Arab News, Thursday, Jan 7, 2021 | Jamadi Al Awwal 23, 1442
Export companies set for early boost from resumption of Saudi-Qatari trade
Saudi Arabia: The normalization of Saudi-Qatari diplomatic and
trade relations will have benefits for both countries, especially for the
aviation industry and Saudi export-focused sectors, business experts claim.
Dr. Saleh Al-Sultan, a writer and former chief economist at the Ministry of
Finance, told Arab News: “The Gulf cooperation was undermined in the previous
few years but the relations between Saudi Arabia and other Gulf states and Qatar
are back to normal now, which means the ties between all states will be stronger
than ever.
“Before the boycott, Saudi Arabia and Qatar had many mutual economic activities
but collaboration stopped. We hope that the relations return to normalcy and
ties become deeper and stronger. Besides, increasing the volume of economic
exchange and transactions will bring positive results to Gulf states,” he said.
Abdulrahman Al-Otaishan, chairman of the Saudi-Bahraini Business Council and
former chairman of the Saudi-Qatari Business Council, pointed out the importance
of economic integration between all Gulf states and said that over the past four
decades the Gulf Cooperation Council (GCC) had played a pivotal role in the
region.
“The easy movement of Gulf nationals from one state to another and the
facilitation of money movement have brought about a lot of benefits to all
states.
“Saudi Arabia might have the largest impact and weight because of its
geographical, historical, religious, and economic importance. Gulf states share
many things in common.
“The current summit comes at an exceptional time in light of the coronavirus
disease (COVID-19) pandemic. It’s important to end all differences,” he added.
Al-Otaishan noted the importance of bilateral relations and the land route
connecting Saudi Arabia and Qatar and said that any disruption would have a
negative impact on trade between both countries. He highlighted the Saudi
companies that had contributed to Qatari projects and the quality of their
produce.
Some of the key Saudi gainers will be the likes of Saudia Dairy and Foodstuff
Co. (SADAFCO), mining and metals company Al-Samaani Factory for Metal Industries
Co., and Saudi Basic Industries Corp. (SABIC), the world’s fourth-largest
petrochemicals firm, all of whom are likely to benefit from the reopening of the
border with Qatar.
Mazen Al-Sudairi, head of research at Riyadh-based financial services company Al
Rajhi Capital, told Arab News: “It is positive but not material. It would be
beneficial for export-oriented companies in the construction space and probably
some companies such as Almarai. However, this is already priced in and hence not
much of a surprise.”
According to research by Saudi financial news portal Argaam, Riyadh-based diary
firm Almarai will benefit as it lost 5 percent of its sales when the Qatar
border shut. Similarly, SADAFCO lost 3 percent of its annual sales when the
dispute began in June 2017.
Riyadh’s Saudi Vitrified Clay Pipe Co. (SVCP) saw a drop in its sales when the
borders shut and trading analysis by Argaam showed it was likely to be another
winner as a result of the resolution of tensions between Doha and its neighbors.
In Qatar, one of the main benefactors will be Qatar National Bank. The GCC’s
biggest bank, the Qatari lender had opened a branch in Riyadh in May 2017, just
a month before the Kingdom broke off diplomatic ties with Qatar.
An obvious benefactor of the opening up of airspace will undoubtedly be
state-owned national carrier Qatar Airways.
Joice Mathew, senior research manager at United Securities, told Reuters: “We
should see significant cost saving for some Qatari companies on the fuel and
logistics side.
“With a full removal of the blockade, Qatar Airways stands to benefit
significantly on fuel cost, which would help them in offering competitive prices
to travelers.”
The aviation benefits will also be felt on the Saudi side, as the Kingdom’s
carriers begin to restart international flights.
“Qatar Airways and Saudi Arabian carriers like Saudia, flynas, and flyadeal will
be able to resume operations, even on a limited basis, with a bigger network and
by extension, a bigger avenue to more revenue,” Saj Ahmad, a London-based
aviation analyst at StrategicAero Research, told Arab News.
However, Ahmad said the full benefits for the region’s airlines would take time
to materialize and that there was “no boon on the horizon any time soon. That
won’t emerge until such time a significant portion of the globe is immunized
with the COVID-19 vaccines.”
Hong Kong-based Krisjanis Krustins, director of sovereign ratings at Fitch
Ratings, said the normalization of economic and trade relations would “help
Qatar’s battered non-oil economy.” But he warned that Doha’s high public-sector
debt would remain a drag on the country’s AA minus/stable sovereign rating.
Krustins predicted Doha’s government debt-to-GDP ratio would hit 76 percent, up
from 60 percent in 2017 when the dispute began, but was optimistic that the
latest news would help it to balance its books.
“Qatar will post a roughly balanced budget in 2020. The 2021 budget plans for a
deficit of 6 percent of GDP excluding investment income, at an oil price of $40
per barrel. We see this as broadly realistic,” he added.
Sports fans will also be rejoicing at the news, with the Qatar FIFA World Cup
set to be staged in the country in 2022.
Alexander Perjessy, senior analyst at Moody’s, told Reuters that the
international football tournament “would unlikely be a resoundingly successful
event if the regional football fans, especially from the most populous Saudi
Arabia, were unable to attend.”