The Technical Challenges of Doing Business in Saudi Arabia
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The Saudi market is one of the most important in the region and is also one of the most promising, with around half of the population being under 25.
While the land does present a lot of opportunities, doing business in Saudi Arabia comes with obstacles. You may also have to be prepared for a certain cultural shock depending on your understanding of Islamic culture. This is because religion has a profound influence on everything in Saudi Arabia, even how businesses operate. Let’s look at some of the biggest challenges of doing business in Saudi Arabia.
Bribery and Corruption
Bribery and corruption aren’t widespread in Saudi Arabia, but there is a culture of patronage and something known as wasta, which translates to the pull that some members of the society may have on certain decisions. This means that connections are an important aspect of choosing a business partner in the region.
Bribery, however, is strictly forbidden in the country and the government is making considerable efforts to curb it. They recently established an anti-corruption task force that has made many arrests that have been featured in the Saudi press.
Labor Laws
Saudi Arabia is known for having some of the most stringent labor laws and unless you know how to navigate them, you are bound to bump into some issues. For one, at least 75% of the workforce of any company operating in the Kingdom has to be of Saudi national origin. Not only that, but the remaining 25% cannot have combined wages totaling more than half the wages of the other 75%.
Labor laws in Saudi Arabia also have strict provisions for terminating employees and lots of obligations from employers you may not be familiar with. This is why it would be wise to work with a Saudi Arabia PEO like New Horizons to help you navigate the murky waters of the Saudi labor code. They’ll make sure to handle complex functions like payroll and will help you structure your employee contracts. We also suggest you check out nhglobalpartners.com if you need information about doing business in Saudi Arabia in general.
Commercial Disputes
You should know that Sharia is the law of the land in Saudi Arabia and it regulates commercial disputes as well. One of the major differences with the legal system there is that there is no convention or codification of precedent. Also, you can’t expect to get compensated for things such as speculative damages in Saudi Arabia. If you’re going to be awarded damages, it will be for the immediate losses you’ve suffered. You should also know that you may be forbidden from leaving the country if you’re the object of a dispute with a Saudi national.
Saudi Arabia can be a tough market to enter, but it is possible and the market shows lots of potential. However, you must be prepared for the differences between markets and consider working with an expert team that will be able to show you the ropes.
