Saudi Arabia Major Business Sectors

Compiled by: Embassy of Switzerland Riyadh, September 2011

A- Overview and trends Saudi Arabia permitted only to Saudi and Gulf Cooperation Council nationals to engage in trading activities and to register as commercial agents. To attract more foreign investors to do business in the country, Saudi Arabia eased recently its restrictions to allowed foreign individuals and companies to engage in trading activities through a joint venture partnership with a Saudi individual or entity. Since its adhesion to the World Trade Organisation (WTO), Saudi Arabia has liberalised the wholesale, retail, and franchise sectors. Saudi Arabia allows foreign investors to establish joint ventures and retain a 51% shar e. The foreign partners capital requirement is set at USD 5.3 million and his equity share can be increased to 75% after 3 years from the contract date. For industrial activities, foreign investors are allowed to establish a 100% foreign company and can also trade in the products they manufacture. A Saudi joint-venture partner is a requirement for any entity or individual to practice individual professions, such as law, medicine, accounting and financial services, architect and engineers, and other similar professions. According to a recent report of the IMF, the Saudi economy will witness an expansion of 4.5% in 20111 in consequence to an increased public expenditure, strong monetary and fiscal policies, and higher oil prices. The non-oil private sector economy is also expected to grow by 5.2% in 2011, up from 3.8% growth in 2010. Growth in the manufacturing sector is led by the petrochemicals industry that is mainly exported to Southeast Asia and China. Saudi Arabia is the most attractive country for petrochemicals in the Middle East. Business Monitor International reported that more than USD70 billion of investment is being pumped into the petrochemical sector. In 2010, the fastest-growing non-oil industrial sectors were power generation, gas and water equipments and services (+6.0%); transport and communications (+5.6%); retail, restaurants and hotels (+4.4%); and construction (+3.7%). Likewise the petrochemical sector, the power generation, water treatment, transportation, infrastructure sectors and telecommunications should continue to be the main engines of Saudi economic growth. As in the past few years, the construction sector will continue to be one of the main beneficiaries of continued large government expenditures. The largest economy in the region, Saudi Arabia encourages projects incorporating technology and know-how transfer to decrease its dependence on the oil sector and the involvement of the government in its economy sector. Saudi Arabia presents business opportunities for Swiss companies in various sectors.

1 It was 3.4% in 2010

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B- Business opportunities I. Oil and gas The worlds largest oil producer and state-owned company, Saudi Arabian Oil Company (Saudi Aramco) completed in 2009 multiple mega-project programmes that included new or expanded oil, gas and petrochemical facilities. According to Aramco report, the crude oil production capacity was raised to 12 million barrels per day, and important increases were achieved in gas production and processing capacities. Likewise, key support facilities such as water injection and distribution networks were also expanded or upgraded. Saudi Aramco has eleven upstream and downstream investment plans valued at around USD58.45 billion. The Saudi Minister of Oil and Mineral resources announced that Saudi Aramcos daily production capacity of 12 million b/d will become 15 million b/d by the year 2020. Accounting for 44% of the countrys primary energy consumption, Gas is also a prio rity for Saudi Aramco. Foreign companies will be invited in the expansion programme to boost oil refining capacity in Saudi Arabia and in overseas markets such as China. Aramco is targeting a 30 per cent increase in sales gas output by 2014 to 8 billion cubic feet a day (cf/d). Under the Wasit gas development programme, Aramco discovered the Arabiyah and Hasbah fields in January 2009, and has already included them in its five-year spending plan for 2010-14. The Wasit gas development programme will produce and process up to 2.5 billion cf/d of sour gas from the offshore Arabiyah and Hasbah fields. Several other major new offshore gas developments are in the engineering phase to lift domestic production. Aramco has dedicated USD6bn for the development of six offshore facilities out of a total budget of USD60bn planned in its capital investment program for 2010-14. Aramco currently operates at least 16 offshore fields and has boosted the number of active offshore rigs to about 15 in 2009 from just one in 2000. Only companies certified as an in-kingdom contractors are able to bid for Aramcos procurement and contracting (EPC) contracts inside Saudi Arabia. Interested company in supplying Aramco with its products and services should sign a joint venture agreement with a local company or open an office inside Saudi Arabia. Moreover, Aramco has a strongly stated preference under its Saudisation policy for local procurement. 20% of its goods and services are purchased currently through Saudi companies; this figure will double within the next two years. Direct sale by foreign companies is becoming increasingly difficult and Manufacture under license, joint venture or establishing a local company is becoming the more viable route to achieving business with Aramco. Saudi Arabia petrochemical industry currently accounts for more than 75 percent of the Gulf Cooperation Council states total production. The Saudis petrochemical production capacity has increased from 3.7 million metric tons per year (mt/y) in the 1970s to an estimated 64 million mt/y by 2008. The fast- growing petrochemical and steel producer, Saudi Basic Industries Corp. (SABIC) is willing to become the worldwide leader in chemicals. SABIC controls 18 affiliates inside the country (joint venture deals with local and foreign partners).

