‘It’s a liability’: Risk on the rise for Canadian companies in Saudi Arabia
Anxiety and frustration is rippling through Canadian businesses with ties to Saudi Arabia as tensions continue to flare between Ottawa and Riyadh.
The increasingly heated discord over jailed human rights activists is beginning to rattle the confidence of Canada’s engineering and infrastructure giants, as wells scores of smaller Canadian firms counting on contracts from the kingdom.
“Being Canadian in the past was a real advantage. Right now, it’s a liability,” said Walid Hejazi, a board member with the Canadian Arab Business Council, who recently spent time in emergency meetings with companies operating throughout Gulf. “A lot of the countries in the region have all lined up behind Saudi Arabia. There is a lot of concern that this could potentially spread.”
Ottawa’s demand that Saudi Arabia’s government free jailed activists last week was met with the expulsion of the Canadian ambassador, as well as measures to block Canadian grain imports, sell Saudi government-held Canadian investments, and recall post-secondary students from Canada’s academic institutions.
Prime Minister Justin Trudeau offered no apology on Wednesday, instead reaffirming his government’s pledge to call out perceived human-rights violations.
Hejazi, whose not-for-profit group claims to advocate on behalf of some of Canada’s largest companies, hopes to see cooler heads prevail, although he admits “it doesn’t look like it is going to be resolved soon.”
He declined to publicly state which side the majority of Canadian business leaders have sided with since Foreign Affairs Minister Chrystia Freeland posted her tweet calling for the release of Saudi women’s rights activist Samar Badawi.
Very alarmed to learn that Samar Badawi, Raif Badawi’s sister, has been imprisoned in Saudi Arabia. Canada stands together with the Badawi family in this difficult time, and we continue to strongly call for the release of both Raif and Samar Badawi.
— Chrystia Freeland (@cafreeland) August 2, 2018
REALIZING THE RISK
SNC-Lavalin acknowledge the possibility of a “widespread commercial embargo on Canadian commercial interests,” in a statement late Wednesday. The Montreal-based company, which has operated in Saudi Arabia for about 50 years, said such a move would impact its future financial performance.
SNC-Lavalin generated $992 million in revenue in the country last year, representing about 11 per cent of total sales.
A protracted spat between Ottawa and Riyadh could also pose problems for Bombardier. The Montreal-based plane-and-train-maker plans to deliver 47 trains for Riyadh’s new rail network as well as a “game-changing fully automated” monorail system in the same city, according to the company’s website.
A Bombardier spokesperson declined to comment on how the current state of Canada-Saudi relations may impact these plans.
Richard Stuchberry, a portfolio manager at Wellington-Altus Private Wealth, wrote that “everything is up in the air at the moment” in an email to Yahoo Canada Finance about Bombardier’s plans in Saudi Arabia. Wellington-Altus Private Wealth does not hold Bombardier shares in its portfolios.
While diversified global giants like SNC-Lavalin and Bombardier may find themselves caught in diplomatic crosshairs, Hejazi is more concerned about smaller Canadian companies whose plans were predicated upon more stable relations with Saudi Arabia.
“When you think about Bombardier, it’s in around 20 or 30 countries around the world. A lot of these other companies focus their efforts around the GCC (Gulf Cooperation Council nations), and Saudi Arabia is a big part (of that),” he said. “There are a lot of companies that have a lot more exposure (than Bombardier and SNC-Lavalin), even though the dollar amount may be lower.”
Hejazi added that the escalating tensions between Canada and Saudi Arabia has had a chilling effect on some of the optimism spurred by development initiatives outlined in Crown Prince Mohammed bin Salman’s Vision 2030 plan.
These days, concerns about how the conflict could escalate, how foreign business leaders who speak out will fare in bids for future contracts, and how Saudi Arabia’s hardline stance against Canada could be adopted by its neighbours, are proving difficult to ignore.
On the other hand, Hejazi notes that Canadian companies have a “best-in-class” reputation that will be equally difficult to downplay as Saudi Arabia efforts to pivot its economy away from oil.
“The Canadian business community is anxious, and they are very hopeful that the Canadian and Saudi governments can come to an agreement to put this dispute behind us,” he said. “I’m really hopeful that as Saudi Arabia needs more from these companies, this hardline will be eased.”
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