Saudi Arabia has banned 200 foreign companies for allegedly importing Israeli products into the Kingdom. Arabian Business tries to discover the true extent of Arab-Israeli trade

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By  Massoud Derhally Published  September 1, 2002

|~||~||~|With the intifada close to its third anniversary and the Israeli-Palestinian conflict worsening, it is hard to believe that Israeli products are making their way into Arab countries that have no ties with the Jewish state, but they are. At least that’s what Saudi Arabia says.

It is no secret that certain Arab countries seek out Israeli software security products and advanced agricultural expertise, and Saudi Arabia has come down hard in the past on foreign companies it accuses of importing Israeli products into the kingdom. In August, the government banned 200 foreign companies from doing business in the kingdom in a bid to stifle continued Arab trade with Israel.

The Saudi government banned the companies, saying they had, over the past 10 months, imported Israeli goods worth US $150-300 million, according to the Arabic language Saudi daily Al Watan and The Associated Press. But is there more to the event than meets the eye? While some may say this is an attempt by the government to quell illegal trade, others might interpret such a move as a measure of protectionism, especially when some companies say they have been wrongly blacklisted.

The largest proportion of the boycotted companies are Jordanian, with 72 banned from doing business with the Kingdom, followed by 70 companies from Cyprus, 23 from Egypt, and 11 from Turkey. Other banned companies come from the United States of America, Britain, Singapore, Thailand, Portugal and Poland.

The announcement, made by the Council of Saudi Chambers of Commerce and Industry, comes in the immediate aftermath of news reports that Israeli products were making their way into the kingdom and neighbouring Gulf countries.

One of the 72 banned Jordanian companies is Al Ramz Concrete Industries (RMC Jordan), a subsidiary of RMC Group, which also is the mother company of Readymix Industries (Israel). Abed Dajani, the general manager of RMC in Jordan, believes he has been wrongly victimised. “We cannot produce anything that can be exported. We produce something called ready mixed concrete. Nobody exports ready mixed concrete in the world. It does not make sense,” says Dajani.
Dajani was very keen to talk about his company and to try to clear the name of RMC Jordan of any perceived dubious activities. “First, we do not import any of our raw materials from anywhere. All of our raw material is Jordanian. I have nothing to import and nothing to export, I only manufacture purely internally in Jordan,” he says. “Number two, this is a British company; we are the largest British investment in Jordan.”

So why then was RMC Jordan targeted? Johnny Abedrabbo, senior economist at the National Commercial Bank does not believe that the ban is a result of protectionist trade measures adopted by the Saudi government and that we can expect to see similar bans in the future.

“This decision is purely a politically motivated decision, and is not one that is based on protectionist economic policies,” he says. “Therefore, since it is not economically motivated, and not directed by trade policies, it is likely that it will happen again, given the current political environment.”
Despite the inclusion of 72 Jordanian companies, the Jordanian government adamantly denied on August 5, 2002 all claims that Jordanian companies were exporting Israeli products to Saudi Arabia. “The government is ready to deal with any formal complaints from the Saudi authorities. In case there were any violations, firm measures will be taken against the violators,” said Samer Tawil, secretary general of the Ministry of Trade and Industry.
Nevertheless, trade is still going on. Sharon Elidan, Israeli CEO of Sygnet Technologies, told Globes, Israel’s economic daily, that he sells thousands of mobile headsets to Saudi Arabia, estimated to be worth US $250,000. According to Globes, Sygnet, a Jerusalem company secured a contract with a Saudi company in April 2002 to deliver 12,000 headsets for cellular telephones to be supplied through a Western European company that has business connections with Saudi Arabia.

“The Saudis learned of our unique technology at the CeBIT exhibition in Germany a month ago,” Elidan told Globes. The sets, a new type that do not emit radiation, were developed in Israel at a cost of US $2 million and were offered for $20 each in competition with wireless headsets costing $100.

