Doing Business In Saudi Arabia: 2011 Country Commercial .
Doing Business in Saudi Arabia: 2011 CountryCommercial Guide for U.S. CompaniesINTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S.DEPARTMENT OF STATE, 2011. ALL RIGHTS RESERVED OUTSIDE OF THE UNITEDSTATES. Chapter 1: Doing Business in Saudi ArabiaChapter 2: Political and Economic EnvironmentChapter 3: Selling U.S. Products and ServicesChapter 4: Leading Sectors for U.S. Export and InvestmentChapter 5: Trade Regulations, Customs, and StandardsChapter 6: Investment ClimateChapter 7: Trade and Project FinancingChapter 8: Business TravelChapter 9: Contacts, Market Research, and Trade EventsChapter 10: Guide to Our Services
Return to table of contentsChapter 1: Doing Business in Saudi Arabia Market OverviewMarket ChallengesMarket OpportunitiesMarket Entry StrategyMarket OverviewReturn to top According to the IMF, the Saudi economy will expand 4.5% in 2011 (compared to3.4% in 2010) as increased public expenditure, strong monetary and fiscal policies,and higher oil prices continue to fuel economic recovery. The non-oil private sectoreconomy is expected to grow by 5.2% in 2011, up from 3.8% growth in 2010.Inflation is generally expected to remain stable at around 5%. Growth in the manufacturing sector is led by the petrochemicals industry, thanks tocontinued strong demand from SE Asia and China. Business Monitor InternationalLtd. ranks Saudi Arabia as the “most attractive country” for petrochemicals amongthe 11 Middle Eastern countries it surveyed. More than US 70 billion of investmentis being pumped into the petrochemical sector. In 2010, the fastest-growing non-oil industrial sectors were power generation, gasand water equipment and services ( 6.0%); transport and communications ( 5.6%);retail, restaurants and hotels ( 4.4%); and construction ( 3.7%). US 70 billion ofinvestment in the petrochemical sector by 2011 is expected. Likewise, the powergeneration, water treatment, telecommunications, transportation, and infrastructuresectors should continue to be the main engines of Saudi economic growth. As inpast years, the construction sector will continue be one of the main beneficiaries ofcontinued large government outlays. Saudi Arabia was the United States’ 12th largest trading partner in 2010 (up from20th in 2009) and the 22nd largest export market for U.S. goods and services. Totalbilateral trade was around 39 billion, a 31% increase from 2009. Total U.S. exportsto Saudi Arabia exports rose to 10.4 billion, up 7% from 2009. Total Saudi exportsto U.S. amounted to 28.5 billion, up 42% from 2009 due to increased demand for oiland higher petroleum prices.Market ChallengesReturn to top Inflation was not a major concern in Saudi Arabia in 2010, remaining stable at justover 5.0%. The rate of inflation is not expected to change much in 2011, if at all. Commercial Disputes Settlements: The enforcement of foreign arbitration awardsfor private sector disputes has yet to be upheld in practice. Furthermore,government agencies are not allowed to agree to international arbitration withoutapproval from the Council of Ministers, which is rarely granted.
