Canadian companies chasing contracts in Saudi Arabia fear a high-level row between the two countries could dash their attempts to win work in the lucrative market, a former diplomat has said.
Saudi Arabia on Sunday froze all new business and investment transactions with Canada and expelled an ambassador as part of its retaliation to Canada’s calls for the country to release civil society activists detained in the Kingdom.
Saudi Arabia said this “interference” in its domestic affairs was a violation of sovereignty.
“The short-term impact is uncertainty for Canadian companies, especially those entering the Saudi market for the first time,” said Omar Allam, a former Canadian diplomat, who now heads up the Canada-based consultancy Allam Advisory Group, which advises on doing business in Saudi Arabia and the wider GCC.
“The significance of any given risk, of course, depends upon the context of the investment decision.”
While Saudi Arabia is not one of Canada’s main trade partners, trade and investment flows between the two countries have increased in recent years.
A total of 1.45 billion Canadian dollars-worth of goods were exported to Saudi Arabia last year, according to Canadian government statistics for merchandise trade. This compares to 916 million Canadian dollars-worth of exports in 2013. The Kingdom was Canada’s 22nd largest export market for merchandise trade last year.
Construction and engineering firms SNC-Lavalin and Fluor, as well as defence company General Dynamics Land Systems (GDLS), are just some of the more high-profile Canadian businesses with longstanding business relationships and interests in the Kingdom.
SNC-Lavalin has worked on numerous contracts — often for Saudi Aramco — developing the Kingdom’s refineries, petrochemical plants and other infrastructure projects. It won a SR160 million Saudi contract ($42 million) in May to expand Jabal Omar Development Company’s district cooling scheme in Makkah.
Meanwhile, Fluor has project-managed the development of the $8 billion Umm Wu’al phosphate project for Ma’aden Wa’ad Al-Shamal Phosphate Company which started production last year.
GDLS has previously secured contracts to provide tanks and associated equipment to the Kingdom.
Canadian companies active in the construction and engineering sectors are eager to win work in the Kingdom as Saudi Arabia pushes forward with its infrastructure spending plans.
There are at least two Canadian firms already preparing to exhibit at one of the largest construction trade exhibitions in the country, Saudi Build, to be held in Riyadh in October.
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However, Canadian representation at the event is smaller than that from many other nations, including Germany, Portugal or China.
Sectors such as automotive manufacturing are seeing growth in the Saudi Arabian market, with Canadian exports to the Kingdom rising 27.2 percent last year, government figures showed. This contrasts to the overall decline in automotive exports from Canada in 2017.
A spokesperson from SNC-Lavalin told Arab News: “SNC-Lavalin has conducted business successfully in the Kingdom of Saudi Arabia (KSA) for over five decades, and currently see no immediate impact to our existing operations.
“We greatly value the relationships that have been built and our contributions to the KSA. We trust that this situation will be resolved at the earliest opportunity.”
General Dynamics Land Systems declined to comment on the situation when approached for comment. Fluor has not yet responded to Arab News’ request for comments.
Saudi Arabia has also invested heavily in Canada’s education system, Allam said.
According to the Saudi Canada Business Council, there are approximately 20,000 Saudi students currently studying in Canada.
Saudi Arabia’s Education Ministry is working on the preparation and implementation of an urgent plan to facilitate the transfer of Saudi student scholarships to other countries.
“In the past 10 years alone, Saudi Arabia has invested over $10 billion dollars into the Canadian education system. This provides an annual boost to the Canadian economy and generates new tax revenues,” Allam said, citing his own research.
Saudi Arabian Airlines announced on Monday that it was immediately suspending all reservations on its flights to Toronto and suspending all flights to and from Toronto from Aug. 13, according to the Saudi Press Agency.
By Rebecca Spong
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