Page 163 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

A Piece of the Action: Strategies for Entering the GCC Market 147

In addition to the three core goals listed above, participation in
JVs places multinationals in a stronger strategic position as markets
deregulate. As full foreign ownership becomes more broadly feasi-
ble in the GCC, global companies that have experienced the market
directly through joint ventures will enjoy a real advantage over
competitors that have not. Firms without JVs or partnerships may
well have their brands in the market and some customer goodwill
built up, but they will lack the in-depth understanding enjoyed by
companies that are already established. As deregulation plans are
laid and begin to be implemented, multinationals that have partic-
ipated in joint ventures are well positioned to renegotiate terms
with local partners in order to capture more value. Indeed, as the
regulatory environment shifts, more negotiation leverage accrues
to the multinationals. Partners that fail to add adequate value to
their international affiliates face the risk of being marginalized, hav-
ing their profit share renegotiated, or—as the laws evolve—being
bought out entirely. Multinationals that enter JVs today have the
wind at their backs and can expect more favorable regulations
going forward.
One sector in which JVs have long been prevalent is that of
financial services. A close look at the Saudi banking market will
reveal how changes in market attractiveness and in regulatory
regimes have driven the sector toward a joint-venture model.

Joint Ventures in Action: The Saudi Banking Market
The Saudi banking sector today consists of two types of institutions:
domestic banks and international joint-venture banks. The preva-
lence of JV banks is striking, and the JV banks play a crucial role in
meeting the needs of institutions and individuals with global assets
and sophisticated product needs. These JV banks have local names
but international management. Saudi Hollandi Bank (literally, the
“Saudi Dutch Bank”) is a JV with ABN Amro. The Saudi British
Bank (now branded as “SABB”) is a JV with HSBC; Banque Saudi
Fransi (“Saudi French Bank”) is a JV with Calyon Crédit Agricole.
The international banks view the Saudi entity as “affiliate” institu-
tions or partly owned subsidiaries. The Saudi American Bank (now
branded as “Samba”) was previously a joint venture with
Citigroup, but Citi subsequently divested.