Saudi Arabia is Buying Gold
A recently-released Dubai Chamber of Commerce and Industry special report has revealed that the UAE is becoming increasingly competitive in Saudi Arabia’s import market, as the Kingdom constitutes the 2nd largest destination for UAE-made products after India.
The movement of goods between the two countries has been facilitated by the GCC customs unification procedures and efficient transportation system. According to the UAE Federal Customs Authority data, the Emirates recorded a AED40 million trade surplus with Saudi Arabia in 2014, as it gears up to release its 2015 data.
“The UAE is keen on maintaining the best trade relationships with Saudi Arabia,” says Hamad Buamim, President and CEO of Dubai Chamber. “Strong exchange between GCC countries serves to boost the economic performance of the Council as a whole and, consequently, of the entire Arab region. We need to cooperate amongst ourselves to implement all measures necessary to ensure an unobstructed flow of goods and services across borders, to the benefit of all parties.”
While Saudi imports from its neighbour are diverse, items such as pearls, precious stones, metals, and coins dominated the list in 2015, making up 22% of the UAE’s total exports of these products, and 32% of the Kingdom’s net global imports of the product group, worth US3.7 billion. Moreover, 27% of Saudi Arabia’s imports of copper and copper articles (worth US672 million) and 11% of its imports of articles of iron and steel (worth US626 million), on the one hand, and raw iron and steel (worth US507 million), on the other, came from the UAE, constituting 8%, 7%, and 6% of the latter’s total exports to the Kingdom, respectively.
Meanwhile, Saudi Arabia’s export of ships, boats and floating structures to the UAE, consisting mainly of tugs and pusher craft, dominated the list of Saudi exports to the Emirates. The export value of US1.9 billion accounted for 28% of total exports to the UAE and 77% of Saudi Arabia’s world exports of the product group.
In addition to that, 5% of the Kingdom’s exports of plastic and plastic articles (worth US798 million), on the one hand, and organic chemicals (worth US465 million), on the other, went to the UAE, constituting 12% and 7% of the forer’s total exports to the UAE, respectively.
Also on the list of UAE imports from Saudi Arabia were US388 million worth of electrical and electronic equipment, making up 6% of the Kingdom’s exports to the Emirates, yet more than two-thirds (36%) of its global exports of that product group.
The numbers show a clear improvement in the UAE’s competitiveness as a source market for Saudi Arabian imports. In fact, the Emirates’ share in Saudi Arabia’s import market had increased from 4% in 2012 to 5% in 2015. Similarly, the spectrum of imported products expanded as well; in 2012, Saudi Arabia imported 401 types of products from the UAE 38% of all types of imported products during that year while in 2015, the number rose to 586 types, or 52% of the 1,123 types of products Saudi Arabia imported during that year.
A product’s relative competitiveness in its export market can be measured through an index called the Revealed Comparative Advantage, RCA, with a score of at least 100 pointing to high competitiveness. In 2012, 179 products from the UAE managed to record an RCA of 100 or more in the Saudi Arabian export market. The number continued to increase through the years to reach 213 products in 2015.
Saudi Arabia’s largest imports from the UAE in 2015, according to their reported RCAs, were copper wire, with an RCA of 1,047; copper plates, sheets and strips, thickness > 0.15mm, with an RCA of 1,352; tea, with an RCA if 1,171; and rolled stainless steel sheet, width > 600mm, with an RCA of 1,115. Also on the list were solid cane or beat sugar (RCA = 824); polyacetals, polyethers, polycarbonates, etc. (RCA = 691); and gold, whether unwrought, semi-manufactured or powdered (RCA = 665), which also happened to be the Kingdom’s largest import from its Gulf neighbour at an import value of US1.8 billion or 35% of the former’s global import of the product in 2015; as well as special purpose ships and vessels with an RCA of 631.
As the numbers show, trade between the region’s two largest economies have borne the brunt of falling oil prices in the global market. And with crude prices on the rise in recent months, demand for imported goods in both countries is poised to maintain its high levels, painting an optimistic image of the near economic future of the region.