Discover Saudi Arabia’s dual prominence: global oil powerhouse and sacred religious hub.
For a long time, Saudi Arabia, predominantly secluded and unexplored, has stood as one of the leading global oil producers, positioning itself as a major player in the world economy. However, its prominence is not solely attributed to oil production. Within the global Muslim community, numbering over two billion, Saudi Arabia holds a distinct significance, thanks to the presence of the two holiest Islamic sites – Mecca and Medina. The religiously conservative absolute monarchy, led by the Al Saud royal family, stands as one of the most stable countries in the region and a significant political player. Yet, socially, culturally, and religiously, it poses substantial challenges for foreign investors and traders. What can one expect when doing business in the Kingdom?
Saudi Arabia is an absolute monarchy, led by His Royal Highness King Salman bin Abdulaziz Al Saud, who traditionally also served as the prime minister. In 2023, the king appointed his son, Crown Prince Muhammad bin Salman bin Abdulaziz Al Saud, as the prime minister. Crown Prince, also known as MBS, is a controversial figure, particularly due to his involvement in the murder of journalist Jamal Khashoggi. On a positive note, his social reforms, including restricting the power of the religious police and transforming women’s rights, such as allowing them to drive or weakening the male guardianship system, mark a significant shift.
The kingdom’s economy heavily relies on oil extraction and exports, with pilgrimage income from Mecca and Medina as the second-largest revenue source. Besides contributing significantly to the state’s budget, pilgrimage quotas set by KSA for individual states serve as a crucial foreign policy tool.
In recent decades, Saudi society, guided by a conservative interpretation of Hanbali Islam known as Wahhabism, has been undergoing social and economic transformations. The government aims to diversify the economy and reduce its dependence on oil exports, as outlined in the ambitious Vision 2030 strategy. This vision plays a significant role in transforming the country towards a sustainable economy. With substantial investments in private sector development and government megaprojects, Saudi Arabia represents a promising and intriguing market for a wide range of goods and services.
Saudi Arabia is a Muslim state, with Muslims constituting 100% of the population, including expatriates, with an 85% Sunni majority. Public expressions of other religions are prohibited, and practicing them is not officially allowed, although there are millions of non-Muslim expatriates living in the country. Apart from the majority Arabs (approximately 19 million), the population includes 2.1 million Bangladeshis, 1.9 million Indians, 1.8 million Pakistanis, 1.8 million Yemenis, and 1.5 million Egyptians. Sudanese, Filipinos, Syrians, Nepalis, and Jordanians follow.
The Saudi economy historically revolves around oil extraction, with the oil sector contributing 32.7% to the GDP. Despite massive government support for non-oil sector development, the oil sector’s share continues to grow due to rising oil prices.
Alongside oil extraction, the chemical industry plays a key role in the industrial composition. The government emphasizes the development of the mining industry, leveraging the high untapped potential of local mineral wealth (gold, copper, rare metals). Tourism, a sector evolving almost from scratch (Saudi Arabia began issuing tourist visas only in 2019), holds significant importance. Prospective sectors include mining (the value of untapped mineral resources is estimated at USD 1.3 trillion), industry (a key focus of Vision 2030), defense and security (historically spending 6-8% of GDP on defense, consistently ranking among the top 5 countries in defense expenditure), tourism, wellness, leisure, healthcare and pharmaceuticals, research, development, innovation, and education (scientific projects receive generous support, making KSA a leading country in the number of filed patents).
Business Culture
The business culture in Saudi Arabia is distinct from the Western culture in many aspects, and while language proficiency is generally good, collaborating with cultural experts is highly recommended. They can provide insights into communication nuances that involve various traditional elements, some of which are similar to other countries in the region. Examples include engaging in small talk, addressing partners by their professional titles, and avoiding using the left hand in communication (considered ritually impure, e.g., while receiving business cards). It’s worth noting customs such as the offering of light coffee, dining on the floor using one’s hands (without cutlery), and extended handshakes expressing friendship. Positive emotions also play a crucial role, and expressing frustration or anger is highly inappropriate. Business culture is influenced by prayers held five times a day and religious holidays, during which business appointments should be avoided. Segregation of the male and female worlds, especially during an invitation to a partner’s home, is essential. Personal presence is crucial for negotiations, and it’s advisable not to rush. Delays in both negotiations and project implementations, as well as payments from the Saudi side, should be considered.
General crime rates are low, but caution is advised, especially in crowded markets during peak hours. Respect for conservative Islamic behavioral norms is mandatory, including the absolute prohibition of importing alcohol, pornography, or expressions of homosexuality. Non-Muslims are also barred from entering Mecca and Medina, the holy cities. Caution should be exercised when photographing people on the street, especially women.
Riyadh, the capital and largest city of Saudi Arabia, offers a wide range of hotels catering to various preferences and budgets. The city boasts numerous high-end, luxury hotels, as well as more affordable and mid-range options. The hospitality industry in Riyadh has grown significantly in response to the city’s status as a major business and cultural hub. You can find internationally renowned hotel chains, such as The Ritz-Carlton, Four Seasons, Hyatt, Marriott, and others, providing luxurious accommodations and top-notch amenities. Additionally, there are many reputable local and regional hotel brands offering quality services.
Participating in various trade fairs held in the country is an ideal space for presentations and networking. Some of the most significant trade fairs include:
World Defense Show – defense sector
Big 5 Saudi – construction
Riyadh Travel Fair – tourism
Global Health Exhibition – healthcare
Saudi Agriculture – agriculture and food industry.
