Canadian Agriculture and Agri-Food Exporter's Guide to Opportunities in the Middle East: QATAR 382.097105363 C212 1997 c.3 1*1 Agricultureand Agricultureet Canada Agri-FoodCanada AgroalimentaireCanada mew bw**jw ' -:-.ri *^ Canadian Business Develoment International Presents: Canadian Agriculture and Agri-Food Exporter's Guide to Opportunities in the Middle East: QATAR OTHER AVAILABLE COUNTRIES THE STUDY IN Saudi Arabia Jordan Bahrain Lebanon Kuwait Oman Syria Yemen United Arab Emirates Agriculture and Agri-Food Exporter's Guide to Opportunities in the Middle East Canadian Business Development International (CBDI) has been contracted by the Market Industry Services Branch of Agriculture and Agri-Food Canada to provide an overview of the export opportunities and general guidelines for Canadian exporters ofagriculture and agri-food products in the following 10 countries in the Middle East: 1) Saudi Arabia 2) United Arab Emirates 3) Bahrain 4) Kuwait Oman 5) 6) Qatar 7) Jordan 8) Lebanon 9) Syria 10)Yemen The studies ofthe other nine countries are available from Agriculture and Agri- Food Canada. All reports are available in English and French. The study is a collection ofthe best available government and private sector information from Canada and abroad. It is designed to provide the reader with a fully compiled and referenced single source for all ofthis material as well as a detailed analysis of secondary import and export statistics provided by Statistics Canada and the World Trade Database. The information contained in this document has been reviewed by trade and commodity experts at Agriculture and Agri-Food Canada, Department of Foreign Affairs and International Trade, and Canada's posts in the countries, and has met with their approval. For a comprehensive list of the sources used by CBDI and a directory of contacts for further information please see the Bibliographical Index and Contact Information sections at the end ofthe report. EXECUTIVE SUMMARY INTRODUCTION: The Agriculture and Agri-Food Exporter's Guide to Opportunities in the Middle East is designed to provide the reader with a single source reference manual on the key elements and opportunities for exporting to ten countries in the Middle East. It is intended for use by Canadian agri-food exporters. Trade Commissioners and other government officials will also find it a useful source document for information requests. This study is in a modular format, such that each country profile can act as stand-alone documents, detailing the relevant information for potential Canadian exporters. The statistical data included in this document has been provided by Statistics Canada (for Canadian exports) and the World Trade Database (for country imports). Due to the time and recording differentials inherent in the two databases, Canadian export statistics are provided in Canadian dollars, up to 1995; whereas country import statistics are only available in US dollars up to 1994. This standard is consistent throughout the document. POTENTIAL OPPORTUNITIES: The Middle East is generally an arid region with limited land available foragricultural production. Irrigation methods are used, however, countries (specifically Saudi Arabia) are finding it more difficult to drill for fresh and usable water, resulting in a further reduction ofproductive capabilities. As such, the region tends to import a large amount ofagriculture and agri-food products to support consumption demands. These imports range from US$140 million (Qatar in 1994) to US$4.1 billion (Saudi Arabia in 1994). Thus it is clear that the Middle East offers immense potential for Canadian agri-food exporters. Key opportunities include: Processed Food and Products: (HIGH) There are extensive opportunities forvalue-added products in all ten countries covered by this study, however, Saudi Arabia, the UAE and Kuwait offerthe best potential for growth. Special Crops: (HIGH) Canadian exports of special crops to the region have been increasing steadily overthe past several years, with new opportunities emerging in chick peas and other pulses. Key markets are: the UAE, Saudi Arabia, Kuwait, and Syria. Beverages: (HIGH) Since most countries in the Middle East are predominantly Muslim, there is a high demand fornon-alcoholic beverages. Canadian fruit and vegetablejuices, carbonated flavoured water, and mineral water have the potential to do very well in the region. Bahrain, and the UAE in particular, offer a great deal ofpotential for alcoholic beverages as well. Grains and Oilseeds: (HIGH) Although Canadian exports ofgrains and oilseeds have tended to be either erratic or declining, there are significant opportunities for barley, wheat, canola oil and niche products in many countries, most notably Saudi Arabia and the UAE. Eggs