int. business-arab saudi

10 Introduction

Saudi Arabia has a very conservative business and cultural environment

Discerning readiness and a fundamental knowledge of the Saudi culture will determined

the success or failure of the business On the contrary it is vital to remember that a wealth

of Saudi executives and government officials are familiar with international culture and

customs Therefore they are comfortable with the Eastrsquos approach to business provided

respect is shown both ways For example body language the attention put on

relationships and proper attire are all fundamental components of Saudi etiquette

20 Enhancing Business in Saudi Arabia

21 Business Opportunities

Saudi Arabia is pursuing few policies such as economic diversification free

market enterprise structural shift from building the infrastructure to the

production of goods and services and the following increasing dependence on the

private sector as the major economic force Therefore Saudi Arabia invites

foreign companies to participate in the following industries which are important

to its current and future economic growth

Joint ventures on import and export oriented goods

Contribution of projects in technological progress the Saudi and

improvement of production methods and minimization costs of product through

the development of established factories

Projects that are directly related to the current economic development in

the Saudi which include but are not limited to the following

a) Industries utilising locally generous raw materials from petrochemical or

petroleum products

b) Food industries utilising locally generous agricultural products

c) Specialised industries in maintenance and the manufacturing of spare parts and

equipment

Almost all industrial joint ventures the management technical expertise and part

of equity resources are supplied by the foreign partners if they desired depending

1

on the arrangement of the collaboration On the Saudirsquos part they will provide

local skilled and unskilled labor local supervision and handling local business

contacts apart from taking part in the equity resources

The niche market in Saudi Arabia has numerous business opportunities for

Companies catering labor-saving equipment and services

Training services directly delivered or as part of a product package

Administration services either directly delivered or as part of a product

package

Most of the areas of health personnel and services

The following list of major growth areas in Saudi Arabian economy provides tips on

potential commercial opportunities in the Kingdom

Industry Most industrial activities in Saudi Arabia are carried out by the aggressive

Saudi private sector Saudi Arabian industrial sector structure is composed of three

apparent sub-sectors which are oil refining petrochemicals and other manufacturing

The main objectives of the Saudirsquos industrialization are

a) To decrease the Kingdomrsquos reliance on the export of crude oil as the major source

of income

b) To increase Saudi Arabian private sector partnership in the economic

development of the country

c) To create new job opportunities

d) To create an advanced industrial and technological base

Foreign investors are welcome to join Saudi Arabiarsquos private sector to invest in industries

that utilize modern technology and to broaden investment in import substitution and

export-oriented industries

22 The Saudi Arabian Market

Although Saudi Arabia is a country full of actual and potential business and

investment opportunities it should be recognised that the Saudi Arabian market is

highly competitive and business transactions take place on the basis of quality and

cost

The following factors expedite foreign investments in Saudi Arabia

2

Aggressive private sector respect for private ownership and free

entrepreneurial enthusiasm

Capital availability convertibility of the Saudi Riyal to hard currencies

with stability of exchange rates

Trade marks patents and copy rights protection

No controls on capital movement and reinstatement of profits

Advanced and excellent banking system availability

A liberal tax system called zakat

23 Establishing Business Contact

Foreign individuals or firms intend doing business in or wanting to export their

products to Saudi Arabia are required to look for a Saudi Arabian partner an

import agent or local representative in close adjacency to the Saudi Arabian

market This is the key to business success in Saudi Arabia and when a company

intends to do business there potential investors are recommended to use the

following channels of business contacts

The Saudi Chambers of Commerce and Industry located in the major urban

centers of the Kingdom should be contacted as a matter of priority to find a

representative distributor partner or agent in Saudi Arabia Names of various

products and Saudi importers of those products could also be obtained directly

from these Chambers Credibility reports about prospective Saudi business

partners are often available at these Chambers A list of Saudi Chambers of

Commerce and Industry with their addresses and telephone numbers is supplied

The Saudi Chambers of Commerce and Industry publish trade directories of their

respective business communities These can be obtained by contacting the

appropriate Chamber directly

Various advertising agencies newspapers and internet marketing services

providers in the Kingdom should be contacted to utilize their services for

advertising export products Additionally some of the major Chambers of

Commerce and Industry located in important urban centers have their own

periodicals and may publish upon request and for a fee information relating to

3

commercial offers Wanted advertisements and others all of these services

could be arranged for your company trough our own company by emailing our

marketing department with your specific requests also you are welcome to use our

Business Opportunity section and our Classifieds section

In addition to its role as a part of the Kingdoms diplomatic mission to any

foreign country the Commercial Office of the Royal Embassy of Saudi Arabia in

your country provides the business community with information about Saudi

business regulations and procedures and means of doing business in the

Kingdom It also facilitates commercial contacts sponsors Saudi business shows

exhibits and trade missions to the foreign countries participates in seminars

meetings conferences etc that promote Foreign-Saudi business and trade and

mediates commercial disputes between Foreign and Saudi companies if both

parties are willing to cooperate in order to reach an out-of-court amicable

solution

Foreign firms are encouraged to take advantage of the opportunity to attend trade

