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Marketing U.S. Products and Services



Saudi Arabia EMPLOYMENTMarketing U.S. Products and ServicesSaudi Arabia EMPLOYMENT

Also See
The Saudi Business Center

Author - U.S. Department of Commerce

STAT-USA on the Internet
US Department of Commerce
(202) 482-1986


Distribution and Sales Channels

There are three major marketing regions in Saudi Arabia:  the

Western Region, with the commercial center of Jeddah; the Central

Region, where the capital city Riyadh is located; and the Eastern

Province, where the oil and gas industry is most heavily

concentrated.  Each has a distinct business community and

cultural flavor, and there are few truly "national" companies

dominant in more than one region.      
Many companies import goods solely for their own use or for

direct sale to end-users, making the number and geographical

pattern of retail outlets a factor of potential significance.

U.S. exporters may find it advantageous to appoint different

agents or distributors for each region having significant market

potential.  Multiple agencies and distributorships may also be

appointed to handle diverse product lines or services.      
In considering the socio-cultural differences between Saudi

Arabia and the United States, in particular, the relative

segregation of men and women, it should be not be overlooked that

the number of Saudi businesses owned and managed by women is

significant, and growing rapidly.  In its sixth development plan,

the Government aims to increase the number of female students

from 126,000 to 177,000.      
According to official statistics, Saudi women own and run over

15,000 companies, about 4.3 percent of registered Saudi

businesses.  In addition, women account for about ten percent of

the Saudi workforce.  The Saudi Government projects that more

Saudi women will enter the labor market, and their number

increased to 240,000 based on a recent report published by the

Jeddah Chamber of Commerce.      
While there is no requirement that distributorships be granted on

an exclusive basis, it is clearly the policy of the Saudi

Ministry of Commerce that all arrangements be exclusive with

respect to either product line or geographic region.      
Many Saudi companies handle numerous product lines making it

difficult to promote all products effectively.  Saudi agents

typically expect the foreign supplier to assume many of the

market development costs, such as hiring of dedicated sales

Foreign suppliers often detail a sales person to the Saudi

distributor to provide marketing, training, and technical

support.  Absent such an arrangement, U.S. firms should expect to

make at least four visits per year to support their Saudi

Use of Agents/Distributors; Finding a Partner

The Saudi Government is currently reviewing a new agency law and

related regulations with the aim of improving and further

promoting commercial exchanges as the Kingdom prepares to join

the World Trade Organization (WTO).      
U.S. exporters are not required to appoint a local Saudi agent or

distributor to sell to Saudi companies, but commercial

regulations restrict importing and direct commercial marketing

within the Kingdom to Saudi nationals and wholly Saudi-owned

companies.  Agent/distributor relations are governed by the

Commercial Agency Regulations of the Kingdom of Saudi Arabia,

administered by the Ministry of Commerce.      
Obtaining a business visa for Saudi Arabia requires sponsorship

by a Saudi national, and Saudi nationals receive strong

preference in sales to Government agencies and parastatal

corporations.  Consequently, U.S. firms may find it advantageous

to establish local representation, especially for product lines

requiring strong sales and service efforts.      
Foreign contractors wishing to bid for Government contracts must

appoint a local service agent, and consultants must be

represented by a Saudi consulting agency.  The compensation

payable to a local service agent is limited to five percent of

the total contract price as per the Service Agency Regulations.

However, that percentage is not adhered to at all times.      
Terminating an agent/distributor agreement can be difficult even

though Saudi policy has changed to permit registration of a new

agreement over the objections of the existing distributor.  Time

is better spent in making the proper initial selection than in

attempting to end an unsatisfactory relationship at a later date.

The U.S. Commercial Service, through its U.S. District Offices,

Export Assistance Centers, and overseas posts, offers a variety

of services to assist U.S. firms in selecting a reputable and

qualified representative.  A complete "Guide to

Agency/Distributor Regulations in Saudi Arabia" is available

through the National Trade Data Bank in CD-ROM format (Tel: (202)

482-1986 for details).      

