GBE Report On Apparel Retailing in Saudi Arabia

GLOBAL BUSINESS ENVIRONMENT
REPORT
ON
OF
BRANDED APPAREL RETAILING
IN SAUDI ARABIA
SUBMITTED TO:
Dr. HIMANI JOSHI
(Academic Co-coordinator)
SUBMITTED BY:
Nikita Sanghvi
ROLL No.: 27
DATE OF SUBMISSION
29th MARCH 2010
EXECUTIVE SUMMARY
The report “Global Business Environment of Branded Apparel Retailing in Saudi Arabia” identifies
Saudi Arabia the most potential and dynamic retail market across the region. The market has continued
dominating the retail industry landscape for more than a decade and will continue to do the same in the
STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 1

coming years. The presence of large expatriate population and majority of the region’s retail investment
in these countries have helped to maintain the growth momentum.
 Increasing population and growing economy will remain one of the major key drivers for the
growth of retail industry in the Middle East Region.
 Population is young with 60 percent of its citizens under 25 years old, with strong brand
awareness. An ideal place for retailers especially in the apparel industry.
 Large availability of retail space in the Middle East makes the region all the more attractive for
industry players. Dubai is alone expected to see a growth of over 263% in Gross Leasable Area
by 2010 from 2006.
 Various shopping events like Dubai (Dubai Summer Surprises and Dubai Shopping Festival) and
Dubai Duty Free (DDF) is the major contributor in the UAE’s retail industry, with retail sales in
DDF accounting for more than 9% of total retail sales in the UAE.
 The trend of shopping at modern retail formats is growing in Middle East.
Today, Indo-Saudi business relations are growing strongly reflecting the inherent strength and
complementarily nature of the two economies. The various occasions for high-level dialogue on
business matters and regular exchange of delegations have established a sound basis for a constructive,
mutually beneficial relationship. The outlook for Indo-Saudi business ties is very promising.
The report is an outcome of an extensive research and rational analysis on the retail sector of the Saudi
Arabia and India. The report focuses on the socio-cultural environment, legal environment and political
environment factors affecting the business culture in Saudi Arabia.
The report will help vendors, customers, consultants and industry analysts to get in depth understanding
of the past and current scenario of the apparel retail industry of the region. The report also identifies
future growth areas. The information analyzed in the report is based on data available in research papers,
journals and websites.
TABLE OF CONTENT
S. No. NAME OF THE TOPIC PAGE NO.

EXECUTIVE SUMMARY 2
1. INTRODUCTION 4
SAUDI ARABIA AND APPAREL RETAIL

2. 7
INDUSTRY
SOCIO-CULTURAL STRUCTURE OF SAUDI

3. 9
ARABIA
4. POLITICAL STRUCTURE OF SAUDI ARABIA 12
5. ECONOMIC STRUCTURE OF SAUDI ARABIA 13
6. BUSINESS CULTURE OF SAUDI ARABIA 19
7. TAX STRUCTURE OF SAUDI ARABIA 27
8. SAUDI ARABIAN IMPORT/EXPORT REGULATIONS 29
9. SAUDI ARABIA AND WTO 37
10. INDIAN APPAREL RETAIL SECTOR 39
11. FOREIGN TRADE POLICY 44
12. INDIA-SAUDI ARABIA BUSINESS RELATIONS 49
13. CONCLUSION 52
14. REFERENCE 54

1. INTRODUCTION
SAUDI ARABIA
Saudi Arabia is a monarchy in southwestern Asia, and occupies most of the Arabian Peninsula. Saudi
Arabia is bordered on the north by Jordan, Iraq, and Kuwait; on the east by the Persian Gulf and Qatar;
on the southeast by the United Arab Emirates and Oman on the south by the Republic of Yemen; and on
the west by the Red Sea and the Gulf of Aqaba. The southeast and southern boundaries are not precisely
defined.
Saudi Arabia has an oil-based economy with strong government control

over major economic activities. Saudi Arabia possesses 25% of the
world's proven petroleum reserves, ranks as the largest exporter of
petroleum, and plays a leading role in OPEC.
Saudi Arabia's economy is a centrally planned economy. Private

enterprises do exist; they are however regulated by the Saudi
government.
Fact
If one is not a Muslim, he/she may not enter Saudi Arabia without an invitation and he/she may not
leave without an exit permit. Visitors to Saudi Arabia are subject to the same rigorous Islamic law as

Saudis. It is not uncommon for Westerners to be imprisoned for possessing illegal substances such as
alcohol, pornography, pork or narcotics. Thieves still have their hands amputated and capital crimes are
punished by public beheadings.
1.1 FACTS AND FIGURES

Main data source: CIA World Fact Book
All values, unless otherwise stated, are in US dollars
1.1A THE GEOGRAPHY
Region: Middle East & North Africa

Land Area: 2 200 000 sq. km
1.1B THE DEMOGRAPHY
Population: 25million
Population density: 11 sq. km
Income category : High income
Life expectancy: Men: 71 yrs
Women: 75 yrs
Adult literacy: 79%
Average per household: 5.9
Divorces per1,000 : Unknown


1.1C THE ECONOMY
Currency: Saudi Riyal (SAR)

Fiscal year: Calendar year
Trade organizations: WTO, OPEC
STATISTICS
GDP: $592.886 billion (PPP; 22nd)
$469.426 billion (nominal; 23rd)
GDP growth: -0.6% (2009 est.)
GDP per capita: $23,814 (PPP; 38th)
$18,855 (nominal; 41st)
GDP by sector agriculture: 3.2%; industry: 60.4%; services: 36.4% (2009
est.)
Inflation (CPI): 5% (2009 est.)
Labour force: 6.922 million (2009 est.) note: about 80% of the labor force
is non-national
Labour force agriculture: 6.7%; industry: 21.4%; services: 71.9%
(by occupation): (2005 est.)
Unemployment : 11.6% among Saudi males (2009 est.)
Main industries: crude oil production, petroleum refining, basic
petrochemicals, ammonia, industrial gases, sodium
hydroxide (caustic soda), cement, fertilizer, plastics, metals,
commercial ship repair, commercial aircraft repair,
construction
EXTERNAL
Exports: $180.5 billion (2009 est.)
Export goods: petroleum and petroleum products 90%
Main export partners: US 17.2%, Japan 15.3%, South Korea 10.2%, China 9.4%,
India 5.9%, Taiwan 4.6%, Singapore 4.4% (2008)
Imports: $86.61 billion (2009 est.)
Import goods: machinery and equipment, foodstuffs, chemicals, motor
vehicles, textiles
Main import partners: US 12%, China 10.4%, Japan 7.6%, Germany 7.3%, South
Korea 5.1%, Italy 4.7%, India 4.5%, UK 4% (2008)
Gross external debt: $72.45 billion (31 December 2009 est.)
PUBLIC FINANCES
Public debt: 20.3% of GDP (2009 est.)
Revenues: $167.7 billion (2009 est.)
Expenses: $164.3 billion (2009 est.)
Economic aid(Donor): $100 million in 1993 to Lebanon; since 2000, Saudi
Arabia has committed $307 million to Palestinians; pledged $240
million to Afghanistan; pledged $1 billion in export
guarantees and soft loans to Iraq.

2. SAUDI ARABIA AND APPAREL RETAIL INDUSTRY

Middle East has emerged as a key market for retailers across the world. The region
is witnessing rapid transformation in retail industry, driven by changing market
dynamics and rapid economic transformation. Over a period of time, the retail
culture across the Middle East has evolved from traditional outlets to large
shopping malls, hypermarkets, supermarkets and organized chains. The changing
consumer demographics in countries like Saudi Arabia and UAE, presence of
large expatriate population, rising purchasing power and abundance of petro dollar
has attracted various premium and luxury brands to the region.
In 2003, the Middle East retail industry was valued at around US$ 200 Billion and by the end of 2008,
this value swelled more than US$ 400 Billion. The anticipation is that there will be a marginal effect of
the 2008 financial crisis on the retail market in the Middle East, and it will see a growth of around 14%
during 2009-2013. Strong economic fundamentals and well protected banking system will shield the
region from the aftermath of the financial crisis. Although the declining oil prices may be a cause for
concern for most of the oil exporting countries, it will be short-lived as improving economic conditions
and increasing fuel consumption will drive the oil prices upwards.
The Saudi apparel retail industry is one of the high-growth markets in the Arab region especially in the
women and children segments. The apparel business grew rapidly over the last several years as people
became more fashion-oriented. The growth in the sector is attributed to high young population and
increasing purchasing power in the backdrop of recent economic boom. Growth of this sector is
evidenced by the growth of fashion retailers. In fact according to Colliers
International, Riyadh has 2.5 million square meters of gross leasable shopping
mall space in Riyadh versus 1.1 million in Jeddah and 1.7 million in Dubai as
of 2007.
The branded retail apparel market is quite competitive in Saudi Arabia.
Considering the clothing style in Saudi Arabia, men mostly wear the
traditional white thobes along with
the red shemaghs. Women on the other hand, wear the

black abayas and tarhas for everyday use. Despite the fact that all women wear the traditional Abaya on
top of their clothes, underneath the abaya, Western dress is most common. Western dress is adopted
more by the younger Saudi generation outside school. Non-Saudi adults usually wear the Western dress
code.
The market for apparel sales in Saudi Arabia are made up of varied products not representing global
brands in addition to unbranded items, which are generally imported from Asia. However, with the
maturing of the market, there has been a shift towards branded apparel sold through international retail
chains. Sales of braded apparels are estimated to be around 25 to 30 per cent of total apparel sales. Its
share continues to increase as evidenced by the expansion of the number of outlets and the number of
malls specialized in international retail chains.
The market share of branded apparel has witnessed a steady increase in the last decade due to changes in
consumer tastes and converging global fashion trends. Saudi consumers have become increasingly
sophisticated, demonstrating brand awareness and brand loyalty, demanding quality service and value
for money and carefully looking out for new product lines from their preferred brands.
Saudi Arabian Apparel market is heavily reliant on imports especially when it comes to fabric, cloth,
accessories and ready-made Western style clothes. These imports come from all over the world
depending on price range and quality. There is a noticeable distinction and a clear line between the high-
end and low-end types of clothes. European and American clothes are usually classified as high-end and
targeted towards the upper social class, whereas, garments imported from the Far East especially from
China and India offers much lower prices and quality and is geared towards the lower social class, which
represents the largest section of the pie. Saudi manufacturers, on the other hand, mainly supply military
uniforms and traditional abayas.
Apparel outlets in Saudi Arabia range from exclusive boutiques carrying true haute couture and top
international designer labels to souq stalls. In Saudi Arabia, Riyadh is currently the largest market for
retail apparel in Saudi Arabia accounting for around 40 per cent of total apparel sales, and is followed by
Jeddah at around 30 per cent and Dammam and Khobar at around 20 per cent. The growing presence of
international branded apparel in these big cities has contributed to growth in branded apparel sector.
3. SOCIO-CULTURAL STRUCTURE OF SAUDI ARABIA