shows or to participate in Foreign trade missions to Saudi Arabia for American

companies The Office of the Near East at the US Department of Commerce

(14th Street and Constitution Ave NW Washington DC 20230 Tel (202)482-

870) offers market information identifies trade leads and promotes trade shows

and US trade missions to Saudi Arabia Information regarding US trade with

Saudi Arabia and related Department of Commerce services is available via the

automated Flash Fax hot line which may be accessed by dialing (202)482-1064

In addition the Departments District Offices provide a number of export

promotion services including the AgentDistributor Service which identifies

Saudi Arabian agentsdistributors who are capable of handling your business

matters in the Kingdom and the World Traders Data Report which evaluates

potential trading partners overseas

It is advisable to personally visit the Kingdom to establish direct contacts with the

Saudi business community In order to obtain a short visit business visa normally

valid for one to three months the nearest Saudi Arabian Royal Embassy or

Consulate should be contacted (A list of Saudi Arabian Embassy or Consulate

4

Offices in the US is provided and a list of Saudi Diplomatic Missions in the rest

of the world is provided

(Source wwwsaudia-onlinecom)

24 Penetrating market in Saudi Arabia

Food exporters from Malaysia have variety of ways in promoting their products in

Saudi Arabia depending types and nature of business and the duration involve

241 Distribution ChannelSaudi Arabia has a common and straightforward distribution structure

They import products from foreign companies and sell it in wholesale

through souqs (traditional market) to retailers or consumer directly It is

important to visits the market personally to evaluate the full scope and

opportunities to know the end-user and shortlist potential local

representative

Futhermore in tradition a large portion of food and beverages retail sales

have been made through these thousands of small grocery outlets

networking Purchased are made through major wholesalers local

manufacturers or importersdistributors There are some supermarkets

imported their requirements direct Importers usually have their own storage

facilities and handle all distribution servicing the three major trading and

business cities Jeddah Riyadh and Dammam

With Jeddah as the headquarters for most of Saudirsquos large importers and

distributors 80 per cent of the foods come through the Jeddah Islamic

Port

There are several ways where Malaysian Halal food companies can

distribute their food items

a) Commercial Agent

This is the simplest way where Malaysian can promote their food

to the Saudi Market With a local agent to sell the food marketing

will become more effective and some transaction in the business

may require a local presence

5

Malaysian food companies may consider this type of distribution

as all wholesale and retail is reserved exclusively and entities

wholly owned (100 per cent) by Saudi nationals Moreover only

Saudi companies can obtain an import license

Companies that import goods or practice as commercial agencies

must be registered with the Ministry of Commerce (MOC) and one

of the Saudi Chambers of Commerce and Industry

Malaysian companies may consider giving exclusive agency

agreement to a Saudi agent A Saudi agent may only be given right

of distributorship to cover certain regions or provinces in Saudi

Arabia for instance central (Riyadh) western (Jeddah) and eastern

(Dammam)