Franchising is a popular and growing approach for local firms to

establish additional consumer-oriented business in Saudi Arabia.

Although the franchise market is small relative to that in the

United States, it is rapidly expanding in several business

Franchising opportunities exist in the following business

categories:  apparel, laundry and dry cleaning services,

automotive parts and servicing, mail and package services,

printing, and convenience stores.      
Success in the Saudi market is often attributed to finding the

appropriate franchisor and location.  Non-food franchises account

for 55 percent to 65 percent of the franchise market.      
Franchising remains a growing sector in Saudi Arabia.  This is in

part due to a desire among Saudis to own their own business, and

an appreciation for Western methods of conducting business.

Competition is particularly fierce between U.S. franchisors and

local and third country competitors in the following sectors:

car rental agencies, laundry and dry cleaning services, and auto

maintenance.  Moreover, some local fast food outlets are already

making inroads, being more successful and more accommodating to

Saudi taste buds.      
Direct Marketing

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 in the

home.  Limitations in the Saudi postal system are also a

constraint:  no home delivery or postal insurance is available

yet; however, as part of the privatization of the Post,

Telecommunication, and Telegraph Ministry, it is highly likely

that mail and parcel home deliveries could begin by the end of

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.      
The advent of the Internet in the Saudi market will eventually

have a profound effect on Saudi shopping behavior, providing

increased possibilities and accessibility for Saudi consumers.      
Joint Venture/Licensing

The Saudi Government is currently reviewing the foreign

investment code to encourage more Saudi-foreign joint ventures in

Saudi Arabia.  Foreign investment is generally welcomed in Saudi

Arabia if it promotes economic development, transfers foreign

expertise to the Kingdom, involves Saudis in ownership and

management, and creates jobs for Saudis.      
Foreign investment is regulated under the Foreign Capital

Investment Law administered by the Ministry of Industry and

Electricity (MIE), which must approve all investments.

Investments involving mineral extraction are handled by the

Ministry of Petroleum and Mineral Resources.  The Ministry has

already granted a mining concession to an American-Saudi joint

venture, a positive step toward privatization and more openness

to foreign investments.      
Foreign investment is normally limited to joint ventures in which

the Saudi partner holds at least 25 percent up to a majority

share.  There are no restrictions in the use of currency accounts

or on the entry or repatriation of capital, profits, dividends,

or salaries, provided tax requirements have been satisfied and

clearance provided by the Department of Zakat and Income Tax.

Foreign ownership is not permitted in a few sensitive areas or in

well-developed sectors where it is believed sufficient local

investment and expertise already exist.      
A variety of incentives may be available to foreign investors

upon approval of the Ministry of Industry and Electricity.  These

include tax holidays for five years (ten years for industrial and

agricultural projects), duty free importation of capital

equipment, spare parts and raw materials for the duration of the

project, and access to low cost financing, industrial land, and

Local products receive price preferences of 10-20 percent in

Government tenders.  Most incentives are only available to joint

ventures with at least 25 percent Saudi ownership.      
Licensing is an appropriate method of doing business in the

Kingdom under some circumstances, but the tax implications should

be considered.  Royalties, license fees, and certain management

fees are deemed to be 100 percent profit, and the full amount

will be taxed at the normal corporate tax rate for non-Saudi


The process for establishing a joint venture is as follows:

First, the Ministry of Industry and Electricity (MIE) and its

constituent parts must review and process all applications for

industrial projects.  Within the MIE, the Industrial Licensing

Department (ILD) and Foreign Capital Investment Bureau (FCIB) are

responsible for evaluating and licensing industrial projects.

Non-industrial projects are handled unilaterally by the FCIB.      
The MIE's Industrial Protection and Encouragement Department

(IPED) studies the project's potential impact on domestic

industry and determines any tariff protection that may apply.