3.1 LANGUAGE IN SAUDI ARABIA
Arabic is the official language of Saudi Arabia, but English is widely spoken. It is used in business and
is a compulsory second language in schools. Among the non-Saudi population, many people speak
Urdu, the official language of Pakistan, and other Asian languages such as Farsi and Turkish.
Arabic is spoken by almost 200 million people in more than 22 countries. It is the language of the
Qur'an, the Holy Book of Islam, and of Arab poetry and literature. While spoken Arabic varies from
country to country, classical Arabic has remained unchanged for centuries. In Saudi, there are
differences between the dialects spoken in urban areas and those spoken in rural areas.
3.2 ISLAM
Islam is practised by all Saudis and governs their personal, political, economic and legal lives. Islam was
born in Saudi Arabia and thus is visited by millions of Muslims every year. The Prophet Muhammad is
seen as the last of God's emissaries (following in the footsteps of Jesus, Moses, Abraham, etc) to bring
revelation to mankind. He was distinguished with bringing a message for the whole of mankind, rather
than just to a certain peoples. As Moses brought the Torah and Jesus the Bible, Muhammad brought the
last book, the Quran. The Quran and the actions of the Prophet (the Sunnah) are used as the basis for all
guidance in the religion.
Among certain obligations for Muslims are to pray five times a day - at dawn, noon, afternoon, sunset,
and evening. The exact time is listed in the local newspaper each day. Friday is the Muslim holy day.
Everything is closed. Many companies also close on Thursday, making the weekend Thursday and
Friday.
During the holy month of Ramadan all Muslims must fast from dawn to dusk and are only permitted to
work six hours per day. Fasting includes no eating, drinking, cigarette smoking, or gum chewing.
Expatriates are not required to fast; however, they must not eat, drink, smoke, or chew gum in public.
Each night at sunset, families and friends gather together to celebrate the breaking of the fast (iftar). The
festivities often continue well into the night. In general, things happen more slowly during Ramadan.
Many businesses operate on a reduced schedule. Shops may be open and closed at unusual times.

3.3 MEETING ETIQUETTE
. Men shake hands. Good friends may greet each other with a handshake and a kiss on each cheek.
. Women generally hug and kiss close friends.
. Men and women would not greet each other in public.
. When Saudis greet each other they take their time and converse about general things.
Gift Giving Etiquette
Gifts are not the norm as in many other countries.
. If you are invited to a Saudi's house bring something small as a thank you.
. Flowers do not make good gifts from a man, although a woman could give them to her hostess.
. Never give alcohol unless you are positive they partake.
. Gifts are not opened when received.
3.4 DRESS
Saudi Arabian dress follows strictly the principles of hijab (the

Islamic principle of modesty, especially in dress). The
predominantly loose and flowing but covering garments are helpful
in Saudi Arabia's desert climate. Traditionally, men usually wear an
ankle-length shirt woven from wool or
cotton (known as a thawb), with a keffiyeh
(a large checkered square of cotton held in
place by a cord coil) or a ghutra(a plain
white square made of finer cotton, also held
in place by a cord coil) worn on the head.
For rare chilly days, Saudi men wear a
camel-hair cloak (bisht) over the top. Women's clothes are decorated with tribal
motifs, coins, sequins, metallic thread, and appliques. Women are required to wear an abaya and niqab
when in public. The Saudi niqāb usually leaves a long open slot for the eyes; the slot is held together by

a string or narrow strip of cloth. Many also have two or more sheer layers attached to the upper band,
which can be worn flipped down to cover the eyes.
3.5 DRESS ETIQUETTE
. Most Saudis wear long white thobes. You would be expected to wear a suit.
. Business women should make certain that their collarbones and knees are covered and that their
clothes are not form-fitting.
3.6 CLIMATIC CONDITIONS
The extremely hot climate of Saudi Arabia, coupled with high humidity in the coastal areas, prompts
high demand for light fabrics. The best prospects for sales are light and medium weight cotton,
polyester-cotton blends, and virgin wool. Silk apparel is also valued for its lightweight qualities and
because it enjoys a traditional cultural demand in Saudi.
3.7 RELATIONSHIPS & COMMUNICATION
. You will need a Saudi sponsor (wakeel) to enter the country. The sponsor acts as an intermediary and
arranges appointments with appropriate individuals.
. Saudis do not require as much personal space as most western cultures. As such, they will stand close
to you while conversing and you may feel as if your personal space has been violated.
. Saudis prefer to work with people they know and trust and will spend a great deal of time on the
getting-to-know-you part of relationship building.
. You must be patient.
. Since Saudis will most likely judge you on appearances, dress and present yourself well.

4. POLITICAL STRUCTURE OF SAUDI ARABIA
Saudi Arabia government and politics are the most

important features when it comes to the framing of
the administrative policies and the foreign relation of
Saudi Arabia. The nation's relation with its several
neighboring countries and the foreign policies, which
its government ministry adopts, decide the future of
the nation. Economically, Saudi Arabia is a rich
nation, thanks to the sincere efforts made by the
monarchical government. In spite of the fact that the
king and the Ulemas play an important role in administering the country, the spirit is truly democratic.
Being guided by the words of the Quran, the principles on which the Saudi government is laid has given
the nation a strong foundation.
The monarchical government is led by the king of Saudi Arabia. He is the head of the monarchy, the
house of Saud, the two Holy mosques and also the military of the nation. His powers, though
considerable, are limited and guided by the religious leaders or the Ulemas. He appoints a 150 member
consultative body, which guides his administrative steps for a term of four years.
This apart, the responsibility of administration is distributed among cabinet ministry of the King. There
are several government ministries, which are given individual responsibilities of agriculture, defense,
finance, education and several such other aspects. The country is divided into thirteen provinces for a
more localized supervision of all Saudi political affairs.
Saudi Arabia government and politics decide the administrative efficiency and the ultimate progress of
the nation.
Principal Government Officials
 King, Prime Minister, Custodian of the Two Holy Mosques--King Abdallah bin Abd al-Aziz Al
Saud

 Minister of Foreign Affairs--Prince Saud al-Faisal bin Abdul Aziz Al Saud
 Ambassador to the U.S.--Adel al-Jubeir
5. ECONOMIC STRUCTURE OF SAUDI ARABIA
5.1 ECONOMIC OVERVIEW
The petroleum sector accounts for roughly 45% of budget revenues, 45% of GDP, and 90% of export
earnings. About 40% of GDP comes from the private sector. Roughly five and a half million foreign
workers play an important role in the Saudi economy, for example, in the oil and service sectors. The
government is encouraging private sector growth to lessen the kingdom's dependence on oil and increase
employment opportunities for the swelling Saudi population. The government has begun to permit
private sector and foreign investor participation in the power generation and telecom sectors. As part of
its effort to attract foreign investment and diversify the economy, Saudi Arabia acceded to the WTO in
2005 after many years of negotiations. With high oil revenues enabling the government to post large
budget surpluses, Riyadh has been able to substantially boost spending on job training and education,
infrastructure development, and government salaries.
5.2 INVESTMENT DECISION
Saudi Arabia has the largest free market economy in the Middle East and Northern African market, and
as a result investment in Saudi Arabia is quite profitable. The country has an ever-expanding domestic
market and provides easy access to Africa, Europe and Asian markets.
Investment in Saudi Arabia is further facilitated by the stable government, international quality of
infrastructure, liberal and open market enterprises. The new Foreign Investment Law allows complete
foreign investment in oil projects and the real estate market.
Privatization has become a key word for Saudi Arabian economy and as a result many industries have
been opened to the private sector. Some of the common private sector industries, which offer favorable
investment options, include airlines, apparel, medical equipments, educational services,
pharmaceuticals, insurance, auto parts and services, snack foods, processed food and vegetables,
refrigeration equipments, postal services, telecommunications, port services, electricity and water

utilities.
The Saudi Arabian government has gained the membership status of various international organizations
like Supreme Economic Council and World Trade Organization to ensure further stability for investors.
Saudi Arabia is a member of the Multilateral Investment Guarantee Agency, which provides the
investors with equal protection and incentives.
Foreign investment in Saudi Arabia is highly encouraged, especially when it is beneficial for the growth
and industrialization of the country.
5.3 INVESTMENT BARRIERS
In April 2000, the Council of Ministers approved a new foreign direct investment code with the goal of
facilitating the establishment of foreign companies, both joint ventures and 100 percent foreign-owned
enterprises, in Saudi Arabia. Key provisions allow foreign investors to transfer money freely into and
out of the country, allow joint-venture companies to sponsor their foreign investors as well as their
foreign employees (all foreigners in Saudi Arabia need a legal sponsor in order to reside in the country),
and permit foreign investors to own real property for company activities.
The government established the Saudi Arabian General Investment Authority (SAGIA) to function as a
one-stop shop, where foreign investors can obtain all of the permits or authorizations necessary to make
an investment. In addition to its four existing service centers (in Riyadh, Jeddah, Dammam, and
Medina), SAGIA opened a Women’s Investment Center in March 2003 to promote the participation of
Saudi women in business.
SAGIA must grant or refuse an investment license within 30 days of receiving an application and
supporting documentation from the investor. Licenses are required for all foreign investments. Wholly
domestic projects funded with Saudi or other GCC Member money do not need licenses through
SAGIA’s investment services center, as it was specifically designed for foreign investors. However,
many of the licenses SAGIA issues concern projects jointly owned with Saudi investors. Bureaucratic
impediments arising in other ministries have sometimes delayed the application process. SAGIA
continues to take steps to address these impediments and to streamline the process, including concluding
23 separate agreements relating to the processing of license applications with other ministries and
government agencies. Some companies still experience bureaucratic delays after receiving licenses from
SAGIA, for example, in obtaining a commercial registry or purchasing property.