However Malaysian companies should be careful when appointing

commercial or trading agent in Saudi Arabia as local law provides

considerable protection to Saudi agents in the event of a dispute

and the process would be very lengthy The choice of a local agent

should be approached carefully as terminating or changing agents

could be a difficult process

Any termination or change of a commercial agent to a new one

must be fair to the old agent Under some circumstances the

failure to renew an agent may be considered a form of termination

Wrongfully terminating an agent may expose a company to

liability and may make it more difficult to obtain Saudi

government approval of a replacement agency agreement As a

result the termination section of any agency agreement must be

carefully spelled out and should generally provide for fair

treatment of all parties upon termination

6

Moreover Malaysian companies have to note that every Saudi

commercial agent is required to register their commercial agency

agreements with the MOC failing which can result in a fine Saudi

Arabia has an extensive set of legislation that governs the terms

and conditions of agency agreements Commercial agents can be

an agent andor distributor or franchisee

b Franchises

Malaysian Halal food exporters could also consider engaging

Saudi franchisees to promote their halal food products to Saudi

Arabia Franchising has become an increasingly popular form of

doing business in Saudi Arabia as it offers greater flexibility than

commercial agency agreements and does not require huge

resources compared to opening own branch office or making joint

venture

To establish a franchise in Saudi Arabia Malaysian Halal food

franchisor must select a franchisee and register the franchise with

the MOC The franchisor must be the original franchisor and may

not be a third-country subfranchise The parties may negotiate their

own franchise agreement

The franchise law has only been effective since 1992 Because

commercial agency law also applies to franchises many of the

same concerns may arise regarding the potential wrongful

termination of a franchisee In order to avoid later difficulties

Malaysian companies should consult an attorney familiar with

Saudi franchise law before entering into a franchise agreement or

terminating a franchisee

Issues such as intellectual property registration and protection also

need to be addressed by Malaysian Halal food franchisor

c Joint Ventures

The least way for Malaysian Halal food companies to consider

marketing their products to Saudi Arabia is through joint ventures

7

with Saudi partners in Halal food production Joint-venture in food

production involves larger commitments for Malaysian companies

particularly in capital investment but over the long-term it

qualifies for favorable tax treatment or other economic incentives

from the Saudi Government

b) Jjf

c)242 kxzjc

8

Joint ventures may take two forms Under a contractual joint venture a Malaysian firm simply signs a contract with a Saudi company and obtain an operating license from the Saudi Government (MOC) Alternatively Malaysian company may create a new limited liability company in Saudi Arabia Most foreign firms prefer to use this form of joint venture to establish a presence in Saudi Arabia as it allows them to engage in business activities However to form a limited liability company it is essential to involve Saudi citizens While Saudi participation is not a legal requirement the government strongly favours a company in which Saudi investors participate Companies with majority Saudi equity percentage would qualify for certain tax breaks and other investment incentives Pricing Pricing products competitively is of utmost important and it also applies to food items Saudi agents tend to request for the lowest possible price from their exporters so they could set for the highest possible profit margin In the past Saudi dealersretailers used to take a very high profit margin when pricing their products ranging from 120-150 But now due to stiffer competition in the market especially of competing food products from many other countries they have lowered their mark up to only 50-80 Malaysian Halal food companies may take note that the Saudi government has no control over pricing of products by local supermarket and retailers Therefore we could see much difference in prices for one product from one retailer to another in the market

Saudi Halal Food Standards And Import Regulation Saudi Arabian Standards Organization (SASO) is the authority which determines standards and labelling requirement for all types of food and food products imported into Saudi Arabia The requirements are different from one type of food to another like beef and buffalo (fresh chilled and frozen) luncheon meat canned corned beef and mutton canned sausage etc Each product has its own specification issued by SASO Export and Shipping Documentation All food and food products imported to Saudi Arabia must have the following documents Certificate of origin Commercial invoice stating the country of origin name of the carrier brandtrademark and number of goods along with a description including HS code weight and value Packing list Bill of lading (for sea freight) or Airway bill (for air freight) Steamship certificate (a document appended to bill of lading or airway bill) Insurance documents (if shipments are sent CIF or insured by exporter) Special documents (if applicable)

9

Some special documents which usually are required for food products include 1 Ingredients Certificate This certificate should include a comprehensive description of the exported food products (contents inclusive of animal fats and percentage of each ingredient) chemical data microbiological standards storage and life of product (date of manufacture and date of expiry) This certificate must be obtained from a local health department and must be signed by the authority 2 Consumer Protection Certificate This certificate confirms the healthiness of the various ingredients of the exported food products to Saudi Arabia and their safety and fitness for human consumption This certificate is similar to HACCP certificate and can be obtainable from the Ministry of Agriculture 3 Halal Certificate This certificate indicates that slaughtering has taken place in an officially licensed slaughterhouse according to Islamic procedures The Halal meat certificate should be legalized by a recognized Islamic Center (for Malaysia is JAKIM) in the exporting country 4 Health Certificate for Meat This certificate should indicate the date of slaughter kind of animal and average age in each shipment The Health Certificate is required for all exports to Saudi Arabia of all kinds of meats (including poultry and seafood) meat products livestock vegetables fruits and human blood attesting to the fact that they are free from pests andor disease 5 Health Certificate for Vegetable and Fruit This certificate must accompany all shipments of vegetables and fruits to Saudi Arabia certifying that such exports are free from pests insects and other agricultural diseases and that they have not been exposed to ionizing radiation (but can be treated with aluminum phosphide) This certificate usually can be obtained from the Ministry of Agriculture 6 Phytosanitary Certificate This certificate verifies that the seeds or grains to be exported to the Kingdom of Saudi Arabia are free from agricultural diseases It is also obtainable from the Ministry of Agriculture This certificate is required to accompany all shipments of flour rice grains agricultural seeds lumber plants and plant material Food Import Inspection Although Malaysian exporters are able to submit all the required documents as in order Saudi Arabia will still impose food sampling and lab testing on every shipment arrives at their Quality Control Department to ensure that the foods are fit for human consumption Those documents serve mainly to ease the inspection by the Department Usually all meat and poultry products entering Saudi Arabia are examined for Salmonellae for poultry volatile nitrogen which should be less 20mg100gm for beef and less than 50 gm100gm for poultry

10

Species identification tests for pork are routinely run on meat-based products All meat and meat-based that their ingredient contains genetically engineered animal products is banned from entering Saudi Arabia Import Clearance Malaysian exporters could advise their importers to provide the Arabic translated documents to customs agent in order to start the clearing process Containers are normally cleared in few days time provided all documents are in order and imported products meet Saudi standards and specifications In the event a food product is rejected by the Quality Control Laboratory at the port of entry the importer can submit an appeal to call for a re-test The appeal must be submitted in writing to the Director General of the Quality Control and Inspections Department of the Ministry of Commerce If an appeal is accepted the Director General orders a re-test by another laboratory usually King Faisal Specialist Hospital Laboratory If the second test verifies initial result the importer is ordered to re-export or destroy the product Malaysian exporters could kindly contact the Saudi agencies as shown in Annex II for further information on food import standards and labeling requirement Documents Authentication Malaysian exporters also need to note that additional documents may be required depending on the type of goods being shipped on certain requests from the Saudi importer or specified in the letter of credit (LC) or a contract The exporter is responsible for authenticating the certificate of origin the commercial invoice and any special documents Those documents must be certified in the following sequence (i) Notarized by a Notary Public and certified by a local exporting country Chamber of Commerce (ii) Certified by the Exporting country-Saudi Arabian Business Council (if available) In case of Malaysia it is certified by the consular office of the Ministry of Foreign Affairs) (iii) Legalized by the Saudi Embassy or any Saudi Consulate in the Exporting country (Saudi Embassy in Kuala Lumpur)

