Key trade summit in Berlin attracts record numbers

The figures are impressive. The volume of Arab-German trade rose by 28 % last year. German exports to Saudi Arabia and the UAE increased substantially, as did deliveries to Kuwait, Jordan and Syria. German imports from the region rose by as much as 60 %, thus helping to ease the still very large trade imbalance in Germany's favour.

In Berlin, the German economics minister, Werner Mueller, said his government had 're-discovered' the great economic opportunities of a region closer to Europe geographically than America or South East Asia. It represents a rapidly growing market of over 400 million people, who are well disposed to Germany when it comes to trading and joint-venturing the country's know-how, industrial experience and advanced technologies.

The occasion for the minister's address was the fourth German-Arab Economic Forum held in late June, which drew a record number of 600 top business people, high-ranking government officials, technicians, lawyers and other consultants from Germany and all the Arab countries.

There was certainly no lack of vision in the former Prussian assembly building, recently restored to its 19th century splendour and now used by the Berlin parliament. Ingo Friedrich, the German vice-president of the European parliament, predicted that despite the ongoing conflicts in the Middle East the Arab countries would join Europe over the next decade in a huge Euro-Arab economic zone, the largest of its kind in the world.

Currently, customs duties between the Arab countries are being reduced by 10 to 15 per cent annually, and by 2008, the Arab free trade zone could become a reality. Herr Friedrich advised the Arabs to analyse the Europeans' experience in creating a single market and to avoid the mistakes they had made. He felt that the Barcelona process launched in 1995 to bring together the EU and the Arab countries in the Mediterranean was making considerable headway despite the undeniable setbacks.

Likewise, Herr Friedrich believed that the EU-Gulf Co-operation Council set up in the early 1980s with its annual meetings of the foreign ministers of the EU and the GCC member states had been instrumental in bringing about the rapprochement between the EU and the Gulf. And he said that the GCC decision taken in November 1999 to form a Gulf customs union by 2005 similar to that in the EU would definitely help to bridge the gap.


Several German business leaders took the occasion to warn the Arab governments against over-dependence on the US dollar. Despite the current weakness of the euro, the Arabs should give it a chance and treat the European currency as a vital and welcome alternative to the omnipresent greenback.

For decades, Germany's trade policy towards the Arab world was uncoordinated, incoherent and haphazard. As the president of Ghorfa, Mohamed Al-Sady, noted ten years ago, Germany was once the number one trade partner. Today, it has dropped to sixth place, ceding much ground to the United States, France, Italy, the United Kingdom and the South-East Asian nations. But Iraqi-born Al-Sady, himself a German citizen and a successful businessman in the city of Nuremberg, is optimistic: 'By 2004, we aim to get Germany back to third place and, by the year 2005, we hope to regain the number one position with a German-Arab trade volume of EURO 40 billion.'

To achieve this goal, prominent German businessmen, economists and politicians have relentlessly analysed the current situation, the pros and cons and the bureaucratic obstacles still hampering developments on both sides. In March this year a small committee was formed by government officials, the German bundestag, Ghorfa and the German tourism board with a view to drawing up recommendations for the Government. Within three months it produced a paper, which makes compelling reading for Middle East observers.

On the credit side, the committee praised the Government's efficient instrumentation of guarantees for German exporters. In the state budget for 1999 and 2000, the frame of authorization for such bonds was fixed at DM 220 billion per year. In the Federal budget for 2001, this frame was increased to DM 230 billion. An important source of assistance, especially for small and medium-size companies, in penetrating new markets was the official promotion given to participation in international trade fairs. In 2000, the Government sponsored a German presence at 21 Middle East trade fairs; in 2001, 23 trade fairs in the region will enjoy financial benefits from Germany.

Incidentally, the promotion list again includes the Baghdad International Trade Fair. The economics minister explicitly voiced the interest of the German government in reviving the once thriving business links with Iraq, as far as this is permitted by the UN resolutions. Simultaneously, he urged Baghdad to show a more constructive response to the recent move by the UN Security Council towards loosening and eventually abandoning the sanctions.

The stream of prominent visitors from the Middle East is another indicator of the new found dynamism of German-Arab relations.


