Page 92 - Aamir Rehman - Dubai & Co Global Strategies for Doing Business in the Gulf States-McGraw-Hill (2007)

76 Dubai & Co.

In principle, WTO accession should radically open the GCC
economies. The requirements for membership in the WTO, which
include agreeing to treaties on goods (GATT), services (GATS), and
22
intellectual property (TRIPS), are sweeping. For example:
● WTO members must provide “most favored nation”
(MFN) status to other members, providing access to all
and not choosing among them.
● WTO members must give “national treatment” to foreign
companies—not treating them differently than they treat
domestic firms. 23

In the old GCC, where economies have long been closed and
local companies and business families have acted as gatekeepers
and agents for foreign firms, these changes would have been noth-
ing short of revolutionary. In recent years, however, economic real-
ities have prevailed and the GCC states have negotiated significant
exemptions and graduated timelines in order to ease the transition
to WTO compliance. Each country’s provisions are complex and
need careful study by corporate legal teams when considering a
multinational firm’s prospects in Gulf countries. By way of illustra-
tion, however, it’s worth noting a few of the exceptions in place.
A few of Saudi Arabia’s negotiated terms were as follows:

● In the services sectors open to foreign investment such as
telecommunications, foreign equity was limited to 49
percent, to be increased to 51 percent by the end of 2006
and to 60 percent by the end of 2008. Moreover, the
foreign investment had to be in the form of a joint stock
company.
● The provisions covering the retail sector were more liberal:
51 percent equity ownership was allowed on accession, and
the figure would increase to 75 percent after three years.
● However, retailers were subject to minimum investment
amounts, minimum outlet sizes, and the requirement that
15 percent of their employees trained each year be Saudis. 24
These terms ensure that Saudi business owners will continue
to play a central role in the evolving economy. Local owners cannot
be completely cut off from the business; locals will always have siz-
able equity in key sectors. By reserving the right to define minimum