11 All documents (original or copies) should bear the handwritten signature of the

person issuing the document Facsimile signatures are not accepted

12 Important Business Regulations and Procedures

Saudi Arabia seek a liberal trade policy with no quantitative or price limitation for

importers However there are a number of regulations and procedures

administrating business and trade in the Kingdom and devotion thereto could be

very helpful for those intending to do business in Saudi Arabia

13 Leading Industries for Investment

Saudi Arabia looks for attractive capital-intensive and highly automated industries

and projects that are incorporate technology transfer

importsubstitution and transfer of management expertise

11

Top Ten Leading Industries for Investment

1 Electrical Power Systems

2 Water Resources Equipment

3 Oil and Gas Equipment and Services

4 Security and Safety Equipment

5 Chemical Production Machinery

6 Medical Equipment

7 Telecommunications Equipment and Services

8 Education and Training Services

9 Auto Parts and Service Equipment

10 Insurance Services Analysis on Foreign Investment in Saudi Arabia

14 PESTLE Analysis

The effect of the Saudi politics on the food and beverages industry

Since their establishment Saudi Arabia is ruled by the family of Al Saud by the

Islamic Law The family also upholds their support in economic growth and

development of the nations It is very challenging because the idea of

globalization does not appeal the Muslimrsquos fundamentalist hence this laid a fair

political risk of the regime On the other hand this political situation affects the

food and beverages industry positively because this industry remains the major

unconcealed method of entertainment among Saudis Furthermore the Kingdom

of Saudi Arabia is recognized as the leader of the Muslim world because Makkah

is the pilgrimage place for Muslim

Saudirsquos political situation is the main strength of the food and beverages

industry whereeating out becomes the main source of entertainment for most of

the population when there are no cinemas or night clubs This will give a good

effect on bottled drinks

The effect of the Saudi law and Regulation on the food and beverages

industry

12

Saudirsquos has taken a major step in reforming where they had apply for

membership of the World Trade Organisation (WTO) and consistently making

legal changes in meeting its requirements but still have doubts from the private

sectors toward the government due to the unnecessary bureaucratic practices and

inappropriate regulations For example a company must give a proof that they

have significant fund to invest not less that US$ 10000 and it will take almost six

months to register a company

On the other hand the consistent changes made have proved to be most

beneficiaries to those Saudi companies which are pursuing to grow through

alliances with foreign investors However Saudirsquos law requires foreign investors

to have a majority of control over the business with a Saudi partner and the Saudi

partner individual or company Basically it is very complex and financially risky

whether to open a small business or a major enterprise Saudirsquos government

should enhance these processes to encourage foreign investments

Saudi economicsrsquo on the food and beverages industry

Saudi has experience increase growth due to oil price spikes between the years

1999 to 2005 Associating this with the fact that the Kingdom has one of the

worlds fastest growing populations (35 per year) and investors faced with an

expanding market with good disposable income levels

Saudi Arabia being the fact that itrsquos a third world country it depends on imported

goods and technology the commitments from the government to the economic

expansion creates job opportunities for professional trained foreigners and depend

on them to fulfill the countrys ambitious development strategies HSBC Bank has

classified Saudi Arabia as the second in the wealth of professional trained

foreigners and is ranked twenty two among other countries in the tourism sector

Moreover with over five millions pilgrims yearly from all over the world coming

for Hajj and Ummrah the food and beverages industry is one of the major

Beneficiaries from such advantageTherefore in the mid-2008 a package of new

flexible visa rules were released allowing many groups from Europe to visit Saudi

13

Arabia with a group tourist visa which years before was unheard of This policy

has created a new segment for the Saudi food and beverages industry

In addition the large number of foreigners coming as workers or as tourist and

pilgrims with their ethnic background are considered the back bone for the food

and beverages industry

The effect the social characteristics on the food and beverages industry

As restaurant industry booming in Saudi Arabia the food and beverages have a

lot to offer As dining out became a habit among all social classes in Saudi Arabia

with the lack of other entertainment venues due to religious issues This social

characteristic has bloom and flourishes effect on the food and beverages industry

in Saudi Arabia

Technology and the environment effect of the food and beverages industry

These are the last of the two macro marketing environment forces

In Saudi Arabia Technology in the food amp beverages industry is not limited to

basic kitchen appliances and tools especially in manufacturing area

In Saudi Arabia there is no compelling awareness from the government or most of

the population to the environmental issues

Saudirsquos practice recycling and green energy are mostly internationally franchise

