RIYADH, 2 September — Saudi Arabia’s trade with Iran rose by 29 percent last month compared to the same period last year, thanks to a recent decision by Riyadh to cut customs tariff from 12 to five percent. The Saudi move has affected Dubai’s re-export business.
Saudi Arabia has been a major re-export market for Dubai, especially for telecommunications and information technology products until the Kingdom slashed its customs tariff two months ago.
A report by the Exports Development Center, an affiliate of the Council of Saudi Chambers of Commerce and Industry, had expected that the cut in customs tariff would affect the position of Dubai as a major re-exporting center to Saudi Arabia.
The Saudi move also threatens a major project by the United Arab Emirates to expand its Jabal Ali free port at a cost of 130 million dirhams ($35 million).
The project, to be completed within a year, will help the port receive large container ships.
The Jabal Ali project comes in the wake of a trend by international shipping lines to build a new generation of ships having double the capacity of the present ones.
On the other hand, Saudi ports have been geared to brace an increase in imports, following decrease of up to 60 percent in tariffs.
The Saudi Seaports Authority has developed its ports in Jeddah and Dammam for re-exports, making them some of the major ports in the region.
The Saudi ports on the Red Sea will receive the European exports to Iran and then transport the products either by road or by a new railway line (which has been planned by the Communications Ministry) to the eastern ports.
Saudi Arabia is studying ways to remove the obstacles facing its trade exchange with Iran and explore ways to facilitate exports to Tehran directly without the involvement of a third party.
Most Saudi exports to Iran now go through Jabal Ali, and thus such deals will not appear in the trade balance. This situation makes it difficult to get correct information about trade between the two countries.
The main obstacle confronting trade exchange between Saudi Arabia and Iran is the lack of financial guarantees from the Iranian side. Absence of direct coordination between businessmen in the two countries is another obstacle as it affects mutual confidence.
There is no direct shipping line between Saudi Arabia and Iran, thus hampering their trade. Both countries do not know the products and services required by the other. Recurrent fluctuation of Iranian riyal against international currencies is another problem.
The Saudi Export Development Center has conducted a study on the Iranian market through the International Trade Center in Geneva.
The study advised Saudi businessmen and industrialists to export their products directly to Iran and have agencies and representatives in Iran to facilitate their exports.
