Türkiye's Exports to Saudi Arabia Increased

Turkey's exports to Saudi Arabia rose more than 50 percent in May, 30 percent in June, and 21 percent in July. The 11th webinar in the series organized by the Aegean Exporters Associations under the title "The Course of Coronavirus in Our Target Markets" was held. Jeddah Chamber of Commerce Counsellor Hıfzı Oğuz Korkmaz evaluated developments in Saudi Arabia's foreign trade following the pandemic and answered questions raised by exporters. Melih İşliel, Board Member of the Aegean Fish Products and Livestock Products Exporters Association, also shared various information about the Saudi Arabian market. Jak Eskinazi, Coordinator Chairman of the Aegean Exporters Associations, recalled that Saudi Arabia is one of the world's largest economies and noted that the country imports many products it uses. Eskinazi, noting that Saudi Arabia is one of Turkey's most strategic markets within the Middle East and Gulf countries, said "Saudi Arabia accounts for 2 percent of our total exports. It is the 15th country where we export the most. With our exports of USD 3.3 billion and imports of USD 3 billion, we have a balanced trade volume exceeding USD 6 billion. There are opportunities for cooperation between our countries in many areas. The sectoral distribution of our exports is 80 percent industrial and 20 percent food. During the January-July period, exports increased in 8 of 27 items. Items that recorded growth in the first 7 months include; cereals, legumes and oilseeds, ferrous and non-ferrous metals, mining products, air-conditioning industry, tobacco, fruit and vegetable products, olives and olive oil, hazelnuts and hazelnut products," he said. Eskinazi, noting that an upward trend is dominant in Turkey's exports to Saudi Arabia, said "Compared to the previous year, our exports increased 50 percent in May, 30 percent in June, and 21 percent in July. In the first 7 months, we realized USD 1 billion 950 million in exports to Saudi Arabia, and USD 258 million in July. In the January-July period, exports from our association reached USD 144 million with a 5 percent increase. In July, we realized USD 25 million in exports with a 31 percent increase. The leading sectors in our association's exports are; tobacco, fish products and livestock products, steel, cereals, legumes and oilseeds, mining, chemical substances, fresh fruit and vegetables, olives and olive oil," he said. Eskinazi favors exporters taking precautions to prevent the impact of the decline in oil prices—the main source of income that constitutes 70 percent of the country's budget due to the coronavirus effect—and political developments on bilateral trade. "We are receiving feedback that there has been an increase in practices targeting our companies exporting to Saudi Arabia and operating in the country, and that developments affecting our trade have occurred in a wide range, including the slowing of customs procedures. Our food products, which are highly susceptible to deterioration, particularly fresh fruit and vegetable exports, are among the sectors most affected by this situation. Fresh fruit and vegetable exports experienced a 42 percent contraction throughout the year and a 51 percent decline in July. Although our relations with Saudi Arabia were not very good in 2019, it became the country where we increased our exports the most among the top 20 countries to which we export. Despite various delays and problems at customs, our exports increased 25 percent. With the pandemic, the perception of protecting domestic production is at the forefront in all countries. For this reason, customs increases are being implemented. Our exporters should position themselves accordingly and be prepared for all types of scenarios."

Recommendations for the Saudi Arabian market are as follows;

