Guidance

Doing business in Saudi Arabia: Saudi Arabia trade and export guide

Updated 15 February 2016

1. Saudi Arabia export overview

The Kingdom of Saudi Arabia is the largest economy in the Arab world. It accounts for 25% of the Arab world’s Gross Domestic Product (GDP).

Contact a Department for International Trade (DIT) Saudi Arabia export adviser for a free consultation if you’re interested in exporting to Saudi Arabia.

Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Saudi Arabia.

Saudi Arabia has an oil based economy with strong government controls over major economic activities. The Kingdom possesses around 25% of the world’s oil reserves, and plays a leading role in Organization of the Petroleum Exporting Countries (OPEC). The petroleum sector accounts for roughly:

  • 80% of budget revenues
  • 45% of GDP
  • 90% of export earnings

Saudi Arabia is ranked at 49th in the World Bank’s Ease of Doing Business rankings.

Benefits for UK businesses exporting to Saudi Arabia include:

  • UK’s largest trading partner in the Middle East
  • growing diversification within Saudi economy
  • massive government investment in transport, infrastructure, healthcare, education and energy
  • common use of English in business

Strengths of the Saudi market include:

  • no taxation on personal income
  • proximity to other Gulf markets
  • key member of the Gulf Cooperation Council (GCC)
  • largest economy and population in the Gulf region

2. Challenges

A physical presence is very important when establishing a business in Saudi Arabia.

Challenges include:

  • identifying suitable sponsors for initial entry into the market
  • finding an appropriate Saudi partner for joint ventures
  • lead time to establish legal entities and obtain licenses from appropriate ministries

You must apply through the relevant government ministries for licenses to do business in Saudi Arabia.

Contact the Department for International Trade (DIT) team in Saudi Arabia for advice on the appropriate processes.

Businesses must also employ a certain quota of Saudis to comply with Saudisation rules. Saudisation (Nitaqat) is a Saudi policy which aims to create better employment prospects for Saudi citizens, and rely less on imported foreign labour.

You must take a great deal of care when establishing payment terms with private and government entities in Saudi Arabia in order to help ensure you get paid on time. Saudi Arabia is ranked in mid table in the World Bank’s ranking for contract enforcement.

3. Growth potential

3.1 Economic growth

Saudi Arabia has had a period of relatively high growth and economic progress over the past few years. It is predicted to grow by at least 3% for the next couple of years.

With 50% of Saudis under 25 years old the Saudi population is one of the fastest growing in the world. The current population of over 28 million is expected to increase to 29 million by 2020. The large youth population generally lacks the education and technical skills the private sector needs.

Massive investment will be required to meet the needs of this growing population. The Kingdom has substantially increased spending on employer led vocational training and education. This includes opening a number of new women’s colleges and the women only Princess Noura University.

The government is also encouraging foreign companies to invest in vocational and technical training in support of Saudisation.

The government’s budget for the 2015 fiscal year allocated the following to:

  • 25% to education and training
  • 19% to health and social development
  • 7.3% to infrastructure (a reduction of 5% on 2014 but still £11 billion)

The Saudi government is pursuing a strategy of economic diversification and reform to:

  • grow the private sector and reduce reliance on oil and gas
  • open up previously restricted industries to foreign investment
  • increase employment opportunities for Saudis

The government is also focused on getting private and foreign investment in important sectors such as:

  • petrochemicals
  • automobile assembly
  • biotechnology
  • other knowledge driven industries, particularly those involved in research and development and IT where there is an opportunity for knowledge transfer

3.2 Free trade agreements

Saudi Arabia is the largest free economic market in the Middle East and north Africa (MENA). It is part of the GCC. It has free trade agreements with:

4. UK and Saudi Arabia trade

The UK has a strong historic relationship with Saudi Arabia. The Kingdom is our largest trading partner in the Middle East.

UK exported around £7 billion goods and services in 2014. Goods exports were 4.17 billion in 2014. Over 6,000 UK firms actively export goods to Saudi Arabia.

The top UK exports to Saudi Arabia in 2014 were:

  • transport related equipment
  • power generating machinery and equipment
  • medicinal and pharmaceutical products
  • general industrial machinery
  • professional and scientific instruments
  • road vehicles and parts
  • foodstuffs and other consumables

The UK is the Kingdom’s second largest cumulative investor with approximately 200 joint ventures, estimated to be worth around £11.5 billion.

There is considerable Saudi investment in the UK.

5. Opportunities for UK businesses in Saudi Arabia

Department for International Trade (DIT) provides free international export sales leads from its worldwide network. Search for export opportunities.

Saudi Arabia is a high growth market which offers significant opportunities for UK companies across a range of sectors. Record oil revenues have allowed the Kingdom to increase public spending on infrastructure and welfare. This includes major projects in:

  • power
  • water
  • oil and gas and petrochemicals
  • communications
  • transport
  • mining
  • construction
  • social infrastructure (including healthcare and education)

These High Value Opportunity (HVO) projects will make up an estimated USD $1,000 billion of investment over the next 20 years. In addition to the HVO projects there are many opportunities in the construction, security, financial services and retail sectors.