The MIE's Industrial Cities Department (ICD) evaluates requests

for sites in Saudi Arabia's industrial cities.      
In addition, an application must be made to the Foreign Capital

Investment Committee (FCIC) for a foreign investment license.

The FCIC is an inter-ministerial committee that receives

recommendations forwarded by the MIE/FCIB, and after study makes

its recommendation for final approval to the MIE.  Following the

issuance of the investment license, an application for commercial

registration is made to the Ministry of Commerce (MOC).      
In this process, the MOC will approve the joint venture's

Articles of Association, register the company under the MOC's

Companies Regulations, and assign a commercial registration

Depending on the nature of the foreign investment, the Saudi

Arabian Standards Organization (SASO) may be involved.  SASO is

the Saudi authority for establishing product standards for

imports and locally-manufactured goods, and will examine products

or processes to be used to ensure they meet existing or planned

Saudi standards.      
The Saudi Industrial Development Fund (SIDF) may be engaged to

provide up to 50 percent financing for approved industrial joint

venture projects.  Market intelligence also is available through

the SIDF for prospective investors.      
Other Saudi Arabian Government entities that may be involved in

the process include the Ministry of Foreign Affairs (visas), the

Ministry of Interior (residence permits and industrial safety and

security approvals), the Ministry of Labor and Social Affairs

(work permits for foreigners), the Royal Commission for Jubail

and Yanbu (if the project is sited at the Saudi industrial cities

of Jubail or Yanbu), the Government Organization for Social

Insurance (social insurance and disability payments for Saudi

employees), and the General Organization for Technical Education

and Vocational Training (training programs for Saudis).      
Foreign investors may structure their enterprise as a limited

liability company (the most commonly used approach), 

as a joint-stock company, or as a joint venture.  

By law, limited liability

companies must not have less than two nor more than fifty

shareholders and must be capitalized with at least SR. 500,000

($133,333).  Limited liability companies are forbidden to deal in

insurance or financial enterprise.  Joint stock companies are a

variety of the limited liability company that can be held either

privately or publicly.  They resemble U.S. corporations in

structure and function.      
Joint ventures are unincorporated associations in which each

party to the venture holds title to his mutually agreed

contribution.  They resemble general partnerships.  The Ministry

of Commerce approves formation of all joint ventures.

Applications must include the venture's objectives, rights and

liabilities, as well as the manner in which profits are to be

divided.  A detailed "Guide to Establishing Joint Ventures in

Saudi Arabia" is available in CD-ROM format on the National Trade

Data Bank.  A few major U.S. accounting firms with Saudi offices

also publish very useful guides to the tax and legal aspects of

doing business in Saudi Arabia.      
Steps to Establishing an Office

The procedures to follow in establishing an office in Saudi

Arabia differ according to the type of business undertaken.  The

most common and direct method of establishing an office is simply

to appoint an agent/distributor, who can set up the office under

their own commercial registry and obtain residency visas for any

necessary expatriate personnel.  The agent/distributor agreement

should be registered with the Ministry of Commerce as previously

A second method might be to establish a technical and scientific

services office, which requires a license from the Ministry of

Commerce.  This approach preserves the independence and identity

of the foreign company's local office as a separate entity from

the Saudi agent/distributor.      
Technical and scientific service offices are not allowed to

engage directly or indirectly in commercial activities, but they

may provide technical support to the Saudi distributor as well as

conduct market surveys and product research.      
A third method is to establish a branch office, which is normally

permitted only for foreign defense contractors.  The

establishment of branch offices is open to wholly foreign-owned

entities, and requires approval of the Ministry of Industry and

Electricity's Foreign Capital Investment Committee (FCIC).      
An essential element in the FCIC's approval process is that the

branch office contributes to the Kingdom's economic development.

