How to Do Business in Saudi Arabia: Entering the Market, Why, and Forms of Doing Business
For businesses, Saudi Arabia is best known for its oil industry.
However, the oil industry is not the only thing that the Kingdom offers. As Saudi Arabia steadily reduces its dependence on oil, it opens new doors for foreign businesses and investment. Below, we have a brief guide on how to do business in Saudi Arabia.
Why Do Business in Saudi Arabia?
The first and foremost reason is the fact that Saudi Arabia is the largest economy in the MENA region. The Kingdom has a population of more than 32 million with a GDP per capita of approximately USD 21,000.
The domestic market of Saudi Arabia is also growing as it has annual population growth of 3.5%. Not to mention the geographic location of Saudi Arabia provides easy access to markets in Asia, Europe, and Africa.
According to Saudi Competitive Intelligence, the main driver of Saudi Arabia’s economy has been oil. However, this will change in the future.
In recent years, the government of Saudi Arabia is attempting to steer its economy away from oil dependence by moving to more diverse sectors such as business, tourism, and entertainment.
In short, the economic diversification plans open new doors for foreign investment and business.
Also, while Saudi Arabia implements the policy of “Saudization”, the country’s political and economic stability, excellent infrastructure, high standard of living, and business-friendly environment make it an attractive market for foreign businesses.
How to Do Business in Saudi Arabia: Ways to Enter the Saudi Market
Foreigners who want to enter the market of Saudi Arabia can do so in five ways: by establishing an incorporated entity, by entering into a partnership, by establishing a branch office, by establishing a representative office, and by engaging a service agent.
Forms of Doing Business
Besides doing business through an agent or distributor, four entity setups in Saudi Arabia are available to a foreign investor. The setups are single-member limited liability company (SMLLC), joint-stock company (JSC), foreign company branch, and limited liability company (LLC).
A Single Member Limited Liability Company (SMLLC) is a limited liability company that can have a sole owner. In this type of business entity, the business owner owns all of the company shares.
A Joint Stock Company (JSC) consists of capital that is divided into shares with equal value. The company shares are owned by shareholders who can sell, transfer, and buy their respective shares without affecting the company’s existence.
A foreign company can do business through a branch as well. A foreign company branch is allowed to not only represent but also conduct business activities in the country whilst complying with its law and regulations.
Of all the entity setups in Saudi Arabia, the Limited Liability Company (LLC) is the most common one. In this business entity, owners are allowed to have limited liability under the company’s debt.
Other than the four entity setups, a foreign investor can also do business in Saudi Arabia through an agent or distributor. Using this option, a foreign investor needs not set up a business entity in Saudi Arabia.
Now you know how to do business in Saudi Arabia. The country offers plenty of opportunities for foreign businesses and investment. If you want to enter the Saudi market, you can do so in multiple ways. There are also various forms of doing business in the Kingdom as well.