Business Visas: All visitors to Saudi Arabia must have a Saudi sponsor in order toobtain a business visa to enter Saudi Arabia. On the positive side, in May 2008, theUnited States and Saudi Arabia signed an agreement to grant reciprocal 5-year,multiple-entry visas for business travelers. This agreement represents a significantstep forward in the visa process. Intellectual Property Protection: Intellectual property protection has steadilyincreased in the Kingdom. Over the last seven years, Saudi Arabia hascomprehensively revised its laws covering intellectual property rights to bring them inline with the WTO agreement on Trade- Related Aspects of Intellectual PropertyRights (TRIPs). The Saudi Government undertook the revisions as part of SaudiArabia’s accession to the WTO, and promulgated them in coordination with theWorld Intellectual Property Organization (WIPO). The Saudi Government updated itsTrademark Law (2002), Copyright Law (2003), and Patent Law (2004), with the dualgoals of TRIPs-compliance and effective deterrence against violators. In 2008 theViolations Review Committee created a website and has populated it withinformation on current cases. The patent office continues to build its capacity throughtraining, has streamlined its procedures, hired more staff, and reduced its backlog.In September 2009, the King approved a mechanism to protect Exclusive MarketingRights (EMR) for certain pharmaceutical products which lost patent protection whenSaudi Arabia transitioned to a new TRIPS-compliant patent law in 2004. The SaudiMinisterial Council in December 2009 approved the Kingdom’s accession to both theIntellectual Property Owners Association Patent Cooperation Treaty (PCT) and itsImplementing Regulations and the Patent Law Treaty (PLT) adopted by theDiplomatic Conference in Geneva on June 1, 2000. The Council of Ministers issueda resolution on 23/11/1428H (December 3, 2007) approving the Law of Trademarksfor GCC countries. Counterfeiting: Although anti-counterfeiting laws exist, manufacturers of consumerproducts and automobile spare parts are particularly concerned about thewidespread availability of counterfeit products in Saudi Arabia. The SaudiGovernment remains committed to stopping counterfeit products from entering intothe country. Arab League Boycott: The Gulf Cooperation Council (Saudi Arabia, Kuwait,Bahrain, Oman, Qatar, and the United Arab Emirates) announced in the fall of 1994that its members would no longer enforce the secondary and tertiary aspects of theArab League Boycott. The primary boycott against Israeli companies and productsstill applies. Government Procurement: Government contracts on project implementation andprocurement strongly favor Saudi and GCC nationals. However, most Saudi defensecontracts are negotiated outside these regulations on a case-by-case basis. SaudiArabia published its revised government procurement procedures in August 2006.Foreign suppliers participating in government procurement are required to establisha training program for Saudi nationals.
Banking: Although the Saudi central bank, SAMA, has granted licenses to anumber of foreign financial institutions to open branches in Saudi Arabia, thesebanks are only being allowed to provide investment banking and brokerage services,as applicable. The number of commercial banks operating in the Kingdom in 2009amounted to twenty, including branches of the National Bank of Kuwait, DeutscheBank, Muscat Bank (Oman), National Bank of Bahrain, Gulf International Bank (GIB)of Bahrain, Emirates Bank (EB), J.P. Morgan Chase N.A, BNP Paribas, NationalBank of Pakistan (NBP), and State Bank of India (SBI). Shipping: Saudi Arabia gives preference to national carriers for up to 40% ofgovernment-related cargos. Two local companies take full advantage of thissituation. Standards and labeling: As part of the GCC Customs Union, the six MemberStates are working toward unifying their standards and conformity assessmentsystems. However, each Member State continues to apply its own standard or aGCC standard. A new ICCP mandates that a Certificate of Conformity mustaccompany all consumer goods exported to Saudi Arabia. Labeling and markingrequirements are compulsory for any products exported to Saudi Arabia. Travel Advisories: Americans visiting Saudi Arabia are advised to check the U.S.State Department’s website at http://travel.state.gov/travel/cis pa tw/tw/tw 932.htmlfor the latest information on travel to Saudi Arabia.Market OpportunitiesReturn to top Saudi Arabia, the construction leader in the Gulf area, has budgeted US 385 billionon roads, airports and energy projects for the five-year period from 2010 to 2014.The government is planning to spend US 3 billion on 6,600 km of new roads in 2011alone. Major rail and airport expansion projects are also under way. Saudi Arabia has the biggest IT market in the Gulf region, worth about US 3.3 billionin 2010 and expected to grow to about US 4.6 billion by 2014. All three of Saudi Arabia’s GSM operators are in the process of implementing higherdata transmission speeds over their 3.5G networks. This development shouldstimulate increased demand for mobile broadband services in the long term. Saudi Arabia’s ambitious rail plans are fuelling activity in the infrastructure sector,with US 30 billion worth of contracts under way or at the bidding stage. Majorprojects include the North-South railway, the Saudi Land Bridge, and the MeccaMedina (or “Haramain”) railway. Saudi Arabia is the third largest consumer of water per capita in the world, but haslimited groundwater to tap. Desalination forms the backbone of the government’swater strategy. The Saudi government has committed US 6bn a year to bolsteringthe water sector over the next two decades. The state-owned utility Saudi Electricity Company (SEC) intends to invest US 70billion by 2018 to add 22MW to the nation’s power-generating capacity in order tomeet the growing demand from a rapidly increasing population. SEC’s goal is toreach a power-generation capacity of 65,000 MW by the end of the year 2018.
