Near East-N. Africa-South Asia: oil slump dims trade outlook; despite downturn, selected sales opportunities remain
by Karen Sasahara | August 18, 1986
The decline in oil revenues continues to color the outlook for U.S. exports to the Near East, North Africa and South Asia. The inevitable belt-tightening following such a drop in what for many countries in the region comprises their main source of income, means a cutback in imports and reduced government spending.
Despite the downturn, there are still opportunities in selected sectors in a number of these countries. Some of the sectors that offer the best prospects for U.S. exporters include: medical supplies, telecommunications equipment, education and manpower training, operations and maintenance, services, and computer equipment.
The largest U.S. customers in the region (1985 figures) are still Saudi Arabia ($4.5 billion), Israel ($2.6 billion), Egypt ($2.3 billion), India ($1.6 billion), and Pakistan ($1 billion).
Developments in selected countries are described below. Saudi Arabia, Egypt, Algeria, Morocco, and India are featured in separate articles.
Israel--The economy continues to improve as a result of the sweeping measures introduced by the government in July 1985. Inflation has fallen sharply this year to an annual rate of 18 percent, although it may rise in the second half. Foreign debt is down by more than a billion dollars, and foreign exchange reserves are up. The economy continues to suffer, however, from higher than normal unemployment and the difficulty of adjusting to the new economic realities. The civilian trade deficit has increased by some 15 percent. Imports are up about 12 percent, while exports have increased 11 percent. To maintain economic stability, the government is continuing price controls unti the end of the year and is curtailing its spending. Once the economy is stabilized, the government plans to implement growth policies to move the economy forward.
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U.S.-Israel trade during the first half of 1986 totaled almost $2 billion. The United States recorded a trade deficit of more than $40 million, due primarily to a large drop in exports of military products. U.S. exports of a wide range of industrial inputs declined slightly due to the slowdown in Israel's industrial sector.
Despite these figures, the American Embassy in Tel Aviv reports a growing interest in a wide range of American products. The fall in the value of the dollar, and the Free Trade Area Agreement between the two countries, make Israel a promising market for American companies.
To facilitate this interest, an Israel-America Trade Week will be held in Israel Nov. 16-21. The week-long event will include workshops and individual appointments with potential customers, agents, and partners.
Iraq--Total U.S.-Iraq trade for the first six months of 1986 was $447 million, compared to $426 million for the same period in 1985. This increase may continue for the remainder of the year, given Iraqi determination to continue its economic development in spite of the war with Iran. Agricultural commodities dominate U.S. exports to Iraq.
The major obstacle to increased U.S. exports to Iraq is the Iraqi government's policy of requiring deferred payments on nearly all commercial imports. American firms will have to seek financing arrangements; the United States has offered very limited credit facilities for the sale of nonagricultural goods.
In spite of reduced revenues, a result of lower oil prices and the war with Iran, Iraq offers good opportunities for American goods and services, particularly in high technology and water and agricultural development.
Since the restoration of diplomatic relations in November 1984, the commercial climate for U.S. firms has improved significantly. Iraqi government officials have made it clear that American companies will be treated equally with companies from other countries, an important factor since the government controls almost 90 percent of foreign trade.
The Department of Commerce will sponsor the second official U.S. pavilion at the 1986 Baghdad International Trade Fair held in November. This is an important annual event, as Iraqi government officials are required to attend and make purchasing decisions based in part on the products exhibited. Firms interested in further information on Iraq may contact the Office of the Near East at (202) 377-5767; for information on the Baghdad International Fair, call (202) 377-3640.
Kuwait--Kuwait, too, is feeling the pinch of decreased revenues. Per capita income has fallen from a 1980 high of $20,000 to $13,100 this year. The country is, however, protected by income from its varied investment portfolio.
Traditional U.S. exports such as construction equipment and automobiles are way down, reflecting lost market share to Japan; this situation may be remedied as the rise of the yen makes American goods more attractive.
Best prospects in Kuwait are medical supplies, telecommunications, personnel safety and security equipment, and investment. Kuwaiti investors are always searching for opportunities to bolster their portfolios with acquisitions of real estate or financial instruments. Last March, agroup of businessmen representing Philadelphia traveled to Kuwait to promote investment in their city. Other investment missions to Kuwait are planned for 1987.