applying their own corporate policy as part of their responsibility

15 SWOT Analysis Food Industries

Strengths 10487071048707Saudi Arabia boasts the Gulf regionrsquos largest dairy industry10487071048707With a youthful population of more than 28mn which is increasingly susceptible to Westernconsumer trends Saudi Arabia is a good regional point of entry for investors seeking longtermvolume growth10487071048707Like the rest of its Gulf peers Saudi Arabia is home to a vast expatriate population able toconsume high-value packaged and processed foods10487071048707Saudi Arabia is a member of the Gulf Cooperation Council common market and provides alower-cost export base than some neighbouring countries10487071048707The Middle East and North Africa political crisis has possibly made Saudi Arabia seem

14

more secure as an investment destination relative to some other countries in the regionWeaknesses 10487071048707Saudi consumers are more price conscious than those in the UAE Kuwait or Qatar10487071048707Saudi Arabia has a saturated dairy industry with little room for new dairy manufacturers toenter10487071048707The private sectorrsquos dependence on expatriate labour is a burden for potential investors10487071048707Food manufacturers are highly dependent on imports for ingredients due to the countryrsquossevere agricultural shortcomingsOpportunities 10487071048707Demand for processed and packaged goods among Saudi consumers is set to continue

20 increasing as tastes and preferences evolve and lifestyles become busier30 10487071048707Long-term opportunities for premiumisation remain across all segments of the food40 industry50 10487071048707Rising health consciousness has significantly increased opportunities for food producers60 that are able to introduce lsquohealthyrsquo or lsquolightrsquo options70 10487071048707Demand for organic foods is steadily increasing80 Threats 10487071048707Demand for higher-value foods fell in 2009 and despite recent improvements

consumer90 confidence remains way off pre-2009 highs100 10487071048707Poverty levels remain quite high despite the countryrsquos oil wealth and generous government110 handouts

111 Porters 5 Forces Analysis

Threat of New Entrants

The food and beverages industry is the easiest to enter basically as barriers to enter this

industry are mainly in the bureaucratic regulation that might take time but this is not

considered a serious barrier

Power of Suppliers

Saudi still depend on imported drinks because manufacturing has not been fully utilized

The import of food and beverages are estimated to exceed $7 billion annually and the

Saudirsquos remains the leading market in the region excluding dates and milk There a large

numbers of suppliers and prices are controlled by the government

Power of Buyers

Saudi buyers are always looking for the best quality and price Drinking water is essential

and people are always ready to new products in the market There arevariety of products

to choose from mineral water to canned drinks with intense competition lead buyers

seeks lower prices and better services

15

Availability of Substitutes

Substitutes for the food and beverages industry in general include alternative form of

entertainment like cinemas or night club Most mineral water and canned drinks are

showing positive growth and are ever present in the food and beverages sector

Competitive Rivalry

Even though there are no figures revealing the size of this critical market a high industry

growth rate is aggravating the competitive rivalry the presence of so many available

substitutes are a particularly challenging situation for some firms

Conclusion and recommendation

After carrying the above analysis we concluded with the following findings and

recommendations to Clear Mineral WaterSdn Bhd considering entering the food and

beverages industry in Saudi Arabia

The strength of the food and beverages industry lies on its ability to attract huge capital

and labor with it openness to the world market The industry is showing compelling

growth faster than anywhere in the world

The political economic and low labour market plus other socio-cultural factors have

contributed to this fast growth industry

The economical and political outlook for food and beverages industry in Saudi Arabia is

very promising government shows guarantee and support to economic growth which is

reflected in its double-digit increase in government consumptions on many aspects that

are related to the restaurant business

Furthermore currently the government economic plan affirms in strengthening the

growing private sector business opportunities with focus on increasing the national and

foreign investments

16

One of the most promising aspects for the food and beverages industry is the social

changes in Saudi Arabia For example Saudirsquos female role has dramatically changing in

the social and economic life Saudirsquos women are now allowed to work and this has huge

impact on the purchasing power and certainly a change in womenrsquos lifestyle that is

favorable to the food and beverages industry

On the other hand the legal process in Saudi is quite complex and financially risky

whether you are opening a small business or a major enterprise Saudirsquos government

should modify these processes to encourage further foreign investments Also the Saudi

food and beverages industry is weak in economies of scale and labor productivity

120 Setting Up Clear Mineral WaterSdn Bhd Branch at Saudi Arabia

Clean drinking water is among the most outstanding natural resources in the

world Its value is distinguished by the laws of supply and demand which are effected by

economic geography and social From our research and development findings the Clear

Mineral WaterSdn Bhd has decided to undertake a direct foreign investment in Saudi

Arabia

This project will pursue the profitable opportunities in developing and implementing a

desalination plant in DubaiSaudi Arabia which is located next to the Persian Gulf