and Poultry: (MEDIUM) There are promising opportunities for egg-type and broiler-type breeding chicks in Saudi Arabia, the UAE, Bahrain, and Yemen. As well, since pork is not consumed in most ofthe countries, poultry meat is generally a staple. Livestock and Other Animal Products: (MEDIUM) Despite rigorous import regulations, the Middle East is a large import market for live animals and meat products. Strong potential exists in the UAE, Saudi Arabia, Jordan, and Syria. Exporter's Guide to the Middle East Summary - 1 GENERAL CONSTRAINTS: Many North American's perceive the Middle East to be too complicated a market to enter, despite the significant opportunitiesthat await determined exporters. Although there are very real constraints to dealing with the Middle East, they are easily overcome with the right approach. Some of the more notable difficulties include: Transportation Costs: Due to the long distances, there are considerable costs involved in exporting goods to the Middle East. Furthermore, containerization is often aproblem. Since Canada does not import enough products that require refrigerated or ventilated containers, exporters often find it costly to bring these specialized containers up from the US. • Although these are real constraints, Canadian exporters may consider consolidating shipments to the Middle East to reduce costs and avoidpartially empty containersfrom increasing shipping costs. Language and Cultural Barriers: Unlike exporting to the US or Europe, the Middle East is a dramatically different environment in which to operate. There are very specific ways to conduct business which may seem foreign to many Canadian exporters. • These barriers are easily overcome withfrequent visits to the region. Also important is the selection ofa goodagent who can bridge the gap in culture andlanguagefor the exporter Strict Regulations: The Middle East has a number ofregulations that make exporting to the region complex and cumbersome. Most notably are the strict halal requirements for animal products and bilingual (and other) labelling requirements and production and expiry dates for all goods. • The Canadian embassies in the region can help exporters understandandcomply with these regulations, as well as assist in the selection ofa good agent who will also help. This document also explains a number ofthe requirementsfor exporting to the region. It shouldalso be noted that Canadianproducers have an inherentadvantage in meeting the labelling demands ofthe region, since they are already accustomed to printing bilingual labels for domestic use. MARKETING TIPS: Below are some suggestions for marketing Canadian products to the Middle East: Ifpossible, visit the region. Face-to-face contact can be the difference between marketing success and failure. Bring product samples (where applicable) and be prepared to discuss price. Consider participating in major food shows in the area; for example, the GulfFood Show in Dubai. UAE is an excellent way to meet potential customers from throughout the region and beyond. Eye-catching designs, logos, and colours that identify the product as Canadian may boost sales. Be ready to assist with shipping. If necessary, be ready to recommend a shipping company or directly arrange shipment and provide shipping costs. Be prepared to discuss marketing and advertising strategies. Gulf importers, in particular, are increasingly looking for advertising advice and assistance, especially with new-to-market products. Be aware that many importers will request exclusive agency agreements with suppliers. In many cases, local laws make it difficult to terminate an agency agreement, even with due cause. Thus selecting a good agent is particularly important. Exporter's Guide to the Middle East Summary - 2 REGIONAL INFORMATION MARKETING: The Middle East is a dynamic and diverse region with differences in the way business is conducted both within and between the various countries. However, there are some general rules for marketing products in the region. Face to face contact can significantly increase the chances of establishing successful business relations. Maintaining that relationship through frequent communications is equally important for success. The countries in the region are mostly cash markets, with substantial revenues from oil resources. Many ofthe countries have young populations, implying higher disposable income and expected growth in the future. The Gulfcountries in particular have highly advanced agriculture and agri-food markets that tend to be very price competitive. The region has a strong knowledge and growing desire for Western products. Key points to stress when selling products are: competitive price; Canadian origin; and the high-quality ofthe products. Considerable emphasis