Following SAGIA’s recommendations in 2001, the Supreme Economic Council published a list of 16
manufacturing and service sectors and subsectors in which foreign investment is currently prohibited,
including oil exploration, drilling and production, and manufacturing and services related to military
activity.
In October 2003, Saudi Arabia passed the Capital Markets Law, which took effect in February 2004.
The law allows for the creation of financial intermediaries (stock brokerages and investment banks) and
created an independent stock market and an independent stock market regulatory body. The law sets
SR50 million ($13.3 million) capitalization requirements for brokerages and provides penalties for
insider trading and wrongful dissemination of information. The law also allows for the development of
long term investment instruments and limits the maximum equity share held by foreign partners in joint
ventures with Saudi entities to 49 percent. Saudi Arabia agreed to raise the maximum allowable
percentage of the foreign partner to 60 percent after WTO accession. The 2003 law does not repeal the
prohibition on direct foreign participation in the Saudi stock market. However, foreigners can continue
to purchase shares in bank operated investment funds. Foreign participation in these funds is limited to
10 percent of the total value of the fund.
5.4 TEN ECONOMIC FREEDOMS of Saudi Arabia

(SOURCE:www.heritage.org/Index/Business-Freedom.aspx)
84.6 Business Freedom AVG 64.6 45.0 Investment Freedom AVG 49.0
82.5 Trade Freedom AVG. 74.2 50.0 Financial Freedom AVG 48.5
99.6 Fiscal Freedom AVG. 75.4 40.0 Property Rights AVG 43.8
68.1 Government Spending AVG. 65.0 35.0 Fdm. from Corruption AVG 40.5
62.3 Monetary Freedom AVG. 70.6 74.4 Labor Freedom AVG 62.1
Saudi Arabia’s economic freedom score is 64.1, making its economy the 65th freest in the 2010 Index.
Its score is 0.2 point lower than last year, reflecting modest declines in three of the 10 economic
freedoms. Saudi Arabia is ranked 8th out of 17 countries in the Middle East/North Africa region, and its
overall score is above the world average.
The Saudi Arabian economy performs well in trade freedom, fiscal freedom, and business freedom. The
overall regulatory environment for business formation has become more streamlined and efficient. The

tax regime is competitive, and the overall tax burden is low. Overall economic growth has slowed in
recent years, but the impact of the recent global financial crisis on the banking sector has been relatively
modest.
Saudi Arabia remains weak in monetary freedom, investment freedom, property rights, and freedom
from corruption. The legal system remains vulnerable to political influence. Investment freedom is
hampered by bureaucracy and a lack of transparency. Monetary stability is weak and continues to be
adversely affected by lingering price controls.
5.4a Business Freedom 84.6
The overall freedom to start, operate, and close a business is well protected under Saudi Arabia’s
regulatory environment. Starting a business takes five days, compared to the world average of 35 days.
Obtaining a business license takes about half of the world average of 218 days. Bankruptcy proceedings
are relatively straightforward.
5.4b Trade Freedom 82.5
Saudi Arabia’s weighted average tariff rate was 3.8 percent in 2008. Import bans and restrictions, export
controls, services market access barriers, non-transparent and inconsistent standards implementation,
domestic bias in government procurement, and weak protection of intellectual property rights add to the
cost of trade. Ten points were deducted from Saudi Arabia’s trade freedom score to account for non-
tariff barriers.
5.4c Fiscal Freedom 99.6
Saudi nationals or citizens of the Gulf Cooperation Council and corporations pay a 2.5 percent religious
tax mandated by Islamic law rather than traditional income or corporate taxes. Foreign citizens are
subject to a flat 20 percent income tax. Special tax regimes apply to natural gas and oil production. In
the most recent year, overall tax revenue as a percentage of GDP was 5.6 percent.
5.4d Government Spending 68.1
Total government expenditures, including consumption and transfer payments, are moderate. In the most
recent year, government spending equaled 32.6 percent of GDP. State participation in the economy

remains substantial. The state-owned mining company was privatized in 2008, and authorities are
working to prepare the national airline for partial privatization.
5.4e Monetary Freedom 62.3
Inflation has been moderately high, averaging 7.8 percent between 2006 and 2008. The government
influences prices through regulation, extensive subsidies, and state-owned enterprises and utilities.
Twenty points were deducted from Saudi Arabia’s monetary freedom score to account for policies that
distort domestic prices.
5.4f Investment Freedom 45.0
Foreign investment is generally welcome, but foreign investors must take local partners in certain
sectors. All foreign investors must be licensed by the General Investment Authority, and licenses for
other projects may be required. Foreign investment is prohibited in 16 manufacturing and service sectors
and sub-sectors. Dispute resolution is cumbersome, local hiring requirements are burdensome, and the
licensing process is time-consuming. Residents may hold foreign exchange accounts; approval is
required for non-residents. There are no controls or restrictions on foreign exchange transactions or
capital payments and transfers. Foreign investors may acquire land for business use.
5.4g Financial Freedom 50.0
Saudi Arabia’s financial system has undergone gradual modernization and transformation. Regulatory,
supervisory, and accounting standards are generally consistent with international norms. Foreign
ownership of financial institutions is limited but growing. The government has eased licensing
requirements for foreign investment in financial services and has raised the foreign equity ceiling in
financial institutions to 60 percent. The government retains majority shares in the country’s largest bank,
the National Commercial Bank; holds minority shares in other domestically incorporated banks; and
offers subsidized credit to preferred sectors. All insurance companies must be locally registered and
must operate according to the cooperative insurance principle. Insurance has undergone some
liberalization to allow greater competition from foreign insurers. Capital markets are relatively well
developed, and the stock exchange is the region’s largest.

5.4h Property Rights 40.0
Saudi courts do not necessarily enforce contracts efficiently. The court system is slow, non-transparent,
and influenced by the ruling elite. Laws protecting intellectual property rights are being revised to
comply with the WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, but
enforcement is weak and procedures are inconsistent. The International Intellectual Property Alliance
announced in February 2009 that Saudi Arabia had the highest piracy levels of any country in the Gulf
region. Legal and societal barriers constrain women from asserting their limited property rights.
5.4i Freedom from Corruption 35.0
Corruption is perceived as significant. Saudi Arabia ranks 80th out of 179 countries in Transparency
International’s Corruption Perceptions Index for 2008. The absence of transparency in government
accounts and decision-making encourages a perception of corruption on the part of some members of the
royal family and in the executive branch. Government procurement is an area of concern. Bribes, often
disguised as “commissions,” are reportedly commonplace.
5.4j Labor Freedom 74.4
Saudi Arabia’s labor regulations are relatively flexible. The non-salary cost of employing a worker is
low, and dismissing an employee is not burdensome. Regulations on work hours are relatively flexible.

6. BUSINESS CULTURE OF SAUDI ARABIA
6.1 BACKGROUND TO BUSINESS IN SAUDI ARABIA

Western business culture makes a strong separation between work and religious belief. Even very
devout Christians would be loath to invoke divine scriptures or mention the will of God in a typical
business encounter. However, when doing business in Saudi Arabia (and elsewhere in the Gulf), it is
important to bear in mind the all-pervasive nature of the influence of Islam.
Life and business as an important aspect of life are governed by the prescriptive tenets of a religion
which forms the backdrop to society. Nothing happens which has not been willed by God. If a deal
comes off it is due to the will of God, if it fails it was not meant to be. Thus, a sense of fatalism and a
resulting lack of urgency are often quoted by business people from
non-Islamic cultures as being the over-riding impressions of a trip
to Saudi. The oft-quoted Arabic phrase, In Sha Allah, (if God wills
it) represents a deeply rooted belief in the unending activity of a
Supreme Being, rather than an excuse for inactivity or lack of
motivation.
The observance of religious ritual takes precedence over all other

aspects of life and prayer punctuates the business day. Meetings'
discourse contains numerous references to God and His Prophet
Mohammed and offices display numerous Koranic texts.
Do not underestimate the deep conviction of your Saudi contacts and do not imagine that reference to
religion is in any way a ploy or insincere.
6.2 SAUDI ARABIAN BUSINESS STRUCTURES

Business is usually developed around a family unit with all key employees coming from the extended
family. Nepotism is a way of life and the idea that positions would not be given to family members is
incomprehensible. Who can you trust if not your own family? Within this family-based structure, the
company would be developed along strongly hierarchical lines with the majority of power being held at
the top by the senior, usually older family members.

