Saudi-Egyptian business ties set to strengthen

After several months of reported tensions between the two countries, it seems that Saudi Arabia and Egypt are overcoming their differences meaning their ties are back on the right track. President Sisi’s visit to Saudi Arabia last month and prior to that, his meeting with King Salman on the side-lines of the Arab League summit in Jordan on March 29th, were likely to have sealed an improvement in Saudi-Egyptian relations.

It appears that both Riyadh and Cairo are overlooking their differences (Syria, Yemen and the transfer of sovereignty of two Red Sea islands Tiran and Sanafir) and concluded that they should not impede the development of their economic ties or rupture political relations. Egypt is in dire need of Saudi Arabia’s support, while Egypt’s stability is a strategic interest for the Kingdom.

Important support

To be sure, Saudi Arabia has already provided several multi-billion dollar schemes for aid and credit since President Abdel Fattah al-Sisi assumed power in Egypt in 2013. The influx of the Kingdom aid and financial support are still needed, as the performance of Egypt economy’s three pillars: tourism income, Suez Canal revenues, and foreign direct investment (FDI) continues to struggle compared with years before the so-called Arab Spring.

Not only that, Saudi Arabia is one of the largest countries in the world hosting huge number of Egyptian workers estimated at more than two million sending remittance to Egypt of over $8 billion annually. Additionally, more than 100 thousand Saudi tourists visit Egypt each year, pumping hundreds of millions of dollars into the Egyptian economy. Importantly, the move last March by Saudi Aramco to resume petroleum products shipments to Egypt can be seen as a very positive sign for foreign investors.

In this regard, the Economist Intelligence Unit, (EIU), has noted in a recent report that: “There would also be economic benefits for Egypt, both in terms of managing its import costs and through improving investor sentiment”. The Saudi petroleum products are provided under an agreement signed in April 2016 (during King Salman’s visit) for the supply of 700,000 tons per month of petroleum products (400,000 tons of gasoline, 200,000 tons of benzene, and 100,000 of low-quality) for five years, funded by a 2% interest rate on a payment that can be settled over 15 years. The Saudi supplies are equivalent to about 180,000 barrels/day and responsible for supplying over 40 percent of Egypt’s foreign oil imports.

Saudi Arabia is one of the largest countries in the world hosting huge number of Egyptian workers estimated at more than two million sending remittance to Egypt of over $8 billion annually.

Naser Al-Tamimi

Steady trade

On top of this, Saudi Arabia’s market is also a very important destination for Egyptian exports. Over the past decade, the bilateral trade between Saudi Arabia and Egypt has increased steadily. It has doubled almost 2.5-fold, jumping from $ 1.7 billion in 2006 to $4.2 billion at the end of 2016, according to latest data from the International Monetary Fund (IMF). Today, Saudi Arabia is Egypt’s 3rd top trade partner (behind the EU and China) and the 3rd largest export market (after the EU and UAE).

The trade balance tilts in favor of Saudi Arabia. Energy items such as petroleum products, plastics, rubber and chemicals, machinery and equipment form the bulk of imports from Saudi Arabia; while iron and steel, furniture, agricultural products, vegetables and fruits, dairy products, medical products, and electrical appliances, form the bulk of Egyptian exports to the Kingdom.

Significant investment

Improved relations between Riyadh and Cairo should help also unblocking the multiple billion-dollar agreements signed by Saudi Arabia and Egypt in April last year, during King Salman’s visit to Egypt. These agreements are part of the economic cooperation plan, including the Saudi-Egyptian investment fund $16 billion, plans for a 2250 megawatt electricity plant, the development of a 6-km industrial zone around the Suez Canal, and most important is the construction of a bridge across the Red Sea to connect both countries.

In this context, Egyptian official figures show that Saudi Arabia top the list of Arab countries investing in Egypt, with total investments over $6 billion through a total of 3,421 projects in several sectors. Egyptian investments in the Kingdom are estimated to be around $2.5 billion with over 1,300 projects in the sectors of contracting, telecommunications, healthcare, and manufacturing.

Looking forward, Cairo has embarked on an ambitious reform program aimed at significantly improving the investment climate in Egypt. Indeed, Egypt’s long-awaited new investment law is expected to be finalized this month, aimed at eliminating red tape, liberalizing the licensing process, and rolling out new incentives. These reforms, if implemented, are expected to attract more foreign investment, including those coming from Saudi Arabia.

Against this backdrop, some outstanding issues may have some negative effects in the near future. Given the uncertain fate of the Red Sea islands and political differences over some regional issues, such as Syria and Yemen, sporadic tension between the two countries cannot be ruled out in the future. On the other hand, serious domestic disturbances in Egypt due to the economic situation could hinder the implementation of reforms - even stop some of them.


Dr. Naser AL-Tamimi is an independent UK-based Middle East researcher, political analyst, and commentator with particular research interests in energy politics and Gulf-Asia relations. AL-Tamimi is the author of the book, (China-Saudi Arabia Relations, 1990-2012: Marriage of Convenience or Strategic Alliance? Routledge, 2014). He has also carried out extensive research on various aspects of Middle East-China/Asia relations, Saudi Arabia in particular. AL-Tamimi has worked for numerous Arab media and academic institutions, in the United Kingdom and a number of Arab countries and has written several articles, papers, and chapters in English and Arabic, (available at: https://independent.academia.edu/nasertamimi ) on the most pertinent political and economic issues affecting the Middle East. The writer can be reached at: Twitter: @nasertamimi or @chinaarabnews and email: nasertamimi@gmail.com


Last Update: Tuesday, 9 May 2017 KSA 11:31 - GMT 08:31
Disclaimer: Views expressed by writers in this section are their own and do not reflect Al Arabiya English's point-of-view.

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