121 Company Background

For the purpose of this assignment the company background of Malee Mineral

Water Sdn Bhd has been chosen as the sample

CLEAR MINERAL WATER SDN BHD was established in 2007 with a goal to

provide pure natural mineral water together with efficient and prompt services to

our consumers We work hard to guarantee our product quality and to ensure our

customers enjoy the best services and products they can have We are passionate

about bringing pure and fresh water to the consumers and the public

17

The company is situated in the middle of the tropical rainforest in Mersing

District of Johor surrounded by the great nature The production facility is 10

kilometers away from the nearest town hence it is virtually free from pollutions

and contaminations from the urban jungle Due to our strategic location our

reliable sources of water are of the purest Our area spans across a region of 100

acres approximately 90 of which is reserved for underground water extraction

In our effort to protect our water sources the land is well preserved and free from

any industrial activity

We began our business with the production of pure drinking water using the

Reverse Osmosis method With the aids of advanced technology and skilled

workforce we are able to produce clean and crystal clear drinking water while

maintaining the highest standards In 2011 the company then ventured into

natural mineral water after obtaining the mineral water production licence

approved by the Ministry of Health Malaysia Henceforth we have been focusing

our productions on drinking water and more importantly pure natural mineral

water

CLEAR MINERAL WATER is growing at a remarkable rate since its start-up

From our origin as a small drinking water provider in 2008 in just a few years

time we have grown from strength to strength and now supplying both types of

water in the local as well as overseas markets We continue to seek ways to

progress forward and aim to become one of the leading bottled water

manufacturers in Malaysia

Our production plant is closely situated at our water sources which is why we

have easy access to the freshest water from deep below the underground Our

production plant comprises a treatment facility plastic production facility a

bottling plant and a storage hub

Started with one production line in 2008 we have been introducing an extra

production line every year in the following 3 years in our bottling plant Each

18

bottle that comes out from the bottling plant is examined and closely screened by

our well-trained quality control team

Water Treatment Facility

Our water treatment division utilizes advance filtration systems imported from

abroad We use reverse osmosis system to produce pure drinking water The water

goes through intense and complex filtration before being transferred to the filling

and bottling machines for production

As for our natural mineral water raw water is extracted from our well-preserved

water sources and is treated through different stages of the purification system

The quality of water is well maintained and supervised from time to time We

place countless amounts of efforts in assuring good quality of water

Plastic Division

We have heavily invested in the plastic division which manufactures our own

preforms and water bottles All bottles and preforms produced are strictly

inspected by our qualified engineers We have taken every precaution in the

production of our PET bottles to ensure that they do not affect the taste of water

when filled

Bottling Plant

Our advance bottling and filling machines are imported from abroad and fully

operational Each machine has a designated operator to over watch the entire

functions of the machine We improve our productivity by continuously searching

and investing in new technology to meet the ever-increasing demand in the

market

(Source httpwwwmaleecommy)

122 Clear Mineral Water Business Plan in Saudi Arabia

19

The plant will be called MySaudi desalination plant and will provide the highest

quality bottled drinking water to the Eastern and Central Provinces In order to avoid any

complication in implementing the MySaudiprojectClear Mineral WaterSdn Bhd will

enter into a joint venture with Amex Distributing Company In entering into a joint

venture Clear Mineral WaterSdn Bhd agrees to give up 30 share ownership in the

MySaudi project

The decision to enter into a direct foreign investment was made on the basis that

Clear Mineral WaterSdn Bhd wanted to maintain its control over operations avoiding

transport costs and trade limitations This also will allow for a long-term investment that

would obtain fixed assets such as equipment land and buildings

Most importantly current water supplies are not meeting consumer standard

This is critical because Saudi Arabia consumers have strong buying power and are

considered as being a young booming population with 60 of its population under the

age of 25 Another important aspect of Saudi Arabia is that it has a modern infrastructure

and has been a secure and stable market for the last 15 years

In order to accomplish this task with approval and support from Saudi Arabian

government a joint venture with Amex was necessarily the best avenue Saudi

government tends to favourably look upon a joint venture with Saudi companies because

it creates jobs and attract additional foreign investment Saudi Arabiarsquos government has

granted some incentive for foreign investors such as exemption on custom tax low price

of utilities and natural resources duty free capital equipment and most importantly

government support in obtaining information and statistical data needed for this project

Furthermore the Saudi government is readily to support a joint venture with a no

tariff and low cost financing Another advantage is there will be no personal income tax

or limitations on movement of finds which is essential in currencies converting Although

Clear Mineral WaterSdn Bhd gave up 30 share interest in the MySaudi project it gains the

support of the Saudi Government and incentives that are crucial for a swift beginning

After an in-depth research on which corporation to establish a joint venture Amex

Distribution Co was ideally chosen due to its reputable establishment for 18 years Amex

Distribution Co has a solid group of management staff which has achieve in generating $100

million in sales in year 2013 A joint venture is vital for Clear Mineral WaterSdn Bhd

20

because it not only lightens the burden of distribution cost and concerns but also acquires

the knowledge and expertise in host country business practices The knowledge and

expertise shall prove priceless in developing and maintaining market shares

The marketing department of Clear Mineral Water and Amex has decided that at

the first stage the target market will be the Central Regions which make up a third of Saui

