Omar Allam: Canada has golden opportunity to capitalize on renewed Saudi Arabia ties

Omar Allam: Canada has golden opportunity to capitalize on renewed Saudi Arabia ties

The risk of inaction is simply too high for Canada to ignore Saudi Arabia any longer

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As global trading rules and political alliances are being rewritten, the balance of power is shifting with intensified geopolitical competition. Canada has a milestone opportunity to course correct and drive progress with a very important trade partner and influential geopolitical player in the Middle East and the world: Saudi Arabia.

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Canada’s appointment of a new ambassador to Riyadh, Saudi Arabia, is a positive step in resuming bilateral trade and investment relations.

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The restoration of diplomatic relations brings a golden opportunity for Canada.

The country offers a thriving domestic and regional market through world-class infrastructure and a favourable geographic location from which to access Europe, the Middle East, Africa, and Asia as well as neighbouring Gulf Cooperation Council (GCC) countries.

International trade, innovation and foreign direct investment are the way forward. Other countries such as the United States, China, India, Singapore, the United Kingdom and Germany are active in the market and so can we. Canada must combine its natural value proposition with clarity and focus to build on this opportunity.

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Saudi Arabia registered the highest growth rate in the G20 in 2022, according to the Organization for Economic Co-operation and Development (OECD). By comparison, the United Arab Emirates was just behind with 7.6 per cent growth while Qatar grew at 4.8 per cent, its fastest rate in nearly a decade.

As Riyadh continues to flex its diplomatic muscle, Saudi Arabia is on track to become the world’s fastest-growing economy in 2023 outperforming all G20 peers, according to the International Monetary Fund’s 2023 World Economic Outlook projections.

Since Saudi Arabia suspended diplomatic ties with Canada in 2018, ​the country has been undergoing a major transformation in recent years, fuelled by a necessary desire to diversify its economy away from hydrocarbons.

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Some notable achievements and substantial reforms underpinned by Saudi Vision 2030 over the last few years include:

Scientific investments and space co-operation

With the creation of the Saudi Space Commission in 2018, Saudi Arabia made history earlier this week after successfully sending two of its citizens to space — including the first-ever Arab female.

Rapid response and rescue missions

The country played a global leadership role and was instrumental in evacuating more than 5,000 people from over 100 nations, including Canada, during the Sudan crisis that unfolded in April 2023.

Flagship NEOM project

Saudi Arabia’s US$500-billion mega city NEOM, 33 times the size of New York City and bordering the Red Sea, earned top spot in Forbes’ list of Top 10 Economies of the Future Companies in March 2023.

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Rapid tourism and leisure sector development post social reforms

In addition to large-scale projects like NEOM, Saudi Arabia is open to tourists, and has greatly expanded its offering of leisure, sports, cultural and entertainment events.

Significant mining potential, seeking international partnerships

Saudi Arabia’s Ministry of Industry and Mineral Resources announced in April 2023 that the government shortlisted 13 bidders (including Barrick Gold Corp.) for mining exploration licences as part of its plans to diversify away from oil, unlocking vast resource exploration potential across aluminium, gold, copper and uranium.

Special economic zones (SEZs) to attract foreign investment

Four new SEZs were established in April 2023 across various regions of the country that offer competitive incentives for businesses and robust regulatory framework.

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Saudi Vision 2030 reforms are substantial and momentum is evident. Transformational changes and major investments in the market are driving significant demand for many goods, services, technologies and investments in aerospace and defence, education and training, tourism, health care, transportation, mobility, mining, public-private partnerships, and in the renewables sector, clean tech, solar and wind as well as batteries, electric vehicles and tech-driven manufacturing, all of which already have established sustainable value chains — all areas where Canada is recognized as a world leader.

The immediate focus for Canada should be the design of an international export and investment strategy that includes Saudi Arabia as a priority market that can’t be overlooked. If Canada wants to “de-risk” from China and diversify trade and attract foreign investment, if it wants to counter global terrorism, and help combat climate change, Ottawa needs to re-engage with Riyadh as a full trading partner and we need to keep all channels for trade and political dialogue open, especially when we disagree on sensitive topics.

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For those with experience in the GCC region, it goes without saying that Saudi Arabia is a relationship market that requires respect, long-term investment, patience and risk tolerance to succeed.

Moving forward, here’s what Canada should consider to be successful in Saudi Arabia:

1. Pick top markets in which to invest and sectors with a clear competitive edge

The Saudi market needs to be carefully examined as part of a broader government and private sector-led exercise to define Canada’s trade and investment priorities, international markets of focus which includes Qatar, United Arab Emirates and the GCC.

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2. Adopt a deal oriented mindset

Leverage trade financing solutions and government-to-government contracting vehicles with Saudi’s US$730-billion sovereign wealth fund, the Public Investment Fund, and major holding companies to make strategic investments in Canada, Saudi Arabia and third markets.

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3. Orchestrate clear value proposition to build high-growth exports

Canadian companies should look closely at opportunities that will contribute to achieving the Saudi Arabia’s economic development goals aligned to Vision 2030 and leverage the government of Canada’s international trade portfolio and partner with trusted local professional services firms to help navigate the business, legal, tax, financial and regulatory environment and environmental, social and governance (ESG) obligations.

4. New trade partnership models

Although Canada and Saudi Arabia have a bilateral trade mechanism in place — the Joint Economic Council or JEC —  it is underutilized and needs a reboot. The JEC will require the private sector in working groups to advance co-operation in high growth sectors. With proactive engagement, the JEC can be used as a strategic vehicle to pursue a comprehensive trade and economic partnership.

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5. Charm offensive

Prime Minister Justin Trudeau should seize the opportunity to lead a high-level visit with key ministers and business leaders to Saudi Arabia in October 2023 on the margins of the Future Investment Initiative to signal Canada’s commitment and to advance strategic interests.

The time is now. Without significant action, Canadian companies will continue to fall behind competitors and miss out on lost opportunities.

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The signs are clear, the risk of inaction is simply too high for Canada to ignore Saudi Arabia any longer.

Omar Allam is a global trade adviser and a former Canadian trade diplomat.

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