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The Saudi petrochemical industry enjoys a natural competitive advantage due to the availability of low cost feedstock, the availability of vast crude oil and natural gas resources, close proximity to high-growth markets, and modern infrastructure. It is reported that 90 percent of Saudi Arabias petrochemicals revenue stems from base chemicals, including ethylene, with 10 percent coming from more valuable processed plastics and chemicals. Saudi Arabia aims at reducing its dependence on oil income by diversifying the national economy. One of the Saudi ambitious petrochemical projects is accounting for approximately one-fourth of the global polyolefin market by 2020. To concretise this ambitious goal, Saudi Arabia is focusing on secondary and tertiary petrochemicals instead on the production of basic chemicals. This strategy is at the core of the Saudis 15 -years development programme that aims at introducing new specialties into the local market. The affiliate of SABIC, Saudi Kayan Petrochemical Company (Saudi Kayan) is building a 450,000t/y polypropylene plant at Jubail at a cost of USD 400 million. The plant will produce a variety of petrochemical products including ethylene, propylene, polyethylene, polypropylene, ethylene glycol and series of specialised products that will be produced locally for the first time. Observers forecast that future petrochemical expansion in Saudi Arabia will rely on alternative feedstock supplies. According to SABICs press release; the company is conduc ting a study to build new complexes to increase petrochemical production to 130 million metric tons by the year 2020 from a total of 56 million tons in 2008. SABIC has started looking downstream for the next wave of expansion projects. Major competitor engineering companies from the Unites States, Europe, Japan, South Korea, China and Australia participate in this lucrative market. Two industrial clusters will be built around the Aramcos two major petrochemical megaprojects. One cluster will be built around the Petro Rabigh refinery and petrochemical complex on the Red Sea coast (Aramcos joint venture with Japans Sumitomo Chemical). The other cluster will be built around the planned USD15 billion Aramco-Dow project in Jubail on the Gulf coast. The production will include Polyurethane building block, metallocene based elastomers, glycol ethers, solution polyethylene, methyl/ polymethyl methacrylate (MMA/PMMA), nylon and ethylene propylene rubber. II. Financial Services Saudi Arabia is one of the least indebted countries in the world. Improvement of the investment climate (diversify an economy overly dependent on oil and petrochemicals), continues to be an important part of the Saudi governments broader programme to liberalise the cou ntrys trade and investment regime, and promote employment for a young population. Saudi Arabia continued to show positive progress towards full compliance with its WTO requirements after joining the organisation in 2005. In its Doing Business 2011 report, the Intern ational Bank for Reconstruction and Development (World Bank) ranked Saudi Arabia 11th out of 181 economies in terms of ease of doing business, a marked improvement from 2005, when it ranked 67th. Saudi Arabia has free and open financial markets. Private capital and currency can be transferred in and out of Saudi Arabia without restriction, with the exception of limits on bulk cash movements: non-GCC foreign investors may only invest in the stock market through mutual funds and swap agreements. However, these limits are gradually relaxing.