But Dr. Gil Feiler, managing director of Info-Prod Research in Israel, says US $250,000 for mobile headsets is not much money and that Elidan of Sygnet was selfish in speaking to the press. “It is irresponsible; there were negotiations not a real deal. Tell me, when I did a lot of projects with the Arab countries, which I like to deal with, do you think I would go to the press to tell them? It is meaningless, he sought to get PR, and this is not the way to do business,” says Feiler. “In the Middle East, you have to do business discreetly, quietly, especially when it’s done between Arabs and Israelis. Now, what I have noticed when I get a lot of phone calls from the Gulf, I ask them whether they want to go between Israeli Arabs or Jordanians and they say ‘No, we would like to do it directly.’ What is most important is the secrecy.”

An article that appeared in July 2002 in the Saudi owned newspaper, Asharq Al-Awsat, said that Saudi Arabia confiscated cellular telephones with Israeli components that are manufactured at, “the branch of an Israeli company that operates in Britain and assembles in China.”

Abedrabbo at NCB says that while it is hard to verify the dollar value of Israeli goods seeping into the Arab world and Saudi Arabia in particular, he believes “Most of the goods consist mostly of agricultural products, vegetables and such, in addition to some electronic devices, including mobile phones, which have been reported here in the local press.”

Abedrabbo adds that total imports from Jordan amounted to 0.4% of imports in Saudi Arabia in 2001. “Since trade with those countries [Jordan and Cyprus] represents a small fraction of trade with the Kingdom, the impact of this move will be insignificant at best,” he says.

In fact, Israeli exports to Arab countries are down 39% in the first quarter of 2002 to US $21.3 million, compared with the corresponding period last year, according to Israel Export Institute figures. Imports from Arab countries also declined 2% in the first quarter of 2002, to $16.4 million, compared with the first quarter in 2001.

Imports from Jordan increased by 8% to $10.4 million, while imports from Egypt fell 5% to $4.7 million. The Export Institute reported that imports from Morocco grew by 96% in the first quarter of the year to $670,000. Imports from Lebanon amounted to a negligible $1,500. While Israel exported goods to the Gulf, there were no imports from these countries in the first quarter.

However, an Israeli official speaking on condition of anonymity, says: “Honestly speaking it is very difficult to give an estimate because it is not direct trade but indirect and therefore all the Israeli official organs which are dealing with trade cannot trace anything.”
The official went on to say that if someone in Turkey buys a product for $200 million then it would be set in the record book as a component of Israeli-Turkish trade. No one in Israel would know the product’s destination if the Turkish merchant or partner removes Israeli labels and markets them in Saudi Arabia.

“All I can tell you is that, surprisingly enough, over the last year, there is a considerable increase [in Israeli exports to Arab markets]. A recent press release [referred to above] by the Israeli Ministry of Trade and industry a few months ago shows that there was a decrease in the volume of trade with Egypt and in the volume of exports to Jordan, but there was an increase in the volume of imports from Jordan, and there was an increase in the volume of trade with the Gulf countries,” adds the official.

“The paradox is that while the intifada is getting worse and worse and the political situation is worse, the volume of trade is on the rise.”

Daniel Bloch, director of media and public relations for the Israel Export Institute, told Arabian Business that there is an increase through trade parties. “Usually, the most popular items are those that cannot be purchased in other countries or that have special qualitative edge: software, components, agro-technology, printing, irrigation devices, medical equipment and pharmaceuticals.”

Feiler estimates that backdoor trade between Israel and the Arab world is nowhere near what people say it is, and that if relations between the Jewish state and the Arab world were normalised the flow of trade would rise to a billion dollar figure.

Rachella Weinstock, a director at the Israeli Export Institute, echoed the anonymous Israeli official and Feiler but drew a different conclusion from Globes, saying, “As far as we know, there is absolutely no trade with Saudi Arabia. I do hope that I’ll be lucky enough to have the opportunity to organise the visit schedule of Saudi delegations coming here in the not too distant future. But so far, it is a dream…” Massoud A Derhally

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