|
Prime
Minister Tony Blair meets H.R.H
King Abdullah |
Identified opportunities
Saudi Arabia’s fast-growing economy is
creating opportunities for both exporters
and investors. These are further boosted
by moves to diversify the economy away
from oil, and by economic reform programmes.
There are opportunities at all levels
in:
Oil and gas – US $50bn
is to be spent over the next five years
to boost Saudi oil production
Construction and its
many sub-sectors – largest construction
market in the Middle East
Banking, Insurance and Financial
Services - to see further growth,
is highly profitable and continues to
perform well
Software and High Technology
- a fast growing market for leading edge
technology solutions
Education and training
in Saudi Arabia is a rapidly growing market.
43% of the population are under the age
of 14 years and the government is increasingly
looking to the private sector to provide
education opportunities. Companies are
also being compelled to take on Saudis
and at present the education system is
failing to deliver enough suitably framed
graduates. Research shows that there is
a good perception of the quality of UK
education services and products in Saudi
Arabia.
Geography
Occupying most of the Arabian Peninsula,
the Kingdom of Saudi Arabia lies between
the Red Sea and the Arabian Gulf. Countries
bordering Saudi Arabia include Jordan
to the north; Iraq and Kuwait to the north-east;
Qatar and the United Arab Emirates to
the east; and Yemen and the Sultanate
of Oman to the south. The country has
approximately 2,250,000 square kilometres
(869,000 square miles) of land area, which
includes the following regions:
• The Western Province (Hijaz) borders
the Red Sea and contains the Muslim holy
cities of Makkah and Medina, the major
commercial port city of Jeddah and the
industrial city of Yanbu.
• The Central Province (Najd) located
on the central plateau, is the largest
province. Riyadh, the capital of Saudi
Arabia and the seat of government, is
located in this province.
• The three cities of Al Khobar, Dhahran
and Dammam form the centre of the Eastern
Province. Ras Tanura, the oil port, and
the industrial city of Jubail are also
located here. Saudi Arabia’s oil reserves
and related installations are located
primarily in this province.
• The South-west Province (Asir), a mountainous
region with peaks as high as 3,000 metres
(9,800 feet), has some agriculture and
is being developed as a tourist destination.
Politics
The central institution of Saudi Arabian
Government is the Saudi monarchy. The
Basic Law adopted in 1992 declared that
Saudi Arabia is a monarchy ruled by the
sons and grandsons of the first king,
Abd Al Aziz Al Saud, and that the Qur'an
is the constitution of the country, which
is governed on the basis of Islamic law
(Shari'a).
H.R.H. King Abdullah of Saudi
Arabia
There
are no recognized political parties or
national elections. The king's powers
are theoretically limited within the bounds
of Shari'a and other Saudi traditions.
He also must retain a consensus of the
Saudi royal family, religious leaders
(ulema), and other important elements
in Saudi society. The state's ideology
is Salafi. This flavour of Islam spreads
further by funding construction of mosques
and Qur'an schools around the world. The
leading members of the royal family choose
the king from among themselves with the
subsequent approval of the ulema.
Saudi kings have gradually developed a
central government. Since 1953, the Council
of Ministers, appointed by and responsible
to the king, has advised on the formulation
of general policy and directed the activities
of the growing bureaucracy. This council
consists of a prime minister, the first
and second deputy prime ministers, 20
ministers (of whom the minister of defense
also is the second deputy prime minister),
two ministers of state, and a small number
of advisers and heads of major autonomous
organizations.
Legislation is by resolution of the Council
of Ministers, ratified by royal decree,
and must be compatible with the Shari'a
(Islamic law). Justice is administered
according to the Shari'a by a system of
religious courts whose judges are appointed
by the king on the recommendation of the
Supreme Judicial Council, composed of
12 senior jurists. The independence of
the judiciary is protected by law. The
king acts as the highest court of appeal
and has the power to pardon. Access to
high officials (usually at a majlis, or
public audience) and the right to petition
them directly are well-established traditions.
Population
According to the latest Central Department
of Statistics, the Kingdom’s total population
reached 24.06 million in mid-2003, compared
with 23.37 in mid-2002, reflecting an
annual growth rate of 2.9 percent. Approximately
25 percent of the population are foreign
nationals, mostly from the Asian sub-continent.
About 100,000 Westerners live in Saudi
Arabia. Saudi Arabia’s population was
16.9 million in its last official census
taken in 1992.
Each year about 2 million Muslims visit
Saudi Arabia for 3-4 weeks to take part
in the annual pilgrimage (the Hajj) to
Makkah and Medina.
Climate
The Riyadh climate is mild in winter and
very hot in summer. Jeddah has hot humid
summers, with cooler less humid winters.
The Eastern Province is similar to Riyadh,
but with higher humidity.
