As Saudi Arabia gears up to build more schools, erect steel plants and expand its hospital facilities, U.S. companies will have increased opportunity in that market--but not if they don’t pay more attention to local market needs and social customs, several members of a Saudi business delegation said Tuesday.
Abdallah Dabbagh, secretary general of the Saudi Council of Chambers of Commerce and Industry in Riyadh, said U.S. companies have lost their edge in the Saudi market and noted that Japan has surpassed the United States as the Arab nation’s leading trading partner.
Dabbagh blamed a lack of aggressive marketing by U.S. companies and their reluctance to learn foreign trade practices. He also said a lack of long-term commitment by U.S. firms and weak government support have hurt U.S. businesses.
“Two years ago,” he said, “the Japanese overtook the United States as our country’s leading trade partner,” despite a strong appreciation of the yen, which made Japanese products more expensive to foreign consumers.
He predicted that Japanese companies, with a sound marketing strategy and a sizable share of the Saudi market, will continue to prosper at the expense of U.S. competitors.
The Saudi business group was visiting Newport Beach at the invitation of the World Trade Center Assn. of Orange County. The Saudi business leaders met with executives from the county’s computer, pharmaceutical and biomedical industries to discuss opportunities for foreign companies in Saudi Arabia.
James Chang, president of Compulink Associates, an Irvine trading firm specializing in high-technology goods, said he hopes to supply Saudi Arabian companies with computer parts from the suppliers in Orange County and the Far East.
While Dabbagh said he believes that U.S.-Saudi trade relations are relatively sound, he added that conflicts between the two countries continue over Middle East policy and U.S. arms sales to Saudi Arabia.
Saudi Arabia accounts for 50% of all U.S. trade with the Arab world, making it the eighth-largest trading partner of the United States. In the last year, bilateral trade reached $11 billion, with the U.S. suffering a multibillion trade deficit.
One major reason why U.S. businesses are falling behind is that U.S. companies have not kept up with changes in the Arab country, asserted Wahib BinzagrCQ, chairman of the Saudi Cairo Bank.
“American companies should adapt to Saudi specifications, especially in selling environmental equipment in our country,” he said. “If not, they will lose out to more aggressive companies from the Pacific Rim, such as Japan, South Korea and Taiwan.”
More important, the U.S. government should allow U.S. businesses more leeway in selling their goods abroad, members of the delegation said, referring to U.S. government restrictions on the sale of military equipment to the Saudis.
“If we can’t buy (defense-related equipment) here, we can always buy it elsewhere,” Dabbagh said. “There are the British, Italians and so forth.”
But he stressed that the Saudi Arabians would rather buy U.S. defense and technology equipment because of its superior quality.
SAUDI ARABIA’S ECONOMY AND TRADE
PER CAPITA INCOME: $8,800.
CURRENCY: Official rate is $1 to 3.75 Saudi Riyals.
INFLATION RATE: Less than 1%.
1990 ANNUAL BUDGET: $38 billion.
1989 BUDGET DEFICIT: $7.7 billion.
OIL PRODUCTION: 40% of Gross Domestic Product.
LARGEST TRADING PARTNERS: U.S. (16.3%), Japan (16.3%), West Germany (7%).
SEEKING TO IMPORT: Processed food, electronics and calibration equipment, electrical equipment, industrial process technologies, medical and pharmaceutical products, high-performance telecommunication gear, environmental protection equipment, air and sea navigation equipment and aerospace, engineering and construction equipment.
PRINCIPAL EXPORTS: Crude oil, refined petroleum products, petrochemical products, wheat, machinery parts and dates.
PRINCIPAL IMPORTS: Agricultural products, processed food, livestock, non-electric machinery, electronic equipment, cars, trucks, vehicular spare parts, machinery, electronic parts, computers/computer peripherals, telecommunications equipment, chemicals.
Source: National U.S.-Arab Chamber of Commerce