Islam teaches the importance of family relationships, loyalty and the need to show respect to older
people - once again, religion forms the backdrop to social organization. Trying to introduce flatter
systems where promotion is based upon demonstrable talent rather than connections could be seen to fly
in the face of culture, history and religion.
As all business is family and relationship-based, it is absolutely vital to be prepared to devote as much
time and effort as necessary to relationship-building. Every contact within an organisation is important,
as you may not be aware of everybody's connections. A seemingly lowly employee may prove to be a
favored relative of a senior figure and therefore of greater potential help than some other apparently
more important contact.
6.3 SAUDI ARABIAN MANAGEMENT STYLE

As might be expected in a culture where organisations are run along strongly hierarchical lines,
managers tend to be very instructional in their approach. Subordinates view it as the boss' role to take
decisions and to convey those decisions down the chain for implementation. However, the leader will
often include his group in a consensus-style discussion with the final decision being taken by the leader.
One of the by-products of the belief that leaders lead and followers follow is that those things which are
not specifically requested are likely to remain undone. It is, therefore, imperative that all instructions
given should be clear, unambiguous and complete.
It is important to the boss that his position is respected and subordinates may show extreme levels of
deference. It is of course important to remember that this deference is probably not only being shown to
the organisational position of the boss but also to his family status, class connections and age.
6.4 SAUDI ARABIAN MEETINGS

By Western standards, meetings in Saudi Arabia can seem unusual affairs with many of the
commonplace procedures and processes being ignored.
Firstly, when meeting someone for the first time, do not be surprised to find yourself ushered into a
room with several other people who you have never met and do not know. It is likely that the other
people present do not know each other either. Your contact is then likely to give you some undivided

attention before returning to a conversation he was having with someone else prior to your arrival. You
might then be expected to sit in the room for a considerable period of time before your turn comes
around again.
This process can be very frustrating for the task-oriented, time-dominated Westerner. Meetings can drag
on for hours with little, if anything, being achieved. Indeed, because of this process it can be difficult to
schedule more than one meeting per day.
Secondly, as relationships are all-important, many meetings can be spent in a seemingly endless round
of 'getting to know you sessions.' It would be highly unusual to go into a meeting with a formal agenda
and a designated chairman. Discussions can, therefore, appear disjointed with several people speaking at
the same time.
Try not to show annoyance or disapproval if meetings do not proceed along western patterns. Your
ability to interact effectively in the eyes of your Saudi contacts will, in large measure, determine their
opinion of you.
Gift Giving
It is not obligatory to give gifts when visiting a Saudi - either at the office or at home - but gifts can be
helpful in the relationship building process. When offering a gift, it is likely that the gift will not be
opened in front of the giver.
When giving gifts be conscious of Muslim sensitivities and avoid the following:
 Alcohol
 Pork
 Knives
 Pigskin
 Perfumes with alcohol
 Any images with nude women

6.5 SAUDI ARABIAN TEAMS

As most companies are organised along family lines, the concept of team working is accepted as long as
the members really are part of the team (i.e. the extended family or close friends.)
The problems really begin when trying to develop team spirit within a group who have no natural
kinship ties. In such a situation, people tend to display suspicion of one another and progress can be
slow. Within any gathering of Saudis, hierarchy will always be present and even if you wish to develop
a flat system within the team, it is likely that traditional class and family issues will result in an
unofficial hierarchy developing very quickly indeed.
6.6 SAUDI ARABIAN COMMUNICATION STYLES

One of the most difficult concepts for many other cultures to grasp is the need to offer flattery in many
business situations. Arabic is a language of hyperbole, where the merits of others are praised and overtly
commented upon. Therefore, during the relationship-building process, it is important to offer
compliments to your host, his organisation, Saudi Arabia and the Muslim world in general. You, in
return, will be complimented - do not seem distant, aloof or embarrassed if this happens - take the
compliments in the spirit they are given.
People are reluctant to convey bad news to you about any business issues. When this characteristic is
combined with natural Arabic hyperbole, it is important to maintain a sense of perspective when being
given very positive feedback about any particular proposition.
Do not be surprised if people seem somewhat aggressive in meeting situations. Speaking volubly and
with a rising tone shows sincerity. This denotes engagement and interest and is in no way a negative
sign. (The ability to converse in this manner is a much-admired characteristic in the region.)
Finally, be aware of the importance of good, strong eye contact. A man's sincerity and honour can be
judged by their ability to look you in the eye. This can be somewhat uncomfortable for those from
cultures with much weaker eye contact (many Asian countries) but efforts must be made in this area.
Avoid any negative references to Islam, the situation in the Middle East or the role of the House of
Saud.

6.7 WOMEN IN BUSINESS IN SAUDI ARABIA

Women play little role in public life in Saudi and have virtually no role to play in the business world. It
is, therefore, very difficult for women business travellers to achieve a great deal in the country - even if
they are granted a visa. The constitution of any delegation sent to Saudi on business needs very careful
consideration and the normal western concerns on selection through achievement, track record and
technical ability may not be appropriate.
Any women visiting on business needs to be very conservative in both their dress code and behaviour.
6.8 SAUDI ARABIAN DRESS CODE

Visitors to Saudi are expected to dress in a conservative, smart fashion. Men should wear suits and ties
for business meetings, despite the heat and women should wear business suits (not trousers) which leave
as little flesh showing as possible. Skirts should be well below the knee and preferably ankle-length. It is
also advisable for women to carry a headscarf.
It is not advisable for men to wear traditional Saudi costume as this may seem bizarre or even offensive
behaviour to local Saudis.
The correct observance of dress code is monitored by the Matawain (religious police) who are
responsible for the enforcement of modest dress in accordance with Islamic law.
6.9 RECOMMENDATIONS ON SAUDI ARABIAN BUSINESS CULTURE

Tip 1
All aspects of life in Saudi are governed by an absolute belief in the teachings of Islam and an
adherence to its tenets. No business deal will ever be discussed without reference to the
Almighty and His Prophet Mohammed.
Tip 2
It goes without saying that the utmost respect must be given to such devoutly held religious
beliefs and accommodations made to allow people to observe religious rituals of prayer and
fasting.

Tip 3
As all things emanate from the will of Allah, a degree of fatalism and acceptance are inherent in
the Saudi character. Things will or will not happen according to the will of God and not because
of the actions of man. The meeting will take place tomorrow at nine o'clock - God willing.
Tip 4
Business is usually family-based with all senior positions filled by family members. Nepotism is
the natural order of things and not something that needs to be explained to visitors.
Tip 5
This family-orientation leads naturally to the development of strong hierarchies with the oldest
male relatives being at the head of the organisation.
Tip 6
Age is worthy of respect and honourable visitors will display respect to older people - therefore it
is good to have some older heads amongst any delegation going to Saudi.
Tip 7
Try to find out the relationship tree of any company you wish to do business with. Power may
not reside with a functional head if that head is not a family member or has poor relationships at
the top.
Tip 8
Managers tend to lead through instruction and subordinates are not expected to show initiative. If
is not requested, it may not get done.

Tip 9
Meetings can involve sitting in rooms with unknown people who are simultaneously meeting
your contact. In effect, several meetings may take place at the same time.
Tip 10
Initial meetings can be very time-consuming and appear to deliver very little in terms of tangible
returns.
Tip 11
Time is very flexible and meetings may start very late (if at all) and last for many hours. It is
difficult to schedule a series of meetings on the same day.
Tip 12
Teams work well if birth or kinship associates everybody in the team. Teams of strangers rarely
gel effectively.
Tip 13
It is important to offer lavish compliments to your host and that you are prepared to receive them
in return.
Tip 14
Saudis do not like to say no or deliver negative news. It can be very difficult to fully understand
exactly how interested people are in your propositions. Only perseverance and patience will
reveal the true picture.
Tip 15
Loud and aggressive discourse denotes engagement and interest - not anger or hostility. Do not
be frightened or worried if the noise levels in meetings start to grow.

Tip 16
Levels of eye contact are very strong and strong eye contact denotes sincerity and
trustworthiness.
Tip 17
Avoid touching anybody with your left hand or pointing feet at people as both of these are seen
as extremely rude behaviour.
Tip 18
Do not comment on the political situation in the Middle East or make any adverse comments
about the influence of Islam.
Tip 19
Women play little or no active role in business life and it can be very difficult for women to even
get a visa to enter the country on business.
Tip 20
Dress conservatively, but very smartly. You will be judged partly on your appearance.

7. TAX STRUCTURE OF SAUDI ARABIA

Income taxes of Saudi and expatriate employees working in the Kingdom were abolished in 1975. All
Saudi citizens and all Saudi companies, however, must pay a religious tax -- zakat -- of 2.5% annually
on profits and on the assessable amount for individuals.
In general, Saudi law requires that all foreign and Saudi companies pay a tax on profits earned in the
country. Companies with joint-ventures having at least 25% Saudi ownership are exempt from income
tax for a period of ten years.
A company's tax status is determined by the tax department of the Ministry of Finance upon receipt of
the company's records and activities in the Kingdom. These records must be submitted in Arabic.
US and Saudi accounting procedures are used in auditing companies.
Different tax rates are applied to companies working in petroleum or hydrocarbon industries. The final
payment to a company is dependent upon a certificate being received from the Ministry of Finance
stating that the contractor is either exempt from paying taxes or has paid all the due taxes. The foreign
partner in a joint-venture does not pay zakat.
In May 1993, the Minister of Finance and National Economy stated that all foreign companies which
are actively involved in the capital expansion of various industrial projects in Saudi Arabia will be
exempted from paying taxes on profits made in the Kingdom. Foreign investors are to be encouraged
to reinvest their profits which accrue to them from joint-ventures.
Taxes are collected by the Department of Zakat and Income Tax (DZIT). Income tax is levied on
Saudi-source income of non-Saudi persons or entities.
7.1 CORPORATE TAXES

Corporate tax is levied on net income. No distinction is made among the various forms of business
organization, and the applicable tax is computed on the same basis regardless of whether the entity is a
limited liability or joint stock company of a "joint venture". Income tax on Saudi business organizations
is assessed on the foreign shareholder's or partner's share of the entity's net income. Once such tax is
paid, no additional taxes are levied on distributed profits.
Saudi corporate tax rates range from 25 percent (on annual taxable income of up to SR 100,000) to 45
percent (on annual taxable income of over SR 1 million).
Under current practice, supply contracts whereby a foreign, non-resident company exports goods to

Saudi Arabia would not generate income subject to Saudi tax. However, supply contracts under which
the foreign, non-resident company also furnishes services in Saudi Arabia would be taxable in its
entirety (i.e., on income derived from the export of goods as well as provision of services), although the
value of supplied goods can usually be deducted as an expense item.
7.2 PERSONAL INCOME TAXES

Salary and benefits of non-Saudi employees are not subject to income tax at present. However, non-
Saudis who derive income from investments in Saudi businesses or from professional activities, and
who are non-residents, are taxed at rates ranging from five percent (for taxable income up to SR
16,000) to 30 percent (for taxable income over SR 66,000).
The Zakat is a wealth tax levied on Saudi and GCC nationals, wholly Saudi or GCC-owner entities,
and Saudi and GCC shareholders in limitedliability companies. The rate is approximately 2.5 percent
of an individual's net worth or of an entity's assets (less specified deductions).
Other Taxes: Currently, no local, regional, property or other sales taxes are imposed.

