Canadian firms chasing Saudi business left in limbo

The diplomatic row with Canada is a concern for Canadian companies seeking work in the Kingdom such as GDLS, maker of the LAV 111 armored vehicle. (Supplied)
Updated 07 August 2018
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Canadian firms chasing Saudi business left in limbo

  • Trade had been increasing in recent years
  • Kingdom a major investor in Canada education

LONDON: Canadian companies chasing contracts in Saudi Arabia fear a high-level row between the two countries could dash their attempts to win work in the lucrative market, a former diplomat has said.

Saudi Arabia on Sunday froze all new business and investment transactions with Canada and expelled an ambassador as part of its retaliation to Canada’s calls for the country to release civil society activists detained in the Kingdom.

Saudi Arabia said this “interference” in its domestic affairs was a violation of sovereignty.

“The short-term impact is uncertainty for Canadian companies, especially those entering the Saudi market for the first time,” said Omar Allam, a former Canadian diplomat, who now heads up the Canada-based consultancy Allam Advisory Group, which advises on doing business in Saudi Arabia and the wider GCC.

“The significance of any given risk, of course, depends upon the context of the investment decision.”

While Saudi Arabia is not one of Canada’s main trade partners, trade and investment flows between the two countries have increased in recent years.

A total of 1.45 billion Canadian dollars-worth of goods were exported to Saudi Arabia last year, according to Canadian government statistics for merchandise trade. This compares to 916 million Canadian dollars-worth of exports in 2013. The Kingdom was Canada’s 22nd largest export market for merchandise trade last year.

Construction and engineering firms SNC-Lavalin and Fluor, as well as defence company General Dynamics Land Systems (GDLS), are just some of the more high-profile Canadian businesses with longstanding business relationships and interests in the Kingdom.

SNC-Lavalin has worked on numerous contracts — often for Saudi Aramco — developing the Kingdom’s refineries, petrochemical plants and other infrastructure projects. It won a SR160 million Saudi contract ($42 million) in May to expand Jabal Omar Development Company’s district cooling scheme in Makkah.

Meanwhile, Fluor has project-managed the development of the $8 billion Umm Wu’al phosphate project for Ma’aden Wa’ad Al-Shamal Phosphate Company which started production last year.

GDLS has previously secured contracts to provide tanks and associated equipment to the Kingdom.

Canadian companies active in the construction and engineering sectors are eager to win work in the Kingdom as Saudi Arabia pushes forward with its infrastructure spending plans.

There are at least two Canadian firms already preparing to exhibit at one of the largest construction trade exhibitions in the country, Saudi Build, to be held in Riyadh in October.

However, Canadian representation at the event is smaller than that from many other nations, including Germany, Portugal or China.

Sectors such as automotive manufacturing are seeing growth in the Saudi Arabian market, with Canadian exports to the Kingdom rising 27.2 percent last year, government figures showed. This contrasts to the overall decline in automotive exports from Canada in 2017.

A spokesperson from SNC-Lavalin told Arab News: “SNC-Lavalin has conducted business successfully in the Kingdom of Saudi Arabia (KSA) for over five decades, and currently see no immediate impact to our existing operations.

“We greatly value the relationships that have been built and our contributions to the KSA. We trust that this situation will be resolved at the earliest opportunity.”

General Dynamics Land Systems declined to comment on the situation when approached for comment. Fluor has not yet responded to Arab News’ request for comments.

Saudi Arabia has also invested heavily in Canada’s education system, Allam said.

According to the Saudi Canada Business Council, there are approximately 20,000 Saudi students currently studying in Canada.

Saudi Arabia’s Education Ministry is working on the preparation and implementation of an urgent plan to facilitate the transfer of Saudi student scholarships to other countries.

“In the past 10 years alone, Saudi Arabia has invested over $10 billion dollars into the Canadian education system. This provides an annual boost to the Canadian economy and generates new tax revenues,” Allam said, citing his own research.

Saudi Arabian Airlines announced on Monday that it was immediately suspending all reservations on its flights to Toronto and suspending all flights to and from Toronto from Aug. 13, according to the Saudi Press Agency.


US economists less optimistic, see slower growth: survey

Updated 25 March 2019
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US economists less optimistic, see slower growth: survey

  • While the odds of a US recession by 2020 remain low, they are rising
  • The odds of a recession starting in 2019 is at around 20 percent, and for 2020 at 35 percent

WASHINGTON: US economists are less optimistic about the outlook and sharply lowered their growth forecasts for this year, amid slowing global growth and continued trade frictions, according to a survey published Monday.
And while the odds of a recession by 2020 remain low, they are rising, the National Association for Business Economics said in their quarterly report.
The panel of 55 economists now believe “the US economy has reached an inflection point,” said NABE President Kevin Swift.
The consensus forecast for real GDP growth was cut by three tenths from the December survey, to 2.4 percent after 2.9 percent expansion in 2018.
The economy is expected to slow further in 2020, with growth of just 2 percent, the report said.
Three-quarters of respondents cut their GDP forecasts and believe the risks of to the economy are weighted to the downside.
“A majority of panelists sees external headwinds from trade policy and slower global growth as the primary downside risks to growth,” NABE survey chair Gregory Daco said in a statement.
“Nonetheless, recession risks are still perceived to be low in the near term.”
Panelists put the odds of a recession starting in 2019 at around 20 percent, and for 2020 at 35 percent, slightly higher than in December.
Daco said that “reflects the Federal Reserve’s dovish policy U-turn in January” when the central bank said it would keep interest rates where they are for the foreseeable future, a message reinforced this week.
After four rate increases last year, Daco said a “near-majority of panelists anticipates only one more interest rate hike in this cycle compared to the three hikes forecasted in the December survey.”
Panelists see wage growth as the biggest upside risk to the economy, despite expected increase of just 3 percent this year, as inflation holds right around the Fed’s 2 percent target.
Meanwhile, amid President Donald Trump’s aggressive tariff policies, the panel projects the trade deficit will rise to a record $978 billion this year, beating last year’s record $914 billion.
In an interesting twist in the survey, only 20 percent said they expected to see the dreaded “inverted yield curve” — when the interest rate on the 10-year Treasury note falls below the 3-month bill — this year.
In fact, the yield curve inverted on Friday for the first time since 2007.