Saudi economy measure hits 19-month high despite geopolitical worries

Saudi economy measure hits 19-month high despite geopolitical worries
Caught in the middle of a global trade war and regional political tensions with Iran, Gulf economies such as Saudi Arabia and the UAE are seeking to introduce rapid economic reforms as their oil revenues come under pressure. (Shutterstock)
Updated 04 July 2019

Saudi economy measure hits 19-month high despite geopolitical worries

Saudi economy measure hits 19-month high despite geopolitical worries
  • Purchasing managers’ index reveals that inflows of new orders from abroad rose for the fourth month running

LONDON: A key business output measure has hit a 19-month high in Saudi Arabia driven by new business growth but tempered by geopolitical worries.

The Emirates NBD Purchasing Managers’ Index revealed that inflows of new orders from abroad rose for the fourth month running.

However, overall business confidence in Saudi Arabia and neighboring UAE has suffered from rising regional geopolitical tensions, which has increased in recent months following attacks on shipping.

“While both output and new work increased at a solid rate in June, there was almost no change in private sector employment,”  said Khatija Haque, head of regional research at Emirates NBD. “Firms remained optimistic about future output, although this component of the survey declined to the lowest level since August 2018, possibly reflecting heightened geopolitical tension in the region.”

Caught in the middle of a global trade war and regional political tensions with Iran, Gulf economies such as Saudi Arabia and the UAE are also seeking to introduce rapid economic reforms as their oil revenues come under pressure amid rising shale production in the US and faltering global demand.

The headline seasonally adjusted Emirates NBD Saudi Arabia Purchasing Managers’ Index rose to 57.4 in June, up from 57.3 in May and the highest since November 2017. A reading above 50 indicates expansion.

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The Saudi Purchasing Managers’ Index rose to 57.4 in June, up from 57.3 in May.

“In contrast to the headline PMI, output growth in Saudi Arabia’s non-oil private sector slowed to a three-month low during June. That said, the rate of expansion remained sharp and was broadly in line with the long-run series average,” Emirates NBD said.

June also saw a second consecutive monthly rise in average cost burdens faced by non-oil private sector businesses in the Kingdom. Despite this, the rate of inflation was fractional and eased from May.

Business confidence towards future growth prospects was strongly optimistic during June, Emirates NBD said.




Sami Al-Obaidi, chairman of the Council of Saudi Chambers.

The Kingdom is seeking to grow foreign direct investment as part of a broader economic reform push.

Sami Al-Obaidi, chairman of the Council of Saudi Chambers, told the Arab British Economic Summit in London yesterday that it was important to boost economic cooperation and investment ties with the UK.

PMI data also released yesterday for the UAE reported a decline from 59.4 in May to 57.7 in June.

Backlogs of work increased amid reports of delays in receiving payments from customers, the bank noted.

Non-oil companies remained strongly optimistic that business activity will increase over the coming year, although sentiment eased again from April’s record high. 

Next year's Expo 2020 was highlighted as a key factor behind overall business optimism.


Indonesia campaign helps SMEs enter Saudi market

Indonesia campaign helps SMEs enter Saudi market
Updated 19 January 2021

Indonesia campaign helps SMEs enter Saudi market

Indonesia campaign helps SMEs enter Saudi market
  • They will be the main target of the export initiative, which is estimated by the Indonesian Ministry of Trade to be able to generate $60 million

JAKARTA: Indonesia has launched a campaign to help small firms in the country compete for millions of dollars-worth of food trade in Saudi Arabia.

The government aims to help small and medium-sized enterprises (SMEs) improve the quality and competitiveness of their products to meet the Kingdom’s required standards, Indonesian trade and commerce officials have said.

Under normal circumstances, before the coronavirus disease (COVID-19) pandemic, around 1.5 million Indonesians a year make the pilgrimage to Saudi Arabia to perform Hajj and Umrah and hundreds of thousands work in the Kingdom.

They will be the main target of the export initiative, which is estimated by the Indonesian Ministry of Trade to be able to generate $60 million.

To meet the Saudi food regulator’s standards, the Indonesian Chamber of Commerce (Kadin), the Ministry of Trade, and the Ministry of Cooperatives and Small-Medium Enterprises have teamed up to assist SMEs in improving products such as bottled chili sauce, soya sauce, coffee, tea, and sugar that are in highest demand among Indonesians in Saudi Arabia.

Kadin chairman, Rosan Roeslani, told Arab News: “We have facilitated five small-medium enterprises that produce soya sauce to obtain Saudi Food and Drug Authority approval for distribution, while nine tea and coffee producers are in the pipeline to also obtain a license. We have also submitted the application for four bottled chili sauce producers.”

While travel and pilgrimage restrictions remain in place due to the COVID-19 outbreak, he said that the time before things get back to normal will be used to prepare the SMEs — which contribute 60 percent to the country’s gross domestic product and employ up to 90 percent of its workforce — for expansion into the Saudi market as soon as the pilgrimage sector resumes.

“We still have time to groom them as there are many aspects such as hygiene, and consistency in their product quality and quantity that they need to improve,” Roeslani added.

In 2014, the Ministry of Religious Affairs issued a regulation obliging catering companies that provided food and drink to Indonesian pilgrims in Saudi Arabia to source their products from Indonesian producers whenever possible.

Indonesia’s vice religious affairs minister, Zainut Tauhid Sa’adi, said that as each Indonesian pilgrim received food from caterers an average 75 times during his or her pilgrimage, demand was high but supply in Saudi Arabia remained limited and similar products from India and Thailand had been used instead.

Kasan Muhri, director general for export development at the Ministry of Trade, told Arab News that the program to prepare the SMEs had been in the making since 2017 and officials eventually decided to launch it this year despite the COVID-19 restrictions.

“Just because there are few Umrah pilgrims now and this year’s Hajj remains uncertain, it does not mean that the market is gone.

“People from around the world would still go to Saudi Arabia to perform the pilgrimage, not just Indonesians, so we are doing this to anticipate the market when the economy revives, and things are recovered. We don’t want to be left behind,” Muhri said.

Besides food and beverage products, officials say they are also looking into the possibility of exporting items such as goodie bags, prayer beads, and other pilgrimage accessories made by Indonesian SMEs.