Gulf Cooperation Council (GCC) Market Profile

Market Overview:

The Middle East market covers the Gulf Cooperation Council (GCC-6) members (Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates (UAE), and Saudi Arabia). This assessment focuses on the two largest markets, Saudi Arabia and UAE. The Khaleej Times reported on March 2nd 2018 that Middle East countries are marking a turning point in 2018 as their economies overcome two difficult years of a low oil price environment and various austerity measures, according to economists and analysts. While the combined Gross Domestic Product (GDP) of the GCC-6 is expected to hit 2.4% from 0.1% in 2017, expanding at the fastest rate since 2015, the wider Middle East region's GDP is expected to grow 2.9% in 2018, up from 1.1% in 2017.

The Times report added that Middle East economies are recovering from the difficult years of a low oil environment, various austerity measures and geopolitical risks. The overall economic outlook looks positive this year and in 2019, thanks to the rising oil prices (forecast at US$67 per barrel), expansionary fiscal policy and relative improvements in the overall security conditions. For oil exporters, economic activity is expected to pick up, driven by two main factors - rising oil prices and increased government spending.

Private consumer spending will be weighed down by the 5% Value Added tax (VAT) and rising living costs as a result of higher electricity tariffs and gasoline prices introduced in January. Saudi inflation is expected to reach 4% in 2018, up from -0.3% in 2017. For businesses, levies on expat labor and rising input costs pose additional challenges. While on the monetary policy side, the expected three rate hikes in the U.S. this year will translate into higher interest rates in Saudi given the U.S. dollar peg - this would raise the cost of borrowing for businesses and consumers alike.

U.S. exports of consumer food products to the GCC-6 members increased 3% to nearly US$1.7 billion in 2017. This partner group is a solid importer of U.S. processed foods, totaling US$1.1 billion, a decline of 2% from the prior year. Top U.S. processed food exports to the region in 2017 included:

  • Food preparations
  • Fats and oils
  • Condiments and sauces
  • Processed/prepared dairy products
  • Snack foods
  • Processed vegetables and pulses
  • Chocolate and confectionery
  • Non-alcoholic beverages

The UAE and Saudi Arabia are now the 14th and 19th largest markets respectively from the U.S. for consumer foods and are frequently in the top 10 of most major processed food export categories. Their import share is well over 75% of the regions total, although food products may be transiting through the Emirates into other GCC and/or Middle Eastern markets.

The U.S. has Free Trade Agreements (FTAs) with two of the six GCC-6 countries. The U.S.-Bahrain Free Trade Agreement (FTA) entered into force on August 1, 2006. Bahrain is the first U.S. FTA partner on the Arabian Peninsula and the third FTA partner among Arab countries (Jordan and Morocco are the others). The U.S.-Oman FTA, which went into force on January 1, 2009, significantly opened U.S. trade with Oman in goods and services by eliminating most tariff and nontariff barriers. Under the market access provisions of the FTA, almost all consumer and industrial goods and 87% of all agricultural tariff lines were given duty-free access. Both countries agreed to phase out all tariffs on the remaining eligible goods by 2019.

The GCC confers special trade and investment privileges to member countries. Processed food products manufactured in any of these countries can be exported to other GCC countries duty-free. The GCC formally instituted its Customs Union over a decade ago. A 5% across-the-board common external tariff now applies to most imported food and agricultural products that enter from non-GCC suppliers. There are plans however to introduce a new value added tax (VAT) of 5% by 2018.

The advantages for U.S. exporters of consumer ready food products to the region are numerous. They include:

  • A high quality image of U.S. products
  • High regional per capita incomes
  • Broad familiarity with U.S. culture
  • There is an increasing interest in U.S. products, as well as an increasing number of tourists to Bahrain, Oman and the U.A.E. in particular; and a U.S. military presence in Kuwait and Qatar
  • There are also consistently low tariffs and relatively transparent import procedures

The challenges in the region for U.S. exporters are also apparent:

  • There is significant competition from producers in European Union (EU), Asia, Australia, New Zealand and, increasingly, from local and regional processors
  • There is also the large Indian subcontinent population with easy access to "home grown" products and modest income
  • U.S. goods are viewed as those with a higher price, one in part caused by higher freight rates for U.S. foods compared to other regional suppliers
  • Importers often want to start with small quantities and consolidate shipments, and often find there is a lack of interest from some U.S. exporters who are not willing to entertain small orders, as well as meet local labeling requirements

The Gulf Cooperation Council-5, (the aforementioned less Saudi Arabia), countries covered by USDA’s Office of Agricultural Affairs, OAA, in Dubai, hereinafter referred to as “Post” are a relatively homogeneous group of small nations with a total population of just over 21.4 million. Energy is the main source of revenue and per capita income levels are high. All GCC 5 countries experienced economic growth in 2017.  



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