Germany is Saudi Arabia's largest trading partner in the European Union, with imports from Germany expected to reach a record high in 2007.
Saudi-German trade has a long history and historic roots. Of the 25 nations which make up the European Union (EU), Germany is the Kingdom's leading trade partner. Worldwide, it ranked third - after the US and China - among the sources of imports into Saudi Arabia during 2006.
This ranking has been maintained over the past few years, despite the rise of China to become the Kingdom's second largest trading partner and the fall of Japan to the fourth slot. The gap between German and Japanese imports, however, is very small and does not represent a significant shift in trading patterns. Future years are expected to see China rapidly increase the variety and market share of its exports to the Kingdom, further widening its lead over both Germany and Japan.
The recent four-nation tour of the EU states of Britain, Germany, Italy and Turkey by Saudi Arabia's King Abdullah bin Abdul-Aziz, Custodian of the Two Holy Mosques, is expected to have boosted the Kingdom's trade relations with the EU.
"Germany is a country of an ancient history and human civilisation and a minaret of intellect. Its people have the right to be proud of it. It is illogical to diminish the image of Germany and its history or to blame its people for the mistake of a dark era it had lived and the German people were its first victim as the whole world suffered form the crimes of that era," said King Abdullah in a wide-ranging interview to the German newspaper Frankfurter Allgemeine during his recent trip.
"I think Germany managed to overcome this historical era to come back as a great country with its political and economic status and contribute with great efforts to the support of international security and peace and human development. This is what we have felt through its membership and recent chairmanship of the EU," added King Abdullah.
"During this period, there have been constant coordination and consultation at the level of efforts to solve the crises in our region and to bolster economic and cultural cooperation between our two countries," maintained King Abdullah.
In response to another question, King Abdullah reiterated that the new world order encourages transcending geographical boundaries and therefore calls for enhanced cooperation on all fronts. "I think that the globalisation era we are currently living managed to cancel all political, economic and cultural borders among all countries of the world and as an international community, we have become to live in a world whose concepts transcend geographical borders and there is inter-action among its parts despite distances and various cultures," he said.
"This requires from us to boost joint cooperation to achieve human development. With their civilisation reservoir, deep-rooted culture and human and material capabilities, Arabs are no doubt qualified to tangibly, essentially and importantly contribute to and participate in the world of the 21st century."
In February German Federal Chancellor Dr Angela Merkel visited Saudi Arabia. In 2006, Federal Foreign Minister Dr Frank-Walter Steinmeier visited the country twice within three months.
TIES THAT BIND
Although the UAE is officially Germany's leading economic partner in the region - with German imports amounting to $7.2 billion in 2006 - Dr John Sfakianakis, Chief Economist, SABB Bank, maintains in a recent report that the Saudi figure does not reflect the full picture. As in the case of UK imports, a large amount of German products enter the Kingdom through neighbouring GCC countries in the form of re-exports.
"We estimate that around SR2.9 billion ($773 million) worth of German goods were trans-shipped via other GCC countries in 2006. During that year, Saudi Arabia's imports from the GCC rose by 19.3 per cent to SR30.6 billion ($8.1 billion)," writes Dr Sfakianakis. "The export volume in 2007 is to mark a rise from the $5.6 billion in 2006," German Commissioner of Trade and Industries Gerd Dobner said.
Set up in 1978 by the German Association of Chambers of Industry and Commerce, the German-Saudi Arabian Liaison Office for Economic Affairs (GESALO) is part of the global network of German Chambers of Industry and Commerce, the German Association of Chambers of Industry and Commerce and the bilateral German Chambers of Foreign Trade. Through its office in Riyadh, GESALO supports and promotes bilateral economic relations between Germany and the Kingdom of Saudi Arabia.
Germany's main exports to Saudi Arabia are machinery (29 per cent), motor vehicles and parts (16 per cent), electrical goods (8 per cent) and pharmaceuticals (4 per cent). "It's true to say that German automobiles occupy a special place in the hearts of many Saudis," writes Dr Sfakianakis. Yet, despite a 14 per cent rise in vehicle sales across the Kingdom since 2005, German luxury cars do not command the same leading position in the Saudi market which they enjoy in the UAE.
In fact, it is Japanese automobiles that dominate - with a 35 per cent market share in the Kingdom, against a mere 5.3 per cent for German cars (SABB figures, 2006). However, German companies have traditionally dominated sales of new trucks (110,000 in 2006, according to SABB figures, which represents one of the largest commercial-vehicle sectors in the region). The truck market looks set to expand further, fuelled by the boom in construction projects across the Kingdom.
Since 1977, Mercedes-Benz has run a joint venture with the local National Automotive Industry, producing up to 8,000 heavy-duty trucks a year at its plant in Jeddah - one of the two truck-assembly plants in the Kingdom.
German firms won big contracts this year to supply development projects in Saudi Arabia with machinery and technology, which will lead to an increase in German exports to the Kingdom reaching $7.1 billion this year, Dobner said last month.
German firms are involved in technology transfer schemes to seven Saudi petrochemical projects under construction, and a German-Saudi consortium led by Deutsche Bahn is expected to vie for a north-south railways expansion contract for the transportation of raw material, according to Dobner.
© Gulf Business 2007
