Doing Business in Saudi Arabia - International Franchise Association

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Return to table of contents Chapter 1: Doing Business in Saudi Arabia • Market Overview • Market Challenges • Market Opportunities • Market Entry Strategy Market Overview Return to top • According to the IMF, the Saudi economy will expand 4.0% this year as increased public expenditure paves the way for sustained economic recovery. Specifically, the growth in the manufacturing sector led by the petrochemicals industry is expected to see strong demand from Asia. US$70 billion of investment in the petrochemical sector by 2011 is expected. Likewise, power generation, water treatment, telecommunications, transportation and infrastructure sectors are expected to register strong growth. Specifically, the construction sector will be one of the main beneficiaries of continued large government outlays. • Saudi Arabia was the United States’ 20th largest trading partner in 2009 and also the 20 th largest export market. Total bilateral trade was around $33 billion, a 51% decrease from 2008 due to lower oil prices. However, total bilateral trade as measured in quantity grew by 0.15% Total U.S. exports were $10.2 billion, down 13% from 2008. Total Saudi exports to U.S. amounted to $21.4 billion, down 61% from 2008. Market Challenges Return to top • Inflation was not a major concern in 2009, falling from 9.2% in 2008 to 4.4%, largely due to the global economic slowdown. • Commercial Disputes Settlements: The enforcement of foreign arbitration awards for private sector disputes has yet to be upheld in practice. Furthermore, government agencies are not allowed to agree to international arbitration without approval from the Council of Ministers, which is rarely granted. • Business Visas: All visitors to Saudi Arabia must have a Saudi sponsor in order to obtain a business visa to enter Saudi Arabia. On the positive side, in May 2008, the United States and Saudi Arabia signed an agreement to grant reciprocal 5-year, multiple-entry visas for business travelers. This agreement represents a significant step forward in the visa process. • Delayed Payments: Although the Saudi Government is keen to resolve any payment disputes and has reduced its arrearages in the last few years, the problem persists and American companies should check with the U.S. Embassy or Consulates if they encounter a problem.
• Intellectual Property Protection: Intellectual property protection has steadily increased in the Kingdom. Over the last seven years, Saudi Arabia has comprehensively revised its laws covering intellectual property rights to bring them in line with the WTO agreement on Trade- Related Aspects of Intellectual Property Rights (TRIPs). The Saudi Government undertook the revisions as part of Saudi Arabia’s accession to the WTO, and promulgated them in coordination with the World Intellectual Property Organization (WIPO). The Saudi Government updated its Trademark Law (2002), Copyright Law (2003), and Patent Law (2004), with the dual goals of TRIPs-compliance and effective deterrence against violators. In 2008 the Violations Review Committee created a website and has populated it with information on current cases. The patent office continues to build its capacity through training, has streamlined its procedures, hired more staff, and reduced its backlog. In September 2009, the King approved a mechanism to protect Exclusive Marketing Rights (EMR) for certain pharmaceutical products which lost patent protection when Saudi Arabia transitioned to a new TRIPS-compliant patent law in 2004. The Saudi Ministerial Council in December 2009 approved the Kingdom’s accession to both the Intellectual Property Owners Association Patent Cooperation Treaty (PCT) and its Implementing Regulations and the Patent Law Treaty (PLT) adopted by the Diplomatic Conference in Geneva on June 1, 2000. The Council of Ministers issued a resolution on 23/11/1428H (December 3, 2007) approving the Law of Trademarks for GCC countries. • Counterfeiting: Although anti-counterfeiting laws exist, manufacturers of consumer products and automobile spare parts are particularly concerned about the widespread availability of counterfeit products in Saudi Arabia. The Saudi Government remains committed to stopping counterfeit products from entering into the country. • Arab League Boycott: The Gulf Cooperation Council (Saudi Arabia, Kuwait, Bahrain, Oman, Qatar, and the United Arab Emirates) announced in the fall of 1994 that its members would no longer enforce the secondary and tertiary aspects of the Arab League Boycott. The primary boycott against Israeli companies and products still applies. • Government Procurement: Government contracts on project implementation and procurement strongly favor Saudi and GCC nationals. However, most Saudi defense contracts are negotiated outside these regulations on a case-by-case basis. Saudi Arabia published its revised government procurement procedures in August 2006. Foreign suppliers participating in government procurement are required to establish a training program for Saudi nationals. • Banking: Although the Saudi central bank, SAMA, has granted licenses to a number of foreign financial institutions to open branches in Saudi Arabia, these banks are only being allowed to provide investment banking and brokerage services, as applicable. The number of commercial banks operating in the Kingdom in 2008 amounted to twenty two, including branches of the National Bank of Kuwait, Deutsche Bank, Muscat Bank, National Bank of Bahrain, Gulf International Bank (GIB), Emirates Bank (EB), J.P. Morgan Chase N.A, BNP Paribas, National Bank of Pakistan (NBP), and State Bank of India (SBI). • Shipping: Saudi Arabia gives preference to national carriers for up to 40% of governmentrelated cargos. Two local companies take full advantage of this situation.