• On 2nd April this year, the Syrian economics and foreign trade minister, Dr Imady, accompanied by four other specialist ministers, came to Berlin. This visit followed Chancellor Schroeder's trip to Syria last October, which, among other things, led to a debt rescheduling agreement in early November 2000. German exports to Syria are now once more protected by German export credit guarantees. Syria's President Bashar Al-Assad paid a visit to Germany in July.


• Late in May, Jordanian Finance Minister, Dr. Marto, led a 35-strong delegation to Germany. Jordan's successful programme of privatisation is making good progress, and this should provide good opportunities for German investment.


• Minister Mueller was particularly pleased with the visit of Saudi Arabia's Crown Prince Abdullah in early June, which he described as an 'event of strategic importance' not only for bilateral cooperation, but also for German links with the region as a whole. The Crown Prince is known for his commitment to liberalising and opening up the economy, promoting the private sector and developing tourism. The new investment legislation passed in Riyadh last year will help to improve conditions for foreign investment. The Minister said it was high time that German industry followed the explicit invitation of the Crown Prince to come to Saudi Arabia in large numbers.

On the debit side, there is much cause for concern. It seems that many of Germany's commercial decision-makers are still unaware of the recent reform efforts being made by many Arab countries, which have produced much more favourable conditions for German investments. In fact, the bulk of the Arab countries have now concluded tax and investment promotion and protection agreements with Germany.

German net transfers for foreign investments in 1999 rose by 16 per cent from USD 66.6 billion to USD 74.7 billion. However, in a key oil-producing country like Saudi Arabia, German investment amounted to a meagre USD 89.5 million. The UAE registered around USD 71.6 million worth of German investments in 1999.

The Economic Forum in Berlin showed there is a need to shore up confidence in the ability of some Arab countries to open up their markets, accept foreign majority shares, protect German capital and patent rights and provide legal certainty for German companies.

On the other hand, the Germans also have their homework to do. Red tape and bureaucracy is not a prerogative of the Arab world. The EU, for example, still maintains petty regulations hindering the import of textiles and agrarian produce from the Middle East. Dr Al-Sady noted that some delegates to the Berlin Forum, among them well-known and reputable public figures, had encountered considerable difficulties in obtaining visas from the German Embassies in their home countries.

All in all, a lot remains to be done if the ambitious goals set by the Forum are to be achieved. The discussions produced the following recommendations.


• German companies are called upon to train more Arab specialists and graduates for new relevant skills at home. Also, German training staff should be encouraged to take up jobs in the Arab countries with a view to intensifying the export of know-how and immaterial technology. As one of the speakers in Berlin put it quite bluntly: 'The sooner Arab apprentices, technicians and students familiarise themselves with German industrial methods and learn to work with German machinery, the greater the likelihood that they will opt for German equipment later on at home.'


• German business should be encouraged to seek many more partnerships in suitable organisational forms with Arab companies, particularly in manufacturing, environmental engineering and the service industry.


• Those Arab countries dragging their feet on regulations affecting double taxation, investment protection and permission for foreign majority participation are urged to take action at the earliest possible opportunity.


• The rapidly expanding German tourist industry should help its Arab partners to utilise the largely untapped tourist resources in many Middle East countries in a fitting manner, respecting Arab customs and traditions.


• To overcome the continued trade imbalance, the Arab economies are urged to step up their exports to Germany. Only if Arab exporters broaden the range of goods they supply will they be able to get a permanent foothold in the very competitive, but very rewarding German market. This calls for thorough knowledge of the market conditions and a careful response to German tastes and standards. Visits to German trade fairs and exhibitions, seminars and study tours could be a great help.

German business is well aware of the need for economic diversification in the Arab world. Therefore the subject of German involvement in the upstream oil production was hardly a point of discussion at the Berlin Forum. Germany feels that it has a lot to offer in other areas of interest to its Arab partners. In particular, a modern transport infrastructure, including a comprehensive road and rail network, will be vital for the successful development of the Arab regions and German competence in this field may be increasingly be called upon.

It is no coincidence, therefore, that next year's forum will be entirely devoted to this matter.