.4.3.6 Maize…….. ............................................................................................................................26 3.4.3.7 Preparations of cereals, flour, starch/milk for infant use .........................................................27 3.4.3.7.1 Consumer market for baby food in Saudi Arabia ....................................................................27 3.4.3.8 Milk powder not exceeding 1.5% fat, Milk and cream powder unsweetened exceeding 1.5% fat……… ................................................................................................................................28 3.4.3.8.1 Consumer market for milk products in Saudi Arabia ...............................................................29 3.4.3.9 Bovine cuts boneless, frozen ..................................................................................................29 3.4.3.10 Other products .......................................................................................................................30 3.4.3.10.1 Maize seed…… ......................................................................................................................30 3.4.3.10.2 Refined sugar in solid form .....................................................................................................30 3.4.3.10.3 Chocolates……. .....................................................................................................................31 3.5 Tariff structure ..............................................................................................................................33 4. TRADE BARRIERS ........................................................................................................................33 4.1 Non Tariff Barriers ........................................................................................................................33 4.2 Sanitary and phyto-sanitary (SPS) regulations ...........................................................................34 4.3 Trade related infrastructure .........................................................................................................35 5. CONCLUSION ................................................................................................................................35 6. COMMENTS ON STUDY ................................................................................................................37 ANNEXES ..............................................................................................................................................39 Annex 1: Exports of all agricultural products by SA to Saudi Arabia in 2008 ..........................39 Annex 2: Description of the Trade Potential Index .....................................................................42