8. SAUDI ARABIAN IMPORT/EXPORT REGULATIONS

8.1 CUSTOMS DUTIES
According to Royal Decree No. M/13 dated 10/5/1408 H., corresponding to 12/30/1987, and to the
Saudi Council of Ministers order No. 86 dated 10/5/1408 H. (12/19/87) the following customs duties'
rates have been in effect since 13/5/1408 H. (corresponding to January 2, 1988):
 Most of the basic consumer products are duty free, e.g., sugar, rice, tea, unroasted coffee,
cardamom, barley, corn, livestock and meat (fresh or frozen).
 Customs duties of 20% are imposed on some imported commodities for the purpose of protecting
the national infant industries.
 Import duty on other items is 12% ad valorem on the c.i.f. (cost, insurance, and freight) value.
 A limited number of items are subject to customs duties calculated on the basis of metric weight
or capacity, rather than ad valorem. However, the rates for these items are fairly low.
 Members of the Arab League who are signatories to the Agreement to Facilitate Trade and
Exchange and to Organize Transit between the Arab League States are granted special
concessions.
 Imports from the Arab states with which Saudi Arabia has bilateral trade agreements are entitled
to further reductions of duty.
Royal Decree No. M/56 dated 19/10/1407 H., corresponding to June 15, 1987, has approved the
international Brussels agreement of 14 June 1983 on the Harmonized Commodity Description and
Coding System (HS). According to the Minister of Finance and national Economy Order No. 3/1805
dated 19/10/1410 H., corresponding to May 14, 1990, the Kingdom has been implementing the
Harmonized System since 15/6/1411 H., corresponding to 1/1/1991. For details, contact Customs
Department
Saudi Arabia has been implementing the Brussels Harmonized Commodity Description and Coding
System (H.S.) since 1991.

8.2 COMMERCIAL DOCUMENTS
The documents required for all commercial shipments to the Kingdom of Saudi Arabia are:
 commercial invoice
 certificate of origin
 a bill of lading (or airway bill)
 a steamship (or airline) company certificate
 an insurance certificate (if goods are insured by the exporter)
 packing list
Additional documents may be required, depending on the type of goods being shipped, on certain
requests from the Saudi importer or in the letter of credit (L/C), or according to a contract.
The exporter is responsible for authenticating the certificate of origin, the commercial invoice, and any
special documents. The documents must be certified in the following order:
1. Notarized by a Notary Public and certified by a local Exporting country Chamber of Commerce.
2.Certified by the Exporting country-Saudi Arabian Business Council.
3. Legalized by the Saudi Embassy or any Saudi Consulate in the Exporting country
All shipments must contain two basic documents — the Certificate of Origin and the Commercial
Invoice — and any other related documents required by the L/C to be certified and legalized. Each
document should be prepared in (at least) an original and one copy. All documents (original or copies)
should bear the handwritten signature of the person issuing the document. Facsimile signatures are not
accepted.
In addition, two copies of the Export Information Sheet (EIS) must be filled out, signed by an official of
the exporting/shipping company and submitted with the other required shipping documents.

8.3 DESCRIPTION OF SHIPPING DOCUMENTS
8.3a Commercial Invoice:
All commercial invoices must be on the exporting company’s letterhead. The invoice should contain the
names and addresses of the consignor and the consignee, and must accurately describe goods and
components (including the six-digit Harmonized System number), trademarks, name of the vessel (or
airline) and the date of sailing, port of loading and port of discharge, net and gross weight, quantity, unit
price and extended price of each type of goods, total value of the shipment, contents of each package
and container, currency, L/C number (if applicable) and freight and insurance.
As of May 18, 1996, Saudi customs authorities have emphasized that commercial invoices issued by
exporters should contain an accurate description the goods being exported to the Kingdom. It should
include:
For equipment:
 line, number, and size of exported item

 model number
 trademarks
 manufacturer’s complete name
 any other information helpful in identifying the exported equipment
For other exported products:
 complete material description including type, size, weight, and percentage of its components if
possible
 complete name(s) of manufacturer(s) or producer(s)
 trademarks
 any other information pertaining to the type of the exported item

Commercial invoices should contain a notarized statement, signed by a responsible official of the
exporting firm, saying: "I certify this invoice to be true and correct and in accordance with our books,
also that the goods referred to are of ****** origin."
8.3b Certificate of Origin:
The certificate of origin must be issued by the manufacturer (or the exporting firm), and must include
the name of the vessel (airline) and the date of sailing, name(s), nationality(ies), and full street
address(es) of the manufacturer(s) of all items to be shipped to Saudi Arabia. Furthermore, the origin of
each item or component must be specified. In addition, a signed statement to the effect that the
document is true and correct must be given. If the merchandise is not solely and exclusively a product of
the exprting country, a notarized "Appended Declaration to Certificate of Origin" must be attached to
the certificate of origin.
In addition, the certificate of origin must include the name and address of the Saudi importer, a
description of the goods, and the address of the shipping company.
8.3c The Bill of Lading (or Airway bill):
One nonnegotiable copy of the bill of lading is to be presented to a Saudi Arabian Consulate. The bill of
lading should agree with the commercial invoice and show description, value, net and gross weight of
shipped goods, volume and measurement, marks, number of packages, name and address of the
consignee (Saudi importer) and consignor, name and address of shipping company and/or shipping
agent, name of vessel and date of sailing, port of loading and port of discharge. Marks and numbers
should agree with those on the invoice and containers.
8.3d Steamship Certificate:
This certificate (which is an Appended Declaration to Bill of Lading or airway bill) should be issued by
the steamship (or airlines) company in at least one original. It must be notarized and contain the
following information about the vessel (or plane), named in the Bill of Lading or the airline company
certificate:

 name of vessel (plane), and previous name (if applicable)

 nationality of vessel (plane)
 owner of vessel (plane)
 names of ports (airports) that the vessel (plane) will call on en route to the Kingdom of Saudi
Arabia, including port (airport) of loading and port (airport) of discharge.
Further, the steamship (airlines) company certificate should declare that the vessel (plane) shall not
anchor or call on any other ports (airports) than those mentioned in it, and that all information provided
in the certificate is true and correct. The standard form of "Appended Declaration to the Bill of Lading"
(or airway bill) is available from the Saudi Consulates.
8.3e Insurance Certificate:
This certificate (issued by an insurance company in at least one original) must contain the actual amount
of insurance, description and value of insured goods, name of vessel, port of loading and Saudi port of
discharge, and name and address of beneficiary. In addition, the "Appended Declaration to Insurance
Policy" (available from the Saudi Consulates) should state that the insurance company has a duly
qualified and appointed agent or representative in the Kingdom of Saudi Arabia, giving his name and
full address.
If the shipment is insured by an insurance company in Saudi Arabia, the exporter, on their letterhead,
must state the name and address of that company.
8.3f Packing List:
This includes names and addresses of consignor and consignee, description and value of the exported
goods, net and total weight, number of packages and their contents, number of containers and contents,
numbers of seals, and L/C number (if applicable).
8.3g Other Requirements
 According to Royal Decree No. 5/E/27748 dated 24/11/1402 H. the country of origin must be
mentioned on all products imported into Saudi Arabia, except when it is unfeasible.

 Carpet manufacturers and suppliers must indicate in Arabic the thickness or weight of each
square meter, type, pile weight, and country of origin, to be applied on each 5 meters along the
carpet roll length. All carpet manufacturers, suppliers and distributors have to show the
captioned data on the sales invoice.
 Importing used clothing requires an official disinfection certificate. These goods will be subject
to inspection by the Saudi Arabian quarantine officials.
 Non-commercial shipments of less than 10,000 Saudi Riyals (about $2,600) and cars imported
into the Kingdom for personal use, regardless of their value, do not require complete shipping
documents.
 Commercial samples are subject to the payment of customs duty and surcharge either by a
deposit equal to the duty at the time of import or by a bank guarantee. A refund is made if the
goods are re-exported within 12 months. In case samples are sold, neither deposit nor guarantee
will be refunded. Prior permission to import samples must be obtained from the Director General
of Customs, Customs Department, who should be furnished with lists of samples, prices and
catalogues. A non-refundable duty of 12 percent is levied for imports of samples of jewelry and
watches. Authenticated shipping documents are required for all shipments of commercial
samples.
8.4 ARRANGEMENT OF SHIPPING DOCUMENTS
Shipping documents must be presented to the Saudi Arabian Consulate in the following order, stapled
together:
1. Commercial Invoice
2. Certificate of Origin
3. Insurance Certificate
4. Bill of Lading (or airway bill)
5. Steamship Certificate
6. Packing List
7. Special Documents

The Export Information Sheet should accompany these documents but should not be stapled together
with them.
8.5 COMMERCIAL LEGAL DOCUMENTS
Legal Documents include:
 Power of Attorney
 Agency Agreements
 Sole Distributorship
 Trade Marks Registration
 Certificates of Free Sale
 Bid or Tender Documents
 Registration of Partnerships, Corporations, or Joint Ventures
All companies’ documents must be legalized as follows:
 Notarized by a Notary Public

 Certified by the County Clerk of the respective county where the Notary Public is commissioned
 Certified under the seal of the Office of the Secretary of the state where the documents originated
 Authenticated by the Exporting country Department of State, Authentication Division
 Legalized by a Saudi Consulate
8.6 SAUDI ARABIAN IMPORT STANDARDS
In November 1995, the Saudi Ministry of Commerce implemented the International Conformity
Certification Program (ICCP), in coordination with the Saudi Arabian Standards Organization (SASO).
SASO relies primarily on international standards when issuing Saudi specifications, and SASO
specification conformity is applied to all products, both locally produced and imported, to provide the
necessary consumer protection. All of the approved SASO procedures, including the ICCP program,
work within the guidelines of the International Standards Organization.

