What can go wrong during Saudi Arabia business set up

Doing business in Saudi Arabia is notoriously difficult. There are challenges and obstacles at almost every turn. Foreign investors should factor in the following during business set up in the Kingdom:

  • Many international companies that entered into joint ventures (JVs) with local partners conclude that the reliability of Saudi nationals is poor;
  • Because Saudi law favours citizens, Clients planning to enter into a JV with a local partner are urged to conduct extensive due diligence prior to signing an agreement;
  • Protect your interests by signing a legal service agreement that clearly stipulates each party’s rights, responsibilities, and what each can and cannot do. This agreement must be carefully reviewed by Saudi and international lawyers;
  • The use of silent Saudi partners with no vested interest in the business is prohibited, and is a breach of anti-concealment law;
  • Doing business in Saudi Arabia is expensive. Clients wishing to register a fully foreign owned entity must budget for start-up expenses of over US$200,000 including i) business licence and set up fees ii) paid up share capital requirements iii) fully fitted office rental iv) hiring national employees;
  • Anyone doing business in Saudi Arabia will quickly become familiar with the concept of wasta. It effectively means using middlemen (for example in government departments or banks) to expedite official procedures (e g obtaining a licence or getting paperwork stamped or approved);
  • Unfortunately, abuse of power, nepotism and wasta are alive and kicking in the Kingdom, despite efforts to clamp down on corruption. Healy Consultants staff will help shield our Client from having to deal directly with these practices;
  • Saudi government departments and banks are slow and inefficient. Our Clients should prepare for frustrating and unexpected delays throughout the engagement;
  • Between May and September, Client engagements tend to advance even more slowly because of i) Ramadan, when government departments, banks and all offices work a maximum of four hours per day, causing serious engagement delays and ii) Saudi public holidays during this period;
  • Local municipalities (Baladiyah) are slow and inefficient. It can take up to three months to complete office inspections and issue a municipal licence. To get a licence, the office must meet minimum operational fit out requirements – potential obstacles include i) the office building has historic fines issued by civil defence ii) there are outstanding fees payable to the authorities. Check these with the real estate agent or office management company before signing the lease agreement;
  • A local company must hire Saudi nationals before sponsoring foreign employees. It is difficult to find quality, reliable Saudi national employees;
  • All non-Saudi/GCC nationals need a residence visa (Iqama) before being appointed as bank signatory to a local corporate bank account. Unfortunately, it takes on average two to three months to secure an employment and residency visa;
  • Before an Iqama is issued, our Client must travel to and stay in Saudi Arabia for at least two weeks;
  • During the engagement, our Client must notarise and attest several company and personal documents. Attestation can take up to a month to complete in Saudi Arabia;
  • Documents which have not been translated to Arabic by a Saudi resident legal translator may sometimes be rejected by local public notary or Ministry of Commerce officers, or bank relationship managers. To avoid delays, Healy Consultants Group will assist our Client in getting documents translated locally;
  • Before a KSA company is fully operational, our Client must deposit the paid-up share capital in a temporary Saudi Arabia corporate bank account. Unfortunately, banks are slow and inefficient. Opening a corporate bank account can take up to two months, requiring several in-person meetings. Saudi banks may take a month to issue a capital deposit certificate;
  • Some local banks do not offer Internet banking access for foreign currencies. Therefore, securing a simple bank statement can become time-consuming, requiring the bank signatory visit to the Saudi branch;
  • See also Disadvantages of doing business in Saudi Arabia.

Corruption was part and parcel of business culture in Saudi Arabia. But things are improving steadily – the kingdom ranked 58th out of 180 countries on the 2018 Corruption Perceptions Index.

Contact us

For additional information on our business registration services in Saudi Arabia, please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi
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