Submitted to:
GUJARAT TECHNOLOGICAL UNIVERSITY, AHMEDABAD
Institute:
N.R.VEKARIA INSTITUTE OF BUSINESS MANAGEMENT STUDIES,
JUNAGADH.
CONTENT
1.1DEMOGRAPHIC PROFILE OF THE COUNTRY
We the students of N. R. Vekaria Institute of Business Management Studies,
have gone through research upon “Saudi Arabia”, in which we have studied
about the contemporary demographic, economic, industry tread and
commerce, political, social, technological, environmental and legal scenario.
We found that population growth of the country, economic growth, literacy
rate, death rate, birth rate, religion, language, festivals and many more things.
Every nation has its own history or etymology. This Global Country
Study Report would provide immense information about Saudi Arabia’s
current condition.
HISTORY:-
Saudi Arabia is not only home land of Arab peoples, it is thought that
the first Arab originated on the Arabian Peninsula, but also the home land of
Islam, the world’s second largest religion Muhammad found Islam there, and it
is located in two holy places of pilgrimage Mecca and Medina.
The kingdom of Saudi Arabia is entirely the creation of king Abdul Aziz
Bin Saud (1882 – 1953). A descendant of Wahhabi leaders, he seized Riyadh
in 1901 and set himself as leader of the Arab nationalist movement. The
current king of Saudi Arabia is Abdullah.
POPULATION:-
The US Bureau of the census based on statistic from population
censuses, has given estimated information about the population of Saudi
Arabia. If you look at the chart of the population of Saudi Arabia can find that
the demography is burgeon every year. In 2000 it was about 22,023,510 but in
the last data shown that it grown at 26,534,500.Saudi Arabia’s population is
more than Riyadh, Mecca, medina and other native cities. The population of
major cities such as, Riyadh the capital of Saudi Arabia 4.725 million, Jeddah
30234 million, Mecca 10484 million, whereas, Medina 1.104 million. The
population of the capital and up to cities defined urban agglomeration with
population at least 7,50,000 people. According to the World Bank’s report the
refugee population by territory of origin in Saudi Arabia was last approximately
at 667 in 2010.In total population 90% are Arab, 10% Afro-Asian. Health
expenditure was 5.6 % in 2008
Year Population (July est.)
2012 26,534,500
2011 26,131,700
2010 25,731,780
2009 28,686,630
2008 28,146,660
2007 27,601,040
2006 27,019,730
2005 26,417,600
2004 25,795,940
2003 24,293,840
LITERACY:-
There is no universal definition of literacy according to most of the
experts and educationists a person who has ability to read and write they call
him\her literate. In the Saudi Arabia majority population is comprised of Arab.
They have whopping amount of money because they are biggest oil producing
country but they never think about educate themselves and their children as
well.
According to United Nations Educational, Scientific and Cultural
Organization (UNESCO) Institute for statistics provided this information. The
adult female literacy was 80.2 and adult male 89.5 in 2009. Primary
completion ratio of boys 86.9 and girls 89.5, total 88.2. On top of that if we
look at the total net enrolment ratio in primary education of both gender 86.9
and particular boys 87.7 and girls 85.1 in 2009. They most probably familiar
with one language, it is Arabic. They do not know other language especially
English. They follow one religion Muslim. Education expenditure was 5% of
GDP in 2009.
� RELIGION:-
Religion is sacrosanct thing, everyone have faith, trust and conviction
upon it. In the Saudi Arabia Islam is undoubtedly main religion. 96% of Arab
people follow Islam, Christianity is 3.5% of the total population and Hinduism
is practiced by 0.6 % of total population. On top of that followers of Baha’i are
0.1 % of the total population.
Most of the Saudi Arabian people are followers of Sunni Sect. The
major religion destination of Saudi Arabia includes Kaba and Black Stone in
Mecca, Mount Arafat, Quba, Mosque in Medina, Al- Masjid al- Haram in
Mecca.
1.2 ECONOMIC OVER VIEW OF SAUDI ARABIA
The petroleum sector accounts for roughly 45% of budget revenues,
55% of GDP, and 90% of export earnings. About 40% of GDP comes from the
private sector. Roughly five and a half million foreign workers play an
important role in the Saudi economy, for example, in the oil and service
sectors. The government is encouraging private sector growth to lessen the
kingdom's dependence on oil and increase employment opportunities for the
swelling Saudi population.
The government has begun to permit private sector and foreign
investor participation in the power generation and telecom sectors. As part of
its effort to attract foreign investment and diversify the economy, Saudi Arabia
acceded to the WTO in 2005 after many years of negotiations. With high oil
revenues enabling the government to post large budget surpluses, Riyadh has
been able to substantially boost spending on job training and education,
infrastructure development, and government salaries.
DEFINITION:
This entry briefly describes the type of economy, including the degree
of market orientation, the level of economic development, the most important
natural resources, and the unique areas of specialization. It also characterizes
major economic events and policy changes in the most recent 12 months and
may include a statement about one or two key future macroeconomic trends.
� GEOGRAPHY
• Full country name: Kingdom of Saudi Arabia
• Population: 25.7 million (The World Fact book, 2010)
• Border countries: Jordan, Iraq, Qatar, UAE, Oman, Yemen, Kuwait.
• Climate: hot and humid with desert conditions, although winter
temperatures in the northern regions can fall below freezing.
• Terrain: mostly barren and uninhabited, includes the largest sand desert
in the world, mountains and salt flats, gravel plains and sand dunes.
• Natural hazards: sand and dust storms. Saudi Arabia has numerous
volcanoes including Harrat Rahat, Harrat Khaybar, Harrat Lunayyir and
Jabal Yar, however they have seen little activity in the last few centuries.
1.3 OVERVIEW OF INDUSTRIES TRADE AND COMMERCE IN THE SAUDI ARABIA
Saudi Arabia permitted only to Saudi and Gulf Cooperation Council
nationals to engage in trading activities and to register as commercial agents.
To attract more foreign investors to do business in the country, Saudi Arabia
eased recently its restrictions to allowed foreign individuals and companies to
engage in trading activities through a joint venture partnership with a Saudi
individual or entity. Since its adhesion to the World Trade Organization
(WTO), Saudi Arabia has liberalized the wholesale, retail, and franchise
sectors.
Saudi Arabia allows foreign investors to establish joint ventures and
retain a 51% share. The foreign partner’s capital requirement is set at USD
5.3 million and his equity share can be increased to 75% after 3 years from
the contract date. For industrial activities, foreign investors are allowed to
establish a 100% foreign company and can also trade in the products they
manufacture. A Saudi joint-venture partner is a requirement for any entity or
individual to practice individual professions, such as law, medicine, accounting
and financial services, architect and engineers, and other similar professions.