5.1 Railways

The total project value of the railways development programme is likely to exceed £14 billion. The Saudi Railways Organization (SRO) has an ongoing requirement for material, equipment and service providers.

There are additional opportunities for light rail systems in Jeddah, Mecca and Riyadh.

There are opportunities for UK companies throughout the supply chain.

Contact the Senior Trade Adviser mohammed.farooq@fco.gov.uk for more information on railway and general transport opportunities.

5.2 Healthcare

The £60 billion healthcare development programme will lead to large scale investment in:

  • infrastructure
  • workforce
  • systems development

Opportunities for UK companies include:

  • commissioning of facilities and clinical services
  • training for nursing staff and Accountable Health Partnerships (AHPs)
  • design and construction of smart hospitals and health centres
  • health centre equipment
  • ICT
  • facilities management
  • delivery of clinical services

Contact the Senior Trade Adviser shivani.tyagi@fco.gov.uk for more information on healthcare opportunities.

5.3 Water

The £30 billion water and wastewater upgrade programme is made up of a number of projects that will be undertaken between 2012 and 2017. These include:

  • building 20 new desalination plants
  • new sewage treatment plants

Contact the Senior Trade Adviser omar.sayeed@fco.gov.uk for more information on water and wastewater opportunities.

5.4 Sadara Petrochemical project

A joint venture between Dow Chemicals and Saudi Aramco will establish a major petrochemical complex. When complete in 2015 the complex from this US$20 billion development programme will produce:

  • 1.3 million tonnes per year of ethylene
  • 400,000 tonnes per year of propylene

Although the ‘first stage’ of this project will be complete in 2015 there are still opportunities for UK firms involved with engineering and procurement. UK Export Finance (UKEF) has signed a finance guarantee of £450 million for UK companies involved.

Contact Deputy Head Department for International Trade (DIT) Al Khobar danial.shaikh@fco.gov.uk for more information on petrochemical opportunities.

5.5 Airports

New terminals in Riyadh, Jeddah and 33 other airport development projects all provide major opportunities for UK companies.

The UK is seen as a prime source of knowledge and support for this programme.

Contact Head Department for International Trade (DIT) Jeddah glyn.cartmell@fco.gov.uk for more information on railway and general transport opportunities.

5.6 Red Sea natural gas

Saudi Aramco plans to exploit natural gas reserves during this decade off the Red Sea coast to support increased domestic demand. This will involve use of deep water technologies for drilling below 1,000 meters. US$25 billion capital expenditure is expected.

This programme offers opportunities for UK engineering and service companies with experience in deep water regions, such as the North Sea.

Contact Senior Trade Adviser khalid.darazi@fco.gov.uk for more information on these opportunities.

5.7 Nuclear

Saudi Arabia will invest US$100 billion in 16 new reactors over the next 20 years.

Opportunities for UK companies include:

  • project management
  • engineering and technical consultancy
  • legal advice
  • regulatory and licensing consultancy
  • skills and training
  • local capability building
  • uranium enrichment

Contact Deputy Head Department for International Trade (DIT) Al Khobar danial.shaikh@fco.gov.uk for more information on nuclear sector opportunities.

5.8 Urban transport projects

5 major cities have developed public transportation master plans. These are at various stages of planning and implementation. They involve development of major rail networks, including tram, monorail, light rail and metros.

The UK has established capability in the planning and implementation of mass urban public transit systems. Major opportunities exist in exports of consultancy, products and services.

Contact the Senior Trade Adviser omar.sayeed@fco.gov.uk or mohammed.farooq@fco.gov.uk for more information on transport opportunities.

5.9 Education

Saudi Arabia is investing heavily in the public education sector, particularly in further education and vocational training. Saudi Arabia represents the biggest education industry in the region. 25% of the government’s 2015 budget is allocated to the education sector (£37 billion).

Over £1.4 billion in high value contracts were awarded to UK education providers in 2013 to 2014.

Opportunities for the UK education and training sector include:

  • teacher training and development
  • curriculum development
  • developing kindergartens
  • Special Need Education (SEN)
  • hospitality and tourism / hospital management / logistics management / healthcare training
  • marine training / International Maritime Organization (IMO) accreditation

Contact the Senior Trade Adviser mumtaz.abdulla@fco.gov.uk for more information on education opportunities.

6. Start-up considerations

You must appoint a Saudi agent to conduct trading activities if you do not have a physical presence in the Kingdom.

You must have a physical presence in Saudi Arabia to be directly involved in the buying and selling of goods. Under Saudi investment law the establishment of a physical presence requires a joint venture with a Saudi partner.

You should evaluate your business partner thoroughly. You should take local legal advice and consult Department for International Trade (DIT) Saudi Arabia.