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Generally credit has been available to both Saudi and foreign entities from commercial banks, and has been allocated on market terms. The global financial crisis of 2008 has substantially reduced this availability to all parties, resulting in the delay or cancellation of some projects. Beside commercial banks, some government credit institutions, such as the Saudi Industrial Development Fund (SIDF), allocate credit based on government-set criteria rather than market conditions. To be qualified for credit, the applicant company must have a legal presence in Saudi Arabia. As part of the economic reforms initiated for accession to the WTO, Saudi Arabia liberalised licensing requirements for foreign investment in the financial services. In addition, the government increased foreign equity limits in financial institutions from 40% to 60% to entice further foreign investment). As of 2010, the Saudi Arabian Monetary Agency 2 (SAMA) has granted eleven foreign bank licenses to operate in Saudi Arabia, including BNP Paribas, Deutsche Bank, Emirates Bank, Gulf International Bank, J.P. Morgan, Muscat Bank, National Bank of Bahrain, National Bank of Kuwait, National Bank of Pakistan State Bank of India, and T.C. Ziraat Bankasi A.S. Swiss financial institutions have solid opportunities to enter the local market but they should refer to the experience of the foreign financial institutions operating in the country. Credit Suisse and UBS have already put their first stone in the Saudi financial sector. The Capital Markets Law, passed in 2003, allows for brokerages, asset managers, and other non-bank financial intermediaries to operate in the Kingdom. Financial firms established under the law will drive an increase in corporate and consumer finance activity. By the end of 2009 108 companies had received licenses to work as financial advisory offices (73) or brokerage services (35) in Saudi Arabia (www.cma.org.sa). III. Engineering and construction services Architectural construction and engineering sector remains one of the most important sectors in the Saudi strong economy. The Saudi construction sector is seen growing by nearly 6 percent as major infrastructure projects continue to be built in the country despite the impact of the global downturn. The Saudi government continues to invest intensively in construction projects that will boost and diversify the economy. The construction and engineering sector is mainly boosted by government-led infrastructure development plants and the new housing. The growing population, the stability of the banking sector and liquidity will continue to stimulate the positive growth of the construction sector during the next future. The housing sector, in particular, is likely to grow, as the Saudi population is rising at a rate of 2.5 percent a year. The Saudi Government keeps fuelling the sectors growth. Over the next five years, the go vernment will spend about USD400 billion on large infrastructure projects. Industry experts estimated the governments expenditures on construction projects for the period October 2008 to October 2010 at USD150 billion. In Saudi Arabia, infrastructure and construction projects are stimulated by domestic demand. Industry sources reports that more than 325 civil construction projects, valued in excess of USD300 billion, are currently underway or under design in Saudi Arabia. The planned in2 SAMA, which oversees and regulates the banking system, is the only central bank in the Middle East beside Israel s that is a member and shareholder of the Bank for International Settlements in Basel, Switzerland.

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vestments3 (about USD 450 billion) in the Saudi constructions sector are mainly governmentrelated (75%). The industrial construction sector received a major boost with the awarding of engineering procurement and construction contracts at the Jubail oil refinery and the Red Sea oil refinery. Including Saudi Aramco, a total of USD 13.6 billion worth of contracts to develop the two refineries in 16 packages were awarded in July 2010. The main fourteen civil construction projects in Saudi Arabia under construction or in design are as follows: - King Abdullah Economic City (KAEC) (USD 93 billion) - Prince Abdulaziz bin Mousaed Economic City (USD 53 billion) - Jizan Economic City (USD 30 billion) - Jeddah Project Mile High Tower (USD 10 billion) - Medina Knowledge Economic City (USD 7 billion) - Jabal Omar Project ($5 billion) - Princess Noura bint Abdulrahman University (USD 11.5 billion) - King Abdullah Petroleum Studies Research Centre (KAPSARC) in Riyadh (USD 2 billion) - King Abdullah Financial District (USD 40 billion) - Sudair City Development: Schedule (USD 40 billion) - Upgrade of King Abdulaziz International airport in Jeddah (USD 7 billion) - King Abdullah Sports City Development near Jeddah (USD 4 billion): - Shamieh Projects (USD 9.3 billion) - Ministry of Interior (MOI) Projects (USD 11.5 billion) IV. Medical Equipment and Health care The Saudi health-care sector is one of the largest in the region in terms of expenditures, size, activity, and potential. The yearly expenditure on health care is estimated at USD21 billion in 2011, 75 percent by the Saudi government. In the 2011 budget, the Saudi government has allocated USD18.3 billion for the health and social development sectors, 12 percent more than in 2010. The funds will be used to finance the construction of 12 new hospitals and to renovate and refurbish four existing hospitals. With an annual population growth rate of 2.5% to 3%, Saudi Arabia would require an additional average annual investment of USD587 million in hospital bed capacity to meet the demand4. Hospital beds are likely to grow from 53,519 to 62,000 by the end of 2011. Such facts will be favourable to the environment for purchases of new medical equipment and increased investments in these sectors. Swiss companies might find tremendous opportunities in the following sectors and subsectors: - Patient beds; - Rehabilitation equipment and accessories; - Diagnostic equipment and components; - Electro-medical equipment;
3 Expansion of a number of airports, the ongoing construction of three major new railway lines and the construction of government institutions including new schools and hospitals) 4 Expansion and growth of existing hospitals and clinics, privatisation, compulsory healthcare insurance, the aging population, and greater material wealth along with an upsurge in lifestyle diseases and favourable government policies all combine altogether to boost the demand for healthcare services.