� INDUSTRIES IN SAUDI ARABIA
1. Oil and Gas
2. Financial Service
3. Engineering and construction services
4. Insurance Sector.
5. Food and Beverage
6. Electrical Power Systems
7. Education and training
1.4 OVERVIEW OF DIFFERENT ECONOMIC SECTORES OF SAUDI ARABIA
Saudi Arabia, despite moves to diversify its economy, is still almost
entirely dependent upon oil. Petroleum sales provide the kingdom with 90
percent of its export earnings and 75 percent of its annual budget revenues.
Saudi Arabia is a founding member of the Organization of Petroleum
Exporting Countries (OPEC) which was founded in Baghdad, Iraq, in
September of 1960 to unify and coordinate members' petroleum prices.
In 1998, industry, which included oil production, contributed 47 percent
of GDP and employed 25 percent of the total workforce of 7 million.
Agriculture contributed just 6 percent of GDP and employed 12 percent of the
workforce, while the services sector contributed another 47 percent and
employed 63 percent of the workforce.
Economy of Saudi Arabia
100 Saudi Arabia Riyal Note
Currency Saudi Arabia Riyal
(SAR)
Fiscal year Calendar year
� Economy of Saudi Arabia:-
Statistics Percentage/Amount
GDP Growth Rate 3.2%
Inflation Rate 5 %
Unemployment Rate 10.9%
Reserve of foreign Exchange and gold $556.2 billion
1.6 PRESNT TRADE RELATIONS AND BUSINESS VOLUME OF DIFFERENT PRODUCTS WITH INDIA
India and Saudi Arabia enjoy cordial and friendly relations reflecting
centuries old economic and socio-cultural ties. These ties increased many
folds following the visit of the Custodian of Two Holy Mosques King Abdullah
to India in 2006, and the visit of HE Prime Minister of India to the Kingdom in
2010. However, there is huge scope for expansion of economic and
commercial ties between India and Saudi Arabia.
� Economic and Commercial Relations
India is the 5th largest market for Saudi exports, while Saudi Arabia is
the 3rd largest market in the world for Indian import. During the year,2010-
2011 bilateral trade between India and Saudi Arabia reached more than
US$25 billion.
The import of crude oil by India forms a major component of bilateral
trade with Saudi Arabia being India’s largest supplier of crude oil, accounting
for almost one-fifth of its needs.
India main export to Saudi Arabia cathodes and sections of cathodes
of refined copper, benzene, floating docks, basmati /non-basmati rice, pipeline
for oil and gas, meat, compressors used in refrigerating equipment, tea,
manmade yarn, fabrics, made-ups, cotton yarn, primary and semi-finished iron
and steel, chemicals, plastic & linoleum products, machinery and instruments,
edible fruits and nuts, meat products etc.
India imports from Saudi Arabia are petroleum and petrochemical
products. Saudi Arabia is the largest supplier of crude oil to India. It provides
around a quarter of India’s crude imports.
� India-Saudi Arabia Bilateral Trade:-
Financial year
(April-March)
India’s import From
Saudi Arabia
($)billion
India’s Exports
to Saudi Arabia
($) billion
Total
Trade($)
billion
2005-06 1632.34 1809.77 3442.11
2006-07 13373.44 2586.15 15959.59
2007-08 19,470.30 3,711.16 23,181,46
2008-09 19,972.74 5,110,38 25,083,12
2009-10 17,097.57 3,907,00 21,004.57
2010-11 20,385.28 5,227.19 25,612.46
2011-12 (Apr-
Dec)
23,048.30 3,935.82 26,984.68
1.7 PESTEL ANALYSIS
PESTEL analysis is concerned with external environmental
influences on a business. The acronym stands for the Political, Economical,
Social and Technological issues that could affect the strategic development of
a business.
Identifying PESTEL influences is a useful way of summarizing the
external environment in which a business operates. However, it must be
followed up by consideration of how a business should respond to these
influences.
The table below lists some possible factors that could indicate important
environmental influences for a business under the PESTLE headings:
Political
Factors
The Kingdom of Saudi Arabia is a monarch ruled by King
Abdullah. The country is governed by Islamic laws. The
country is politically stable and undergoing political
reforms though in a slower pace. Local body elections
were held in 2005 for the first time and more reforms are
expected in the coming years
Economical
Factors
Saudi Arabian economy is mostly controlled by the government,
followed by the formation of Supreme Economic Council in
but private participation is on the increase 1999. The
economy that is highly dependent on the oil sector has
started diversifying into other sectors. Six new economic
cities are being built across Saudi Arabia
Technological
Factors
Currently, Saudi Arabia is becoming a technological
focused. The spending on connectivity and human
resources has been increased. With the growing private
sector, systems with advanced and innovative technologies
are being installed. Efforts are also being made to make IT
an integral part of the Saudi Arabian educational system
Social Factors The country’s population has increased from 5 million to
28 million in less than 30 years. The country continues to
import talented individuals and non-Saudis account for one-
fourth of the population. The industry and services sector
account for 88 per cent of the labor force. Technical
educationis emphasized more to keep pace with the global
technological changes.
POLITICAL If ever there was a perfect example of a 21st century absolute monarchy it would be Saudi Arabia. The king is the absolute ruler of the country and he is aided by a largely familial team of advisors. All the major important positions in the Saudi government are occupied by members of the Al Saud family, a formidable dynasty comprising of nearly 7,000 individuals. There is a Council of Ministers that is responsible for presenting legislation to the king; that performs like the Roman Senate during the reign of the Caesars. In other words, a toothless Legislative branch of government that is subservient to the Executive. In any case most members of the Council have individual ties to the royal family, therefore represent the king’s interests. Succession is decided by the king as he appoints a Crown Prince who is his direct heir and a Deputy Prime Minister who assumes power if the King and Prince are ill-disposed to rule.
The politics of Saudi Arabia takes place in the context of an absolute
monarchy founded upon the tenets of Islam. The King of Saudi Arabia is both
head of state and the head of government, but decisions are, to a large
extent, made on the basis of consultation among the senior princes of the
royal family and the religious establishment. The Qur'an is declared to be the
constitution of the country, which is governed on the basis of Islamic law
(Shari'a).
Government is dominated by the vast royal family, the Al Saud, which
has often been divided by internal disputes and into factions. The members of
the family are the principle political actors. Political participation outside of the
royal family is limited, but there has been pressure for some time to broaden
participation. In recent years, there has been a rise in Islamist activism, which
has also resulted in Islamist terrorism.
.3 Political changes in Saudi Arabia
Ashfaqur Rahman
The seismic political changes taking place in the Middle East today seem
to have little effect on Saudi Arabia. There is no discernible opposition in that
country. Nor is there any cry for political change or for economic reforms. So
what is happening there?
