Page 171 - 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 155

Today, deregulation is occurring rapidly. As we discussed in
Chapter 3, deregulation is one of the core elements of the
Opportunity Formula that has made the GCC countries such an
attractive place to do business. All six GCC states are now members
of the WTO. Privatization is on the rise, and barriers to entry are
either falling or set to fall across a wide range of industries. As each
GCC state has negotiated its own WTO accession terms, including
the exceptions to deregulation, it is crucial to read the fine print in
order to understand the nuances of government policies.
In the case of Saudi Arabia—the region’s largest market—
ownership rights are governed by the country’s Foreign Investment
Act, with oversight by the Saudi Arabian General Investment
Authority. While the act permits the notion of businesses being
wholly owned by foreign entities, it also contains a list of excluded
or protected industries, (even though the act enjoys full WTO sup-
port). Here are a few highlights of the act: 24

● Foreign investment in manufacturing is generally
permitted, except for oil exploration, military equipment,
and a few other categories.
● The broad “services” sector is partly protected, with areas
such as real estate brokerage and security and detective
services either fully or largely protected.
● Retail and distribution firms are artfully protected,
with maximum equity ownership caps persisting even
into the long-term future under Saudi Arabia’s WTO
agreement, albeit at a high level of 75 percent. Minimum
capital and outlet size requirements will bar foreign
ownership of small retail businesses and distributorships,
and there are stipulations for training of Saudi
employees. 25
● These restrictions aside, Saudi Arabia is committed under
the WTO to significant opening of its economy. In many
cases, the opening was to occur immediately, without any
grace period. In addition to a general lowering of many
tariffs and simplification of nontariff barriers, key sectors
such as mobile telephony, health care, big-box retailing,
and financial services are open to foreign investment—
with, of course, certain rules and exceptions in the fine