New Zealand’s traditional trade with the Gulf states is getting a shake-up, ambassador to Saudi Arabia Rod Harris says.
The coming building boom in the Gulf opens huge opportunities for Kiwi firms in sectors in which this country have been under-represented, he told NBR ONLINE.
Bilateral trade with the six states making up the Gulf Cooperation Council (GCC) – Saudi Arabia, Kuwait, United Arab Emirates, Qatar, Bahrain and Oman – stood at a touch over $5 billion last year, making the collective our fifth biggest trading partner behind Australia, China, USA and Japan.
That number has jumped $2 billion in two years. Statistics New Zealand figures show the main Kiwi exports to Saudi Arabia, our 11th largest trade partner by value, continue to be milk powder, butter and dairy spreads, and sheep meat.
Unsurprisingly, imports from Saudi Arabia are dominated by crude oil and fertiliser.
A similar picture emerges for UAE, our 16th biggest trade partner, with $1.34 billion of bilateral trade, while 20th-ranked Qatar’s 2011 trade figures ($1.07 billion) are skewed by $950 million of crude oil imports by New Zealand.
The figures are mind-boggling. Saudi Arabia estimates it will spend $US800 billion on infrastructure to 2020, while Qatar, the host of the 2022 Football World Cup, is planning to spend $US80 billion.
Kuwait, the so-called sleeping giant of the region, has plans to spend more than $US100 billion. Whole cities are being built in Saudi Arabia and a Gulf-wide rail link is planned.
Earlier this week, a $US124 million contract to build Qatar’s first rail system, in preparation for the World Cup, was awarded to Australian firm Leighton Holdings, which has a 45% stake in a Middle East company.
Mr Harris, a former lawyer and trade negotiator, has been in New Zealand this week giving his message to business groups.
He told NBR ONLINE: “There are mind-boggling sums being spent on construction. I look at that and I know we have niche products and service suppliers, like engineers or architects, who have been getting a slice of the action.
“And if they’re wanting to expand their operations in the gulf, then what we’re saying is come and have a look and we’ll try and introduce you to the right people and see if the deals are there to be done.
“People keep talking about China. Yes, China’s fantastic and important and central, and it needs to be at the heart of what we’re doing as a country.
“But when I think of the scale of what’s being done in the Gulf it must be broadly comparable.”
Some high-tech, niche New Zealand firms already have big plans in the region.
Auckland businessman John MacCulloch says the Middle East will be the biggest export market over the next few years for his company, Aluart, which specialises in aluminium cladding.
Aluart has tendered for work in the region worth $US25 million and will open a manufacturing base in Qatar early next year.
Mr MacCulloch says the biggest issues facing Saudi companies is supplier-side shortages. His warning for Kiwi businesses is that it takes time to firm relationships and companies should be in a well-defined niche.
“If you’re selling a generic product you’ll get a generic price. If you’ve got a tech product, you’ll get a tech price.”
Aluart will open a manufacturing plant in Qatar early next year, rather than shipping its products from Australia and New Zealand.
“The reality is the jobs there are so large you’ve got to have local manufacturing.”
Initial contracts open doors
Mr Harris says some Kiwi companies expect to take three years to establish strong business ties in the Middle East, while others have taken six months.
“It’s like business in most places, I suspect. You need to get that first one or two contracts or a signature project so you can go elsewhere in the Gulf and say, ‘well, they did it over here’.”
Considering the recent Arab Spring, what of security and stability?
Mr Harris says it is “crystal ball stuff” and you never know what is around the corner. However, from living there, he gets a sense of “real stability”.
“New Zealand business people just don’t know a lot about the Gulf. Understandably, businesses have a limited amount of resource and capital to spend on expansion and export, and they’ll probably go to the places they know.
“They should at least think about the possibilities in the Gulf as another very exciting market.”