Saudi Arabia is a kingdom at the centre of the Middle-East and occupies
a strategic position in the global scheme of things. US is dependent on its oil
resources so is Europe and some major Asian countries.
Yes, Saudi Arabia is a kingdom and a strong monarchy. Its legitimacy
depends on governance based on a strict interpretation of Islam.
The present king, His Majesty King Abdullah bin Abd ul Aziz who is in his
late eighties, leads a government which symbolises The Political System
of Saudi Arabia
ENVIRONMENTAL
Article 32 of the Royal Decree on the “Basic System of Governance” has
declared that the Government of the Custodian of the Two Holy Mosques is
committed “to protect and develop the environment and prevent pollution”. This has
created a mandate to translate this important message into concrete actions on the
policy, strategy, and program and project level.
In recognition of the importance of the environment at the national and
international level, the environmental policy framework of the Kingdom was
restructured by the establishment of the Ministerial Committee on Environment
(MCE) under the chairmanship of HRH the Second Deputy Premier and Minister of
Defence and Aviation, and the Inspector General. The MCE is the highest
environmental authority in the Kingdom and has been designed to address both policy
and implementation issues. The MCE is represented by the Ministers of Agriculture
and Water, Industry and Electricity, Finance and National Economy, Foreign Affairs,
Health, Interior, Municipal and Rural Affairs, and Petroleum and Mineral Resources
as well as the president of King Abdul-Aziz City for Science and Technology
(KACST) and the president of MEPA who has been designated as the Secretary
General of MCE. The MCE is assisted by a preparatory committee chaired by HH
Assistant to HRH the Second Deputy Premier and Minister of Defence and Aviation,
and the Inspector General.
ECOLOGICAL FACTORS
Ecological mainly included on the bases of Weather, Climate & Climatical change, Natural environment, Economic development & pollution, Green marketing, Environmental pollution Act, Increase in pollution and role of government, Environment protection Act. 47
Ecological concepts such as food chains, population regulation, and productivity were first developed in the 1700s, through the published works of microscopist Antoni van Leeuwenhoek (1632–1723) and botanist Richard Bradley (1688?–1732).[4] Biogeographer Alexander von Humbolt (1769–1859) was an early pioneer in ecological thinking and was among the first to recognize ecological gradients, where species are replaced or altered in form along environmental gradients, such as a cline forming along a rise in elevation. Humbolt drew inspiration from Isaac Newton as he developed a form of "terrestrial physics." In Newtonian fashion, he brought a scientific exactitude for measurement into natural history and even alluded to concepts that are the foundation of a modern ecological law on species-to-area relationships
Weather
Saudi Arabia has mainly two season summer and winter, Rainfall is low in the country, especially in the central region. Here, normally, a change in season is
preceded by a rain or dust storm. The dusty season usually takes around 40 days to conclude with the dust storm hitting then letting up every few days. In the
southwestern coastal areas it rains quite regularly with high humidity in the summer, but there is very little rainfall in the capital city of Riyadh and the northern parts of the
Red Sea coast. 48
The peak winter falls during the months of December and January while peak summer hits during June and July. From May to September, daytime temperature reaches 45°C
or higher throughout the country with slightly cooler coastal temperatures.
During peak winter (December-January): The breadth of temperature between day and night in the desert is very important. At night, temperature usually drops quite radically and is often well below zero degrees. February-May & November: It is neither too cold nor too hot. It is rather moderate weather and there is no great difference in temperature between days and nights. During peak Summer (June-July): Too hot. Temperature during the night is hot August-October: It is rather hot during the day. Evenings are warmer.
SOCIAL
The Saudi population is by all standards a very young population. In 2006 estimates, 38.2% of Saudis were under the age of 15, 59.4% were 15-64 years old and only 2% were 65 and older. The median age for males is 22 and females 19.4. Access to education is limited by gender with women having limited access to education. There are only 8 universities in Saudi Arabia with 6 of the 8 being accessible to women.
2.5 EFFECT OF SOCIAL ENVIRONMENT ON BUSINESS SOCIETY
Business organizations strive to survive by the efficient use of the factors
of production and other facilities of the society. This process puts
organizations in an interdependent relation with the government, the
community at large and the environment. Such interdependence gives rise to
a series of broader responsibilities to society in general (Mullins, 2005).
Mullins further illustrates that the social responsibilities are both internal and
external to the organizations.
Presently, there is an increasing concern with the social responsibilities of
organizations. This is reflected in part by the extent of government action and
legislation on such matters as, for instance, employment protection, equal
opportunities, company’s acts, consumer law, product liability and
safeguarding the environment (Mullins, 2005). Based on this the social
responsibilities of organizations have turned into a legal requirement.
Business Stakeholders
Palmer and Hartley (2002) argue that business organizations should act
in a socially responsible manner for two self-evident reasons: one philosophic
and the other pragmatic. Philosophically, models of a responsible society
require organizations to do their part along with the family and other social
institutions (the schools, the religious institutions, etc.).
Pragmatically, organizations have to take account of the society’s values,
otherwise they will be isolated and therefore their long-term survival will be
jeopardized.
LEGAL The Kingdom of Saudi Arabia is an absolute monarchy ruled by the al-Saud family. The current monarch, King Abdullah bin Abdul Aziz (hereinafter referred as to King Abdullah or the king) entered the throne in 2005. The huge al-Saud family is extended to the members of the tribe, who are often appointed to central leading positions in society (Thunander 2010:165- 166). Article 39 in the Basic Law of the Kingdom stipualates that political parties are prohibited in the country and in the municipal council elections in 2005, women were not allowed to vote. When these elections were announced there were no criteria or instructions for voting or for running in the elections. The Ministry of Justice did support the right of voting for women but voiced objections were projected, mainly from the conservative religious establishment. The Minister of Interior decided that women were not allowed to vote due to the lack of sex-separated polling place and that the municipal meetings would have to be sex-separated for women to attend
(Freedom House 2010:62th paragraph from above). Alongside the royal family the religious establishment has a lot of influence. Highest in the hierarchy is the conservative ulema, the religious scholars who together with other religious institutions issue fatwâs, legal opinions. The ulema controls the mutawwa which is the powerful religious police whose function is to uphold the morality and religion among people.