FCIC approval also requires the foreign company submit a

certified copy of its charter and bylaws, accompanied by an

Arabic translation, as well as the company name, address, date of

establishment, type of business and amount of capital.  The

company's board of directors must also provide a resolution

authorizing the establishment of a Saudi branch office.      
Following FCIC approval, the branch office must establish and

register with the Commercial Register of the Ministry of

Commerce.  The registration process requires representation by a

Saudi attorney.      
A fourth method is to establish a representative (or liaison)

office.  This is normally granted only for companies that have

multiple contracts with the Government and require a local office

to oversee contract implementation.  Representative offices are

not allowed to engage in direct or indirect commercial activity

in the Kingdom.  Establishment requires a representative office

license from the Ministry of Commerce.      
Finally, foreign companies may establish an office by entering

into a joint venture with a Saudi firm, as described in the

previous section.      
Costs associated with setting up an office in Saudi Arabia can

vary considerably.  As a general guide, the following are current

costs of housing and office rental, as well as costs for employee

salaries, taxes, and transportation.  Most of these costs have

remained relatively unchanged from the previous year.  Typical

rent per year for a one-bedroom furnished apartment is $13,200,

and $16,134 for a two-bedroom apartment.      
A one-bedroom furnished villa in a Western-standard residential

compound will rent per year for $22,000 to $23,650; two bedrooms,

$27,866 to $29,333; three bedrooms, $33,733 to $36,666; four

bedrooms, $42,533 to $54,266.  Residential compounds in Saudi

Arabia often include a swimming pool, tennis courts, a club

house, and eating facilities.      
Typical management, maintenance, and use charges are usually

included in the rental price, and security deposits are in the

range of $2,970.  Rental terms are for one year payable in

advance.  Office rental costs are variable, and are governed

largely by the city and business location.      
Typical rental costs in a modern commercial center are

approximately $220 per square meter, inclusive of maintenance and

utility charges.  A 12-month rental is the minimum and advance

payment is required.      
Saudi law requires that Saudi nationals make up 75 percent of a

company's work force and 51 percent of its payroll in all

businesses.  However, due to a shortage of qualified Saudis, in

practice much of the work force is made up of non-Saudi Arabs,

Europeans, Americans and Asians.  In 1996, the Saudi Government

implemented a regulation requiring each company employing over 20

workers to include a minimum of five percent Saudi nationals.

Companies not complying with the five percent rule (which will

increase in annual increments of five percent) will not be given

visas for expatriate workers.      
An employee's nationality and level of experience, as well as the

nature and location of the business will create variations in

pay, but a typical manager's yearly salary (base) is

approximately $30,000 to 40,000.  Mid-level office workers are

paid approximately $20,000 to 30,000 per year.  A clerical

worker's base yearly salary is in the range of $8,000 to 10,000.

A support worker (driver, caretaker) earns in the range of $6,000

to 7,000 yearly.  Local Saudi employee taxes are 15 percent of

base or combined with benefits.  From base salary and housing,

companies withhold five percent and pay 10 percent.      
It is customary to provide non-Saudi workers with furnished

accommodations or a housing allowance as well as round-trip air

fare to their country of origin on a yearly basis.      
Regarding transportation, four-door sedans rent monthly for

approximately $960, and yearly for about $11,500.  A new GMC

Suburban can be purchased for approximately $30,373.  It is

important to note that, by law, females in Saudi Arabia,

regardless of nationality, are forbidden to drive motor vehicles.      
Additional monies, along the lines mentioned above, should be

included in an office budget to provide sufficient cars and

drivers for transportation of female family members and staff.      
Business travelers coming to Saudi Arabia to explore business

opportunities are eligible for a visitor's visa, which currently

is a single-entry visa for up to three months' duration.