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- Medical X-ray equipment; - Monitoring equipment; - Hospital disposables; - Hospital management; - Therapeutic appliances; - Orthopaedic appliances; - Artificial body parts; - Oxygen generators and related components; - Optical microscopes and related components; - Operating-theatre instruments; - Dental or veterinary devices; and - Medical laboratory equipment. Lifestyle of Saudis has been affected by the affluence that brings with it diseases such as diabetes, obesity, coronary diseases, and cancer (lung, throat and breast cancers). Other major diseases of concern include kidney diseases, and recently Dengue fever cases in the Western Province. In line with the government restructuring strategy to convert government hospitals into private entities in the form of a public-private partnership to maximise system efficiencies and raise the overall standard of care, the Saudi private sector was the largest contributor to growth in the number of hospital beds over the last decade. In addition to the Ministry of Healths annual requirement for e quipment and instruments, the Gulf countries also present excellent opportunities for Swiss companies to participate in the six-country annual bid for various items, including5: - Medicines; - Radiopharmaceuticals; - Renal dialysis equipment and supplies; - Vaccines; - Dental supplies; - Chemicals; - Laboratory instruments and disposables; - Orthopaedic and spinal rehabilitation equipment; and - Cardiovascular treatment and rehabilitation equipment. To face the increasing number of healthcare providers and patients in the country, the Saudi Ministry of Health is envisaging the establishment of a national electronic records system for healthcare, which will create enormous opportunities for health systems integrators and specialists in this field. Especially that the insurance companies are also willing to establish a network connecting them with various hospitals around the country. A major regulatory development was enacted to allow foreign companies to invest in 150bed Saudi hospitals, which may open the door for Swiss investors/companies to enter into the market, and take advantage of opportunities and growth prospects in this sector. The Saudi Food & Drug Authority (SFDA) has been mandated to develop and enforce a regulatory system for medical devices. This will include establishing licensing procedures for
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These tenders are offered annually and the Secretariat General of the six nations Health Ministries will usually commun icate directly with foreign vendors.

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manufacturers and suppliers. In what is a first step in developing a regulatory framework for medical devices, the SFDA in 2007 started the Medical Devices National Registry (MDNR), which is a voluntary web-based project involving the registration of manufacturers, agents and suppliers in the country. From July 2009 all regulatory responsibilities were handed over to SFDA for pharmaceuticals, medical devices and food. Saudi population demand for improved health care and pharmaceutical products continuously increases. More than 98% of pharmaceutical products are imported. Despite the tremendous need in the pharmaceutical sector, it may be underlined that under the existing regulations medicines and pharmaceutical products are not admitted to the country unless a prior registration is made with the SFDA, which issues the needed license. VI. Insurance sector Since the introduction of the first phase of the compulsory health insurance for expatriates, private sector workers and foreign pilgrims, the insurance sector has grown exponentially from 36 percent of the total insurance market in 2007 to 44 percent in 2008, with gross written premiums valued at USD1.2 billion. Some seven million are now covered by private insurance, and by 2013, consumers will spend an estimated 4 percent of their income on healthcare. According to local insurance experts, the health insurance market in Saudi Arabia is expected to grow up to USD 40 billion over the next years. Driving growth in the healthcare sector is the mandatory insurance law and the government earmarking increasing amounts of the annual budget to cater to a burgeoning population that is set to double by 2023. In 2010, the Saudi Government allocated USD16.3 billion for healthcare and social affairs, a 17 percent increase on 2009 and in the 2011 budget allocated some USD18.3 billion. Nowadays, around 34 insurance and reinsurance companies operate in one of the fastest growing insurance markets in the world. Indeed, by 2014, total insurance premiums are projected to be worth USD11.8 billion, with health insurance to account for over half of the market. VII. Transport Saudi Arabia has an efficient network of roads, marine ports and airports and plans to connect the countrys major commercial centres with a new rail network. Saudi Arabia gives more attention to upgrading its airports. Thus a number of airports in Saudi Arabia are set for expansion including King Abdulaziz International Airport in Jeddah and Prince Mohammed bin Abdul Aziz International Airport in Madinah. The transportation sector initiatives are continuing with the ongoing construction of three major new railway lines (the North-South, the Haramain high-speed project, and the Saudi Land Bridge). The key ongoing projects in transportation sector (airports, railways, seaports) are very large and lucrative ones. In 2010, transport was one of the fastest-growing non-oil industrial sectors (+5.6%). According to the Saudi Minister of transport, transportation and infrastructure sectors should continue to be the main engines of the Saudi economic growth.