Legal system of Saudi Arabia The legal system of Saudi Arabia is based on Sharia, Islamic law derived from the Qu'ran and the Sunnah (the traditions) of the Islamic prophet Muhammad. The sources of Sharia also include Islamic scholarly consensus developed after Muhammad's death and analogical reasoning by Muslim judges. Its interpretation by judges in Saudi Arabia is influenced by the medieval texts of the literalist Hanbali school of Islamic jurisprudence. Uniquely in the Muslim world, Sharia has been adopted by Saudi Arabia in an uncodified form. This, and the lack of judicial precedent, has resulted in considerable uncertainty in the scope and content of the country's laws. The government therefore announced its intention to codify Sharia in 2010. Sharia has also been supplemented by regulations issued by royal decree covering modern issues such as intellectual property and corporate law. Nevertheless, Sharia remains the primary source of law, especially in areas such as criminal, family, commercial and contract law, and the Qu'ran and the Sunnah are declared to be the country's constitution. In the areas of land and energy law the extensive proprietorial rights of the Saudi state (in effect, the Saudi royal family) constitute a significant feature. The current Saudi court system was created by King Abdul Aziz, who founded the Kingdom of Saudi Arabia in 1932, and was introduced to the country in stages between 1927 and 1960. It comprises general and summary Sharia courts, with some administrative tribunals to deal with disputes on specific modern regulations. Courts in Saudi Arabia observe few formalities and the country's first criminal procedure code, issued in 2001, has been largely ignored. Decisions are made without juries and usually by a single judge. King Abdullah, in 2007, introduced a number of significant judicial reforms, although they are yet to be fully implemented. Criminal law punishments in Saudi Arabia include public beheading, stoning, amputation and lashing. Serious criminal offences include not only internationally recognized crimes such as murder, rape, theft and robbery, but also apostasy, adultery, witchcraft and sorcery. In addition to the regular police force, Saudi Arabia has a secret police, the Mubahith, and "religious" police,
the Mutawa. The latter enforces Islamic social and moral norms. Western-based human rights organizations, such as Amnesty International and Human Rights Watch, have criticized the activities of both the Mubahith and the Mutawa, as well as a number of other aspects of human rights in Saudi Arabia. These include the number of executions, the range of offences which are subject to the death penalty, the lack of safeguards for the accused in the criminal justice system, the treatment of homosexuals, the use of torture, the lack of religious freedom, and the highly disadvantaged position of women. Additionally, Albert Shanker Institute and Freedom House have stated that "Saudi Arabia's practices diverge from the concept of the rule of law. The primary source of law in Saudi Arabia is the Islamic Sharia derived from the Qu'ran and the traditions of Muhammad contained in the Sunnah.[2] It also includes ijma, or scholarly consensus on the meaning of the Qu'ran and the Sunnah developed after Muhammad's death, and Qiyas, or analogical reasoning applied to the principles of the Qu'ran, Sunnah and ijma.[20] Court structure The Sharia court system constitutes the basic judiciary of Saudi Arabia and its judges and lawyers form part of the ulema, the country's religious leadership. However, there are also extra- Sharia government tribunals which handle disputes relating to specific royal decrees. Final appeal from both Sharia courts and government tribunals is to the King and all courts and tribunals follow Sharia rules of evidence and procedure. The Sharia courts have general jurisdiction over most civil and criminal cases. At present there are two types of courts of first instance: general courts and summary courts dealing with lesser cases.Cases are adjudicated by single judges, except criminal cases if the potential sentence is death, amputation or stoning when there is a panel of three judges.There are also two courts for the Shia minority in the Eastern Province dealing with family and religious matters.Appellate courts sit in Mecca and Riyadh and review decisions for compliance with Sharia. Judges The judicial establishment, in the broadest sense, is composed of qadis, who give binding judgements in specific court cases, and muftis and other members of the ulema, who issue generalized but highly influential legal opinions (fatwas). The Grand Mufti, the highest religious authority in the country, is the most senior member of the judicial establishment, and his opinions are highly influential among the Saudi judiciary. The judiciary proper (that is, the body of qadis) is composed of about 700 judges. Qadis generally have degrees in Sharia law from an Islamic university recognized by the Saudi government with, in many cases, a post-graduate qualification from the Institute of Higher Judiciary in Riyadh. The training received from such Sharia law degrees is entirely religious in character and is based on the Qu'ran and centuries old religious treatises with no reference to, for
example, modern commercial issues. Although most judges have been educated and appointed under the current system, some of the older judges received the traditional qadi's training of years of instruction by a religious mentor in a mosque. The capabilities and reactionary nature of the judges have been criticized. The main complaint reportedly made by Saudis privately is that judges, who have wide discretion in interpreting the Sharia, have no knowledge, and are often contemptuous, of the modern world. Reported examples of judges' attitudes include rulings banning such things as the children’s game Pokémon, telephones that play recorded music, and sending flowers to hospital patients. Saudi judges come from a narrow recruitment pool. By one estimate, 80% are from Al-Qassim province, the conservative religious heartland of Saudi Arabia in the center of the country. Senior judges will only allow like-minded graduates of select religious institutes to join the judiciary and will remove judges that stray away from rigidly conservative judgments. Recent reforms and developments The Saudi system of justice has been criticized for being slow, arcane, lacking in some of the safeguards of justice and unable to deal with the modern world. In 2007, King Abdullah issued royal decrees with the aim of reforming the judiciary and creating a new court system. The reforms have yet to be implemented in full but, once they are, will include the creation of a Supreme Court and the transfer of the Board of Grievances' commercial and criminal jurisdictions to a restructured general court system. New specialist first instance courts will be established comprising general, criminal, personal status, commercial and labor courts. The Sharia courts will therefore lose their general jurisdiction to hear all cases and the work load of the government's administrative tribunals will be transferred to the new courts. Another important change is the establishment of appeal courts for each province. It has been claimed that the reforms will establish a system for codifying Sharia and incorporating the principle of judicial precedent into court practice. • King Abdullah who since coming to the throne has ordered a number of reforms of the judiciary In 2009, the King made a number of significant changes to the judiciary's personnel at the most senior level by bringing in a younger generation. For example, as well as appointing a new Minister of Justice, a new chairman of the Supreme Judicial Council was appointed. The outgoing chairman was known to oppose the codification of Sharia. The king also appointed a new head of the Board of Grievances and Abdulrahman Al Kelya as the first chief justice of the new Supreme Court. Law enforcement The police department of the Saudi Ministry of the Interior is divided into three forces: the regular police, secret police and the religious police.The Department of Public Safety is the
official name of the regular police force and handles most day-to-day police activities.It is a highly centralized force and is usually headed by a member of the royal family. The secret police, or mubahith, deals with domestic security and counter-intelligence. It runs the `Ulaysha Prison in Riyadh, where it holds its prisoners. The United Nations' Working Group on Arbitrary Detention has objected to arbitrary detention by the Mubahith at `Ulaysha. The religious police, or mutawa (or Mutaween, their official name being Committee for the Promotion of Virtue and the Prevention of Vice) enforce Islamic codes of behavior. Numbering about 20,000 men untrained in law enforcement, the mutawa ensure that there is strict separation of the sexes in public, that businesses close at prayer time, pressure women to wear traditional dress and, in some areas, prevent them driving cars. Often accompanied by a police escort, the mutawa can order the detention and arrest of "violators". Criticism of the mutawa by Saudis has grown since 2002, when 15 schoolgirls died in a fire at their school in Mecca after the mutawa allegedly prevented male rescuers from entering because the girls were not veiled.
