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Customs reforms key to achieving petrochemicals export potential, say experts at GPCA Supply Chain Conference

Riyadh/Jeddah, Saudi Arabia; May 7, 2015: Customs regulation reforms will be crucial for the export-oriented GCC petrochemical industry to reach the milestone of manufacturing 190 million tons of products by 2020, said industry leaders at the 7th Supply Chain Conference in Dubai, hosted by the Gulf Petrochemicals and Chemicals Association (GPCA).
“The GCC petrochemicals industry has been growing on a CAGR of 8% over the past five years increasing from 37.2 in 2008 to 67.6 million tons by the year 2014,” said Dr. Abdulwahab Al- Sadoun, Secretary General, GPCA. “However, countries in the Arabian Gulf also have varying degrees of success in terms of optimizing their supply chains. Details such as export times, number of documents required for trade or trade tariffs measure how easy it is to do business and these are areas that need to be improved to ensure that the GCC chemical industry will maintain its competitive advantage.”
According to GPCA research, GCC countries have significantly improved their global ranking among the leading chemicals exporting countries over the past five years.
Saudi Arabia is ranked 14th in the world in terms of chemicals export volumes, up six places from 2008, as per data collated from the GPCA and World Trade Organization (WTO). However, as per data released by the World Band’s “Doing Business Report-2015”, export costs per container for petrochemicals from the Kingdom are the highest in the Arabian Gulf and had increased over the past year alone by 22% from $1,055 to $1,285 per container. Further, the average number of days for export is 13 working days, a figure that is amongst the highest in the GCC.
“Saudi Arabia accounts for the 67 percent of chemicals export volumes in the GCC, solidifying its ranking as a regional leader,” said Dr. Al- Sadoun. “However, much work needs to be done in terms of easing export costs and expediting export times as these details will help the Kingdom in strengthening its leadership position. Customs and documentation procedures reforms will allow for products manufactured in Jubail, or Yanbu, to reach their required destinations worldwide.”
Petrochemical products manufactured in the GCC amounted to 80% of the region’s product portfolio in 2014, or 67.6 million tons of chemicals, according to GPCA estimates. As the GCC’s chemical industry expected to add an additional 50 million tons of capacity by the end of this decade, the region’s petrochemicals sector clearly has potential, with exports expected to account for a sizable percentage of this share.
“As an industry with increasingly competitive worldwide players, operating agile and flexible supply chains will be essential in the development of our export portfolio,” continued Dr. Al- Sadoun. “In order to ensure that we are preferred partners for wide- ranging customers, introducing customs and clearance procedures reforms will be key to ensuring global market share.”
Commenting on the ongoing challenge of oil price decline, which have dropped by nearly 50% since June 2014, Mohammed Husain, Chairman of GPCA Supply Chain Committee and Chairman and CEO of Equate said, “We are in a volatile period where everyone in the oil and gas industry strive to be winning. And as everyone asks about the effect of oil prices, we face additional challenges as petrochemical producers in this region.
“Our exports are dependent on Europe, which will hopefully pick up and even China needs to grow consistently by 8% for us to reach our potential. And if something happens to the petrochemical supply chain, our companies will lose money, their reputation and the trust of customers,” warned Husain.
“At the end of the day, due to the limited domestic market size, our industry is predominantly export oriented” concluded Dr. Al- Sadoun. “Easing access to our products destined for export markets will help enhance the competitiveness of our players in an increasingly competitive global markets”.
Held on the theme of ‘Strengthening the Supply Chain Backbone – Paving the Way Forward for 2020’, the GPCA Supply Chain Conference gathered 20 speakers from petrochemical companies, ports, consultancies and customs authorities to share their insights with 350 delegates from the region.
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