The US share of that growing import market is expected to reach $117 billion — an unprecedented level of US exports that bodes well for job creation in the United States. This is an increase in the US share of total market demand from 8.9 percent in 2009 to 11.2 percent by 2013.
US President Barack Obama's National Export Initiative (NEI), launched in March 2010, calls for doubling American exports to $3.14 trillion by 2015 in order to create an additional two million jobs. Applying NEI metrics, US goods and services to the Arab world are on track to sustain 340,000 direct and 683,000 indirect American jobs by 2013.
According to the newly-released US-Arab Trade Outlook 2013, produced by NUSACC, US exports to the MENA region are on track to grow steadily from $67.70 billion in 2010 to $83.21 billion in 2011 to $95.17 billion in 2012 to $116.60 billion in 2013.
The six Gulf Cooperation Council (GCC) nations, whose markets were responsible for more than 70 percent of US exports to the Arab world in 2010, will continue to be major markets for US goods and services for many years to come.
The top three Arab markets are expected to maintain the same ranking — led by the United Arab Emirates ($35.59 billion), Saudi Arabia ($26.48 billion), and Egypt ($10.29 billion) — but subsequent rankings are likely to change.Iraq ($8.53 billion) is expected to move up to the No. 4 position, followed by Kuwait ($6.06 billion), Lebanon ($5.66 billion), and Qatar ($5.59 billion). The next four slots will be occupied by nations that have signed Free Trade Agreements (FTAs) with the United States: Oman ($3.01 billion), Morocco ($2.99 billion), Bahrain ($2.97 billion), and Jordan ($2.71 billion).
"More than 70 percent of US goods and services to the Arab world are going to the GCC nations, and a high percentage of this is driven by demand in Saudi Arabia. US exports to the Kingdom are expected to top $26 billion by 2013 — an all-time high — and there is more room to grow as Saudi Arabia invests heavily in some of the region's biggest infrastructure and energy projects," David Hamod, president & CEO of NUSACC, told Arab News.
"With Saudi-US commercial relations shattering all previous records, this is clearly a good time to do business with the Kingdom," Hamod added.
US Undersecretary of Commerce Francisco Sanchez told 200 leading US business executives at a luncheon organized by the NUSACC in Washington on Monday that "change is afoot throughout the region, and nothing can safeguard the region more than economic progress."
The meeting was attended by five Arab ambassadors, four of whom represent nations that have signed FTAs with the United States: Bahrain (Houda Nonoo); Jordan (Alia Hatoug-Bouran); Morocco (Aziz Mekouar); and, Oman (Hunaina Al-Mughairy).
Also in attendance were Ali Al-Aujali, Libya's ambassador to the United States, and Mohammed Abdulla Al-Rumaihi, Qatar's assistant foreign minister for follow-up affairs.
According to the NUSACC report, four regional demand factors are the core drivers for US exports: Infrastructure build-out, upstream energy development and downstream petrochemical projects, consumer spending, and enhanced investments in defense.
Of these four drivers, infrastructure build-out is the most important across the MENA region, prompting substantial regional reinvestment in local MENA economies.
The Arab market accounted for four percent of the world's total foreign direct investment (FDI) inflows in 2007, and these rose to seven percent in 2009, according to the United Nations Conference on Trade and Development (UNCTAD). Given the high return opportunities, according to the NUSACC study, three to four investment dollars from abroad are likely to enter the MENA countries for every FDI dollar that these countries invest outside their home markets.
In September 2010, the Export Promotion Cabinet released a report on the National Export Initiative (NEI) to President Obama that identified Saudi Arabia as one of a handful of "next tier" markets for the United States. The ambitious plan of Custodian of the Two Holy Mosques King Abdullah to establish Saudi Arabia as one of the world's most competitive nations and to diversify his nation's economy away from hydrocarbons has opened up a wealth of new opportunities for foreign direct investment (FDI).
FDI inflows to Saudi Arabia, No. 1 in the region, are driven by energy and infrastructure investments that average $32 billion per year. Inward FDI stocks in the Arab market increased more than ten-fold from $50.8 billion in 1990 to $541.9 in 2009, according to the latest UNCTAD World Investment Report (2010). Saudi Arabia captured 27 percent of the Arab world's total inward investments, followed by the UAE (14 percent), Egypt (12 percent) and Morocco (6 percent).
According to the UNCTAD, Saudi Arabia is the largest destination in the Arab world for FDI, attracting approximately $147.1 billion over the past two decades. American investors accounted for $5.8 billion in FDI between 2007 and 2009, followed by Kuwait ($4.3 billion), France ($2.6 billion) and Japan ($2 billion).
In addition to Saudi Arabia's investment potential, the Kingdom's consumer market is growing faster than expected, opening the door for increased US exports of goods and services. Saudi Arabia's Central Department of Statistics released preliminary figures from the 2010 census which confirmed a total population of 27.1 million — approximately 20 percent larger than 2004 and reflecting a 3.1 percent average annual growth in population.
According to the Five-Year Development Plan, Saudi Arabia plans to invest $385 billion in infrastructure, health and education projects through the year 2015. Tatweer, the King Abdullah Project for Developing Public Education, has an unprecedented budget of $2.4 billion (SR 9 billion). Due to what Moody's, the international ratings agency, described as the Kingdom's "solid state of government finances" and its foreign reserves in excess of $400 billion, Saudi Arabia is well-situated to finance current and future mega-projects — in schools and education and a host of other infrastructure projects.