Bahrain--Although the Bahraini economy has been seriously affected by falling oil prices and downward regional trends, U.S. exports to Bahrain during the first six months of 1986 jumped by 54 percent to $93 million. In addition, work is continuing on the Arabian Gulf University project and a number of aluminum fabrication plants, with possible future developments including the construction of a new town on offshore land still to be reclaimed at Fasht Al Adham, as well as a Gulf tire manufacturing plant. Recently-completed projects include the Gulf Aluminum Rolling Mill, the Gulf Petrochemical Industries complex, and the Causeway with Saudi Arabia. Best prospects for U.S. sales to Bahrain during the next few years lie in the areas of petroleum and gas equipment, computer equipment for telecommunications and the banking community, and consumer goods.
United Arab Emirates--The plunge in world oil prices has led to continue contraction of the UAE economy, with U.S. exports during the first six months of 1986 falling almost 10 percent to $288 million. While this trend is expected to continue during the coming year, the UAE remains a relatively wealthy market with development moving ahead in a number of fields. Plans for the development of water resources, for example, have received top priority in the Emirate of Abu Dhabi, along with the design and construction of a campus for the new UAE University at Al Ain. In addition, the Emirate of Um Al Qaiwain is proceeding with plans for a large aluminum smelter complex, which will include electrical power generation, water desalination, offshore gas development and treatment, and port loading facilities.
As emphasis shifts toward operations, management and other services where U.S. firms excel, the U.S. share of the UAE market should remain steady. Business opportunities also exist in the areas of water desalination and power generation, oil field operations, computers and data processing, telecommunications, health care, and manpower training.
Yemen Arab Republic--North Yemen is one of the least-developed countries in the world, but the existence of an "informal economy" provides the market with some consumer goods, and suggests that the gross national product per capital is somewhat higher than the estimate of $500 to $600.
Business is hampered by import restrictions and a hard-currency shortage. Venture capital, much of it abroad or outside the banking system, is available, but the government will have to make systematic changes in the economy to attract it.
Public spending on education and manpower-development has increased, signifying that the government is moving to solve a serious obstacle to further development, but this effort is hampered by budget constraints. Decreased remittances from Yememi workers abroad and reduced aid will likely offset revenue from North Yemen's nascent oil industry.
There is a market for some American products and services, including: agricultural commodities, oil extraction equipment, oil-field servicing, pipeline construction, solar energy equipment, information processing equipment, water resources technology, and agribusiness and food processing technology.
Sri Lanka--Despite the ongoing communal disturbances, Sri Lanka continues to provide export opportunities for American firms. In April, the government lifted restrictions on imports of computers, including software and hardware, and reduced the customs duty on all ADP equipment to 5 percent. The proposed privatization of the telecommunications sector, as well as related telecommunications modernization and upgrading efforts, offer possibilities for the sale of U.S. equipment and services.
Pakistan--Record levels of agricultural and industrial production have produced another year of rapid economic growth, as GDP rose an estimated 7.5 percent in Pakistan fiscal year 1985-86 (July 1, 1985-June 30, 1986). This strong growth, coupled with the country's infrastructure development plans, means that Pakistan will remain an expanding market for imported machinery, industrial raw materials and consumer goods.
U.S. exports to Pakistan for the first six months of 1986 totaled $490.9 million. Principal export items included wheat, soybean oil, aircraft and aircraft parts, fertilizers, tallow, oil and gasfield equipment, insecticides, and radio navigational aids. For American firms interested in selling to Pakistan, best prospects continue to be computers and business equipment; chemical and petrochemical industry plant and equipment; mining, construction and earth-moving machinery; food processing and packaging equipment; oil and gasfield equipment; electric power general machinery; hospital and health care products; and telecommunications. The United States and Pakistan recently agreed to a new six-year foreign assistance program valued at $4.02 billion over the period 1988-93. A large portion of this economic and military aid is tied to procurement of U.S.goods and services. Upcoming Commerce-sponsored promotion events include catalog shows for computers and peripherals, medical equipment, analytical, scientific and laboratory equipment, agricultural machinery, and chemicals, and a renewable energy seminar mission.
Bangladesh--Bangladesh's recent economic performance has been mixed, and the import market is limited. Major U.S. exports to Bangladesh other than foodgrains include cotton, fertilizer, used clothing, and medical supplies. Sales opportunities exist for shipbuilding equipment, industrial chemicals, power generating equipment, and data processing equipment. There are also a number of sales prospects in connection with projects funded by USAID or multi-national assistance (IBRD, Asian Development Bank, and UNDP).
COPYRIGHT 1986 U.S. Government Printing Office
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