Ignoring Saudi Arabia is not an option for Canadian companies

August 16, 2016    

Today, Canada has many interests in the Middle East and Gulf Cooperation Council, ranging from trade, defence, development, immigration and global security.

If we continue ignoring Saudi Arabia, Canadian companies will lose out on major export opportunities in a strategically located, business-driven and geopolitical market.

Canada will also miss out on attracting foreign direct investment into the economy – which is a priority for the Canadian government.

In Canada, we have a cloud hanging over General Dynamics’ controversial $15-billion sale of light armoured vehicles to Saudi Arabia. Needless to say, some of the scaremongering and cultural insensitivity around the issue is creating major barriers for Canadian companies trying to pursue new business and those that are currently active in the market.

Canada can ignore Saudi Arabia today, but that won’t stop the kingdom from having an impact on Canadian interests tomorrow. Saudi Arabia is regarded by some of Canada’s closest allies as a key partner in an unstable but valuable part of the world.

What should be worrisome to the Canadian government and business executives is that our number one trading partner – the United States – is taking full-advantage of Canada’s lack of interest in a $750-billion economy.

Let’s unpack this.

In less than two months, Saudi Deputy Crown Prince and Minister of Defence Mohammed bin Salman made two visits to the United States to advance trade, defence and security interests. On both official visits, Canada was overlooked. In Washington, he met with President Barack Obama, the U.S. Secretary of Defence, the U.S. Chamber of Commerce, as well as executives of defence companies, including Boeing, Raytheon and Lockheed Martin.

The Deputy Crown Prince also travelled to New York and Silicon Valley where he announced a $3.5-billion (U.S.) investment into Uber from the Saudi Public Investment Fund and he signed a deal with 3M, granting them a trading licence that makes them one of only three companies to be granted 100-per-cent ownership and the ability to operate and invest in the kingdom.

Saudi Arabia’s youngest and most powerful leader was able to pitch Saudi Vision 2030, a wide-ranging economic plan, to U.S. defence, financial services, technology, banking and entertainment executives.

Here is a brief look at the current state of Canada-Saudi trade relations.

  • Saudi Arabia is ranked as Canada’s largest trading partner in the Middle East and North Africa;
  • Canada is a second-tier market and our bilateral relations aren’t as strong as they were in the 1970s, when we had an active Joint Economic Commission (JEC).
  • The last Canadian prime minister to visit the kingdom was Jean Chretien in 2000. Ottawa’s reluctance to engage strategically with Riyadh over the past 16 years has pushed Canada further down the priority list.
  • There is no Saudi trade representation in Canada.

We know that the Office of the Commercial Attaché at the Saudi Embassy in Washington led by a seasoned diplomat is interested in increasing trade and investment ties between Canada and Saudi Arabia. This is a real sign of encouragement.

We are seeing real potential for Canadian companies in the areas of aviation, health care, technology, outsourcing, education and training – and there are mid-size Canadian firms and large publicly traded organizations that are actively pursuing large multimillion-dollar contracts.

Here’s what Canada should do to be successful in Saudi Arabia.

  • Canada should welcome Saudi Arabia’s commitment to economic reform while underscoring Canada’s desire to be a key partner in helping Saudi Arabia implement its ambitious economic reform program while working through multilateral and regional platforms to address issues such as counterterrorism, human rights and the environment.
  • Canadian companies should look closely at the investment and export opportunities that are being created by Saudi Vision 2030 and the National Transformation Program 2020.
  • 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 and international markets of focus. The kingdom needs to be on that list.
  • The Canada-Saudi JEC needs to include the private sector in working groups to advance co-operation in health care, education, science and technology, energy and defence.
  • The Prime Minister should lead a co-ordinated Canadian trade mission to Saudi Arabia and the region in 2017.

We know the United States and Saudi Arabia intend to build on their high-level conversations in the coming months, which is consistent with the strong partnership between the two countries.

As for Canada, small steps are being taken but we need to be more tactical and active about helping Canadian companies when promising business opportunities are being presented.