TECHNOLOGICAL Compared with other neighbouring Arab countries in the area, Saudi Arabia was late in adopting modern communication technologies, and highly resistant to it. There were several reasons for this. First Saudi Arabia has not been colonized. This isolated it from the rest of world development. Second the geographical nature of the land. Most of the land is desert. The mentioned two reasons have reflected on the people’s life and created cultures that view the world from a point of view of fear. There were more than one stage in transferring, and introducing modern communication technology to Saudi Arabia. We will lock at each stage in this paper media wise, first telegraph, then radio broadcast, then television, video, and last we will look at the Internet. In each stage we will try to describe the political, societal and cultural effect, and change of the media in the Saudi society. New communication Technology This part of the paper discusses the introduction and diffusion of new communication technology, namely Videocassette Recorder VCR, Direct –To-Home Satellite (DHS), and the Internet.
Technology Assessment Framework Provides a concise but comprehensive description of how impacts in the economy are derived from government support of technology development by companies.
HAL has developed a reputation for thorough economic and social analysis. The focus of many federal S&T programs, and the rationale for continued federal support, has shifted towards clearly serving the needs of stakeholders and demonstrating benefits. We have used our technology assessment methodology in support of federal and provincial departments and agencies interested in determining these benefits. The methodology has been shown to be a useful tool in providing structure and consistency to our quantitative and qualitative assessments. FRAMEWORK OVERVIEW A concise but comprehensive description of how impacts in the economy are derived from technological activity is essential to provide a common understanding of the roles of the different participants. The HAL Technology Assessment Framework shown below provides this description. It has been used to: � Explain the factors and considerations influencing the translation of technology into economic impacts; � Guide preparation of the questions for studies to insure that key information is collected; and � Present results from studies in a common format for analysis.
The HAL Technology Assessment Framework has five main parts. Central to the framework is the Study Company that undertakes contracted activities, technology development activities, and product development, production and marketing activities. The Study Company is influenced and assisted by the government through the procurement of goods and services, the activities of government laboratories, and government programs. The study company, in turn, influences the rest of Canadian industry by forming formal and informal alliances with other companies, and by unintentional diffusion of skills and knowledge to other companies. The Study Company also affects the Canadian users of its goods and services by providing quality and productivity improvements in their activities. In the end, the activities of the study companies, Canadian government, Canadian Industry, and Canadian Users result in impacts on the Canadian economy in the form of infrastructure 40 Economic returns from technology come from the commercialization and application of the technology rather than from its development. When assessing the potential payoff from technology development, it is these downstream benefits that must be identified and estimated. Traditionally, impacts have been thought of in terms of direct wealth creation - stimulating the economy through the production and sale of tangible goods in the economy, usually by the private sector. In addition, we know that technology can enhance the social well-being of a country (the public good), and the infrastructure. Research into infrastructure improvement, such as faster communications systems or improved methods and codes, ultimately contribute to productivity, wealth creation and the public good. Wealth Creation Wealth creation comes from the production and sale of goods and services. Impacts include: � Employment effects; � Trade of goods and services; � Productivity effects; and � Exports and import substitution. Infrastructure In its broad context, infrastructure comprises: � Physical structures including buildings, facilities, machines, equipment, experimental apparatus, instruments, communications, libraries, databases, computers, software and the operating systems and procedures specific to each structure. � � Institutional structures and systems including management systems, regulations, standards, codes, laws, dispute resolution mechanisms, etc.; � � Knowledge, information and technology; � Human resources with experience and expertise; and � Social and cultural values, codes, habits, rituals, heritage, expectations, etc.
ECONOMICAL OVERVIEW
This entry briefly describes the type of economy, including the
degree of market orientation, the level of economic development, the most important
natural resources, and the unique areas of specialization. It also characterizes major
economic events and policy changes in the most recent 12 months and may include a
statement about one or two key future macroeconomic trends.
The manufacturing sector has expanded widely since 1976, when the
government established the Saudi Basic Industries Corporation (Subic) in order to
diversify the economy. Its initial goal was to expand the manufacturing potential of
sectors of the economy related to petroleum. Since then manufactures, many
associated with Subic, have included rolled steel, petrochemicals, fertilizers, pipes,
copper wire and cable, truck assembly, refrigeration, plastics, aluminum products,
metal products, and cement. Small-scale enterprises have included baking, printing,
and furniture manufacturing.
Economical
• Since the discovery of oil in 1938 has grown to be among the wealthiest
nations.
• Produces more than 5% of the total production of petro -chemicals in the
world.
• Capitalist Economy.
• GDP (PPP) $622 Billion and Growth 3.7%.
• 40% of GDP from private sector.
• As part of its effort to attract foreign investment and diversify the economy, Saudi Arabia
acceded to the WTO in 2005 after many years of negotiations.
Role of financial market in Saudi Arabia As of December 2010, there were 23 licensed banks, of which 20 were active (Table
4). Of these, 12 are Saudi incorporated banks whose assets account for 98 percent of
banking system assets, or more than half of total financial system assets and 85
percent of GDP. As a percentage of GDP,bank assets and credit are comparable to
those in other countries with similar characteristics. As in other GCC countries, loan
portfolios are concentrated, reflecting limited lending to sectors such as SMEs and
housing. Credit concentration risk has been mitigated by high capital requirements,
but the small volumes of SME and housing finance may have adverse
implications for economic growth and the welfare of the population. Sharia-compliant
products are offered by commercial banks based on a single license for commercial
banks. While all banks provide Sharia-compliant products, some banks provide only
these products. SAMA considers the two types of banks as one system with different
products.
The banking sector is fairly concentrated :
The three largest banks together have a share of asssets and deposits of about 45
percent, and each of the next four has a share exceeding 5 percent. The dominant
shareholders of the three largest banks are state entities, the fourth largest is linked to
a family business group, and the next three have ties to major international banks. All
banks with state participations appear to be run on a commercial basis. In addition, all
banks but the largest (state-owned) are listed. This reflects a policy designed to ensure
arm’s-length relationships between banks and the large family-owned groups and to
promote investments in banks by Saudi nationals. The market shares of the long
established institutions have not been significantly affected by the entry of new banks
in recent years. SAMA licensed two domestic banks in the mid-2000s, as well as
several branches of foreign banks. The two new banks account for only 3 percent of
banking assets; and foreign branches remain niche players with a 2 percent market
share.