-Saudi Arabia's economy is one of the world's largest. It is hosting the G20 this year. According to purchasing power parity, it ranks 17th in the world; according to GDP rankings at current prices, it ranks 18th. The largest economy in the region. It provides approximately 50 percent of the production among the Gulf Cooperation Council member countries. With a population of 34 million, it is the largest country in the region. -65 percent of budget revenues, 35 percent of production, and 80 percent of export revenues come from oil sources. Changes in oil prices directly affect the country's economy. For this reason, the country ran a budget deficit of 40 billion dollars. OPEC countries, gathered at the beginning of the year, failed to reduce production due to disagreement with Russia on oil production, and due to the pandemic and shrinking global demand, oil prices fell to as low as USD 14. It is expected to trade at around USD 40 throughout the year. -VAT at the 5 percent level was increased to 15 percent. Increases were made in customs tax rates. Additional customs duties were imposed to protect sectors. -Hajj and umrah pilgrimages were not carried out this year. In 2019, 2.5 million people performed hajj and 19 million performed umrah pilgrimage. 75 percent of hajj pilgrims came from abroad. In umrah, 40 percent comes from abroad. Hajj and umrah contribute 7 percent to GDP. Hajj and umrah are among leading sectors. They bring along many sectors such as hotels, food, textiles, construction, communications, and souvenirs. Since the country is dependent on imports, the closure of this sector leads to declines in other sectors. -Saudi Arabia has the largest construction sector in the region. In the construction sector, investments were expected at the USD 55 billion level at the beginning of the year. This budget is expected to contract by 20 percent or 40 percent. Since the construction sector carries many sectors on its shoulders, it also negatively affects imports. Saudi Arabia will undertake 38 percent of total construction projects among GCC countries as of 2020. -Strengths; the world's largest oil exporter. Increased foreign exchange revenues depending on oil. A fixed exchange rate regime is in place. This is evidence of exchange rate stability. The largest economy in the region and the most densely populated place. Has serious relations with the West, particularly the US and UK. It transfers its technological infrastructure from these countries. From the banking sector to the insurance sector, the technological infrastructure is solid in many areas.

-Weaknesses; a country dependent on oil. Declines in oil revenues affect the economy. High investment costs exist. The business culture we are accustomed to does not exist. Patience is required.

