The Kingdom of Saudi Arabia has not had a quiet year: the
accession of King Salman, two new crown princes, a new young defence minister, military
operations in Yemen, waning oil prices and contentious visits to the French
Riviera are but a few of the topics that have drawn the usually low-profile
country into the headlines.
Yet for foreign companies, faced with contracting or stagnating
domestic markets, Saudi remains a land of opportunity; not surprising given
that over a quarter of all Middle East and North Africa GDP comes from this one
country. The statistics speak for themselves:
- Saudi Arabia has the largest population in the
- Education sector spending accounts for 25 per
cent of all government expenditure.
- Medical budgets increased 50 per cent in 2015.
- $80 billion was spent on government defence
and security in 2015.
- Multiple mega-projects are underway such as
the $22-billion Riyadh Metro train network.
why is Saudi so often left out of carefully considered Middle East strategies?
For many years Saudi has been viewed as “just too difficult”, with companies
preferring to enter the Middle East through the United Arab Emirates, Qatar or
Things are changing, however, and more foreign companies are
seeing success in Saudi, either directly or through local partners. The
evidence can be seen across all the major cities, with newly built business
parks already fully occupied and Western companies proudly displaying their
logos for all to see.
In Riyadh, the recently opened Business Gate site boasts tenants
such as Boeing, Microsoft, Clifford Chance and Alcatel Lucent. Smaller foreign
companies are also entering the kingdom like never before, taking advantage of
opportunities that dwarf neighbouring markets.
“In essence, the differentiator between success and failure is
commitment – commit to the market and reap the rewards”
course, challenges remain and success is often hard won, but there are common
themes and characteristics to the approaches adopted by foreign companies who
have seen success in Saudi. These include:
can seem like an endless cycle, but the reality is that setting out clear
goals, strategy, budgets and timescales is vital.
Patience: There is a wealth of opportunity, but it is important to be
realistic and build a pipeline of qualified, validated opportunities; setting
the right expectations for company leadership avoids corporate fatigue.
Presence: Importantly, there is no substitute for being on the ground.
Managing the market remotely is almost impossible and many Saudi clients are
unsympathetic towards those who try to win business from bases elsewhere in the
Gulf. Being in Saudi does not necessarily mean setting up an entity or forging
an exclusive local partnership; there are various operating models for foreign
companies which are low risk and low cost.
Partner: The perceived need for a local partner often animates legal,
compliance and tax departments. There are many examples of foreign companies
supplying goods or services without a local partner. Equally, there are
examples of highly successful partnerships forged over time and, critically, on
the right terms.
Payment: Payment risk is often a major concern of foreign companies.
Mitigation is best achieved by close relationships with customers and partners.
In essence, the differentiator between success and failure is
commitment – commit to the market and reap the rewards.
Of course, a foreign company must source professional,
independent advice and this must come from consulting practices that are on the
ground in the kingdom; they can provide practical advice rather than just
regurgitate regulations from the internet.
For UK companies a good start is to contact the UK Trade &
Investment team in Riyadh or the two highly active UK groups, the Middle East
Association and Saudi British Joint Business Council.
With the right advice, you will turn your
Saudi plans into Saudi projects.