The SASO ICCP requires a Certificate of Conformity for every shipment of SASO-regulated products
destined for the Kingdom. Before a Certificate of Conformity can be issued, each shipment must provide
evidence of conformity to SASO requirements. Shipments arriving without a Certificate of Conformity
will be rejected at the Saudi port of entry. SASO has appointed Country Offices in locations throughout
the world that perform a conformity verification on each shipment prior to its leaving its port of export.
In addition, SASO has authorized Regional Licensing Centers to administer the registration process,
carry out verification of conformity, and issue SASO Type Approval Licenses. In some cases, random
sampling of the products and testing will also be required by the SASO Country Office.
The procedures for obtaining a Certificate of Conformity are as follows:
The exporter submits a written request to the appropriate SASO Country Office for inspection and
testing of the products requiring a Certificate of Conformity, together with full details of the
consignment.
The Country Office completes the necessary steps appropriate to the product in order to meet SASO
requirements. These steps will depend upon existing product certifications and whether the product is
covered by a valid registration. If the products are registered, the Country Office will set up an
inspection plan which may or may not require products to be sampled for testing.
If the products are not registered, they will be sampled and tested according to SASO requirements.
Assuming the testing and/or inspection produces satisfactory compliance results, a Certificate of
Conformity is issued. The Certificate of Conformity should accompany the shipping documents.
If the products do not meet the SASO requirements, the exporter will be given a complete explanation of
the deficiency. If acceptable corrective action is not taken, no Certificate of Conformity will be issued
and the Ministry of Commerce, SASO representatives, and the importer will be advised accordingly.
When the shipment arrives at the Saudi Arabian port of entry, the Ministry of Commerce and SASO
technical staff will request the accompanying Certificate of Conformity. Each Certificate of Conformity
will be checked for authenticity and matching details. After satisfactory checks, SASO will issue a letter
of release.

9. SAUDI ARABIA AND WTO
Saudi Arabia's acceptance as the 149th member of the World Trade Organization (WTO) has been
widely celebrated as a milestone in the Kingdom's private sector reform and the liberalization of its
economy.
It took 12 years for Saudi Arabia, the world's largest oil producer, to complete negotiations to join the
WTO - the second-longest accession period after China, which negotiated for 14 years before becoming
a member.
There were many in Saudi Arabia who resisted joining the WTO. Some feared that WTO free trade rules
would limit the Kingdom's right to restrict the import of goods prohibited under Islam, including pork,
alcohol and pornography. There were concerns among small Saudi firms that joining the WTO would
trigger overwhelming international competition.
Talks also dragged on due to US and European insistence that Saudi Arabia make its industries and
regulations more transparent. The US took time to accept that the Kingdom's economy was sufficiently
open for membership. Petrochemical producers in Europe were equally worried that maintaining cheap
domestic oil and gas would give Saudi firms an unfair advantage. In the end, all parties agreed on the
final details, and in mid-December Saudi Arabia will be attending the next WTO meeting in Hong Kong
as a full member.
Joining the WTO will have important implications for the Saudi economy, its key industries and its
local companies. Entry into the WTO poses a great challenge to the Saudi private sector, which must
complete preparations to operate in a competitive environment. This applies most of all to the services
sector, which stands to be the most affected by the influx of foreign companies.
It is clear that there will be significant changes in the following areas:
 . Foreign ownership in services sectors, such as retail and distribution;

 . Producers and distributors of liquefied natural gas will have to operate on the basis of normal
commercial considerations, based on the full recovery of costs and a reasonable profit;
 . Gradual lowering of trade barriers and expanding market access for foreign goods; and

 . Opening of the insurance sector to foreign operators.

 Many of Saudi Arabia's top companies have grown over the years thanks to protective
regulations. However, others have been operating in a competitive environment for many years.
In analyzing the implication of Saudi Arabia's entry into the WTO, it is important to look at the
individual sectors and recognize how WTO membership will affect each sector differently.
 . Services: As mentioned earlier, the local services sector is likely to be most affected by the
Kingdom's entry into the WTO. Local companies have historically been sheltered from foreign
competition. With the opening up of retail and distribution to foreigners, local services
companies are likely to experience lower margins and lower sales. It remains to be seen how
quickly they are able to adjust to the changing marketplace.
Overall, it is clear that Saudi Arabia's entry into the WTO is likely to provide yet another boost to the
local economy, one that will result in increased economic activity and one that will have direct benefits
to the average consumer. However, some local companies, especially in the services and perhaps the
petrochemicals sectors, may have to re-adjust to the new operating environment quickly to remain
leaders in their fields.

10. INDIAN APPAREL RETAIL SECTOR

India is one of the most attractive destinations for retailers from all across the globe. Thanks to the entry
of corporate, changing consumer behavior & lifestyle, increasing influence of western culture and rising
income, the Indian retail industry has seen phenomenal growth in the last five years (2001-2006) and
organized retailing has finally emerged from the shadows of unorganized retailing and is contributing
significantly to the growth of the overall retail sector, according to "Booming Retail Sector in India”, a
new market research report. The research report helps the client to analyze the opportunities and factors
that will make the Indian retail industry a success.
Key Findings
 Organized retail market in India is expected to reach US$ 50 Billion mark by 2011.
 Number of shopping malls is expected to increase at a CAGR of more than 18.9% from 2007 to
2015.
 Rural market is projected to dominate the retail industry landscape in India by 2012 with total
market share of above 50%.
 Organized retailing of mobile handset and accessories is expected to reach close to Rs. 5000
Crore by 2010.
 Driven by the expanding retail market, third party logistic market is forecasted to reach US$ 20
Billion by 2011.
 Apparel, along with food and grocery, will lead the organized retailing in India.
Ready-made garments account for approximately 45% of India's total textile exports. They represent
value added and less import sub sector. India's thrust into ready made garment production started in the
early 80s in the wake of the liberalization, received a big impetus during economic reforms in the early
90's and during the last two decades, has moved to the Tenth position, in the World's export of ready
made garments.
Ready made garments are India' s leading export products and achieved rapid growth in the late 1980s
and the first half of the 1990s. However, India' s share of world ready made garments exports has not
risen since 1994. The immediate cause is apparently the slowdown in the import growth of India' s
major markets, namely, the United States and the EU.

The export of ready made garments, which was to the tune of 253.6 million pieces, valued at US$ 826.5
million during January-February 2002 has increase in quantitative terms to 306.1 million pieces, valued
at US$ 1137.9 million, up by 20.07% in quantity and by 37.68% in value terms, during January-
February 2003, when compared with the same period last year.
The USA, EU Member States, U.A.E., Japan, Saudi Arabia, Canada, Hong Kong, Switzerland and
Australia have been the major importing countries of our Indian ready-made garments. In India,
Ludhiana, Tirupur, Delhi, Bangalore, Mumbai and Chennai are all remarkably unique and dynamic
centers of production.
India is at present a niche player in the low-value market segment based on cotton fabrics and for
seasonal and fashion garments. This reflects India's comparative advantage in cotton cloth and its
flexibility advantage in meeting small orders. With the targets of enhancing quality, establishing new
market niches, and moving up the value chain, the strategy should be concentrated on the restructuring
of the production base
10.1 WOMENSWEAR MARKET SET TO GROW IN INDIA
The Indian women apparel market has undergone a transformational phase over the past few years due
to growing number of working women, changing fashion trends, rising level of information and media
exposure.
The entry of large number of foreign brands has given the industry a new dimension. As a result, various
industry majors operating in men apparel segment have now started to diversify themselves into women
wear in order to exploit the highly lucrative market that was estimated at more than
Rs. 37,000 Crore in 2007.
According to a research report by RNCOS titled, 'Women Wear Market Forecast to

2010', the market, in the past five years, posted a growth rate of good 14%. With
the growing presence of organized retail and rapidly spreading mall culture, the
industry is all set to grow further in future.
The report emphasizes that women apparel market is expected to cross Rs. 61,000
crore by 2010, where branded women apparel market is projected to rise at a rate
close to 25% and surpass Rs. 18,000 crore.

Premium segment apparel is forecasted to account for close to 20% of total women apparel market by
2010, where western wear, along with lingerie, will emerge as the fastest growing segment.
The report also reveals that organized players are expected to account for over 40% lingerie market by
2009.
Demand for textile and apparel machinery is anticipated to increase at more than 100% till 2011 and
demand for ready-made garments in rural market is projected to hit a CAGR of around 16.50% by 2010.
The key players of the segment are included Provogue India Ltd., Pantaloon Retail (India) Ltd., Page
Industries, and Donna Karan International Inc.
10.2 SWOT ANALYSIS INDIAN TEXTILE INDUSTRY
10.2a Strengths:
1. Indian Textile Industry is an Independent & Self-Reliant industry.
2. Abundant Raw Material availability that helps industry to control costs and reduces the lead-time
across the operation.
3. Availability of Low Cost and Skilled Manpower provides competitive advantage to industry.
4. Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry.
5. India has great advantage in Spinning Sector and has a presence in all process of operation and value
chain.
6. India is one of the largest exporters of Yarn in international market and contributes around 25% share
of the global trade in Cotton Yarn.
7. The Apparel Industry is one of largest foreign revenue contributor and holds 12% of the country’s
total export.
8. Industry has large and diversified segments that provide wide variety of products.
9. Growing Economy and Potential Domestic and International Market.
10. Industry has Manufacturing Flexibility that helps to increase the productivity.

10.2b Weaknesses:
1. Indian Textile Industry is highly Fragmented Industry.
2. Industry is highly dependent on Cotton.
3. Lower Productivity in various segments.
4. There is Declining in Mill Segment.
5. Lack of Technological Development that affect the productivity and other activities in whole value
chain.
6. Infrastructural Bottlenecks and Efficiency such as, Transaction Time at Ports and transportation Time.
7. Unfavorable labor Laws.

8. Lack of Trade Membership, which restrict to tap other potential market.
9. Lacking to generate Economies of Scale.
10. Higher Indirect Taxes, Power and Interest Rates.
10.2c Opportunities:
1. Growth rate of Domestic Textile Industry is 6-8% per annum.
2. Large, Potential Domestic and International Market.
3. Product development and Diversification to cater global needs.
4. Elimination of Quota Restriction leads to greater Market Development.
5. Market is gradually shifting towards Branded Readymade Garment.
6. Increased Disposable Income and Purchasing Power of Indian Customer opens New Market
Development.
7. Emerging Retail Industry and Malls provide huge opportunities for the Apparel, Handicraft and other
segments of the industry.
8. Greater Investment and FDI opportunities are available.