However, there is hope that the Saudi Government will very soon

agree to two-year, multiple-entry visas for U.S. citizens.      
Currently, the visitor's visa application requires the U.S.

company's representative to submit to Saudi visa authorities a

letter of invitation issued by a Saudi company that has agreed to

serve as his sponsor.  The letter, which must be in Arabic, must

be on the Saudi company's letterhead, in the original, and must

bear an authenticating stamp from the Saudi company's local

chamber of commerce.  The U.S. company's representative must

apply for the visa prior to departing the United States at either

the Saudi Embassy in Washington, D.C., or at one of the Saudi

Consulates in Houston, Los Angeles or New York City.  These

requirements are very strictly enforced by Saudi visa

authorities.  The Saudi Government announced in late May a new

and simplified procedure for the issuance of entry visas to

foreign businessmen, but full details have not been published.      
Selling Factors/Techniques

Expatriate managers have had a strong influence in introducing

advanced selling techniques into a market that relied heavily on

word-of-mouth and established buying patterns until a few years

ago.  Advertising and public relations firms are multiplying in

Saudi Arabia, and the Saudis themselves have become a discerning,

sophisticated clientele.      
Although details of a transaction can be handled by facsimile,

now in widespread use, no serious commitment is likely to be made

without a face-to-face introduction.  Business cards are usually

printed in English on one side and Arabic on the other.      
Saudis are gracious hosts and will try to put a visitor at ease,

even during arduous business dealings.  A large portion of upper

and middle class Saudis were educated in the United States or in

The positive aspect of the Saudis' familiarity with the United

States is that most importers are very receptive to American

products because of the U.S. reputation for state-of-the-art

technology, durability, and stable prices.  Of course, this

goodwill can be used only as an introduction, since a product

must be competitively priced and readily available to make a

Financing may also be offered as part of a sales proposal,

usually after a solid relationship has been established.

Financing is increasingly becoming an important facet of business

dealings with Saudi Government agencies.  Likewise, the

Government has begun to experiment with Build-Operate-Transfer

(BOT) financing schemes.      
Higher oil revenues during 1997 helped the Government to close

out most arrearages to private sector contractors.  The Embassy

estimates that remaining arrearages still total up to $3 billion.      
Foreigners need to find a Saudi partner before they are allowed

to engage in trade within the Kingdom, but direct sales can be

made to Saudi private clients without having to use a local

agency.  Saudi Ministries will purchase only from local agents or

distributors, and contracts for major projects are usually

awarded to joint ventures linking foreign and Saudi partners.      
An irrevocable letter of credit (L/C) is the instrument normally

used for Saudi imports; open account, cash in advance and

documentary collection are also acceptable if both parties agree.

Maximum or minimum credit terms are not required.      
Export Credit Insurance for political and commercial risk is

available from the Foreign Credit Insurance Association (F.C.I.A)

of the U.S. Export-Import Bank in Washington, D.C. (Tel: 202-566-8990, or 212-306-5084).      
The Government maintains a free trade approach to exchange

transactions:  no exchange restrictions apply; exchange for

payments abroad is obtained freely; and there are no taxes or

subsidies on foreign currency transactions.      
With the advent of the Internet, industry sources expect that

such access will boost regional and international business.  For

that matter, the Ministry of Commerce is forming a team to

establish regulations regarding electronic commerce,  which is

expected to expand as soon as the service is established in Saudi

Arabia.  According to some estimates, there are already 30,000

subscribers in Saudi Arabia who are browsing the world wide web

through the Bahrain Telecommunication Company (BATELCO).      
Since 1981, the Saudi Arabian Monetary Agency (SAMA) pegs the

riyal to the dollar, to facilitate long term planning and

minimize exchange risk for the private sector.  The rate has

remained stable at $1 = SR 3.7450 since 1987.      
Advertising and Trade Promotion

Advertising, once a relatively secondary aspect of sales, has

come into its own, especially with the recent lifting of a ban on

televised commercials.  Most companies' advertising budgets now

cover the complete array of media, such as TV, newspapers, trade

magazines and billboards, in addition to trade promotion events.

Saudis receive preferential rates.      
Bright colors such as red, blue, green and black dominate ads.