Market Entry StrategyReturn to top Although American exporters are not required to appoint a local Saudi agent ordistributor to sell to Saudi companies, we strongly recommend that all new-to-marketU.S. companies consider partnering with a local company. For complete informationand regulations on registering a business in Saudi Arabia, please visit the SaudiArabia Government Investment Agency (SAGIA) at Wizard/Introduction/. Although the Saudi Government encourages foreign investment, a U.S. firm isstrongly encouraged to seek in-country legal counsel on the best approach. TheU.S. Commercial Service can assist by providing a list of local attorneys, which maybe associated with American law firms.Return to table of contents
Return to table of contentsChapter 2: Political and Economic EnvironmentFor background information on the political and economic environment of the country,please click on the link below to the U.S. Department of State Background Notes:http://www.state.gov/r/pa/ei/bgn/3584.htmThe U.S. Commercial Service in Saudi Arabia is part of a global network of tradespecialists in more than 100 cities in the United States and 80 countries worldwide,including offices in Riyadh, Jeddah and Dhahran. Our mission is dedicated tostrengthen commercial ties between Saudi Arabia and the United States by offeringcomprehensive, trade promotion assistance through a variety of programs and services.Return to table of contents
Return to table of contentsChapter 3: Selling U.S. Products and Services Using an Agent or DistributorEstablishing an OfficeFranchisingDirect MarketingJoint Ventures/LicensingSelling to the GovernmentDistribution and Sales ChannelsSelling Factors/TechniquesElectronic CommerceTrade Promotion and AdvertisingPricingSales Service/Customer SupportProtecting Your Intellectual PropertyDue DiligenceLocal Professional ServicesWeb ResourcesUsing an Agent or DistributorReturn to topAmerican exporters are not required to appoint a local Saudi agent or distributor to sellto Saudi companies, but commercial regulations restrict importing for resale and directcommercial marketing within the Kingdom to Saudi nationals, wholly Saudi-ownedcompanies, and Saudi-foreign partnerships where the foreign partner holds 25% equity.Nationals from the Gulf Cooperation Council (GCC) countries, which include SaudiArabia, Kuwait, Qatar, Oman, Bahrain, and the UAE, are also allowed to engage intrading and retail activities, including real estate. Agent/distributor relations aregoverned by the Commercial Agency Regulations of the Kingdom of Saudi Arabia that isadministered by the Ministry of Commerce and Industry. Saudi business people cannotact as commercial agents unless their names are entered into the Register maintainedby the Ministry of Commerce and Industry.In July 2001, the Council of Ministers cancelled a decree compelling foreign companieswith government contracts to appoint a Saudi service agent. The old decree alsospecified a maximum commission of 5%. Some government contracts, however, stillrequire a minimum participation by a Saudi entity. In addition, government contractstypically include a clause requiring training programs for Saudis. Even though it is nolonger legally required, we recommend that U.S. companies seeking to do business withSaudi government agencies appoint a Saudi service agent. The sales commission paidto the Saudi service agent is justified by the relatively quick and easy access to theappropriate government decision-maker. The U.S. Commercial Service in Saudi Arabiacan help U.S. companies find a reputable Saudi service agent.Sales commissions are entirely negotiable between the U.S. party and the Saudi agentor distributor, but typically range from 3 to 10 percent, depending on the product or
service and the duties required of the service agent. Whether or not sales commissionsare to be paid, and the percentage thereof, should carefully be spelled out in any agencyor distribution contract.Terminating an agent/distributor agreement can be difficult even though Saudi policy haschanged to permit registration of a new agreement over the objections of the existingdistributor. While most prospective Saudi agents and/or distributors generally preferexclusive agency contracts, these are by no means required. Given the close-knitnature of business circles in Saudi Arabia, replacing an agent or distributor coulddamage a U.S. firm’s reputation if not handled sensitively. A U.S. company should at allcosts avoid