10.2d Threats:
1. Competition from other developing countries, especially China.
2. Continuous Quality Improvement is need of the hour as there are different demand patterns all over
the world.
3. Elimination of Quota system will lead to fluctuations in Export Demand.
4. Threat for Traditional Market for Powerloom and Handloom Products and forcing them for product
diversification.
5. Geographical Disadvantages.
6. International labor and Environmental Laws.
7. To balance the demand and supply.
8. To make balance between price and quality.

11. TRADE POLICIES FOR INDIAN APPAREL RETAIL
11.1 FOREIGN TRADE POLICY
EPCG for Retail Sector

To create modern infrastructure in retail sector, concessional duty benefits under EPCG scheme shall be
extended for import of capital goods required by retailers having minimum area of 1 000 sq. meters.
Such retailer shall fulfill export obligation i.e. 8 times of duty saved, in 8 years
11.2 TEXTILE INDUSTRY POLICIES
Indian Textile Industry plays a vital role in Indian economy. For the proper functioning and operation of
industry it is very essential to have some policies and regulation in place. In India, the Ministry of
Textile is responsible for the formulation of policy, planning, execution, development, export promotion
and regulation of the Textile Industry and related sectors. There are several other bodies and
organizations which help to formulate and execute these policies. All policies should be implemented
for the greater development of the whole industry so that it can help to strengthen the economy.
INDUSTRY POLICY
 There are no restrictions regarding location for establishing manufacturing units.

 All producers of Clothing and Accessories are exempt from obtaining Industrial License to
manufacture. The declicensed undertakings, however, are required to file an Industrial
Entrepreneur Memoranda (IEM) in Part 'A' with the Secretariat of Industrial Assistance (SIA),
and obtain an acknowledgement. No further approval is required.
 After commencement of commercial production, Part B of the IEM has to be filled in. Certain
items of clothing are reserved for small-scale industries.

11.3 TEXTILE NON TRADE POLICIES
11.3a Technology Upgradation Fund:
As there is huge competition in international Textile Industry therefore the Indian Textile Industry has to
be technologically well versed. Industry has been facing problem with high capital cost to improve the
technology and modernization of Textile and Apparel Industry. Under the TUF scheme, Textile and
Apparel Manufacturing Units can take Loan from IDBI Bank, SIDBI, and The Industrial Finance
Corporation Of India at interest rate of 5 % points lower than normal rates. This scheme also helps for
IT Development, Product Development, Diversification and Research & Development through funding.
In 2006-07 Rs.535 crores were allotted for the scheme and, Rs.911 crores have been allocated for the
same for 2007-08.
11.3b Cotton Technology Mission:
To improve the performance of Cotton sector, there is need for improvement in Research &
Development, quality and productivity of products. The Marketing Infrastructure also needs
improvement. The Govt. of India is aimed to increase production of cotton by 50% with improved
quality and productivity.
11.3c Quota Entitlement Policy:
Textile and Apparel Industry in India was running under the terms of Multifiber Arrangements (MFA)
over the many years. Under MFA, USA, European Union (EU), Canada, and Norway did negotiation for
bilateral agreements with India and other textile exporting countries that had limits or quota on their
specific textile exports. On 1st January 1995, the MFA was replaced by the Agreement on Textiles and
Clothing (ATC) with the effect of WTO. Under ATC, quotas were eliminated and agreement provides
complete Integration of Textile and Apparel industry came out with Quota Regime. This development
came on 1st January 2005 under the World Trade Organization (WTO) Agreement on Textiles &
Clothing.

11.3d Construction of Apparel International Mart:
The Apparel Export Promotion Council (AEPC) is sponsored by the Ministry of Textiles, Govt. of India.
The role of AEPC is to monitor garment exports quotas and promotion of exports of readymade
garments from India. The council has been continuously involved in the task of promoting exports by
organising buyer-seller meets, leading trade delegations to potential markets globally, participating in
specialised international fairs, organising the India International Garment Fair biannually, and
organising seminars on fashion & workshops on technical aspects of the industry.
11.4 TEXTILES FDI POLICIES
 After the economic reforms Indian Govt. has taken many initiatives for investment in Textile
Industry. The Govt. has liberalized its investment policies for the Textile Industry. Lot of
investment has been made for the growth and development of various sectors of Textile Industry.
For this purpose Govt. of India has launched many schemes and plans.
 The RBI provides approval within 2 weeks to all proposals that involve foreign equity up to 51
% in the manufacturing of textile products.Investment is increased from Rs.7349.00 crores in
2004-05 to Rs 15,032.00 crores in 2005-06.
 During 2003-06 the total investment in Textile and Clothing was around Rs. 42,978.00 crores.
 For Technology Upgradation Funds Scheme, Rs 916 billion has been issued for technology
upgradation.
 Around 26 Apparel Parks are opened in eight states in India, with a total investment of Rs 134
billion.
 Industrial Entrepreneurship Memorandum is implemented from 1992 with the investment of 263
billion.
 Around a total of US$ 6.67 billion in investment is expected by 2008.

 During year 1991-06 Textile Industry, the Foreign Direct Investments inflows worth US$ 910
million have been received. Industry contributes around 1.29% of total FDI inflows in the
country.

11.5 TRADE POLICIES
11.5a Import Licensing:
India has liberalized its Import regime for Textiles and apparel, but some of the part is still limited for
market access. Currently, there is no import restriction for yarns & fabrics items. Apparel & Made-up
textiles goods require a Special Import License (SIL). Govt. revised Exim Policy on 31st March 1999 by
eliminating Import Licensing Requirements for 894 consumer goods, agriculture products and textiles.
On 28th December 1999 India and Us signed an Agreement for the elimination of import restrictions of
1,429 agriculture, textiles, consumer goods and apparel. India removed restrictions on 715 tariff items as
of 1st April 2000.
11.5b Custom Procedures:
Marking, Labeling, and Packaging Requirements: Marking, Labeling, and Packaging Requirements
for Textile products are technically complex and difficult to implement. According to textile regulation
passed on 22nd july 1998 by GOI, Yarns, and Fabrics to have the statutory markings and these markings
should not mislead the consumers. For instance, Cloths must be remarked with the name & address of
manufacturer, a description of cloth, sort number, length in meters and width in centimeters, and
washing instructions. The Man made fiber cloth must indicate whether it is made by spun or filament
yarn. The month & year of packaging, the exact composition of cloth. The Marking must appear on the
face plait of each piece of cloth. The language for marking must be in Hindi and English with
international numerals.
11.5c EXIM Policies:
i. Duty Entitlement Passbook Scheme: DEPS is available for Indian Export Companies and
Traders on a Pre-Export and Post-Export basis. Pre-Export credit requires the beneficiary
firm has exported during the preceding 3-year period. The Post-Export credit is a transferable
credit that exporters of finished goods can use to pay or offset custom duties on imports of
any unrestricted goods.

ii. Export Promotion Capital Goods Scheme: This scheme is available to export companies
and traders who provide the GOI with information about which type of goods and what value
of Capital Goods they will import. And they also inform what will be the outcome of export
they expect to produce from those imports. Depending upon the export commitment GOI
provides them a license to import capital goods duty-free or preferential rates of duty.
iii. Pre and Post Shipment Financing: The Reserve Bank of India provides Indian Exporters
Pre-Shipment Financing through commercial banks for purchasing raw materials and
packaging materials by presenting Letter of Credit. RBI also0 provides Post-Shipment
Financing through commercial banks at preferential rates by presenting export documents.
iv. Export and Special Economic Zones: Govt. of India has established Export Processing
Zones (EPZs) and Special Economic Zones (SEZs). In EPZs units can import goods free of
custom duty. There is 5-year tax holiday to any industrial unit in EPZs. Govt. has allowed
100% Fore3ign ownership of units under EPZs and SEZs. The Govt. considers SEZs as
foreign territory for trade and tariff purpose. Units under SEZs may engage in
Manufacturing, Trading and Services. Units are exempt from routine checking of exports by
customs, and they can sell in the domestic market on payment of duty as applicable to
imported goods.
v. Duty Drawback Scheme: The basic objective of this scheme is to reduce the indirect taxes
on exports. Exporters can get refund of the excise and import duty. Through this scheme they
can be more competitive and have more potential market.

12. INDIA-SAUDI ARABIA BUSINESS RELATIONS
12.1 INTRODUCTION
India and Saudi Arabia are old business partners: their trade relations go back tens of centuries. Today,
the bilateral business ties are being steadily expanded and further strengthened by continuous interaction
and cooperation, including regular exchange of business delegations. Besides being a major trade
partner, India sees the Kingdom as an important economic partner for investments, joint ventures,
transfer of technology projects and joint projects in third countries.
12.2 TRADE
India is 4th largest trading partner for Saudi Arabia: The value of the two-way trade between the two
countries in 2003-2004 exceeded US$ 6.63 billion. Saudi Arabia is the 15th largest market in the world
for Indian exports and is destination of more than 1.76% of India’s global exports. On the other hand,
Saudi Arabia is the source of 5.5% of India’s global imports. For Saudi Arabia, India is the 4th largest
market for its exports, accounting for 5.95% of its global exports. In terms of imports by Saudi Arabia,
India ranks 9th and is source of around 2.96% of Saudi Arabia’s total imports.
INDO-SAUDI TRADE (IN MILLION US $) Source: Department of Commerce,
GOI.
Year Imports from Saudi Exports to Saudi Increase in Indian

Total trade
( April - March) Arabia Arabia exports
2002-2003 504.72 940.74 1445.47 13.83%
2003-2004 737.77 1123.31 1861.08 19.41%
2004-2005 1301.15 1412.06 2713.21 25.71%
2005-2006 1632.34 1809.77 3442.11 28.17%
2006-2007* 13383.90 2588.18 15972.08
*Note: Includes Petroleum and Petroleum products

