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Starting a Business in Saudi Arabia

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Starting a Business in Saudi Arabia

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Why Start a Business in Saudi Arabia?

The Middle East is a funny old place...and a very old place. It was from the Mesopotamian dust and Sumerian sunshine that civilisation was born. Names changed, seas rose, borders moved, wars were fought, religion was enacted, empires interjected and slowly and arbitrarily the modern Arab world formed.

Despite the tempestuous history, it is an essentially unchanging place. Contemporary has never been temporary. Aesthetically, the Middle East is a gilded landscape, topographically biblical and architecturally poignant. Everything about it evokes antiquity and authenticity.

Sometime during one of the Middle East's finger-cracking, arm-stretching permutations, the House of Saud moved in (the mid-1700s to be precise). Fortunes rose and fell, and struggles went to and fro until Saudi Arabia found its feet on the carpet of commerce. And, boy, can it vaunt now. The slick fortuity of natural resource has been the basis of Saudi success for some time now. Oil, fantastic stuff, the blood of modern civilisation.

However, concerted efforts have been made to redefine the economy and now Saudi can boast diversification rather than geographical serendipity as its headline act. It's all reforms and liberalisation, and for foreign investors this means entry-options aplenty. Energy, finance, education, construction, environment, ICT, and consumer goods are just a handful of sectors that are susceptible to investment. After the US, the UK is Saudi's second largest investor, and this relationship looks to remain robust for the near and foreseeable future.


Embrace what Saudi Arabia can do for your entrepreneurial ambitions, and read on to see why moving there may just be history in the making.

What is the population?

The population of Saudi Arabia is 27.6 million people.

What is the time difference?

The time in Saudi Arabia is GMT + 3.

How is the climate?

The climate in Saudi Arabia varies greatly. The Red Sea coast has a sub-equatorial climate. The summer is hot and humid and the winter is mild with light rains between November and February. In the central region, summer temperatures can average 45C, with the winter dry and cool. The east has high humidity, with temperatures rising to 43C during the warmest season, and moderating in winter months. Rainfall is light, and occurs primarily during the winter.

What is the currency and exchange rate?

Saudi Arabia uses the Saudi Arabia Riyal.

Economic Overview

Saudi Arabia has an oil-based economy with overt government control over major economic operation. Saudi has more than 20% of the world's known petroleum reserves, ranks as its largest exporter, and plays a leading role in OPEC. The petroleum market constitutes approximately 75% of budget revenues, 45% of GDP, and 90% of export earnings.

About 40% of GDP comes from the private sector. Roughly five-and-half million non-indigenous workers play a vital role in the Saudi economy, specifically in the oil and service sectors. High oil prices have increased growth, government revenues, and Saudi ownership of foreign assets, while allowing Riyadh to pay down domestic debt. The government is encouraging private sector growth - especially in power generation, telecommunications, natural gas exploration, and petrochemicals - to lessen its dependence on oil exports and to increase employment opportunities for the ever-increasing Saudi population; nearly 40% of which are youths under fifteen- years-old.

Unemployment is a problem. The staggering youth population generally lacks the education and technical skills the private sector requires. Riyadh has substantially increased investment in job training and education, infrastructure development, and government salaries. The government has announced plans to create six economic cities in various regions of the country to encourage development and eclecticism.

Saudi Arabia recently gained WTO membership. This commitment meant the Arab state had to further liberalise its trading policy and develop a more transparent and foreseeable arena for trade and foreign investment to take place.

The Saudi government has a job in introducing measured reform, developing the economy, and opening it to outside investors.

The World Bank report, which ranks Saudi Arabia twenty-third in world. This surpassed all other Arab and Middle East states. The report also ranks Saudi seventh in terms of pace of its economic reforms:

Foreign investors can now own up to 100% of ventures in some sectors

Tax on corporate profits attributable to foreign investors has been reduced

The state electricity and telecom companies have been "corporatised", and legislation enacted, to pave the way for privatisation and competition in those sectors. The water Ministry is reducing subsidies and moving towards market-based consumer pricing

What are the essentials to know?