-Opportunities; Vision 2030 project exists. Economic diversification is targeted to reduce oil dependence. Investments are expected in tourism, health, education, and technology. The country's goal with this project is to open up to the outside and become a more outward-looking country. -Turkish product perception is at a high level. Although we face an unfavorable political and bilateral relations situation, Turkish products are preferred more compared to products from other countries. -Threats; falls in oil prices, budget deficits, bilateral relations, pandemic, economic situation. Oil prices that were trading at around USD 70 at the beginning of the year are currently at around USD 40 per barrel. The economy is slowly recovering. It causes contraction in the country's economy and affects imports. -Member of the Gulf Cooperation Council (GCC). There is a Customs Union agreement between these countries. Zero tariffs apply between these countries, and common customs duties apply to third countries. There are no customs duties among GCC countries. The GCC has free trade and standstill agreements with Singapore and EFTA. Customs tariff rates are 5 percent, while these rates reach 25 percent on products produced within the country. -As of 20 June 2020, additional customs duties were imposed on over 2,000 products in 57 chapters. Import processes for food, health, pharmaceutical, and cosmetic products are subject to extra approvals and processing. Halal certificate presentation is required for every category in white and red-white meat. -As of 2019, there is a foreign trade volume of USD 400 billion. Export revenues move parallel to oil prices. Since the country's economy is highly dependent on imports, import figures are affected by increases and decreases in oil prices. -In 2019, it had USD 144 billion in imports. It imports most from China, the US, the United Arab Emirates, Germany, and Japan. It exports most to China, the United Arab Emirates, India, Singapore, and Turkey. In this respect, Turkey is an important commercial partner. -Products it imports; mobile phones, passenger vehicles, light oils and preparations, pharmaceuticals, aircraft and spare parts, unworked gold, lighthouse ships, fire-fighting ships, floating cranes, floating pools, machines for receiving, converting and reproducing sound, image or other information, water vessels. The products it exports are petroleum and petrochemical products. -In 2019, exports to Saudi Arabia increased 25 percent while imports decreased 10.4 percent. In 2019, our exports were USD 3.3 billion. It is the 15th country where we export the most. In January-June 2020, our exports decreased 18.8 percent and imports decreased 22.7 percent. In the first half, the economy was completely closed in March and April. When the situation was like this, imports contracted as in all the rest of the world. In June, we achieved exports of over 30 percent. -In July 2020, while Turkey's general exports declined 5.8 percent, exports to Saudi Arabia showed a 5 percent decrease. The last week was the holiday week. Taking into account that Saudi Arabia entered the holiday a week early and the missing working days, the contraction is normal. If we compensate for the holiday and working days, we would have closed with growth. -Problems encountered at customs, uncertainty about whether an embargo is being applied to products sent from Turkey. Field reports were denied by Saudi authorities. As a result of meetings with the highest level of official bodies in Saudi Arabia, the response received was that such news should not be given credence and that Turkey is an important commercial partner for Saudi Arabia. Saudi authorities also conveyed the message that they are ready for all kinds of cooperation, and commitments were also obtained that an embargo would absolutely not be applied and no official measures would be taken. There is no question of our exports being banned or subjected to an embargo. -The issue of delays at customs is not a new situation. Since the second quarter of 2019, we have seen that products originating from our country are detained at customs longer than products originating from other countries. Sometimes it reaches 3 weeks. Our exporters should position themselves, and it is important that suppliers are informed. Products not clearing customs can lead to disruption of the supply chain. Information should be provided on the need for proper inventory management. New exporters considering exports should take this into account. -With the pandemic, since it is an import-dependent economy, customs accelerations were implemented to make supply processes sustainable. Our products cleared within 1 week. However, since June and July, it has returned to the same routine. -SABER system; an electronic product registration system that records the entire chain from imports to exporters and accelerates the process of customs clearance of products. It came into effect from 2019 onwards. All products are intended to be registered. Lists are constantly updated. Exporters should monitor. SABER implementation covers all countries. If required documents are not obtained or if registration is not made, products cannot clear customs. It provides various conveniences that reduce bureaucracy in terms of efficient use of processes. -Saudi Arabia's Standards Institute (SASO) determines the compliance of products with standards. Certificates are issued by the Turkish Standards Institute and other accredited bodies. Without these certificates, products are not allowed into the country. -SFDA, Saudi Arabia's food and drug authority. In exports of food, pharmaceutical, and cosmetic products to the country, SFDA approval is required. The exporting company itself or its local supplier can apply for the document. If you change your supplier when the document is obtained through a local supplier, the process starts over. However, when the exporter obtains it themselves, there is no such problem. SFDA certification can sometimes be a non-tariff barrier. For example, in fish product exports. -SFDA approval is required for egg exports. As in fish products, permission is expected. Permission has not yet come. It is said that domestic egg production in the country is insufficient. However, there is serious production in table eggs. At the beginning of this year, due to diseases occurring in some production facilities, demand was high. Despite the lack of SFDA certification in egg exports, serious exports were realized in April and May due to domestic market demand. Permission was given due to the contraction in the domestic market. -Other matters requiring attention by business circles include; localization and nationalization concepts have come to the fore worldwide. Serious conveniences are being provided for attracting foreign investors to Saudi Arabia. Foreign investments are encouraged as part of the Vision 2030 project and localization is dominant. Customs increases can be linked to protecting domestic production. -In a country where foreign investment is difficult, local business partnerships open serious doors in the long term. It is beneficial to choose our local partners carefully. Since the country is dependent on imports, it would be beneficial for our exporters to work on controlling inventory management. We believe we have left behind the zero-stock chain. Packaging is very important. Natural and organic products are in high demand. -There is feedback that during periods of intense pandemic, suppliers did not do their part despite exports being made. Every type of scenario should be prepared for during this process. Even with trust, exports should be made on a contractual basis. -Turkish origin products are receiving serious treatment at customs. Our exporters should pay attention to licenses and certificates. Some matters could be overlooked through personal relationships and various conveniences were provided, but now our products go through a serious process. If you have obtained the necessary license certificates, there is no situation where products cannot clear. Documents required in imports should be monitored. -Social media use is very intense. 90 percent of the population uses the internet and 70 percent use social media. Digital channels should be utilized in marketing products. 74 percent of the country uses YouTube, 62 percent use Facebook, and 60 percent use Instagram. -E-commerce sales are expected to increase 23 percent in 2020, rising to USD 6.1 billion. This volume may have increased with the pandemic. During the 2020-2024 period, sales are estimated to increase 7.1 percent annually. Electronics account for 33 percent, fashion 31 percent, food and personal care 21 percent, toys 10 percent, and furniture 5 percent market share. It is expected that there will be 21 million users in 2020. With the pandemic, trade fairs cannot be held anymore. Around 10,000 fairs were cancelled. All will be cancelled by year-end. Virtual fairs could be organized. This trend is expected to increase gradually. -Milk and milk products do not receive special treatment applied to Turkey. It applies to the whole world. No additional documents, reports, or certificates are requested.