being viewed as lacking adequate commitment to its Saudi businessrelationships. Saudi agents may request “parting compensation” in the event the foreignexporter decides to dissolve a business relationship. Since this is a common practice inthis market, U.S. companies should address this eventuality prior to executing acontract.U.S. firms interested in the Saudi market are cautioned against trying to use lists ofimporters for “cold calls” on prospective agents. Saudis prefer to do business withsomeone only when they have been properly introduced and have met face-to-face. Tohelp dispel reluctance on the Saudi side, an introduction by a “go-between” typicallyserves to vouch for the reliability of both parties. The U.S. Commercial Service in SaudiArabia performs just this sort of introduction for U.S. companies as part of its “Gold Key”matching service (available to U.S. companies exclusively). Other appropriate thirdparties for such introductions include other Saudi firms, U.S. companies that havesuccessfully done business in Saudi Arabia, banks, trade associations, and chambers ofcommerce.The Saudi legal system, known as Shari’a, is based on the Koran and Hadith and differsconsiderably from U.S. practice. The Saudi Government has earmarked nearly 2 billionto overhaul its judicial system and court facilities in an effort to streamline the legalprocess. Royal Decree M/78 dated October 1, 2007, approved the Charter of theJudiciary System and the Charter of the Board of Grievances, and implemented relevantmechanisms.American firms contemplating an agency or distribution agreement are strongly urged toconsult with a local attorney and have a legally binding contract drawn up, setting forth indetail the rights and obligations of all parties, how and when sales commissions are tobe paid, and how and in what venue any disputes are to be settled. A list of local lawfirms is available on the website of the U.S. Embassy in Riyadh, Saudi Arabia.The U.S. Commercial Service, through its domestic U.S. Export Assistance Centersand overseas offices in Embassies and Consulates, offers a variety of services to assistAmerican firms in selecting a reputable and qualified representative. In Saudi Arabia,the U.S. Commercial Service maintains offices in the capital, Riyadh, and in the regionalbusiness centers of Jeddah and Dhahran. CS Saudi Arabia’s Gold Key MatchingService is a personalized and targeted matchmaking service that combines anorientation briefing, a profile of each Saudi prospect, interpreter services for meetings, aCommercial Specialist from the Embassy to escort you to your meetings, and assistancein developing follow-up strategies. The International Partner Search provides pertinentinformation on up to six pre-qualified potential Saudi representatives. This customizedsearch will put you in touch with firms that have expressed an interest in representing
your product or service. The International Company Profile provides follow upbackground information on potential partners. These services are available to U.S.companies exclusively.Establishing an OfficeReturn to topThe procedures to establish an office in Saudi Arabia differ according to the type ofbusiness undertaken. The most common and direct method is simply to appoint anagent/distributor who can set up the office under its own commercial registry. Theagent/distributor agreement should be registered with the Ministry of Commerce &Industry. The Commercial Agency regulations govern the agent/distributor agreement.A second method might be to establish a technical and scientific service office, whichalso requires a license from the Ministry of Commerce and Industry. This approachpreserves the independence and identity of the foreign company and provides for moreleeway in managing and marketing the company’s products or services. Technical andscientific service offices are not allowed to engage directly or indirectly in commercialactivities, but they may provide technical and advisory support to Saudi distributors, aswell as conduct market surveys and product research.A third method is to establish a branch office. Saudi Arabia’s Foreign Investment Lawallows international companies the possibility of 100% ownership of projects andproperty required for the project itself, while enabling them to retain the same incentivesgiven to national companies. A branch office involves a more direct presence than acommercial agent. Branch offices are largely restricted to an