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VIII. Electrical Power Systems With one of the worlds highest population growth rates (2.5 -3%) and a rapidly expanding industrial base, Saudi Arabia has an ever-growing need for electricity and power sources. Presently, the Saudi power generation, transmission, and distribution industry is one of the fastest growing and most lucrative in the Middle East. Saudi Arabia already accounts for nearly 50 percent of all ongoing power projects in the Gulf State. It is estimated that the country will need close to 55,052 MW of power capacity by 2020, nearly double of the current capacity. Aware of the challenge of meeting the need of the rapidly growing population and industrial economy, the Saudi Government has embarked upon an ambitious plant to bolster the industry. It has invested heavily in a series of projects to achieve this end. In addition to the current projects with a value of more than USD 90 billion, Saudi Arabia is expected to inject about USD119 billion in the industry by 2020. Saudi Arabia is willing to switch its power plants from heavy oil to natural gas. One important step in this process has been the creation, on April 18, 2010, of the King Abdullah City of Atomic and Renewable Energy (KACARE), a scientific centre for nuclear and renewable power. The mission of KACARE is investigating the application of nuclear power together with renewable energy to be used in Saudi Arabia to meet rising electricity demand. Saudi Arabia invites investment of private companies in the power industry to boost the national generation capacity. Therefore, Saudi Arabia has made a rigorous effort to bring about greater efficiency, transparency, and economic viability in the power sector in order to make it a more attractive environment for investment. Also, the Saudi Government established an independent regulatory body, the Electricity and Co-Generation Regulatory Authority (ECRA) in 2001. A new electricity law was passed in 22 November 2005, and was published in late 2007. The new law is central to the regulation and development of the Saudi electricity sector. ECRA has the responsibility of providing a clear, stable, non-discriminatory framework and creating a suitable environment to foster legitimate competition in the industry. IX. Water Resources Equipments
a. Overview

With the third highest daily per capita water consumption in the world, at about 280 litters, after the United States and Canada coupled with its desolate desert environment, waterscarcity issues, the rapid development of cities, massive urbanisation and industrialisation, Saudi Arabia is forced to take drastic measures in reviewing its water policies. The 30 government-run desalination plants on the Red Sea and the Arabian Gulf coasts supply 60-70 % of the Saudi water needs and the rest met by ancient underground aquifers (23%) and the remaining come from wastewater recycling. Meeting future water needs6 is one of Saudi Arabias biggest challenges. Among other s, the government restructured its water departments and created the National Water Company (NWC) with a mission to work in joint ventures with both Saudi and international corpora6

