When Saudi Arabia abruptly amended its rules for imports from neighbouring Gulf states, executives at an UAE conglomerate were stunned into action. They ordered company trucks packed with everything from cardboard packaging to steel pallets to return to Dubai from the Saudi border, while officials urgently phoned clients in the kingdom to ask if they would accept the increased cost of tariffs of between 5 per cent and 15 per cent on products that for years had been shipped tariff-free.
“We were in an absolute panic,” says an executive at the company. “We had no idea what to do with the cargo.”
Cross-border trade was disrupted for a week in July before the company’s Saudi-based clients agreed to take the financial hit and move on. But it was a stark warning that the cosy relationship companies based in the United Arab Emirates have enjoyed with Saudi Arabia — the main market for many Gulf businesses — is being shaken up.
The smaller, nimbler UAE has for decades leveraged its proximity to Saudi Arabia and the more liberal lifestyle it offers foreign executives as it built the Gulf’s premier trade and finance hub. Many of the bankers, consultants, lawyers and manufacturers who serve Saudi Arabia, the Middle East’s largest economy and the Gulf’s biggest consumer market, happily set up shop in the UAE, travelling back and forth to the more conservative kingdom when needed.
But as Crown Prince Mohammed bin Salman, Saudi Arabia’s mercurial day-to-day leader, aggressively drives ambitious plans to modernise his nation, develop new industries and create jobs for the kingdom’s youthful population, the message from Riyadh is it will no longer be business as usual.
Instead, he has made it clear that if companies want to do business in his nation, particularly with the state — the main driver of economic activity — he wants them operating in the country; employing Saudis and boosting his aspirations for transforming the once sleepy kingdom into the region’s dominant economic hub.
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