THE relations between the Kingdom and Germany are progressively growing in all sectors. In fact, formal ties between Saudi Arabia and Germany can be traced back to 1926, but relations were significantly strengthened by the Najd Treaty in 1929 (before the formation of the modern Saudi state) and by the appointment of a German consul general in Jeddah two years later.
The first Saudi king to visit Germany was late King Saud in 1959, while Custodian of the Two Holy Mosques King Abdullah visited that country last year.
Saudi Arabia and Germany have forged closer relations on political front. In the field of trade and commerce, Germany is the Kingdom’s leading partner out of the 25 nations, which make up the European Union. Worldwide, it ranked third — after the US and China — among the sources of imports into Saudi Arabia during 2006 and 2007. 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 Germany rapidly increase the variety and market share of its exports to the Kingdom, further widening its lead. Today, Saudi Arabia is one of Germany’s largest economic partners in the Middle East. Some 220 German companies are currently active in the Kingdom and, according to the latest available data, there are more than 125 joint venture firms with a total capital value of SR13.4 billion ($3.5 billion) — of which about 63 percent is in the hands of Saudi investors.
In fact, since 1975, the period of fastest capital growth in these joint ventures was at the start of the new century. During the entire decade of the nineties, a mere SR1 billion ($266 million) had been invested in Saudi-German initiatives; but the five-year period up to 2005 saw a 65 percent increase in the number of joint ventures and a rise of more than 1,200 percent in the amount of capital invested. This has helped boost the overall level of German exports to Saudi Arabia.
Since 2000, the figure has increased by 124 percent — Western Europe’s second highest rate of export growth (after Austria, which saw its exports rise from a very low base by 387 percent over the same period). German exports to the Kingdom grew from SR9.1 billion ($2.4 billion) in 2000 to a record high of SR20.4 billion ($5.4 billion) last year. Since 2004, this growth has coincided with the second boom in the Saudi economy — with imports from Germany increasing by 51 percent in that three-four year span.
As in the case of British imports, a large amount of German products enters the Kingdom through neighboring GCC countries in the form of re-exports. “We estimate that around SR2.9 billion ($773 million) worth of German goods was transshipped via other GCC countries in 2006,” said a report of a German government agency. Germany’s main exports to Saudi Arabia are machinery (29 percent), motor vehicles and parts (16 percent), electrical goods (8 percent) and pharmaceuticals (4 percent). It’s true to say that German automobiles occupy a special place in the hearts of many Saudis.
For more than two decades now, the balance of Saudi-German trade has favored German exports due largely to Germany’s low level of oil imports from the Kingdom. Only in the past three years has an increase in the volume and value of Saudi exports helped alleviate somewhat that rising German trade surplus. At the same time, EU-25 exports to Saudi Arabia, as a whole, are moving into surplus as the EU increases exports in line with the Kingdom’s booming economy.
The Kingdom’s exports to Germany are predominantly oil-based (around 76 percent), with the remainder comprising largely machinery (13 percent) and plastics (6 percent). On the other hand, as host country of the 2006 football World Cup, Germany received many visitors from the Kingdom with some 17,000 visas issued to Saudis at that time. Conversely, about 2,500 Germans currently live and work in Saudi Arabia. Saudis are also increasingly interested in studying in Germany. About 300 students from the Kingdom are currently pursuing higher degrees in the country, many being Saudi government scholarship holders.
There were only 50 students in 2005, when the scholarship program was launched; but by 2006, about 80 outstanding school-leavers had been selected and sent by the Saudi Ministry of Higher Education to study at universities in a number of German cities. The total number of Saudi students has been substantially gone up till June this year, according to a report published recently.