Arabia Cities at Central Province are located near the Persian Gulf where

MySaudidesalination plant will be built The Central Province has an established modern

infrastructure capable of handling the demands of the MySAudi project In enhancing the

distribution networks there are over 10 industrilised business which are centrally

located with many railroad are being build

Clear Mineral Water has decided to packagethe drinks in sizes of 16oz 20oz and

1 gallon plastic bottles Saudi Arabia marketing research has shown that the public is

very approachable to bright labels and Arab and English language Therefore Clear

Mineral Waterrsquos bottles will contain desalinated water and will display the mission

statement brand name and nutritional data Clear Mineral Water plastic bottles will have

a bluish tint with a sky blue label Clear Mineral Water marketing team has assuredthat

this is the most appealing color to Saudi consumers

The marketing media in Saudi Arabia that will be used are printing such as

newspaper and magazines electronic such as billboards television and radio online such

as website and exhibit centers However the majority of the advertising will be in

newspaper such as Al-Shark and Al-Hajat with circulation of about 70000 to 100000

Advertising in television is becoming popular and mostly done by CNN Orbit

Communications and the Middle East Broadcasting Corporation (MBC) MySAudi will

launch a website wwwmysaudiwatercom which can be used as our marketing and

information center

In deciding of the price Clear Mineral Water has come up with a price that will

attract the price sensitive consumers in Saudi An introductory price of 10 less that the

average price from our competitors (refer Table 1) will be offered For those stores that

carry Clear Mineral Water bottled water will be offered vendor discounts However price

will be raise gradually which will not scare the customers as Saudirsquos customers are very

price sensitive and not brand loyal

21

Amex our partner will be handling all distribution of the bottled water which will

be packed in 50 and 100 according to size Amex has fleet consist of trucks trains and

boats that will deliver our water to various cities Amex will also offer individual

customers door to door delivery of gallons of bottled water

There are several issues that needed to be addressed when it comes to legal terms

for this joint venture Saudi Arabia has strict guidelines to follow on labour force

including the percentage of Clear Mineral Water company must have to break ground

there The employment must consist of 75 Saudi Nationals or if unavailable there must

be at least 5 of total employment Clear Mineral Water would require license for

twenty-five years with protected trademark for up to 10 years As per labour force

Islamic Law is the overall rule when it comes to the hiring and length of time of

employment Firing an employee for a wrong reason may result in employee suing the

company

Being a Malaysia and a Muslim country Clear Mineral Water understands the

social concern in Saudi Arabia There are some similar practices when doing business in

Saudi Arabia such as in Saudi custom it is normal for a Saudi to walk into a room and

individually greet and shake hands with every person The same way with Malaysian a

Saudi addresses another is by their title and first name Traditionally Arabs use their

right hand for all public functions such as shaking hands eating drinking and passing

objects to another person

22

Table 1 The established food and drinks company in Saudi Arabia

23

130 Conclusion

Insufficiency of water threatens economic development viable human livelihoods and

environmental quality in countries and regions around the world Over the last 20-30

years most of the edible water demands have been met through desalinised water Saudi

Arabia has become the forerunners in desalination technology producing over 24 million

cubic meters (MCM) of water per day (Lee 2010) In February 2013 Saline Water

Conversion Corp (SWCC) announced its $64 billion to build the worldrsquos largest water

desalination plant in Rabigh on Saudi Arabiarsquos Red Sea coast (Bloomberg 2013) This is

the latest initiative in Saudi Arabia to enlarge its water desalination capacity using high-

tech green technology

The Clear Water project will constitutes an important part of the major ongoing

effort to decrease oil use in water production in this oil-rich nation According to Lee

(2010) until recently 90 percent of all the water desalination plants in Saudi Arabia ran

on oil or natural gas as the source of energy which is economically

unsoundFurthermore around half the operating cost of a desalination plant comes from

energy use and on current trends Saudi Arabia and many other countries in the region

would consume most of the oil they produce on desalination by 2050 (Yapp 2012)

The new Clear Water plant will be develop by the Saudi government agency

responsible for making seawater edible in Saudirsquos Kingdom The project is expected to be

completed by 2019 It will be the one of the largest desalinated water in Saudi Arabia

Moreover the Clear Water Sdn Bhd and the Amex Corp signed a commercial

agreement for research collaboration evaluating the innovative desalination technologies

performance in the Gulfs unique environment including their capability in effectively

handling factors such as high salinity and high temperatures In addition Clear Water

SdnBhd will enterinto a comprehensive RampD collaboration agreement with an initial

focus on water and water treatment technologies

With Saudi Arabia population set to rise to over 60 million by 2050 and people

incomes expected to increase the food and beverages sector faces great opportunities to

feed this growth Furthermore given the large use of drinking water and other beverages