Pink, cream and other soft colors are not as popular.  With some

modest exceptions, the female human form is not culturally or

religiously acceptable in the media.  

Landscapes and other non-human images are commonly featured.  

Ads, packages, literature,

etc. are frequently in English and Arabic.      
Advertising is critical in gaining retail sales and market share.

Both television, magazines, and point of sale advertising are

common.  Some televised commercials are broadcast on the two

Saudi channels (Secam color system) during limited periods of the

day.  One TV channel is in Arabic; the second is in English, with

broadcasting covering the entire Kingdom.      
Cost of a time slot varies considerably, depending on timing, and

is usually less costly for Saudis than foreign firms.  Contents

are thoroughly screened to conform with strict moral and

religious standards.      
A new approach to presenting products is advertising through

international TV channels such as CNN and MBC (Middle East

Broadcasting Corporation in London).  In 1997, two new satellite

channels broadcasting from Beirut, Lebanon, went on the air, the

Lebanese Broadcasting Company (LBC) and Future Television.      
Many analysts rate the two channels as the most popular pan-Arab

stations, and most major Saudi companies place commercials on

these two channels as well as on the MBC channel.  In addition,

an encrypted TV network provides approximately 30 channels for an

average subscription of $1000 per year.      
The network, Orbit Communications, is owned by a local Saudi

company, and it has a viewer's base of around 170,000 clients.

Other Arabic satellite channels which have been launched, such as

Arab Radio and Television, are also attracting numerous

advertisers.  These TV channels have succeeded in introducing

several new products to the market.      
There are no signs that the cable television network will be

launched in the foreseeable future.  The first of its kind in the

Kingdom, SARA Cable is an offshoot of a large, Riyadh-based,

media and production company, ARA International.      
Print advertising is also important.  In recent years, several

magazines have appeared on the local market.  Popular magazines

are: Al-Wasat, Al-Majallah, Al-Yamamah, and Sayidati.

Advertising rates for publications vary greatly; however their

level is well below the U.S. norm, in keeping with the reduced

Newspaper advertising is carried out in both the local English

and Arabic press, but its effectiveness is somewhat limited by

the relatively low readership rates.  The three local dailies

published in English have circulation in the 20,000 to 50,000

copies range: Arab News (London); Saudi Gazette (Jeddah);  Riyadh

Daily (Riyadh).  The leading Arabic newspapers, with nationwide

distribution, have circulation in the 70,000 to 100,000 range:

Al-Hayat, Al-Shark Al-Awsat, Okaz.  Other relevant newspapers

have lower circulation, and some have only regional distribution:

Al Bilad, Al Jazira, Al Madina, Al Nadwa, Al Riyadh, Al Youm, Um

Al Qura, Al-Riyadiya (sports only).  A newcomer, the Al

Iqtisadiah economic daily, has rapidly earned a loyal readership

of executives and Government officials.      
Numerous trade promotion events take place from September through

June, with most of them held in the modern exhibit centers in the

Kingdom's three major cities:

   Riyadh Exhibition Co., Ltd.

   PO Box 56101

   Riyadh 11554, Saudi Arabia

   Tel: (01) 454-1448, Fax: (01) 454-4846

   Tlx: 406359 EXHB SJ

   Contact:  Bechara Nacouzi, Sales Manager      
   Al-Harithy Co. for Exhibitions, Ltd.

   PO Box 40740

   Jeddah 21511, Saudi Arabia

   Tel: (02) 654-6384, Fax: (02) 654-6853

   Tlx: 602784 EXPO SJ

   Contact: Saeed Haider, General Manager      
   Dhahran International Exhibition

   PO Box 7519

   Dammam 31472, Saudi Arabia

   Tel: (03) 857-9111, Fax: (03) 857-2285

   Contact: Najeeb Abdul Rahman Al-Zamil, General Manager      
Each exhibit center organizes five to ten events a year, and even

though the programs have varied over time, the recurrent themes

cover most industries of interest for U.S. exporters:

agriculture, automotive, computers, medical and lab equipment,

construction, production technology, electrical and A/C-heating,

and communications.  Smaller exhibit facilities are also located

in regional centers, and often operate in cooperation with or

under the sponsorship of the local chamber of commerce.      
Most chambers have a proactive approach to promotion and trade,

organize shows and presentations for individual companies or

groups, and have been eager to attract American and other Western


The main Chambers are:

