How can I start business in Saudi Arabia?

If you are looking to do business in Saudi Arabia, it is important to form a business partnership with a Saudi Arabian business partner, who is referred to as a “Wakeel”. Your Saudi Arabian business partner acts as an intermediary who arranges appointments between yourself and government officials or other businessmen.

There are a few interesting things about the Saudi Arabian business cultures that you should know about if you are to do business successfully in that country.

For one, Saudis do business very differently from what one is used to in the West. Saudis really want to know you well before they agree to a long term business partnership with you. Often, Saudis stand close during a conversation, and you would get the impression of your personal space getting invaded – but this is not so, it is just the Saudi way of displaying their respect and friendship towards you.

The most important thing to keep in mind while dealing with Saudis in Saudi Arabia is to keep patient, because any deal takes a long time, as it has to be approved by a higher ups in an organization, which will come only after extensive discussions among board members. Just as patience is the key, any display of impatience or irritation with a delay in the decision making will not be taken too kindly by Saudi businessmen.

You shouldn’t appear as being aggressive or domineering, and you must defer to the hierarchy in a Saudi business organization. Also, you shouldn’t get too frustrated if a decision gets overturned, because this happens often. You must bear in mind that Saudis are legendary negotiators in the business world, and are known to getting their way in a business deal.

Sometimes, their decisions may not seem to be fair to you, but because of the immense profit potential of doing business in Saudi Arabia, you must bear with this. Also, Saudis are very polite people, and are very hesitant to give bad news. So even if a Saudi businessman praises you and talks highly of you, that doesn’t mean that you’ve got your way in a business deal with him.

While fixing an appointment with a Saudi business partner, it is important to schedule your meeting weeks in advance and to have discussed the agenda of the meeting beforehand, by phone, so that there are no surprises. Saudi businessmen don’t like being caught unawares during a business meeting.

Equally, it’s very important in Saudi Arabia to have face-to-face meetings, as any meeting by Skype or by a collaborative online video conference service won’t be taken seriously. Saudi Arabian businessmen are very old fashioned when it comes to this,

You must always arrive on time and be prepared to be kept waiting for a while. You should expect an open door policy during a meeting and nothing secret or confidential will be discussed unless a measure of confidence has been developed between yourself and your Saudi Arabian business partner.

Do make polite enquiries about a Saudi Arabian businessman’s family, but never ask about his wife – that won’t be appreciated. Do make it a point to glance with interest if a Saudi hands you his business card and offer your business card to the senior most executive first, before moving on to the others in the hierarchy.

Finally, you should dress sharply during your meeting with a Saudi businessman as you will be judged based on your appearance. Wear your best business suits to the meeting. Women should dress modestly, in Western suits, but fully covered.

Economy in Saudi Arabia

Saudi Arabia’s command economy is petroleum-based; roughly 75% of budget revenues and 90% of export earnings come from the oil industry. It is strongly dependent on foreign workers with about 80% of those employed in the private sector being non-Saudi. Among the challenges to Saudi economy include halting or reversing the decline in per capita income, improving education to prepare youth for the workforce and providing them with employment, diversifying the economy, stimulating the private sector and housing construction, diminishing corruption and inequality.

The oil industry comprises about 45% of Saudi Arabia’s nominal gross domestic product, compared with 40% from the private sector. Saudi Arabia officially has about 260 billion barrels (4.1×1010 m3) of oil reserves, comprising about one-fifth of the world’s proven total petroleum reserves.

In the 1990s, Saudi Arabia experienced a significant contraction of oil revenues combined with a high rate of population growth. Per capita income fell from a high of $11,700 at the height of the oil boom in 1981 to $6,300 in 1998. Taking into account the impact of the real oil price changes on the Kingdom’s real gross domestic income, the real command-basis GDP was computed to be 330.381 billion 1999 USD in 2010. Increases in oil prices in the aughts[peacock term] helped boost per capita GDP to $17,000 in 2007 dollars (about $7,400 adjusted for inflation), but have declined since oil price drop in mid-2014.

Final words

This article is a part of our ongoing series on “Doing Business in the Middle East and North Africa.” Our goal is to inform people about the right way to form a business partnership with local business partners in the region, and to offer a better understanding of the business culture and etiquette followed in that part of the world. The intention is to ensure that you are comfortable and know what to expect during a business negotiation with a business partner in the Middle East or North Africa.