INTRODUCTION OF INDUSTRIALIZATION IN SAUDI AREBIA Although industrialization is relatively recent, in Saudi Arabia, it has witnessed a steady
development, during which distinguished accomplishments were achieved. These are
attributed to the importance of the industrial sector and the support it receives from the
government owing to its role in achieving strategic and economic goals of the country.
The efforts exerted by the government for the support of industrial development
covered several basic spheres including implementation of required infrastructure,
construction of Jubail and Yanbu industrial cities, construction of industrial cities in
various regions of the Kingdom, establishment of Saudi Industrial Development Fund
(SIDF), and continued provision of other industrial support and incentives. The response
and cooperation of the private sector with the governmental plans and efforts have an
effective impact on actualization of the industrial development's achievements. In the
following, we review, in brief, some of the industrial progress indicators in Saudi Arabia
over the past years.
REIATIONSHIP OF SAUDI ARABIA WITH WTO AND I.M.F
Saudi Arabia's WTO Membership and the Implications for its
Top Firms
Saudi Arabia’s acceptance as the 149th member of the World Trade
Organization (WTO) has been widely celebrated as a milestone in the
Kingdom’s private sector reform and the liberalization of its economy.
It took 12 years for Saudi Arabia, the world’s largest oil producer, to complete
negotiations to join the WTO – the second-longest accession period after
China, which negotiated for 14 years before becoming a member.
There were many in Saudi Arabia who resisted joining the WTO. Some feared
that WTO free trade rules would limit the Kingdom’s right to restrict the import
of goods prohibited under Islam, including pork, alcohol and pornography.
There were concerns among small Saudi firms that joining the WTO would
trigger overwhelming international competition.
Talks also dragged on due to US and European insistence that Saudi Arabia
make its industries and regulations more transparent. The US took time to
accept that the Kingdom’s economy was sufficiently open for membership.
Petrochemical producers in Europe were equally worried that maintaining
cheap domestic oil and gas would give Saudi firms an unfair advantage. In the
end, all parties agreed on the final details, and in mid-December Saudi Arabia
will be attending the next WTO meeting in Hong Kong as a full member.
Joining the WTO will have important implications for the Saudi economy, its
key industries and its local companies. Entry into the WTO poses a great
challenge to the Saudi private sector, which must complete preparations to
operate in a competitive environment. This applies most of all to the services
sector, which stands to be the most affected by the influx of foreign
companies.
Location : Geneva, Switzerland
Established : 1 January 1995
Created by : Uruguay Round negotiations (1986-94)
Membership : 149 countries (on 11 December 2005)
The World Trade Organization (WTO) is an international organization dealing
with the rules of trade between nations.
At its heart are the WTO agreements, negotiated and signed by the bulk of the
world’s trading nations and ratified in their parliaments. Through these
agreements, WTO members operate a non-discriminatory trading system that
spells out their rights and their obligations.
Each country receives guarantees that its exports will be treated fairly and
consistently in other countries’ markets. Each promises to do the same for
imports into its own market. The system also gives developing countries some
flexibility in implementing their commitments.
Commerce and Industry Minister Dr. Hashem Yamani said that Saudi Arabia
made “far-reaching, very substantial and commercially meaningful
concessions and commitments on goods and services.” However, it is still
unclear exactly what kind of changes Saudi Arabia will be obligated to
undertake.
It is clear from early conversations with relevant parties that there will be
significant changes in the following areas:
. Foreign ownership in services sectors, such as retail and distribution;
. Producers and distributors of liquefied natural gas will have to operate on the
basis of normal commercial considerations, based on the full recovery of costs
and a reasonable profit;
. Gradual lowering of trade barriers and expanding market access for foreign
goods; and
. Opening of the insurance sector to foreign operators.
Many of Saudi Arabia’s top companies have grown over the years thanks to
protective regulations. However, others have been operating in a competitive
environment for many years. In analyzing the implication of Saudi Arabia’s
entry into the WTO, it is important to look at the individual sectors and
recognize how WTO membership will affect each sector differently.
Oil and Petrochemicals: Saudi Arabia’s two largest firms, Saudi Aramco and
Saudi Basic Industries Corp. (SABIC), are direct beneficiaries of the lower
cost of hydrocarbons in the Kingdom. Historically, it has been the norm for
these firms to pass on the savings downstream. However, despite initial
statements to the contrary, it is possible that this policy will be significantly
limited with the entry into the WTO and Saudi Aramco and SABIC may be
forced to sell domestically at world market prices. This would adversely affect
the profitability of local petrochemical producers.
. Banking: Recent economic growth driven by high oil prices and increased
government expenditure has resulted in greater private sector activity and
hence greater domestic liquidity. This is the primary reason for the flourishing
of the Saudi banking sector. Entry into the WTO is likely to have a positive
effect on the financial services sector as it will continue increasing economic
activity and growth. The Saudi banking sector has been very profitable despite
the relatively high level of competition. The Kingdom’s entry into the WTO is
unlikely to result in any lower activity for the sector.
. Insurance: With the WTO entry, Saudi Arabia agreed to allow foreign
insurance companies to operate in the Kingdom. This is likely to put pressure
on the National Company for Cooperative Insurance (NCCI), the government
insurance company. However, the sector will flourish as new companies get
licenses and foreign companies introduce international best practices to the
field.
. Telecommunications: Prior to entering into the WTO, Saudi Arabia had
committed to introduce competition to the telecommunications sector. As the
Kingdom offers the third GSM license and allows private operators of land
lines, the former government monopoly Saudi Telecom Co. (STC) is likely to
lose additional market share. However, the telecom market as a whole is likely
to continue displaying robust growth as penetration rates increase and the
foreign-owned businesses drive additional growth.
3.1 INTRODUCTION OF THE COMPANY
� Company overview
A proud heritage, a positive future and a relentless commitment to quality
“Our success is driven by a combination of factors. Our dedicated team
under the leadership of our supportive Board and visionary management. Our
state-of-the-art infrastructure, incorporating centralized farms and advanced
processing plants. And our talent for innovation reinforced by world-class
marketing and distribution expertise.”
� Inspired vision
Our success story begins in 1977. It was around then that HH Prince
Sultan bin Mohammed bin Saudi Al Kabeer, our visionary Chairman,
recognized an opportunity to transform Saudi Arabia’s traditional dairy farming
industry to meet the needs of a rapidly expanding domestic market.
Under his guidance and patronage, numerous agricultural projects
were launched to achieve his vision. Starting with fresh milk and laban
processing, the scale and scope of these initiatives soon expanded to
incorporate modern dairy farms and state-of-the-art processing plants.
� Commitment through investment
During the early 1990s, Almarai entered a period of restructuring and
reinvestment that took it from a decentralized structure to a centralized
structure. The aim: to establish ourselves as a low-cost producer so that our
consumers can enjoy high-quality products at an affordable price.