Council of Saudi Chambers of Commerce and Industry

PO Box 16683

Riyadh 11474, Saudi Arabia

Tel: (01) 405-3200, Fax: (01) 402-4747      
Riyadh Chamber of Commerce and Industry

PO Box 596

Riyadh 11421, Saudi Arabia

Tel: (01) 404-0044, Fax: (01) 402-1103      
Jeddah Chamber of Commerce and Industry

PO Box 1264

Jeddah 21431, Saudi Arabia

Tel: (02) 651-5111, Fax: (02) 651-7373      
Dammam Chamber of Commerce and Industry

PO Box 719

Dammam 31421, Saudi Arabia

Tel: (03) 857-1111, Fax: (03) 857-0607      
Makkah Chamber of Commerce and Industry

PO Box 1086

Makkah, Saudi Arabia

Tel: (02) 534-3838, Fax: (02) 534-2904      
Medina Chamber of Commerce and Industry

PO Box 443

Medina, Saudi Arabia

Tel: (04) 822-5380, Fax: (04) 826-8965      
Taif Chamber of Commerce and Industry

PO Box 1005

Taif, Saudi Arabia

Tel: (02) 736-6800, Fax: (02) 738-0040      
NOTE:  Add country code 966 if dialing from the United States,

and drop the zero before the first digit of the telephone or fax

numbers above.      
Product Pricing

A rate of exchange of the dollar to the riyal has been set at

3.7450 since 1987, a competitive dollar value compared to the

Japanese and European currencies, and reasonable interest rates

have greatly facilitated market penetration.  Thanks to this,

Saudi importers expect U.S. producers to practice a more stable

pricing policy than their foreign competitors.      
Products are usually imported on a CIF basis, and mark-ups depend

almost entirely on what the vendor feels that the market will

bear relative to the competition.  There is no standard formula

to come up with the mark-up rates for all product lines at

different levels of the relatively short distribution chain.

Pricing is very important to the average Saudi.  Therefore, where

there are competitive products, Saudi buyers frequently will

compare prices before making a buying decision.      
Stability of prices has been a policy of the Saudi Government for

years, and after rising to five percent in 1995 as a result of

the utility and gas rates hikes, inflation was negative 0.4

percent for the 12-month period ending December 1997.      
For the U.S. supplier, some give-and-take is expected in

preliminary negotiations.  The asking price is usually lowered a

bit, to entice the client and to bow to the old-fashioned Saudi

penchant for bargaining and personal exchange.      
Financing has become a leading consideration in purchasing,

especially for investment goods and repeat orders.  As leveraged

transactions become the norm, Saudis have come to understand that

an attractive financial package can be even more interesting than

an up-front low price.  The support and services provided by the

U.S. Eximbank attract the Saudis' keen interest, and are being

considered for several major projects.      
Sales Service/Customer Support

Saudi Arabia is a relatively open market, which makes it highly

competitive.  Brand loyalty and established preferences are less

developed than in other countries.

Consequently, above average sales service and customer support

are indispensable to win and maintain new clients.      
As the Saudi market matures, this will become more and more the

norm, and the recent economic slowdown is adding to the

competitive pressure; the sell-and-forget techniques still common

in the 1980s are definitely out.      
Saudis view a foreign firm's physical presence in the Kingdom as

a tangible sign of long-term commitment.  Prompt delivery of

goods from available stock and the presence of qualified support

technicians have become more important, and they influence repeat

business much more now than ten or even five years ago.