Religion
No public religious expression is allowed
other than Islam. The word "Wahhabi"
is often incorrectly identified by Westerners
as being the Saudi branch of Islam. Those
who are labelled with this word do not
themselves use this term, as it is used
as a means of belittlement. The correct
way of reference is by the term "Salafi",
as in Saudi Arabia it is "the way
of the Salaf". The Prophet Muhammad
(may Allah raise his rank and grant him
peace) and his companions.
Following the way of the Salaf is the
way which has been legislated in the Quran
and Sunnah, the very sources of Islam.
The Prophet (may Allah raise his rank
and grant him peace) said to his daughter
Fatimah: "Indeed, I am for you a
blessed Salaf."
Language
Arabic is the official language, although
English is widely used in the main towns
and is the main business language.
Alcohol and Pork Products
The import or possession of alcoholic
beverages and pork products is strictly
prohibited. Offenders are liable to severe
penalties.
Currency
The unit of currency is the Saudi Riyal
(SR) which is effectively tied to the
US dollar at the rate of 1 US$ = SR3.75.
The current rate of exchange with the
pound sterling is around £1.00 =
SR7.2
Calendar
The Hijra calendar, based on lunar months,
is the official calendar. A Hijra year
begins 10-11 days earlier each year in
the Gregorian calendar. The current Hijra
year, 1426, started on 10 February 2005.
Local Time
Saudi Arabia is three hours ahead of Greenwich
Mean Time and two hours ahead of British
Summer Time.
Office Hours
Private business offices are usually open
from 0800 to 1300, and 1600 to 2000, Saturday
to Wednesday inclusive and from 0800 to
1300 on Thursday. Government offices normally
work from 0800 to 1430 Saturday to Wednesday
inclusive. All offices and shops close
four times a day for prayer. Working hours
during the holy month of Ramadan are reduced
- Government offices should be open from
1000 to 1500. In the private sector many
businesses will open at night in Ramadan,
normally 10 p.m. to 01 a.m.
Business Visits
It is generally best to avoid visiting
Saudi Arabia in July and August (when
many Saudi businessmen are out of the
Kingdom) and close to the two Eid Festivals
(see dates below). Visitors during Ramadan
need to be prepared to do business outside
western hours. The lead-up to the pilgrimage
(Hajj) season is the peak-buying season
for merchants in Jeddah, Makkah and Medina.
The month of Ramadan is normally the peak
period for sales of clothes, furniture
and toys. Beginning in June, large numbers
of Saudis and expatriates leave the country
for the summer holidays.
Public Holidays
The Saudi weekend is Thursday and Friday.
Public holidays are observed for the two
annual Eid Festivals when all government
and business offices are closed. It is
best to avoid non-essential business travel
around these times, especially as the
dates can move back or forward by a few
days:
2006/2007
Ramadan 24 September 2006 – 23 October
2006
Eid al Fitr 24 October – 27 October 2006
Eid al Adha 31 December – 3 January 2007
Communications
The best way to communicate is by telephone,
fax or e-mail. Any other materials should
be sent by courier. The mail is often
slow and unreliable.
Direct Publicity
Direct publicity (by e-mail or fax) is
an effective way to bring your products
to the attention of potential customers.
If you are planning to visit the Kingdom,
time your mail shot 2 weeks before your
arrival.
Visas
All nationals (except those of Bahrain,
Kuwait, United Arab Emirates, Qatar and
Oman) require a visa, to be obtained in
advance from the Saudi Embassy in their
country of residence, to enter the Kingdom.
For a single entry visa, businessmen may
now obtain a visa with a supporting letter
from a UK Chamber of Commerce attesting
to their status as a business visitor.
For multiple entry visas, visitors are
still required to have an invitation from
a Saudi-based company or sponsor. The
easiest way for a businesswoman to obtain
a visa is to join an outward trade mission
from the UK. Alternatively, the prior
approval of the Ministry of Foreign Affairs
in Riyadh is required. Passports bearing
evidence of a visit to Israel will not
be stamped with a Saudi visa.
Economy
The Saudi economy is witnessing a period
of relatively high growth and economic
progress. This is based upon a very strong
oil sector, which is bringing in record
oil revenues. This is allowing the Kingdom
to increase public spending on infrastructure
and welfare to match the increasing needs
of the Saudi population. In turn the non-oil
private sector is feeding off this upturn
in public spending. Government debt is
falling, allowing greater liquidity for
the private sector; business and consumer
confidence is flourishing; the stock market
continues on a strong upward trend as
corporate profits still record high double
digit increases, and these higher profits
act as yet another source of funding.
But demographics mean there is a growing
need for investment and jobs. Around $200bn
investment will be needed over the next
two decades just to supply the necessary
power and water to the ever increasing
population.