Construction of four of the six new economic cities is underway with the involvement of regional and international companies. These cities are expected to contribute over $150 billion to Saudi Arabia's GDP and create 1.3 million jobs.
The United Arab Emirates (UAE) has been the Arab world's leading importer of US goods and services for the past five years — a trend that is likely to continue through 2013 and beyond. These exports grew 16.75 percent in the past year, from $19.04 billion (2009) to $22.23 billion (2010).
As a major gateway to the region and a top marketing and distribution hub for the MENA region, the seven emirates of the UAE are very attractive trading partners for US exporters. According to the UAE Ministry of Foreign Trade, a significant amount of the goods entering the UAE's ports are reexported — 29 percent in both 2008 and 2009. When combined with energy shipments, these re-exports elevate the UAE to the 13th largest goods exporter worldwide — excluding intra-EU trade, says the World Trade Organization.
Significant 2010 rankings underscore the growing importance of the UAE as a global trading partner. According to the World Bank's Doing Business 2010 report, the UAE is the fifth easiest place in the world in which to conduct trade — placing it at the top of the MENA region. In March 2010, the UAE was ranked the most innovative country in the MENA region and the 24th most innovative country in the world, according to INSEAD's Global Innovation Index (GII). Prior to receiving this ranking from one of Europe's leading business schools, the 2009/2010 World Economic Forum's Networked Readiness Index (NRI) placed the UAE 23rd among 133 countries internationally and first among Arab nations.
The UAE's numerous free economic zones give foreign investors 100 percent ownership, tax exemptions, and full repatriation of profits. Led by the Jebel Ali Free Zone in Dubai, the 32 free zones in the UAE offer access to a market of more than two billion consumers throughout the Middle East, South and West Asia, and Africa.
Kuwait is the world's fourth largest exporter of oil, and it is investing heavily to produce even more oil and gas for export during the coming years. Kuwait Oil Company's (KOC) goal is to boost the country's oil output capacity from 3.1 million bpd in 2010 to four million bpd by 2020. The government of Kuwait plans to increase gas production to 4 billion cubic feet per day (cfd) by 2030. Kuwait's oil exports supply more than 90 percent of that nation's revenues.
In late 2010, Kuwait was on track to post a budget surplus of almost $21 billion — its 12th consecutive surplus. The only Gulf nation to drop its peg to the US dollar in favor of a basket of currencies, Kuwait exerts extensive control over monetary policy while exercising caution over petroleum price forecasts. Kuwait's 2010 — 2011 budget was based on $74 per barrel. This strong position has allowed Kuwait to plan construction of four 1,000-megawatt nuclear reactors, scheduled to go online by 2022, in order to satisfy demand for an increase in power from 11,000 megawatts to 22,000 megawatts.
Services are a booming part of Kuwait's economy. The Gulf nation's discount air carrier, Jazeera, was launched in 2005 and now competes head-to-head with UAE-based Air Arabia and Flydubai. Surging net profits and plans to expand to 82 routes across the Middle East by 2015 are spurring demand for new jetliners.
The United States and Kuwait have a long-standing strategic alliance, one which creates significant opportunities for US defense contractors. The Kuwaiti government is boosting its air logistics capability through the purchase of a C-17 Globemaster, made by Boeing, with support services. It has also contracted with Raytheon for a Patriot missile defense system costing nearly $1 billion.
Qatar has emerged as the Arab world's most competitive economy, according to the World Economic Forum's (WEF) Global Competitiveness Report 2010 — 2011. The report ranks Qatar 17th globally, placing it ahead of all the other countries in the MENA)region.
In late 2010, Qatar achieved two other "firsts" for the Arab world that will have implications for Qatar's economy for years to come.
In November 2010, Qatar was selected by the International Federation of Association Football (FIFA) to host the 2022 World Cup. This massive undertaking is expected to generate upwards of $100 billion in infrastructure projects between now and the World Cup in 2022 — including roads, bridges, highways, railways, ports and related consultancy services.
In 2009, Oman was America's eleventh largest market in the Arab world for merchandise and service exports, on track to surpass $2 billion in 2011. By 2013, Oman is expected to move up to the number eight position, in part on the strength of its FTA with the United States. US exports to Oman are expected to rise to over $3 billion annually, with Texas, Washington, Maryland, New Jersey, and California serving as the top five exporting States. According to NUSACC projections, exports of US goods and services to Oman will be led by industrial machinery, vehicles, optic and medical instruments, and various agricultural items.
The FTA, implemented in 2009, was given a boost in 2010 when the US.State Department Middle East Partnership Initiative (MEPI) signed a Memorandum of Understanding (MOU) with Oman to promote the productivity of small and medium-sized enterprises in conjunction with the US Small Business Administration.
Bilateral US-Bahrain trade is fortified by a FTA that went into effect in 2006. Bahrain was the first nation in the GCC to sign an FTA with the United States, and it has been reaping the benefits ever since. As benchmark US-world trade grew on average only 1.52 percent annually during the global economic downswing, bilateral trade between the U.S. and Bahrain — stimulated by the new FTA — averaged 4.6 percent annual growth over the past four years as US exporters expanded sales and distribution relationships. With this in mind, Bahrain recently signed a Memorandum of Understanding (MOU) with the Massachusetts Office of International Trade to stimulate business from the New England region. Renewed demand for Bahrain's two main exports — oil and aluminum — is financing investments in tourism, business services, manufacturing and logistics. Aluminium Bahrain (ALBA), one of the world's largest smelters, posted half-year profits of $200 million thanks to improved efficiency and entries into new markets.