Government agencies usually require equipment suppliers to commit

to providing maintenance and spare parts for an average period of

three years.      
Selling to the Government

Government spending accounts for approximately 24 percent of GDP,

a sign that Saudi Government efforts to broaden economic activity

beyond oil are making progress.  Still, some of the companies

that are considered part of the non-oil private sector, are

majority-owned by the Saudi Government.      
U.S. firms considering sales to the Government should request a

briefing from the Embassy concerning the latest situation on

payments and how U.S. firms can protect themselves.      
As a practical matter, U.S. companies seeking sales of goods and

services to the Saudi Government should appoint a reputable agent

or distributor with experience in the field.      
Foreign contractors operating solely for the Government, if not

already registered to do business in Saudi Arabia, are required

to obtain temporary registration from the Ministry of Commerce

within 30 days of contract signing and to select a Saudi national

as an officially registered agent (weapons sales are exempt from

this agency requirement).  Compensation for agents is limited to

a maximum of 5 percent of contract value; however, the rate may

vary depending on the agreement.  Foreign companies also may be

allowed to establish a branch office by obtaining a foreign

capital investment license from the Ministry of Industry and

Branch offices are usually approved only for foreign defense

contractors.  For others, a liaison office may be established to

supervise work in the Kingdom and to facilitate coordination

between the Government and home offices.      
This requires approval of the Ministry of Commerce.  Liaison

offices are prohibited from conducting commercial business in

Saudi Arabia.      
Foreign contractors involved in public works projects are

required to subcontract at least 30 percent of the contract value

to 100 percent Saudi-owned companies.  This requirement also

applies to limited liability partnerships with less than 51

percent Saudi ownership.      
The subcontractor must be qualified to perform the work and may

not further subcontract any portion of it.  Purchases of Saudi

products and services and of imported products from Saudi

distributors may count toward the 30 percent requirement.      
Protecting your Product from IPR Infringement

Saudi Arabia has a patent office, but has only issued a few

patents, and has an enormous backlog of patents pending.  Saudi

Arabia has made important strides in improving intellectual

property rights (IPR) protection, including a series of well-publicized raids on stores selling pirated material and the

release of a fatwa by the Grand Mufti of Saudi Arabia confirming

that piracy is theft, and therefore forbidden under Islamic law.      
However, piracy remains a problem in Saudi Arabia and, as of

1998, the Kingdom remains on the U.S. Trade Representative's

"Watch List" of countries that need to improve IPR protection.

U.S. firms that wish to sell products in Saudi Arabia should work

through their local representative to register their trademarks

with the Ministry of Commerce and copyrighted products with the

Ministry of Information, which are responsible for IPR protection

in these areas, and report any suspected incidents of piracy or

infringement to the Ministry.      
Despite the backlog of patent applications, the Embassy

recommends that if a U.S. company is concerned about the

possibility of patent infringement, it should "file" a patent

application request with the Saudi Patent Office.  To learn more

about the procedure, we recommend interested companies consult a

local attorney who specializes in this area.  The Embassy can

provide a representative list of qualified attorneys.      
Need for a Local Attorney

Saudi law is based on the Islamic Shari'a and differs

considerably from U.S. practice.  U.S. firms contemplating a

joint venture, licensing, or distribution agreement are advised

to consult with a local attorney.  The American Embassy and

Consulates can provide a list of attorneys.      
Performing Due Diligence/Checking Bona Fides of


In 1995, the Commercial Service in Saudi Arabia ceased to offer

company and business checks, namely, International Company

Profile (ICP) reports.  Nonetheless, CS Saudi Arabia will provide

bona fides checks in support of a U.S. company's due diligence

process, if requested.  Complete background and credit reports

can be produced by Dun and Bradstreet's local agent, Sawabih

Information Services.  

The company can be reached at (966 1) 419-1111, 

Fax: (966 1) 419-1144, attention: Mr. Waleed S. Abalkhail,President.      




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