Friday, May 27, 2005

A glimpse into the Saudi Arabian Economy :: Arab News

Some revealing comments from an Arab News interview with Zaher Al Munajjed:

I explained that the new investment laws permit any industrial conglomerate, or large company, to now come in and establish their own business without any need for a joint venture. Even in the distribution area, where there is still the need for a sponsor, we have seen over the last few years many so-called agencies changing hands sometimes amicably, sometimes not. Today, this is simply a business matter: There are discussions and then agreements, then the deal is done. Nobody is stuck for life with anyone else.
I know of one family, which is very sophisticated, where to avoid confrontation among family members who have very different opinions about how to run the business, there hasn’t been a formal board meeting in 20 years. This is obviously not a way to prepare to face the competition.
...only those companies that are mature enough to go public should do so. The mere fact of wanting to go public, however, forces the company to begin to organize itself. There are certain rules and conditions that are set in stone for going public: You need to have a full-fledged professional management team in place, you need a set of audited financials, ongoing accounting, no current accounts for members of the family within the company and so on and so on. So, yes, the fact of even thinking about going public has a positive impact on the organization of the company, on the fact that disagreements within the family would not destroy the company, but would just mean a transfer of shares.
The rules in Saudi Arabia have been easing up. And Saudi Arabia is a hub, whether you like it or not. The bureaucracy, the problems with visas, all these impediments that have existed for quite some time all these things have encouraged a lot of companies to set up shop in Dubai. But they’re setting up shop in Dubai to do business in Saudi Arabia. In the medium to long term, from a business perspective, the current fascination with Dubai will disappear.
Q: But if you look at the indices, for instance, on the time it takes to set up a business in the region. In Dubai, it takes a day. In Saudi Arabia, it takes six months. There are no taxes in Dubai. There are significant corporate taxes in Saudi Arabia. If I’m looking for a regional destination for my food-processing business, why wouldn’t I go to Dubai?
Today, yes, you’re better off setting up shop in Dubai assuming that you have perfect logistics that will get your products to Saudi Arabia. But, from what I’m seeing, there are significant, positive changes taking place in Saudi Arabia. Again, look at SAGIA; look at the reforms in the telecom sector, how you can now get a phone line in a day when, a year or two ago, it would have taken six months. The changes are taking place, and it’s in your interest to be close to your customer. Shipping goods from Dubai does not satisfy the requirements of your [hypothetical] food business. So, yes, Dubai has put in place a very attractive package. But, in the end, the interest of any manufacturer, or any businessman, is to be among his customers. And that’s what Saudi Arabia offers.
Saudi Arabia is a country of 20-something million inhabitants, with the highest per capita purchasing power in the region. It’s the focus.
Q: Hold on. Qatar, to name just one Gulf state, has higher per capita purchasing power.
A: Yeah, but Qatar doesn’t count as a consumer market. Qatar doesn’t have the mass. Saudi Arabia has the mass and the purchasing power.



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