In this issue. we are proud to include something for you that is very special and exclusive. It is the first publication of the Tajara Monitor for the Kingdom of Saudi Arabia (KSA).
The Tajara, which looks in depth at the trade finance market-place in the KSA, is intended as an informative reference tool for existing practitioners and new entrants alike.
We believe that it opens a new era in publishing in our field and we look forward to hearing your views, which we feel sure will be enthusiastic.
Globally, acronyms seem to be the current fashion on the international trade front. The recent European debt crisis has made most familiar with the unfortunately named PIIGS – ie, Portugal, Ireland, Italy, Greece and Spain – who face the severest problems.
Now though, the world is becoming more and more conscious of the BRIC nations – Brazil, Russia, India and China – that are the up-and-coming trading powers.
Whilst it true that the United States remains the world’s largest consumer economy – inevitably influencing the state of the global economy and international trade – it is bogged down with domestic problems. Those concerns include high unemployment, on-going issues with the financial sector, the economic impacts of military operations and healthcare reform. All of that is contributing to a sense that the world’s big buyer will have to rein in spending, or, at least, refocus its direction in a more selective manner.
As for the BRIC countries, they are exploring opportunities for collaboration, and generally flexing various forms of influence. In the case of China, this is particularly so in the Middle East. Two-way trade between China and the MENA region has tripled in the past five years to $107bn in 2009. Chinese companies have become particularly active in the Middle East infrastructure sector, winning $2.1bn worth of the construction deals in the United Arab Emirates alone in 2008.
By some estimates, trade within Asia is growing at twice the rate of growth of trade between Asia and the rest of the world. In addition, the scale and scope of infrastructure investments across Asia are staggering, and, as with markets in the Middle East such as Saudi Arabia and the UAE, infrastructure programmes are an important element of a broader recovery strategy.
Naturally, the recession, too, has prompted various regions across the globe to look for ways to mitigate the impacts of the crisis. In Africa, the Middle East and Asia, one strategy has been to set up regional trade and commercial partnerships, and, while such activities had been underway for some time, there has been a notable acceleration over the past year.
Trade between Asia and the MENA region is illustrative: commercial partnerships have been increasing for some time and the rate of development of Asia- Middle East trade flows will continue to rise, both as a continuing mitigation against economic dependence on the US and Europe, and as a natural extension of the dynamic that has now built up between the two trading blocs.
One economics expert is quoted in this issue as saying, “It is important to note that the trade flows developing between the Middle East and Asia are shaped, significantly, by the commercial and trade activities of small-and-medium-sized enterprises. Yes, there are large projects and large transactions, but SMEs are critically important drivers of trade flows and of emerging commercial relationships across these dynamic regions.”
This reality has clear implications for trade finance providers and commercial lenders: it will be increasingly important to be able to respond to the financing requirements of the SME segment in the Middle East-Asia trade partnerships.