should be placed on the role ofthese countries as possible markets for re-export of Canadian products. The port ofDubai in the United Arab Emirates (UAE) in particular, is a majorre-export market, serving markets in other Gulfcountries, Pakistan, Iran, and countries ofthe former Soviet Union (FSU). The Dubai World Trade Centre reported that Dubai imports approximately 70% of the UAE's consumable items, worth US$1.9 billion per year. Around 70% of these imports are then re-exported. Approximately 20% of these re-exported goods go to Iran, which is Dubai's largest re-export market. Dubai's re-exports to FSU countries were US$405 million in 1995, 27% of which was comprised of agricultural and agri-food products (not including equipment and chemical fertilizers). Azerbaijan is the leading market in the FSU for these re-exported goods. Each country has specific, and often complex marketing regulations, such as labelling requirements and best before dates, that potential Canadian exporters should examine carefully before bringing their products to the region. For example, in Bahrain, baby food has an 18 month expiry period compared with a 12 month UAE period in the or Saudi Arabia. This example serves to highlight the importance ofverifying each country's regulations before any sales are made. The Trade Annex that accompanies each country profile provides the details ofmany ofthese regulations. It is strongly recommended by Migra's Canadian Exporters Guide (1995) that the term "Persian Gulf should notbe used on goods, documents, or letters for some destinations in this region. Anything so marked might be confiscated and destroyed by the Arab authorities. The term "Arabian Gulf should be used. PRICING: Generally, it is recognized that shipping adds considerably to the cost ofitems manufactured in Canada, which can face stiff competition from Far Eastern and European suppliers. Thus pricing of products, particularly processed or semi-processed foods and beverages is particularly important. Many of the countries in the regionare very price competitive markets, however, high Canadian quality goes a long way. Exporter's Guide to the Middle East Regional - 1 Moreover, exporters should consider the option ofconsolidating shipments ofvarious products in order to reduce the burden oftransportation costs, thereby making products more price competitive when they reach the markets. Some ofthe countries in the region have strict policies with respect to pricing, while others have general norms that are followed by most exporters. Pricing policies are listed in the Annexes for each country. RESTRICTED IMPORTS: All imported beefand poultry products require a health certificate from the country oforigin and a halal slaughter certificate issued by an approved Islamic centre in the country oforigin ("halal" slaughter refers to animal slaughter performed according to Islamic law). TRADE ARRANGEMENTS: GulfCooperation Council (GCC): The Gulf Cooperation Council (GCC) consists ofsix member countries (Saudi Arabia, the United Arab Emirates, Kuwait, Bahrain, Qatar, and Oman). The GCC controls halfofthe proven oil reserves outside the former Soviet Union, and accounts for about 40% ofall the oil moving in international trade. Created in 1981, the GCC tried to maintain the balance ofpower in the Gulfby strengthening multilateral cooperation in security and economic matters. The presidency ofthe GCC rotates yearly among the rulers ofthe member countries. The GCC is headquartered in Riyadh, Saudi Arabia. As far as trade is concerned, the GCC is a loose confederation which serves only as a policy-coordinating forum for its members. It cannot impose trade policies upon its member states, thus each is free to pass and enforce its own trade laws. In recent years there has been growing cooperation among GCC members on certain issues, such as: establishing standards; setting tariffranges; and intellectual property protection. There is also consideration being given to forming a customs union. Renewed work on a free trade area between the GCC and the EU is also pushing the six member states to closer coordination. Arab Cooperation Council (ACC): Jordan, Yemen, Egypt, and Iraq signed an agreement in February 1989.joining the countries in a new Arab economic bloc called the Arab Cooperation Council (ACC). The new community was designed to create a common market and encourage investment in joint projects. The goals ofthe association are to achieve economic integration in all production centres and coordinate the many areas including the economy, residence, travel, finance, industry, agriculture, transport, and communications. Arab League Boycott ofIsrael In 1994, the Arab League boycott ofIsrael was partially lifted. The original boycott was initiated in 1959 and