12.3 MAIN INDIAN EXPORTS
Main Indian exports to Saudi Arabia are basmati/non-basmati rice, tea, manmade yarn, fabrics, made-
ups, cotton yarn, primary and semi-finished iron and steel, chemicals, plastic & linoleum products,
machinery and instruments.
12.4 INDIA’S MAJOR IMPORTS
India’s major imports from Saudi Arabia are petroleum and petrochemical products. Saudi Arabia is the
largest supplier of crude oil to India. It provides around a quarter of India’s crude exports. During 2003-
04, the India’s imports of Crude Oil and petroleum products from Saudi Arabia amounted to 20 MMT
worth approximately US $ 4.77 billion. Thus, Saudi Arabia meets around 26% of India’s crude
requirements annually.
12.5 INDIAN MANPOWER
Contribution by Indian manpower Saudi economy is an important dimension of the Indo-Saudi

relationship: 1.4 million Indians are at present working in Saudi Arabia, over 90% of whom are in the
blue-collar category. These people have made immense contribution to Saudi economy, and they play an
important role in strengthening the Indo-Saudi bilateral relations.
12.6 INDIA INVESTMENT AND JOINT VENTURES:
The bilateral investment between the two countries is growing steadily. Since mid-2000, a number of
Indian firms have taken advantage of the new Saudi laws and established joint venture projects or
wholly-owned subsidiaries in the Kingdom. According to Saudi Arabian General Investment Authority
(SAGIA), during last two years it has issued new 82 licenses to Indian companies for joint ventures or
100% owned entities, which are expected to bring total investment of US $ 467.18 million in Saudi
Arabia. These licenses are for projects in diverse sectors such as management and consultancy services,
construction projects, telecommunications, information technology, pharmaceuticals, etc. Moreover,
several Indian companies have established collaborations with Saudi companies and working in the
Kingdom in the areas of designing, consultancy, financial services and software development.

12.7 SAUDI INVESTMENT IN INDIA
On the other hand, Saudi Arabia is the 22nd biggest investor in India with investments during 1991-
2004 amounting to US $ 228.8 million. There are 49 Indo-Saudi joint ventures or Saudi owned
companies in India, in diverse fields such as paper manufacture, chemicals, computer software, granite
processing, industrial products and machinery, cement, metallurgical industries, etc.
12.8 INDIAN BUSINESS DELEGATIONS TO SAUDI ARABIA
During last couple of years, a large number of Indian trade and industry delegations have visited Saudi
Arabia to explore the opportunities for long-term partnerships and cooperation, including joint ventures.
These delegations received warm and enthusiastic response from the Saudi business community. Indian
and Saudi companies regularly take part in trade fairs in each other’s country. The important recent
bilateral visits from India include Petroleum & Natural Gas Minister, Mr. Mani Shankar Aiyar from
March 28-31, 2005, and Finance Minister Mr. P. Chidambaram from April 12-13, 2005 to co-host the
6th session of the Joint Commission for economic, trade, scientific, technical and cultural cooperation
(JCM) between India and Saudi Arabia.
12.9 SAUDI BUSINESS DELEGATIONS TO INDIA
In recent times, the number of Saudi businessmen and delegations visiting India has grown substantially,
indicating growing interest in emerging business opportunities in India.
12.10 INDIA-GCC INDUSTRIAL CONFERENCE
India and GCC organized a two day India-GCC Industrial Conference on 17-18 February, 2004 at
Mumbai. A large number of Ministers, senior officials, industrialists and business leaders from India and
the GCC states attended this first ever GCC-India Conference. The Conference provided a new
momentum to the strong relations between the GCC States and India, particularly in the field of
economic and commercial exchanges.

13. CONCLUSION
The Saudi retail market can only be described as a goldmine, with its large
population of young adults and the increasing number of shopping malls
which are being built to accommodate the increasingly affluent and highly
mobile population.
The major market segments in retail apparel include women's wear,

footwear, children's wear, menswear and eyewear.
Saudi Arabia is a major market for women and children's clothing. The
market is segmented between the high-end branded sector, the mid-market
branded sector and the lower-priced market. The high-end and mid-market
sectors of the apparel market are dominated by imports from Europe and the US. The lower end of the
market is characterized by imports from the Far East and South East Asia, some of which are styles
copied from European and American brand names.
The Saudi economy has witnessed an economic boom over the past few years thanks to the high crude
oil prices. This oil boom led to the increase in government revenue and expenditure, which in turn
boosted the economy. Furthermore, the government is investing revenue surplus in building
infrastructure and growing the manufacturing and services sectors in the long term. This in turn will help
in preserving the country’s economic strength for the upcoming years.
The impact of a healthy economy on clothing spending is notably positive. With higher levels of
disposable income, and consumer confidence, Saudi consumers are spending more money, particularly
on non-necessities such as mass market branded clothing. Continued growth in GDP for the short to
medium term will have a positive affect on the growth of purchasing power for consumers.
Government initiatives like Saudisation are expected to have a positive impact on retail sector.
Saudisation will impact the composition of workforce and therefore will increase income levels for
Saudis nationals. This in turn may increase expenditures on consumer products as a whole and primarily
expenditure on clothes and accessories.

The construction boom of residential, commercial, and leisure projects, which has taken place all over
the kingdom in the last few years, has led to the availability of large retail space. The rise of the modern
shopping malls in Saudi Arabia has been taking place at a fairly steady rate over the last ten years, with
malls becoming increasingly sophisticated.
Opening of numerous shopping malls and the ease and convenience this has provided shoppers with has
contributed to growth in branded apparel sector.
The branded retail apparel market is quite

competitive in Saudi Arabia. The competition is
further set to as more business families who were
quite successful in other retailing areas are
actively seeking to enter this potentially lucrative
market. The big players in this sector focus on
acquiring franchise agreements with well-known
international suppliers. Currently there are four
large companies dominating the branded apparel
market, each representing a considerable number
of international franchises: Al Hokair, Al Shaya,
Al-Sawani and Nesk Group of Trading Projects, or Al Jedaie.

14. REFERENCE
 http://www.scribd.com/doc/16990454/Globalization-Middle-East-Arabic-Societies
 http://www.scribd.com/doc/19225708/15684129-Final-Project-Report-on-Apparel-Industry-
Necktie
 http://www.policyinnovations.org/ideas/briefings/data/000001
 http://www.users.globalnet.co.uk/~chern/saudi/clothes.html
 http://www.fibre2fashion.com/news/fashion-news/saudi-arabia/
 http://www.scribd.com/doc/902311/Globalization-and-the-Middle-East
 http://www.cyborlink.com/besite/saudi-arabia.htm
 http://www.gokaldasindia.com/in-readymade-industry.html
 http://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia
 http://www.ehow.com/how_2190090_practice-proper-business-etiquette-saudi.html
 http://www.kwintessential.co.uk/resources/global-etiquette/saudi-arabia-country-profile.html
 http://www.kwintessential.co.uk/intercultural-busines-communication/tool.php?
culture1=23&culture2=0
 http://www.worldbusinessculture.com/Business-in-Saudi-Arabia.html
 http://www.prlog.org/10096135-women-wear-market-forecast-to-2010.html
 http://www.doingbusiness.org/EconomyRankings/?direction=Asc&sort=9&tercile=top
 http://www.dinarstandard.com/current/WTOSaudi013006.htm
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 http://www.the-saudi.net/business-center/regulation-import.htm
 http://www.the-saudi.net/business-center/business-etiquette.htm
 http://www.indianembassy.org.sa/IndiaSaudiRelations.html
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and-is-among-the-top-10-in-the-2009-at-kearney-retail-apparel-index.html
 http://www.the-saudi.net/marketing/shopping_malls.htm
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industry-343790.html
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GLOBAL BUSINESS ENVIRONMENT

Dr. HIMANI JOSHI

29th MARCH 2010

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 1

S. No. NAME OF THE TOPIC PAGE NO.

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 2

SAUDI ARABIA AND APPAREL RETAIL

SOCIO-CULTURAL STRUCTURE OF SAUDI

4. POLITICAL STRUCTURE OF SAUDI ARABIA 12

5. ECONOMIC STRUCTURE OF SAUDI ARABIA 13

6. BUSINESS CULTURE OF SAUDI ARABIA 19

7. TAX STRUCTURE OF SAUDI ARABIA 27

8. SAUDI ARABIAN IMPORT/EXPORT REGULATIONS 29

9. SAUDI ARABIA AND WTO 37

10. INDIAN APPAREL RETAIL SECTOR 39

11. FOREIGN TRADE POLICY 44

12. INDIA-SAUDI ARABIA BUSINESS RELATIONS 49

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 3

Saudi Arabia has an oil-based economy with strong government control

Saudi Arabia's economy is a centrally planned economy. Private

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 4

1.1 FACTS AND FIGURES

1.1A THE GEOGRAPHY

Region: Middle East & North Africa

1.1B THE DEMOGRAPHY

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 5

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 6

1.1C THE ECONOMY

Currency: Saudi Riyal (SAR)

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 7

2. SAUDI ARABIA AND APPAREL RETAIL INDUSTRY

The branded retail apparel market is quite competitive in Saudi Arabia.

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 8

3. SOCIO-CULTURAL STRUCTURE OF SAUDI ARABIA

3.1 LANGUAGE IN SAUDI ARABIA

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 10

3.3 MEETING ETIQUETTE

Gift Giving Etiquette

Gifts are not the norm as in many other countries.

Saudi Arabian dress follows strictly the principles of hijab (the

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 11

3.5 DRESS ETIQUETTE

3.6 CLIMATIC CONDITIONS

3.7 RELATIONSHIPS & COMMUNICATION

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 12

4. POLITICAL STRUCTURE OF SAUDI ARABIA

Saudi Arabia government and politics are the most

Principal Government Officials

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 13

 Minister of Foreign Affairs--Prince Saud al-Faisal bin Abdul Aziz Al Saud

 Ambassador to the U.S.--Adel al-Jubeir

5. ECONOMIC STRUCTURE OF SAUDI ARABIA

5.1 ECONOMIC OVERVIEW

5.2 INVESTMENT DECISION

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 14

5.3 INVESTMENT BARRIERS

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 15

5.4 TEN ECONOMIC FREEDOMS of Saudi Arabia

STEVENS BUSINESS SCHOOL BATCH: 2009-2011 Page 16