It is therefore vital for Saudi Arabia
to attract substantial amounts of private
(i.e. largely foreign) investment and
new technology. Hence the need for economic
reform. This is recognised at the top.
But implementation is slow. Nevertheless,
there has been recent progress. For both
power and telecommunications sectors,
legislation has been approved, providing
for a competitive market under an independent
regulator and open to foreign participation.
Similar legislation, liberalising the
insurance and capital markets has been
enacted and there has been a reduction
in the basic customs tariff from 12% to
5%. Both the Saudi Electricity Company
and the Saudi Telecom Company are being
privatised. A second telecom licence was
awarded this year with the intention to
award a third licence in 2006. If the
programme of economic reform is successful,
the demographics will create a substantial
increase in demand for goods and services
over the next two decades.
New national accounting figures published
in August 2004 show nominal growth of
Gross Domestic Product (GDP) in 2003 at
13.7%, boosted by a 28.1% growth in the
oil sector. This growth rate has only
been surpassed in 2000 and during the
Gulf War period (1990). In real terms
growth in 2003 was equally impressive
at 7.2%
The non-oil sector, which now constitutes
around 60% of total GDP, is sustaining
historically high growth rates alongside
the buoyant oil sector. In 2003 nominal
non-oil private sector growth was 4.4%.
Despite volatile growth rates in the oil
sector over the last five years, the non-oil
private sector has been able to achieve
sustained annual growth rates within the
range 3.8% and 4.4%.
These are very competitive figures internationally
and indicate that private sector growth
is now becoming less dependent on oil
sector activity. This would not have been
the case 20 years ago. Government non-oil
activity also increased in 2003 above
recent trends, recording a nominal growth
of 6.3%. Typically, since 1997 it has
been less than half this rate, as the
government has endeavoured to switch resources
from public to private sector.
Doing Business
in Saudi Arabia
There are several ways of doing business
in Saudi Arabia, most common of these
are:
1. Direct Exports
2. Commercial Agents
3. Franchises
4. Branch Offices
5. Joint Ventures
6. Direct Foreign Investment
Each of these methods is discussed briefly
below:
1. Direct Exports
The simplest form of doing business in
Saudi Arabia is direct export into the
country. A company generally may sell
its goods directly to Saudi Arabian customers,
assuming the goods meet the applicable
health and safety standards. Hiring a
local agent is not a requirement of doing
business. However, most companies have
a local presence to sell their goods effectively,
and some types of transactions require
a local presence (e.g. government procurements).
More details on this below.
Export Documentation Requirements
The documents required for all commercial
shipments to the Kingdom of Saudi Arabia
are:
Commercial Invoice
Certificate of origin
( The above two documents need to be attested
by the Saudi Embassy in London. Details
on attestation procedures are available
from the Arab British Chamber of Commerce
at http://www.abcc.org.uk Tel: 020 7235
4363 , Fax: 020 7245 6688)
Bill of lading (or airway bill)
Steamship (or airline) company certificate
Insurance certificate (if goods are insured
by the exporter)
packing list
Additional documents may be required,
depending on the type of goods being shipped,
e.g. International Certificate of Compliance
(ICC) to Saudi Arabian
Standards.
A full list of products that fall under
the ICC regime is available on the link
www.iccp.com The British company Intertek
plc, is accredited to issue compliance
certificates to Saudi standards which
is accepted by the Saudi Customs authorities.
The company’s details in the UK are:
Intertek Testing Services (ITS)
Academy place
1-9 brook street
Brentwood, Essex cm14 5nq
Tel 44 1277 223304 fax 44 1277 220246
Web: www.intertek-fts.com
E-MAIL: info.brentwood.fts@intertek.com
Any consignment arriving in KSA without
an ICC document will be subjected to investigation,
physical inspection, sampling, laboratory
testing, and possible rejection if not
in compliance with the applicable standards.
Information on applicable Saudi Standards
is available from:
Saudi Arabian Standards Organisation (SASO)
P.O. Box 3437
Riyadh 11471, Saudi Arabia
Tel.: 0096614520132
Fax: 0096614520196
www.saso.org.sa
Customs Duties
Customs tariffs on most imported goods
from is 5 percent, there is also a protective
tariff of 12 or 20 percent on some imports
to support some national industries.
Saudi Arabia has been implementing the
Brussels Harmonised Commodity Description
and Coding System (H.S.) since 1991. To
more information on Saudi customs, please
check the web site of the Saudi Customs
Office at http://www.customs.gov.sa/.
2. Commercial Agents
A commercial agent may be more familiar
with the local market and may be able
to facilitate certain transactions. A
company should choose its agent carefully;
terminating or changing agents can be
a difficult process.
Model
Agency Agreement 
The term "commercial agent"
describes a variety of roles and responsibilities.
Some commercial agents sell goods; others
sell services. Some commercial agents
buy goods directly from the manufacturer
and resell them; others sell goods for
the manufacturer and receive a commission.
