Doing Business In Saudi Arabia - Bna

growing competition from local and foreign companies in the following sectors: car
rental agencies, fast food, and business services.
Franchising opportunities exist in the following business categories: apparel, laundry
and dry cleaning services, automotive parts and servicing, restaurants, mail and
package services, printing, and convenience stores.
The Commercial Companies’ Law applies to any franchise agreement, and the
Ministry of Commerce and Industry is the government entity that licenses and
approves such agreements. Under the new Foreign Investment Regulations, a foreign
franchise owner may apply for a license to establish a company with a 49 percent
foreign ownership for the distribution of its franchised product(s) that are locally
produced. The Commercial Companies Law, however, will not make a distinction
between an Area Developer (Master Franchisee) and a sub-franchisee. Either will be
considered as being a local agent/distributor of a foreign principal.
Direct Marketing Return to top
Direct marketing is not widely used in Saudi Arabia. Personal relations between
vendors and customers play a more important role than in the West.
Furthermore, many forms of direct marketing practiced in the United States are
unacceptable due to Islamic precepts regarding gender segregation and privacy at
home. Limitations in the Saudi postal system are also a constraint, however, a new
but comparatively expensive mail delivery system was launched, Wasel, which entails
delivering mail and parcels to residences. The Saudi Post, moreover, set up a
company named Naqel, which is a joint project with the private sector and aims at
upgrading Saudi Post competitive capabilities and develop its services.
Direct marketing has been conducted on a very limited basis using unsolicited mail
campaigns and fax, catalog sales (with local pick-up or delivery arranged), and
commercials on satellite television providing consumers in many nations (including
Saudi Arabia) with a local telephone number to arrange delivery. Extensive consumer
surveys are being undertaken, mainly on behalf of multi-national manufacturers and
particularly in the consumer goods sector.
Joint Ventures/Licensing Return to top
Under the Foreign Investment Act, a foreign investor may either chose to set up
his/her own project or in association with a local investor. If the latter option is chosen,
foreign investors may structure their enterprise as a limited liability company, which is
the most commonly used approach. By law, the minimum capital of an LLC with
foreign participation is SR 500,000. The required amount is increased to SR
1,000,000 for industrial projects and SR 25,000,000 for agricultural projects. The
Board of Directors of SAGIA may reduce the minimum invested capital in projects
established in areas specified by it or in export projects or those which require
considerable technical experience. Limited liability companies must not have less than
two nor more than fifty shareholders. The Ministry of Commerce and Industry
approves formation of all joint ventures.
5/13/2008