administrative role and maynot engage in trading activities. Nevertheless, a branch office can be very useful as aliaison presence for a U.S. company. A branch office offers the benefits of a physicalpresence without the formal requirements of a joint venture company. An U.S. companycan open an independent branch office without a Saudi partner. Its parent companymust accept full responsibility for all work undertaken by the branch office in SaudiArabia.To establish an office in Saudi Arabia, a foreign company needs to submit to relatedSaudi authorities a copy of its articles of association as incorporated in the country oforigin, a copy of its commercial registration, a written approval by the board of directorsof the company, its chief executive officer/president or a similar entity related to theirdecision to open a subsidiary office stating the name of the city and the name of thesubsidiary’s manager. All aforementioned documents are to be attested as required.The authorization to the applicant has to be attested by the Saudi Embassy inWashington, D.C.A fourth method is to establish a representative (or liaison) office. This is normallygranted only for companies that have multiple contracts with the Government andrequire a local office to oversee contract implementation. Representative offices are notallowed to engage in direct or indirect commercial activity in the Kingdom. Founding abusiness establishment requires a license from the Ministry of Commerce and Industry.A fifth method is for a foreign company to establish a joint venture with a Saudi firm.Usually, the Saudi business community refers to limited liability partnerships as jointventures. These partnerships must be also regi
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
Business Visas: All visitors to Saudi Arabia must hae av Saudi sponsor in order to obatin a business visa to enter Saudi Arabia. On the positive side, in May 2008, the United States and Saudi . which include Saudi Arabia, Kuwait, Qatar, Oman, Bahrain, andt he UAE, are also allowed to engage in trading and retail activities, including real .
Doing Business in Saudi Arabia Market Overview The Saudi Arabian economy is the largest in the Gulf region, and Saudi Arabia is the only G-20 member country in the region. Saudi Arabia has an oil-based economy with petroleum accounting for approximately 62 percent of government revenues, 44 percent of GDP, and 72 percent of export earnings in 2016.
Figure 10: Saudi Arabia HVAC-R Market Size, By Value, 2011-2021F (USD Billion) 25 Figure 11: Saudi Arabia HVAC-R Market Share, By Region, By Volume, 2015 & 2021F 25 Figure 12: Saudi Arabia GDP Share, By Province, 2014 27 Figure 13: Saudi Arabia Urbanization Rate, 2011-2015 (As Percentage of Total Population) 27
Saudi Arabia and the principal legal factors to be considered when doing business in the Kingdom of Saudi Arabia. Please note that this overview is for general guidance only and is not intended to be an exhaustive review of the laws of the Kingdom of Saudi Arabia. This guide does not contain definitive legal advice and specific
Saudi Arabia in 100 Questions east of Grenache line and longitudes 34 and 42 to the north of the Equator. The topography of Saudi Arabia ranges from plains, mountains, deserts and plateaus. The most famous of the latter is Najed where the Saudi capital Riyadh is located. The climate of Saudi Arabia is a desert climate
The Saudi Companies Regulations3 set forth the basic rules regarding the organization of a business in Saudi Arabia. The Companies Regulations *Mr. Homsy practices law in Pittsburh, Pennsylvania. 'The present civil regulatory structure in Saudi Arabia has its origins in the first Saudi Com- mercial Code promulgated by King Abdul Aziz in 1931. .
global oil market. Increasing imports by Saudi Arabia of intermediate and capital goods from G20 countries. Providing more investment opportunities in Saudi Arabia for the G20 countries and providing profitable opportunities for the G20 investors to take advantage of the free zones planned to be established in Saudi Arabia.
14 Mercedes Benz A250 2014 Wheel alignment Wheel alignment specifications. Contacted VACC, no information available, checked online for OEM websites, blocked from USA and Europe. 15 Suzuki Jimny 2008 Collision repair Body repair quarter panel replacement procedures. Contacted VACC, no information available, checked online for OEM websites, blocked from USA and Europe. 16 LDV G10 2016 Service .