The Saudi demand is growing at close to 4 percent each year

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tions. In 2008, the Saudi government also announced that it would phase out wheat farming by 20167. The Saudi government is also keen on expanding its facilities for treatment of wastewater so that it can be used for industrial and commercial purposes. b. Business opportunities Some local experts estimate that around USD60 billion will be spent on expanding Saudi Arabias water supply and distribution networks. These projects include USD14 billion for building 16 new desalination facilities in 17 years. Saudi Arabia aims substantially to increase its desalination water production8. The Saline Water Conversion Corp. (SWCC) continues to study the introduction of 20 new saline water conversation projects to be implemented in the near future to meet the demand increase for drinking and used water. The 20 new projects9 will include constructing new plants and expanding existing ones. According to the Ministry of Water and Electricity, there are a number of water and sewage projects being implemented by the Ministry. Water and sewage projects worth SR 6.68 billion are being implemented in addition to a number of projects for plugging water leaks in its distribution networks. There are also several large opportunities in the wastewater treatment sector. A number of major projects are under tendering, such as the North Jeddah wastewater treatment project, the Musk Lake sewage treatment project, the Medina wastewater treatment project, the Hair wastewater treatment project in Riyadh, and the Dammam wastewater treatment project. 1- Desalination and wastewater - Consulting and engineering services; - Anti-scaling chemicals; - Operations and maintenance services; - Potable and process water treatment systems; - Industrial and Sewage wastewater treatment systems; - Oil skimmers (pipes, drums, weir, etc); - Pressure and gravity media filters; - Water disinfection equipment & systems; - Clarifiers & clarification equipment; - RO membranes; - Filters; - Boilers; - Pumps; - Steam & gas turbines; - Treatment chemicals; - Screening equipment; - Training services; - Grit removal units; - Odour treatment;
7 8 9

The agricultural sector absorbing 88 percent of water use and contributing of a mere 3% to the countrys GDP. The water production is currently around 5.7 million m3 a day, to at least 10 million m3 and 13 million m3 a day by 2020. Only Swiss companies with high tech and good reputation in this sector have a chance to compete with the American and Korean ones for those projects.

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- Aeration systems; - Screens and headwork systems; and - Sludge digesters and digester equipment 2- Wastewater treatment opportunities One of the top current priorities of the Saudi government is so far modernising and expanding the sewage system. The loss of life and property in the recent floods in Jeddah city was generally blamed on the existing poor wastewater network; the poor infrastructure and inadequacies of the wastewater collection and treatment services. According to available information, only 40 per cent of the population of Saudi Arabia is served by an integrated sewage and wastewater system. The rest depend upon septic tanks that are occasionally drained by wastewater tankers. Under the recommendation of the King, Saudi Government has now taken measures to address these issues and to revamp its wastewater with the private NWC responsible for running the sewage system in Jeddah and Riyadh. NWC has allocated USD17 billion for private-sector sewage managers in the next five years. The capital spending on the countrys sewage collection and treatment system in the next 20 years is estimated at USD37 billion. Among the planned tenders, there are two sewage treatment plants (STPs) in Riyadh10 and the second phase of the STP in King Abdulaziz International Airport in Jeddah11. X. Telecommunication The telecommunication market was opened up to the competition in 2005. Therefore, Saudi Arabia has become increasingly connected with almost 49 million mobile phone subscribers till the end of 2010. Mobile penetration is expected to reach 214% by 2014, while mobile phone sales are forecast to grow 7% to USD1.1 billion. Saudi Arabia has a fixed-line telephone penetration of 15.6% with 4.3 million subscribers. In 3Q-2010, the total Internet users increased some 11.2 million, with a broadband penetration level of 12.2 percent for the same period. One third of all households in Saudi Arabia have a broadband connection. The upgrading of the telecommunications networks is likely to be a major driver of infrastructure spending. Saudi Arabia is expected to account for more than 50 per cent of spending on ICT in the Gulf Cooperation States over the next three years. Of the nearly USD90 billion expected to be spent on ICT infrastructure by 2012, USD22 billion is likely to be spent on IT and USD67 billion on telecommunications. The Saudi Government is willing to create a new digital infrastructure that will create significant opportunities for providers of technology, software, and hardware. The top opportunities in this sector include: - DSL access switches, enabling multi-service transmission equipment; - Broadband wireless access systems (WiMax), 2.53.5 GHz, 16D and 16 E; - Wireless computing equipment and related accessories; - Network protocol software and systems; - Wideband transceivers; and - Fibber-optic satellite links.
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each with the capacity to process 100,000 m3 a day and a 10-kilometre-long deep tunnel sewer to handle 800,000 m3 a day in the city 11 That will increase capacity by 250,000 m3 a day and a 700,000 m3 a day sewage lift station 10/12

