Doing Business 2020 ranking
Days needed to export
GDP per capita (USD)
SAUDI ARABIA’S EXPORTS
The Leader in the Region
The Kingdom of Saudi Arabia, the biggest economy of the Middle East and first global exporter of crude and refined petroleum is meanwhile highly dependent on the import of food, medical products, technical parts and semi-finished products. KSA is also the centre of Islamic World, year after year hosting millions of pilgrims in Mecca and Medina. The number of Polish and EU-based companies collaborating with Saudi Arabia increases annually and the country became the second biggest trade partner of Poland in the Middle East.
Saudi Arabia covers 80% of the Arabian Peninsula area, lying on the border of the continents: Asia and Africa, on the junction of the great trade routes between Europe and the South-East. The Kingdom borders with Iraq, Jordan, Kuwait, Oman, UAE and Yemen, spreading on the desert territories between the Arabian Gulf and the Red Sea.
The KSA is a rentier state, with the economy based on selling the petroleum and hydrocarbons. As the biggest petrol exporter in the world, the country keeps 18% of the global reserves – 267,026 MMbbl. According to OPEC data from 2019, the daily export from KSA estimates 10,317 bbl of crude petroleum and 118,000M m3 of natural gas. Other natural resources of the country are the ores of iron and copper, gold, bauxites and phosphates.
The population of Saudi Arabia is 33.4M, and 75% lives in the cities of Riyadh (6M), Jeddah (2.5M) and others. Like in other countries in the region, main working power ensure the migrants from Asia and Africa. The official language is Arabic, but English is in use for business purposes.
In 2018 Saudi Arabia was the number 18 economy in the world in terms of GDP, the number 21 in total exports, the number 32 in total imports, and the number 27 most complex economy according to the Economic Complexity Index (ECI). The country exported a total of $263B, the main products were Crude Petroleum ($165B), Refined Petroleum ($23.9B), Ethylene Polymers ($12.5B), Propylene Polymers ($6.33B), and Acyclic Alcohols ($5.14B). The most common destination for the exports of Saudi Arabia are China ($37.5B), Japan ($29.4B), India ($26.3B), South Korea ($23.5B), and United States ($22B).
In 2018 Saudi Arabia imported $136B, led by Cars ($8.87B), Broadcasting Equipment ($4.83B), Refined Petroleum ($3.72B), Gold ($3.33B), and Packaged Medicaments ($3.15B). The most common import partners for Saudi Arabia are China ($19.1B), United Arab Emirates ($17.2B), United States ($13.1B), Germany ($7.58B), and India ($5.84B).
Gospodarka Arabii Saudyjskiej
The Meaning of Islam
Saudi Arabia is the centre of Islamic world, with the holy cities of Mecca and Medina, the goal of pilgrimage for the Muslims all over the globe. The religion has the significant influence on the Saudi policy in the matter of everyday life, interpersonal attitudes and the relations between the state and a person. The violation of these rules is penalised, even for the foreigners.
Islam influences also the trade. The issues contrary to Islamic morality, like devotional artifacts, alcoholic beverages, pork or pornography are illegal and would be confiscated. Their possession would dash the chances to re-enter Saudi Arabia in the future.
Fridays, traditionally free from work, and the holy month of Ramadan are periods, when conducting business and having meetings is almost impossible. One needs to plan the business trip to avoid appointments in this time.
Saudi Arabia is an absolute monarchy, however the king must comply with Sharia (Islamic law) and the Quran, while the Quran and the Sunnah (the traditions of Muhammad) are declared to be the country’s constitution. The king combines legislative, executive, and judicial functions and royal decrees form the basis of the country’s legislation. The king is also the prime minister, and presides over the Council of Ministers of Saudi Arabia and Consultative Assembly of Saudi Arabia. Currently the king Salman bin Abdulaziz Al Saud is on the throne.
The Economist rated the Saudi government as the fifth most authoritarian government out of 167 rated in its 2012 Democracy Index and Freedom House gave it its lowest “Not Free” rating, 7.0 (“1=best, 7=worst”) for 2019. Transparency International in its annual Corruption Perceptions Index for 2019 gave Saudi Arabia a score of 53 (on a scale from 0 to 100 where 0 is “highly corrupt” and 100 is “highly clean”).
The EU and US citizens need a visa to enter Saudi Arabia. The business visit visas are available at the embassies of the Kingdom. Only the tourist visas are available at the entrance (in the seaports and airports). There is an easy-access internet visa service, however the invitation or the aid from the business partner in Saudi Arabia may be required.
The Vision 2030 is a long-term development plan, focusing on economy, society and the 3rd sector. It indicates 96 strategic objectives showing the direction of reforms in this decade. The plan assumes further economic diversification and growth of non-petrol sectors from 16% to 50% of GDP. The country also plans to give 20% of GDP to support SMEs. In 2019 the competences of private sector have been improved by introducing more public-private partnership projects regulated by National Centre for Privatisation.
Saudi government leads complex infrastructural programmes and wants to get 25th place in Logistics Performance Index 2030 (today the KSA is the number 49). The most important projects are building the subway in Riyadh and modernisation of the Jeddah Airport. 70B SAR (6.3% of the state budget) have been reserved for this goal.
Access to the Market
Saudi Arabia achieved 62nd place in Doing Business Index 2020 (30 places higher than in a previous year). Starting business in the KSA requires 10 days and 3.5 legal procedures on average. Selling products to Saudi Arabia requires 1 day for legal procedures, 37h on the border and approximately 400 USD.
The country has many seaports (i.a. Jeddah, Dammam, Yanbu) and international airports in Jeddah, Riyadh and Dammam. Tariff for imported products is 5%, compatibly with the GCC legislature, with some exceptions of protectionist tariff between 12% and 20%. The detailed procedure of import is described on the website of Saudi Custom Service. The institution responsible for regulating the access of foreign investors is Saudi Arabian General Investment Authority. The organisation confirms certificates and watches over the programme of “Saudization” – the obligation to employ Saudi citizens in the newly created companies in the country, e.g. local branches of the global corporations.
The five forms of companies which can be established in the Kingdom are:
- joint liability companies (the equivalent of general partnerships),
- limited partnership companies (the equivalent of limited liability partnerships),
- joint ventures,
- joint stock companies (“JSCs”),
- limited liability companies (“LLCs”).
In Saudi Arabia 35 so called industrial cities can be found, the best known are Jubail and Yanbu. The cities, governed by the Saudi Authority for Industrial Cities and Technology (MODON), offer special privileges for foreign investors.
One needs to remember that Saudi standards are often different from European or American, including halal requirements for food and cosmetics. The detailed data about standards and certificates are available on the websites of Saudi Food & Drug Authority and Saudi Arabian Standard Organization.
The Potential of Business
With the increase of the population and the urbanisation, rises the need to purchase furniture, food, medical products, clothing or computers and electronics. The development of tourism and pilgrimage stimulates the branches of hospitality, restaurants and convenient stores. Since 2017 continues the construction of a huge resort on 50 isles on the Red Sea, requiring a new harbour, airport and services for the guests. The end of the construction is planned for 2022.
During the Covid-19 pandemic the tourism and pilgrimage drastically slowed down, but will be rebuilt in the next years, thanks to the religious duties obligating Muslims to visit Mecca. The halal food market is still growing, and is forecasted do increase by 9% CAGR till 2024.