stated that all products coming directly from Israel, through Israel, or containing inputs from Israel were banned from all Arab League countries. Moreover, trade with countries that also traded with Israel was restricted. The 1994 partial alleviation ofthe ban left only the primary ban on Israeli products intact. Exporter's Guide to the Middle East Regional - 2 | QflfAQL OfficialName State ofQatar HeadofState Shaikh KhalifaBin Hamad Al-Thani MinisterofAgriculture n/a Language Arabic (Official), English Population (1995) 533,916 Currency QatarRiyal (QR) Real GDP Growth (1995) n/a Gross Domestic Product (1995 Per Capita) $20,820 ConsumerPrice Inflation (1995) 3.7% External Debt(1995) $3.9 billion Principle Growth Sectors Manufacturing and Gas Total Country Exports (1995) $3.5 Total Country Imports (1995) $2.14 billion Agri-Food Imports from the World (1994) US$139.7 Agri-Food Imports from Canada(1995) CDN$660,000 Canada's Agricultural Exports to Qatar 1995 Qatar's Agricultural Imports 1994 V»9»tabM*4HorvcufturtlProdu< SpecialCrept Fruitp,Null.V*e>*t»t>*»iHertieuRurelProdi CANADA'S AGRICULTURAL EXPORTS TO QATAR Canada'sAgricultural Exports to Qatar StatsCan:IN CDN$'000 1991 1992 1993 1994 1995 1991 - 1995 Grains&Oilseeds 28 Livestock&AnimalProducts 6 SpecialCrops 71 108 108 112 Fruits,Nuts,&Vegetables 19 77 59 39 10 DairyProducts 49 Eggs&Poultry ProcessedFoodandProducts 89 164 218 541 468 Beverages 13 36 21 TOTALEXPORTS 121 317 385 724 660 i 994 1995 * Importandexport totals may notmatch the sum ofthe commodities due to grouping and rounding procedures. QATAR'S TOTAL AGRICULTURAL IMrtPPOORRTTSS Qatar's Agricult1u9r9a0l-Im1p9o9r5ts From the World WTDB : IN US$'000 1990 1991 1992 1993 1994 Grains&Oilseeds 23,812 21,910 13,453 21,793 12,999 Livestock&AnimalProducts 43,451 38,190 20,427 28,245 18,946 SpecialCrops 17,349 16,485 17,178 16,063 19,524 Fruits,Nuts,&Vegetables 34,032 38,190 13,106 33,779 19,936 DairyProducts 13,524 13,176 7,491 14.353 7,303 Eggs&Poultry 16,534 18,599 14,291 21,141 19,559 ProcessedFoodandProducts 60,513 53,215 34,735 59.688 37,726 Beverages 8,888 6,512 3,815 10,201 3,756 TOTALIMPORTS 218,013 206,606 124,496 205,263 139,749 1990 1991 1992 1993 1994 Exporter's Guide to the Middle East QATAR BACKGROUND INFORMATION PoliticalEconomy: Qatar is a small country with a population of approximately 500,000 people, over half of whom are expatriates. The majority of the population live in the port city of Doha, which has an adequate infrastructure. The Qatari economy is state-dominated to a degree surpassing all other countries in the region. The state owns or directly controls Qatar's mineral wealth, major manufacturing enterprises, banking, and insurance. As such, the Government ofQatar is the largest (and, in some cases, the only) importer and end-user ofa wide range ofproducts and services in the country. It is also the largest employer in the Qatari marketplace. Other economic and commercial activities are, therefore, heavily dependent upon government spending. Agriculture in Qatar: The agriculture sector is modest and contributes about 2% to GDP annually. Currently, the country is self- sufficient for 70% of its summer vegetables and 40% of winter vegetables. Although there is some production ofgrains, eggs and poultry, the country is still dependent on food imports. Most ofthe workers inthe agricultural sectorare foreign. The governmenthas made an effortto strengthenthe agricultural sector offering several incentives to investors. Qatar has 28.000 hectares ofarable land. Agricultural Trade in Qatar: Doha is a small market for value-added foodstuffs and is not a major re-export centre. Some products are shipped directly to Doha, but most are transhipped from Dubai in the UAE. Products can also be trucked into Doha from the UAE. The demand situation in Qatarmay alter somewhat in the next fewyears, because the economy is expected to take an upturn as a new gas project comes into production. Thus, for the time bei,ng, Canadian exporters may not want to make Qatar aprimary export market inthe region, rather it would best serve to compliment activities ofa company already active in the Dubai market or elsewhere in the Gulf. Qatar's imports ofagriculture and agri-food products have been somewhaterratic overthe past several years, hovering around US$209 million between 1990 and 1993, with a decrease to US$124 million in 1992, and another decrease in 1994 to US$139 million. Canadian exports ofagriculture and agri-food products to Qatar are fairly small, but have been increasing from $190,000 in 1990 to $660,000 in 1995, which is a slight decline from 1994 exports of$724,000. This increase has come largely on the strength ofprocessed food and product exports to Qatar. Exporter's Guide to the Middle East Qatar - 2