Doing Business in Saudi Arabia - International Franchise Association

Other entities created by the CML include the Department of Authorization & Inspection; and
Corporate Finance, Enforcement & Market Supervision.
The Government has liberalized the wholesale, retail, and franchise sectors, allowing foreign
investors to establish joint ventures and retain a 51% share. The foreign partner’s capital
requirement is set at $5.3 million and his equity share can be increased to 75% after 3 years
from the contract date. All industrial enterprises are open to non-Saudis, and they can also
trade in the products they manufacture. Restrictions on individual professions also are in force,
such as who can practice law, medicine, accounting and financial services, architect and
engineers, and other similar professions. A Saudi joint venture partner is a requirement for any
entity or individual to practice the above-mentioned professional services.
Many Saudi companies handle numerous product lines (sometimes even competing product
lines, making it difficult to promote all products effectively). Saudi agents typically expect the
foreign supplier to assume some of the market development costs, such as hiring of dedicated
sales staff (especially for high-tech or engineered products), setting up workshops and repair
facilities, and funding local advertising. Foreign suppliers often detail a sales person to the
Saudi distributor to provide marketing, training, and technical support. Absent such an
arrangement, American firms should expect to make frequent, periodic visits each year to
support their Saudi distributor.
Electronic Commerce Return to top
Internet services are freely available and the main cities have several Internet service providers
and Internet cafés. High-speed DSL is available. States of the Arabian Gulf were to have
increased their IT spending by 11.6 per cent to $8.6 billion during 2008, on the back of rapidly
growing investment in software, according to a regional consultancy firm. Saudi Arabia was to
have been the biggest spender at $3.76 billion.
Internet users in Saudi Arabia spent more than $3.2 billion in 2007. Almost half of all Saudi
Internet users reported that they purchased products and services online and through their
mobile handsets in 2007. The same study estimates the number of e-commerce consumers in
Saudi Arabia to exceed 3.5 million, representing 14.26% of the population. The Saudi
Government has already passed a number of regulations to control and monitor electronic
transactions, i.e., regulations for e-transactions and cyber crime. Additionally, the government
has allocated close to $800 million to implement the E-Government initiative. A published report
has mentioned that in order to drive Saudi Arabia’s e-government initiative forward, a YESSER
program (in Arabic world means “to facilitate”) was launched by the government to develop the
first National e-Government Strategy and Action Plan which will be implemented within the next
five years. The YESSER program’s role is to enable the implementation of individual egovernment
services by ministries and other government agencies, on the one hand, by building
the national infrastructure and defining common standards which these agencies can use; and
on the other hand by providing best practice examples and accompanying implementation of
pilot services. Moreover, YESSER will ensure an appropriate level of coordination and
collaboration between implementing agencies. The vision for Saudi Arabia’s e-government
initiative is user-centric and focuses on a number of aspects, which will revolve around the
central notion already mentioned, i.e., providing better government services to the user. It is
understood that users are individuals (citizens and expatriates), businesses and government
agencies. By the end of 2010, everyone in Saudi Arabia will be able to enjoy from anywhere and