Etiquette

The business and cultural environment of Saudi Arabia is highly conservative. Astute readiness, and a fundamental knowledge of the Saudi culture, can make the difference between a successful business deal and a failed negotiation. Conversely is vital to remember that a wealth of Saudi executives and government officials are familiar with international culture and customs. They are therefore comfortable with the West's approach to business, provided respect is shown both ways. For instance, the attention put on relationships, body language, and proper attire are all fundamental components of Saudi etiquette.

Businesswomen in Saudi - Conducting business in Saudi Arabia is rather more challenging for women. There is still gender segregation, despite its progression in other areas. Many public places like hotels and restaurants will have communal rooms where women are served with their husbands. Women are not allowed to drive, and are expected to dress conservatively, with long skirts, sleeves at elbow length or longer, and modest necklines. It is fairly rare for Muslim men to shake hands with women or adopt the familiar body contact that is common when speaking in the West. This is not exclusive: Saudis familiar with the West may act contrarily.

Religion

No public religious expression is permitted other than that of Islam.

Food and Alcohol

The import or possession of alcoholic beverages and pork products is not allowed. This is religious law. Offenders are open to acute penalties.

Public Holidays

The Saudi weekend falls on Thursday and Friday. Public holidays are taken for the two yearly Eid Festivals. During this period, all government and corporate offices are closed.

Communications

The best way to communicate with businesses is by telephone or fax. The use of e-mail is expanding, but it is still not a very reliable method of business to business communication and they often go unanswered. Any postal material should be sent by courier. The mail is often slow and unreliable.

Advertising

Marketing has garnered much popularity and momentum in recent years. Helped by the overturn of the ban on television spots, businesses now utilise all the advertising avenues available, including TV, newspapers, trade magazines and billboards.

Labour and workforce

A lot of workforce is foreign. The governments is campaigning to create more jobs for Saudi nationals and for the wider employment of nationals in the workplace. Overseas businesses allowed to operate in Saudi Arabia may recruit foreign workers through the Ministry of Labour.

Office Hours - Private offices are commonly open from 0800 to 1300, and 1600 to 2000, Saturday to Wednesday. 0800 to 1300 on Thursday. Government building invariably open from 0800 to 1430 Saturday to Wednesday.

Offices and shops close four times a day for prayer. Working hours during the holy month of Ramadan are decreased: government offices are generally open from 1000 to 1500. In the private sector many businesses will open at night in Ramadan, normally 2200. to 0100. Banking hours are 0900 to 1600, Saturday to Wednesday.

Click here to Ask an Expert about Starting a Business in Saudi Arabia

Organisations that can assist with Starting a Business

  • > Looking to buy an existing company in this country?

    Business transfer agents and business brokers. Find franchise opportunities and off the shelf companies

    More Details Visit Website
  • > High Street Partners

    High Street Partners (HSP) helps companies expand and operate overseas in any country in the world.

    More Details Visit Website
  • > TMF Group

    TMF Group helps companies expand and invest seamlessly across international borders.

    More Details Visit Website
  • > B2B International

    B2B International is a global market research agency that specialises in b2b markets. With experience in every industry sector and country imaginable, we are well placed to help you establish your business overseas.

    More Details Visit Website
  • > Credit Checks

    First Report can provide a full credit check report on any of your potential trading partners worldwide.

    More Details Visit Website
  • > Kompass (UK) Ltd

    If you are looking to start up or expand a business overseas then you will need a targeted and reliable data list to find new customers in your new market.

    More Details Visit Website
  • > Fluency Solutions Limited

    Fluency provides centralised outsourced accounting and administrative support to international businesses operating in multiple territories.

    More Details Visit Website
  • > Arabian Enterprise Incubators

    AEI is a Saudi based consultancy enabling foreign companies to pursue, grow and deliver business in the Kingdom of Saudi Arabia.

    More Details Visit Website

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