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Page 7 and 8: Since this is a common practice in
Page 9 and 10: Franchising Return to top Franchisi
Page 11 and 12: companies interested in operating i
Page 13 and 14: Other entities created by the CML i
Page 15 and 16: Pricing Return to top The governmen
Page 17 and 18: Al-Jazira Al-Watan Newspaper Arab N
Page 19 and 20: Engineering & Architectural Service
Page 21 and 22: units and 150,000 square metres of
Page 23 and 24: and has earmarked $8 billion for ne
Page 25 and 26: knowledge-based industries in Madin
Page 27 and 28: Medical Equipment - MED Overview Re
Page 29 and 30: Ministry of Health www.moh.gov.sa M
Page 31 and 32: as Marafiq. This company is respons
Page 33 and 34: • Anti-scaling chemicals • Oper
Page 35 and 36: traffic flow. Non-food franchises a
Page 37 and 38: Saudi Arabia’s Homeland Security
Page 39 and 40: Saudi Arabia’s education system i
Page 41 and 42: Education Trade Fairs in Saudi Arab
Page 43 and 44: $90 billion expected to be spent on
Page 45 and 46: Gulf where a major port will be con
Page 47 and 48: total of $109 billion on railway ex
Page 49 and 50: But over the course of the program,
Page 51 and 52: Al-Qurayyat PP Ext. # 2 - 110 MW -
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prepared based on the planned capac
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Oil & Gas Field Machinery - OGM Ove
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seems that Saudi Aramco has started
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In 2000, Saudi Arabia passed the Fo
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Air-Conditioning & Refrigeration Eq
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Major Projects Some multi-billion d
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growth will be sustained for years
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• Car Batteries • Maintenance a
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Islamic center in the country of or
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educe its soybean import subsidy fr
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Tel.: (+971-4) 332-1000 Fax: (+971-
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and vegetable juices, mineral and o
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However, SPO applied the new law re
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Saudi Customs requires a deposit fo
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standards. The Communications and I
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Publication of Technical Regulation
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efficient customs procedures, and g
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contracts, a restrictive visa polic
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equirements defined in the Ministry
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Of interest to investors who have d
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capacity through training, has stre
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local investment houses. These allo
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any public official must be made a
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• The World Bank Institute publis
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Web Resources Return to top Saudi A
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licenses were also granted to Deuts
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allocated $36.5 billion for the edu
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Recently, the Saudi Fund for Develo
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Return to table of contents Chapter
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visas will likely become the norm o
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Transportation Return to top The bu
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Web Resources Return to top Travel
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Saudi Basic Industries Corporation
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E-mail: abondthorley@fmi.org, sgeor
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Doing Business in Saudi Arabia - International Franchise Association

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