All are covered by commercial agency law
in Saudi Arabia.
3. Franchising
Franchising is becoming an increasingly
popular form of doing business in Saudi
Arabia. It offers greater flexibility
than commercial agency agreements but
does not require the resources of a branch
office or joint venture. Because the franchise
law is relatively new, a foreign company
should proceed cautiously before establishing,
changing or terminating a franchisee.
4. Branch Offices
A branch office involves a more direct
presence than a commercial agent. A branch
office is largely restricted to an administrative
role and may not engage in trading activities.
The parent company must accept full responsibility
for all work undertaken by the branch
office within the Kingdom. Licence to
set up a branch office is issued by the
Saudi Arabian General Investment Authority
(SAGIA).
5. Joint Ventures
6. Direct Foreign Investment
Saudi Arabian General Investment Authority
(SAGIA) is the gateway to investment in
Saudi Arabia. The Foreign Investment Law
allows non-Saudi companies and individuals
the possibility of 100 percent ownership
of the projects. The law gives foreign
companies and individuals full ownership
of the property required for the project
or for housing company personnel, while
enabling them to retain the same incentives
given to national companies. More details
on foreign investment regulations and
applicable taxation is available from
the website of SAGIA at www.sagia.gov.sa.
Taxation
1. Residents and Non-residents Taxation
In general, residence does not determine
the taxation of individuals. Instead,
taxation depends on whether individuals
are Saudi nationals, GCC nationals or
citizens of other countries and on whether
they are engaging in a taxable activity.
Saudis and GCC nationals are subject to
zakat, but not to income tax.
2. Zakat
Zakat is a religious wealth tax assessed
on Saudi and GCC nationals and on companies
entirely owned by those individuals. If
companies or partner-ships are owned by
Saudi or GCC nationals and by other foreigners,
zakat is assessed on the taxable income
of the entity in proportion to the equity
interest of Saudi and GCC nationals in
the company. Complex rules apply to the
calculation of zakat liabilities. In general,
zakat is levied at a rate of 2.5% on capital
that is not invested in fixed assets or
long-term investments and on pre-incorporation
expenses deferred, as adjusted by net
results for the year.
Foreign Investment Law
Saudi Arabian General Investment Authority
(SAGIA) is the gateway to investment in
Saudi Arabia. SAGIA started it mission
in April 2000 as part of a new and liberalised
Saudi Arabian Foreign Investment Law.
The law was formulated with the objective
of liberalising and improving the investment
climate in the Kingdom by strengthening
the rights and privileges of the foreign
investor. The law provides SAGIA with
such a broad mandate that the Saudi Government’s
various ministries and relevant agencies
are represented on SAGIA’s Board of Directors.
The new Foreign Investment Law allows
the international companies the possibility
of 100 percent ownership of the projects.
The new law, which was passed in April
2000, gives international companies full
ownership of the property required for
the project or for housing company personnel,
while enabling them to retain the same
incentives given to national companies.
The law permits foreigners to invest in
all sectors of the economy, except for
specific activities contained in a negative
list. The minimum investment for agricultural
projects is twenty five million Saudi
Riyals, while that for industrial projects
is five million Saudi Riyals and for service
projects it is two million Saudi Riyals.
Foreign investors are no longer required
to take local partners and may own real
property for company activities. They
can transfer money from their enterprises
outside of the country and can sponsor
their foreign employees.
As per the new law, corporate tax rate
for foreign companies with annual profits
over SR 100,000 is reduced from 45 percent
to 30 percent. Companies are also allowed
to carry forward corporate losses for
an unspecified number of years. Projects
that are 100 percent foreign owned are
also eligible for loans from the Saudi
Industrial Development Fund (SIDF). Similarly,
investors are also entitled to hold investment
licenses in more than one type of activity.
SAGIA Approves 189 Projects Worth SR24bn
Saudi Arabia has issued licenses for 189
international and domestic investment
projects worth SR24 billion ($6.4 billion)
in the first quarter of this year.
SAMA unveils list of 22 licensed insurers
The Saudi Arabian Monetary Agency (SAMA)
disclosed the names of 22 insurance companies
licensed to operate in the Kingdom. Among
the 22 licensed companies are 13 that
have foreign ownership, according to the
Saudi Arabian General Investment Authority.
The 22 approved companies have a combined
capital of SR25 billion. Among the requirements
for licensing made by SAMA are that companies
present feasibility studies and a bank
guarantee equal to the company's capital.
The central bank then studies an application
to protect the rights of companies, policyholders
and shareholders.
CWC
Gulf has a representative office
in Saudi Arabia. Although geared
primarily for the for the promotion
of Saudi British business, the
KSA office can undertake any type
of project and consultancy work
throughout the whole region. 
