Saudi Arabia Drops Duties On Dairy Products For Re-Export

Saudi Arabia has agreed to drop import duties on manufactured dairy products destined for re-export, Trade and Agriculture Minister Lockwood Smith announced from Riyadh today.

"The decision will provide immediate savings to the New Zealand Dairy Board's joint venture company of US$1 million per year," Dr Smith said. "More importantly, it will allow the company to immediately implement plans for increasing exports of milk powder and cheese products to other countries in the region, like Jordon and Sudan, which were previously unviable."

The New Zealand Dairy Board has a major joint venture factory in Dammam, Saudi Arabia, which Dr Smith visited on his way to Riyadh. "It is a very impressive facility and an excellent base from which the company will now be able to expand its operations throughout the region," Dr Smith said.

The issue had been unresolved since the facility was opened by former Trade Minister Philip Burdon in 1996.

Saudi Arabia had also agreed for immediate work to begin on the remaining issue of duty exemption on raw materials which are unavailable in Saudi Arabia and used in the manufacture of processed cheese. Dr Smith said the resolution of this issue would lead to further immediate savings of US$1 million and would also bolster the company's efforts to expand operations in the Middle East.

Dr Smith also secured significant improvements in access conditions for New Zealand's increasingly important offal exports to Saudi Arabia.

The Saudi commitments were made during what Dr Smith describes as a "warm and generous" visit to the Kingdom. "We were given unprecedented access to very high levels of the Saudi leadership, demonstrating the strong and positive relationship between our two countries."

While in Saudi Arabia, he met with His Royal Highness Crown Prince Abdullah bin Abdul al- Aziz Al Saud, Finance and National Economy Minister Dr Ibrahim Al Assaf, Commerce Minister Osama J Faqeeh, and Industry and Electricity Minister Hashim bin Abdullah Hashim Yamani.

Dr Smith and the Crown Prince, second in the Saudi hierarchy, expressed their desire for trade, investment and tourism between Saudi Arabia and New Zealand to expand. They discussed the New Zealand experience of economic reform and agreed that thought be given to the establishment of a Joint Ministerial Commission for annual trade discussions at ministerial level.

While in Saudi Arabia, Dr Smith observed a programme being run by the New Zealand Meat Board, in which Saudi butchers were being trained to extract the maximum value from a chilled New Zealand lamb carcass. "The intention is to seek up to $35 more per carcass, which will enable us to get higher returns from this valuable market," Dr Smith said. He commended the programme saying it was an excellent example of how to increase returns by building market share through enhancing customer satisfaction and demonstrated the superiority of New Zealand lamb.

Completing Dr Smith's programme, he met with the Council of the Saudi Chambers of Commerce, chaired by Director-General Osama Al-Kurdi. Prominent businessmen discussed with Dr Smith how New Zealand and Saudi Arabia could work together to meet the needs of the growing Saudi population. The Saudi population, currently 19 million, is expected to double in 20 years. Already, 55% of the population is younger than 15 years old.

Last year, New Zealand exported $190 million of goods to Saudi Arabia, mainly dairy and meat products. We imported $444 million, mostly petroleum oil and plastic raw materials, from Saudi Arabia.

Dr Smith flies to Paris today to attend the OECD agriculture ministers meeting where he will urge the OECD to contribute its analytical resources to preparations of the 1999 World Trade Organisation negotiations on liberalisation of agricultural trade. He will also address the meeting on "The Need for Further Reform".