In line with this model, we replaced five decentralized processing plants
with our first central processing plant. We also replaced ten small
decentralized dairy farms with four large dairy farms in Al Kharj in the central
region.
In late 2005, we commissioned a second, larger central processing
plant, incorporating a new cheese plant. We also commissioned two new
super-farms. In the same year, we moved from being a privately owned
company to a publicly listed company and now have around 70,000
shareholders. At the end of 2011, our market capitalization exceeded SAR23
billion.
Diversifying success
Our growth strategy encompasses diversification through innovation,
geographical expansion and organic growth.
� Bakery
In 2007, we entered the bakery products market by acquiring Jeddah-based
Western Bakeries. Two years later, we started the construction of a new
bakery facility in Al Kharj. We continue to develop our bakery portfolio with
innovative products and new distribution channels.
� Poultry
In 2009, we added poultry products to our portfolio through the acquisition of
Hail Agricultural Development Company (HADCO). After investing in a world-
class production facility, we launched the new premium poultry brand –
Alyoum.
� Geographical expansion
Paving the way for geographical expansion beyond GCC, we pooled our
respective expertise in dairy and juice with PepsiCo. In 2009, we launched a
joint venture together – the International Dairy and Juice (IDJ) Company.
Today, Almarai is capable of delivering high quality products to more than
48,000 customers within the Gulf Cooperation Council (GCC) daily.
� Positive future
We continue to invest intensively in technologically advanced
production facilities while recruiting high-caliber people with the skills and
experience to optimize their performance.
Almarai Co, the largest dairy company in Saudi Arabia by market value,
operates dairy farms and processes food, in addition to marketing dairy
products and fruit juices. The name Almarai means ‘green pastures’ in
Arabic.
The firm began 2009 in bold fashion as it looks to consolidate its
presence in the Kingdom and expand overseas. It announced in February it
was entering into a joint venture with drinks giant PepsiCo to invest in dairy
and juice processors in the Middle East, South East Asia and Africa. Known
as International Dairy and Juice, the venture will be 52 percent owned by
PepsiCo and 48 percent by Almarai.
A month later, Almarai announced it would invest $173m to build a
baby-formula food plant. The company would start selling baby-food products
within 18 months of the investment, it said in a statement.
The Almarai success story unfolded in 1976, when HH Prince Sultan
bin Mohammed bin Saud Al Kabeer recognized the potential to transform
traditional dairy farming in Saudi Arabia in order to meet the needs of a
burgeoning domestic market. Under his visionary guidance and patronage,
numerous agricultural projects were developed towards achieving this
objective, and what began with the processing of fresh milk and laban soon
expanded into modern dairy farms and state-of-the-art processing plants.
In 1991, having already achieved significant market leadership, Almarai
entered a Restructuring and Reinvestment Phase. Recognizing the long-term
strategic competitive advantages, Almarai also undertook a major investment
programme involving a total capital expenditure in excess of SAR 1,100
million between the years 1993 and 1997. It was during this period that the
first Central Processing Plant was commissioned with a large capacity
potential for both existing and new products whilst allowing room for further
expansion in the years to come. Almarai also set up four large dairy farms,
each with capacity for 10,000 animals; these were built and equipped with the
latest technology.
By 1998, Almarai entered the Growth and Utilizing Competitive
Advantages Phase with a strengthened market leadership position and
consequently as a low-cost producer achieving remarkable margins and
profitability, the Company was now in a strong position to face an increasingly
competitive market situation.
Between 2002 and 2005 Almarai has invested more than SAR 3,000
million in the expansion of its farming, operations and distribution activities.
The most significant development has been the commencement of its second
production facility (CPP2) at a cost of approximately SAR 700 million. This
facility which was completed in 2005 consists of three production facilities: for
fresh dairy liquid, fruit juices and cheese. Utilizing modern storage
technologies and sophisticated processing facilities, this new facility has been
designed to deliver long
One of the mainstays of its success is the Company’s unique ability to
maintain and deliver high quality products. With this intrinsic attribute
combined with a strong understanding of consumer tastes and preferences
acquired through intensive consumer research
establish itself as a leader in dairy and dairy
countries.
ALMARAI PRODUTS
Fresh
dairy
• fresh milk and laban• natural and fruit yogurts(zabadi)• dairy desserts
Longlife
dairy
• UHT milk and cream• Evaporated milk• Whipped cream
Fruitjuices
• Assorted fruits
Cheeze &butter
• Butter and Butter ghee• Triangle andteen cheese• Slices,spredable cheese
Bakery
• Filled puffs,Rolls,Croissants• Pound cakes,Cup cakes• Bread,Waffle,Ma'moul
facility which was completed in 2005 consists of three production facilities: for
fresh dairy liquid, fruit juices and cheese. Utilizing modern storage
technologies and sophisticated processing facilities, this new facility has been
r long-term benefits to the business.
One of the mainstays of its success is the Company’s unique ability to
maintain and deliver high quality products. With this intrinsic attribute
combined with a strong understanding of consumer tastes and preferences
acquired through intensive consumer research - Almarai today continues to
establish itself as a leader in dairy and dairy-related sectors in the GCC
fresh milk and labannatural and fruit yogurts(zabadi)dairy desserts
UHT milk and creamEvaporated milkWhipped cream
Assorted fruits
Butter and Butter gheeTriangle andteen cheeseSlices,spredable cheese
Filled puffs,Rolls,CroissantsPound cakes,Cup cakesBread,Waffle,Ma'moul
facility which was completed in 2005 consists of three production facilities: for
fresh dairy liquid, fruit juices and cheese. Utilizing modern storage
technologies and sophisticated processing facilities, this new facility has been
One of the mainstays of its success is the Company’s unique ability to
maintain and deliver high quality products. With this intrinsic attribute
combined with a strong understanding of consumer tastes and preferences -
Almarai today continues to
related sectors in the GCC
PRODUCTS OF THE COMPANY
Sales
Increased by 14% SAR 2,146 million
Net profit
Increased to SAR 386 million
Commercial borrowings
Converted all commercial borrowing to Islamic borrowing.
Initial public offerings Successfully floated 30% of the co. ‘share
capital on the Saudi stock exchange.
New production facility
Completed the construction of our second production facility at a cost SAR 700 million.
Sales distribution network
We now operate 31 sales deposits 22 in Saudi Arabia and 9 in the other GCC countries delivering to 27000 retail outlets.
ITS ROLE IN THE ECONOMY OF SAUDI ARABIA
The Company markets a range of food and beverage products under
the Almarai brand, principally through retail outlets. The product range
includes fresh and long-life dairy products, which are made primarily from
fresh milk, as well as fruit juices, cheese, butter and some non-dairy products.