6.1 Commercial agents

An agent can be:

  • a highly proactive investor, deeply involved in all aspects of management, finance and marketing on a day-to-day basis
  • a hands-off agent who just arranges official paperwork and has little other involvement

It is very important to choose the right agent. It should be made clear from the start what services will be provided and what won’t.

Islamic Law (Shari’ah) is the law of the land in all cases. Other laws are enforced only if they don’t violate the rules of Shari’ah. Unlike in common law jurisdictions, legal judgments are not published so there are no binding precedents.

The main government laws relating to business include:

  • government tenders and procurement laws
  • foreign investment laws
  • employment law, including Saudisation
  • Zakat, the religious wealth tax, and income tax law

Contact the Department for International Trade (DIT) team in Saudi Arabia to help find tax and legal advisers before entering into agreements.

7.1 Standards and technical regulations

The Saudi Standards, Metrology and Quality Organisation (SASO) has implemented a Conformity Assessment Programme (CAP) covering goods destined for Saudi Arabia.

CAP requires quality checks and inspections on companies looking to export to Saudi Arabia. Proof should be provided in the form of a Certificate of Conformity.

The Ministry of Commerce and Industry provides details of import procedures.

7.2 Intellectual property

Saudi Arabia has been a member of the World Trade Organization since 2005 and has introduced new legislation increasing the level of protection for intellectual property.

Certificates of Patents granted by the GCC Patent Office secure legal protection of the inventor’s rights in all member states.

8. Tax and customs considerations

Taxation is a specialised subject and advice should be sought from specialists practicing in Saudi Arabia as part of the planning stage for doing business in this market.

8.1 Income tax

There are no personal taxes in Saudi Arabia. This includes foreign nationals. Saudi and GCC nationals are subject to Zakat.

8.2 Sales tax

There is currently no Value Added Tax (VAT) or sales tax in Saudi Arabia.

8.3 Corporation tax

Companies are generally obliged to pay 20% corporate tax. Foreigners who receive net income from investments in Saudi businesses, and self employed individuals who do business in Saudi Arabia are subject to corporate tax on a sliding scale.

8.4 Customs

The Saudi Customs website provides information on Saudi customs procedures.

The customs tariff on the majority of imported goods is 5%. There is also a protective tariff of 12 or 20% on some imports in order to support certain national industries.

There are import controls on a number of products such as pork products and alcohol.

Check your product is not on the list of restricted items.

You can find more about import tariffs in the Market Access Database (MADB).

8.5 Documentation

The documents required for import and export of goods to and from Saudi Arabia are:

  • invoices – initiated by supplier
  • certificate of origin
  • bills of lading / airway bill

9. Business behaviour

No religious practices other than Islam are allowed. Muslims pray 5 times a day and all shops and many offices will close to observe prayer times. Copies of the bible or any other non-Islamic religious literature can’t be brought into the country, nor any non Islamic symbols or statues.

Saudi businessmen often wear the traditional thobe and shemagh – head dress in public. For foreign businessmen, business suits are the norm. Saudi women and foreign women must wear an abaya – a full length black cloak in public. A headscarf need not be worn, but should be carried with you in case you are told by the religious police to cover your head.

Women are not allowed to drive in Saudi Arabia. The best way to get around is to use a chauffeured car supplied by the hotel, or to use taxis. Many local businesses will be happy to send a car to pick up foreign visitors from their hotels.

Saudi Arabia is the strictest of all Muslim countries and behavior in public is subject to inflexible rules. These include:

  • strict segregation of the sexes in restaurants and hotel swimming pools/gyms
  • no public displays of affection

It’s important for people doing business or living in Saudi Arabia to understand the laws and obey them. Alcohol consumption is forbidden and prison sentences vary from a few weeks to several months, with or without flogging. Anyone caught smuggling or distributing alcohol can face a long prison sentence.

During the month of Ramadan, visitors should avoid eating, drinking or smoking in public between dawn and dusk.

It is forbidden to take photos of airports and military installations and other sensitive buildings. Care should also be taken not to photograph Muslim women without their consent.

Homosexual behaviour and adultery are illegal and carry the death penalty.

The working week is Sunday to Thursday.

10. Entry requirements

Visas are essential for any foreigners, excluding GCC nationals, and must be obtained in advance. This includes visas for:

  • visits
  • pilgrimage
  • residency

Visitors should have a passport with at least 6 months validity beyond the date they intend to leave Saudi Arabia.

Visa applications must first be notified to the Ministry of Foreign Affairs in Riyadh.

You are strongly advised to use a visa agent. Details of visa requirements are available on the Saudi Embassy website.

10.1 Travel advice

If you’re travelling to Saudi Arabia for business, check the Foreign and Commonwealth Office (FCO) travel advice page beforehand.

11. Contacts

Contact the Department for International Trade (DIT) team in Saudi Arabia for more information and advice on opportunities for doing business in Saudi Arabia.