24

these forces challenge the management of the Saudirsquos resources sustainable food and

water for over 60 million people The investment in drinking water productions will need

to undergo remarkable transformation surrounding both the development of systems for

advanced technologies as well as consolidating the balance between domestic and

international collaboration in a continuous and economically viable way

25

Reference

1- A-M M Abdel-Rahman The Determinants of Foreign Direct Investment

in the Kingdom of Saudi Arabia September 2002 Department of

Economics King Saud University

2- httpwwwfoodnavigatorcomRegionsMiddle-EastSaudi-food-and-

beverage-consumption-to-grow-by-5-in-2014

3- Jones Langasalle wwwAMEinfocom ParitoshKashyapPage 5

4- (2015 02) Saudi Arabia Furniture Market Analysis StudyModecom

Retrieved 3rd February 2015 from

httpwwwstudymodecomessaysSaudi-Arabia-Furniture-Market-

Analysis-769491html

5- Saudi Arabia Food and Drink Report wwwbusinessmonitorcom

6- wwwmaleecommy

7- wwwsaudi-onlinecom

26


Plastic Division

Bottling Plant

on the arrangement of the collaboration On the Saudirsquos part they will provide

local skilled and unskilled labor local supervision and handling local business

contacts apart from taking part in the equity resources

The niche market in Saudi Arabia has numerous business opportunities for

Companies catering labor-saving equipment and services

Training services directly delivered or as part of a product package

Administration services either directly delivered or as part of a product

package

Most of the areas of health personnel and services

The following list of major growth areas in Saudi Arabian economy provides tips on

potential commercial opportunities in the Kingdom

Industry Most industrial activities in Saudi Arabia are carried out by the aggressive

Saudi private sector Saudi Arabian industrial sector structure is composed of three

apparent sub-sectors which are oil refining petrochemicals and other manufacturing

The main objectives of the Saudirsquos industrialization are

a) To decrease the Kingdomrsquos reliance on the export of crude oil as the major source

of income

b) To increase Saudi Arabian private sector partnership in the economic

development of the country

c) To create new job opportunities

d) To create an advanced industrial and technological base

Foreign investors are welcome to join Saudi Arabiarsquos private sector to invest in industries

that utilize modern technology and to broaden investment in import substitution and

export-oriented industries

22 The Saudi Arabian Market

Although Saudi Arabia is a country full of actual and potential business and

investment opportunities it should be recognised that the Saudi Arabian market is

highly competitive and business transactions take place on the basis of quality and

cost

The following factors expedite foreign investments in Saudi Arabia

2































3














solution


















4












representative










Port



a) Commercial Agent





5












(Dammam)
















6







b Franchises







venture















c Joint Ventures



7






b) Jjf

c)242 kxzjc

8



9


10













11







6 Medical Equipment





14 PESTLE Analysis
















industry

12






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant































3














solution


















4












representative










Port



a) Commercial Agent





5












(Dammam)
















6







b Franchises







venture















c Joint Ventures



7






b) Jjf

c)242 kxzjc

8



9


10













11







6 Medical Equipment





14 PESTLE Analysis
















industry

12






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant














solution


















4












representative










Port



a) Commercial Agent





5












(Dammam)
















6







b Franchises







venture















c Joint Ventures



7






b) Jjf

c)242 kxzjc

8



9


10













11







6 Medical Equipment





14 PESTLE Analysis
















industry

12






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant












representative










Port



a) Commercial Agent





5












(Dammam)
















6







b Franchises







venture















c Joint Ventures



7






b) Jjf

c)242 kxzjc

8



9


10













11







6 Medical Equipment





14 PESTLE Analysis
















industry

12






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference






3- Jones Langasalle wwwAMEinfocom ParitoshKashyap




Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant












(Dammam)
















6







b Franchises







venture















c Joint Ventures



7






b) Jjf

c)242 kxzjc

8



9


10













11







6 Medical Equipment





14 PESTLE Analysis
















industry

12






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant







b Franchises







venture















c Joint Ventures



7






b) Jjf

c)242 kxzjc

8



9


10













11







6 Medical Equipment





14 PESTLE Analysis
















industry

12






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant






b) Jjf

c)242 kxzjc

8



9


10













11







6 Medical Equipment





14 PESTLE Analysis
















industry

12






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant



9


10













11







6 Medical Equipment





14 PESTLE Analysis
















industry

12






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant


10













11







6 Medical Equipment





14 PESTLE Analysis
















industry

12






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant













11







6 Medical Equipment





14 PESTLE Analysis
















industry

12






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant







6 Medical Equipment





14 PESTLE Analysis
















industry

12






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant






























13











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant











in Saudi Arabia











14









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant









Power of Suppliers





Power of Buyers





15





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant





Competitive Rivalry



















foreign investments

16















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant















Arabia











17
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant
















water













18












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant












Plastic Division





when filled

Bottling Plant





market



19






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant






MySaudi project


























20

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant

























information center







21













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant













company








22


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant


23

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant

130 Conclusion





























24






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant






25

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant

Reference










Analysis-769491html


6- wwwmaleecommy


26


Plastic Division

Bottling Plant

int. business-arab saudi

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