Swiss companies need to look at the Saudi telecommunications industry segment by segment in terms of size and growth rate, as well as the regulatory environment and other barriers to entry. XI. Food and Beverage Saudi Arabia has major manufacturing plants for dairy products, meat processing, snack foods, beverages, bread, biscuits and confectionery. Many foreign companies export to Saudi Arabia through the UAE. Swiss made products enjoy a strong reputation among imported foodstuffs. Last may, Nestl Middle East launched its direct sales and distribution operations in Saudi Arabia, marking a new phase of expansion in the region. XIII. Education and training Education and training are areas of concern. Recently, the Saudi Government passed a ruling allowing foreign educational institutions to set-up schools and colleges in the country. In 2009, the Government has issued more than 19 licenses for international schools, and also approved the establishment of about 36 new colleges. Students are increasingly investigating graduate and post-graduate education possibilities abroad largely in the United States of America and the United Kingdom. But since September 11th, 2001, Saudi students have modified their preference. Europe, New Zealand and Australia are now becoming more popular destinations. This move may represent an opportunity for Swiss educational institutions. The Saudi Government allocated USD 68.3 billion for new projects in the budget for 201112. The education and training sector received the largest allocation at USD40 billion, 8 percent more than in 2010. The education budget included USD 3.2 billion for offshore education, known as the King Abdullah Scholarship Programme. The Saudi Government plans to replace 75 per cent of the estimated six millions expatriate workers with Saudi nationals (Saudisation programme). Thus, training needs are becoming increasingly important as more high school and university graduates enter the labour market. The demand for trained Saudis outstrips the offer by far. Large Saudi organisations often have their own training departments. They often outsource the training of their employees to local institutions that mainly cooperate with foreign training providers. XIV. Business practice - The business system in Saudi Arabia does not appear transparent from the outside. A minimum understanding of the religious traditions and customs of Saudi Arabia is required because of the influence of Islamic law on business and social life. - Generally, business will only be conducted after a degree of trust and familiarity has been established. Considerable time may be spent exchanging courtesies, and several visits may be needed to establish a business relationship. Business visitors should arrange their itineraries to allow for long meetings as appointments are not highly respected in the private sector. Meetings can be interrupted by subordinates and colleagues entering in
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USD 48.7 billion spent on 2,460 projects in 2010

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the office in which the meeting is being held, even other businessmen can come in unexpectedly and participate in the meeting. Tea and traditional Saudi coffee are usually o ffered. One to three cups of Saudi coffee should be taken for politeness, after which the cup may be wiggled between thumb and forefinger when returning it to the server to indicate that you have finished. - A meeting can possibly be interrupted by a prayer time. Many Saudis (all Saudis are of the Muslim faith) and non-Saudi Muslims could excuse themselves to attend a prayer if a long meeting crosses into a prayer time (the hotel can provide information relating to the five day prayer times since the prayer time change according to sunrise and sunsets around the year). - Although many Saudi businessmen have been educated and/or have travelled widely in the West and are sophisticated in dealing with western, many cultural differences remain. As a conservative society, it is advisable to respect local traditions, i.e. not to offer or receive an object with the left hand and sitting crossed-legged with a foot pointing towards the other person is considered offending. - Saudis are hospitable and place a great deal of emphasis on an external expression of politeness and quiet behaviour. Business meals are highly appreciated although Saudis tend to invite their business partners or guests to their homes for a traditional meal. Hospitality is high on their agenda (sometimes in tents either in the back yard of houses or simply in the desert). If you are invited to the home of a Saudi for a party or reception, a meal is normally served at the end of the evening, and guests will not linger long after finishing. Be observant and adapt your behaviour to the customs of your host. - There is strict gender separation in Saudi Arabia and restaurants maintain separate sections for single men and families. Wives are often excluded from social gatherings or are entertained separately. Hotel swimming pools and public exercise/gyms centres are not opened to men and women in the same time. Amusement parks and zoos are open to men and women under some restrictions. - The Ministry of Commerce bans any signs placed on imported products that could indicate another faith other than Islam, or the picture of a pig (pig meat and by-products are banned in Saudi Arabia). Importation of alcohol, narcotics, pornography, religious books except the Koran, pork products, and firearms is strictly prohibited among others. Date: 11th September, 2011 Larbi Elattari Embassy of Switzerland P.O. Box 94311, Riyadh 11693 Saudi Arabia Tel: +966 1 488 12 91 Fax: +966 1 488 06 32 Tel. from Switzerland 031 322 18 96 ext. 207 rya.vertretung@eda.admin.ch

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