Almarai is an integrated organization spanning the food supply chain from
dairy farms through to retail stores.
The origins of the Company date back to 1977 when HH Prince Sultan
bin Mohammed bin Saud Al Kabeer, recognizing the potential to transform
traditional dairy farming in Saudi Arabia to meet the needs of a rapidly
growing country, developed a number of agricultural projects which began
with the processing of fresh milk and laban and soon thereafter expanded into
dairy farms, fresh processing plants and cheese processing plants.
In 1991, the Restructuring and Reinvestment phase started with the
establishment of Almarai Company Trading Limited at which point the Almarai
brand had already achieved market leadership. Almarai was well positioned to
benefit from the economic upturn in the region during that period.
Recognizing the long-term strategic competitive advantages that would
accrue to low cost fresh dairy producers, Almarai undertook a major
investment programmed involving a total capital expenditure in excess of SAR
1,100 million in the five years from 1993 to 1997.
A single large fresh processing plant, CPP, was commissioned with
capacity for both existing and new products for ten years forward, and
allowance for further expansion. Four large dairy farms, each with capacity for
10,000 animals, were built incorporating the latest technology.
By 1998, Almarai entered the Growth and Utilizing Competitive
Advantages phase with a strengthened market leadership position being a low
cost producer, as witnessed by its margins and profitability. The Company
was now in a strong position to face an increasingly competitive market
situation.
In 1999, Almarai initiated a major fresh milk and laban price promotion
in Saudi Arabia. Consumer demand proved extremely responsive and Almarai
made very significant market share gains without adverse effect on overall
profitability. The price sensitivity of milk and laban in Saudi Arabia was again
in evidence as retail prices of milk and laban fell once more in the summer of
2001. Almarai continued to experience growth in volume and market share
mitigating the negative impact of lower sale prices on margins.
� Mission Statement:
Almarai’s mission is to make its food and beverage products the
preferred choice of families throughout its target markets. Almarai’s mission
statement clearly positions it in the consumer food business in the Middle
East. It has established itself as a leader in the dairy and related sectors in the
GCC region.
� Competitive Advantages :
The Almarai brand is instantly recognizable throughout the GCC.
Consumers view the brand as a symbol of quality, value and freshness and
within the industry and wider business community Almarai is renowned for
quality, technical superiority, efficiency and brand awareness.
Almarai has avoided dependence on individual aspects of its business
and is not excessively dependent on any one of the following:
The Company has established and sustained an extremely profitable
dairy business in difficult physical circumstances by its ongoing commitment
to excellence in its people, processes and technologies. As a result Almarai
has attained a high level of capability and expertise throughout its diverse
range of activities, including:
Marketing expertise, particularly in identifying and satisfying consumer
needs Sales expertise, particularly in providing cost effective customer
service Coverage and effectiveness of chilled distribution network Integrated
food supply chain with proven planning and information capability Modern and
advanced asset base Proven sophisticated processing and farming
technologies supported by access to proven technical experts in all major
disciplines - farming, processing and engineering.
Almarai is managed by a skilled and experienced senior team, with
strength in depth across the organization. Senior personnel are drawn from a
variety of backgrounds and nationalities and combine expertise, experience
and local knowledge.
� Key aspects of Almarai’s management expertise include:
Skilful planning particularly in balancing product demand with raw milk
supply Management of the chilled chain and its impact on delivered product
quality Field sales management information and know-how Accurate short
and long-term sales forecasting Integrated financial, information, planning and
control systems.
3.2 STRUCTURE, FUNCTIONS AND BUSINESS ACTIVITIES OF THE COMPANY
� Structure
In August 2005, Almarai became a publicly listed company on the
Saudi Stock Exchange (TASI: 2280). Valued at SAR 2.3 billion, the IPO
floated 4.5 million shares at SAR 512 each, representing 30% of the total
shares.
The remaining 70% was retained by major shareholders including
HH Prince Sultan bin Mohammed bin Saud Al Kabeer (37.2%) and The
Savola Group (28.2%) which is one of Saudi Arabia’s largest companies in
the edible oil and sugar industries. Subsequently, the 1‐for‐3 stock dividend
increased outstanding shares to 20 million, which split 5‐to‐1 in April 2006.
In March 2007, Almarai issued an additional 9 million shares to the Al
Omran family in consideration for the Western Bakeries acquisition,
increasing total shares outstanding to 109 million.
The Company markets a range of food and beverage products under
the Almarai brand, principally through retail outlets. The product range
includes fresh and long-life dairy products, which are made primarily from
fresh milk, as well as fruit juices, cheese, butter and some non-dairy products.
Almarai is an integrated organisation spanning the food supply chain from
dairy farms through to retail stores.
The origins of the Company date back to 1977 when HH Prince Sultan
bin Mohammed bin Saud Al Kabeer, recognising the potential to transform
traditional dairy farming in Saudi Arabia to meet the needs of a rapidly
growing country, developed a number of agricultural projects which began
with the processing of fresh milk and laban and soon thereafter expanded into
dairy farms, fresh processing plants and cheese processing plants.
In 1991, the Restructuring and Reinvestment phase started with the
establishment of Almarai Company Trading Limited at which point the Almarai
brand had already achieved market leadership. Almarai was well positioned to
benefit from the economic upturn in the region during that period.
Board of directors
� HH Prince Sultan bin Mohammed bin Saud Al Kabeer Chairman of the Board
� Dr. Abdulraouf M. Mannaa Director
� Abdulrahman bin Abdul-Aziz Al Muhanna Managing Director
� Mohammed Al Damer Director
� Nasser Al Muttawa Director
� HH Prince Naif bin Sultan bin Mohammed bin
Saud Al Kabeer Director
� Dr. Majed M. Al Gassabi Director
� Ibrahim M. Alissa Director
Functions
� The Company aims at maintaining a consistent brand image as a food and
beverage Company that understands consumers’ needs and competes on the
basis of delivering superior quality and value for money to the consumer.
� The Marketing Division comprises dedicated category teams focused on all
elements of the marketing mix; including product development, strategic
brand management, innovation, market research and public relations.
� Almarai’s marketing effort is broadly divided onto four product categories:
Dairy Liquids, Juice, Pots and Foods. Dairy Liquid is made up of fresh, long
life and flavored laban, milk, and super milk. Juices comprise fresh and long
life juices. Pots include yoghurt, ready-to-eat desserts, fruit yoghurts, labneh
and ghiste. Finally, Foods cover processed and natural cheese, butter, butter
ghee, evaporated milk, sterilized cream and tomato paste. All fresh dairy
based products are available in full cream, low fat and skimmed variants.
� Today, Almarai is one of the best loved and trusted brands in the GCC. This
trust, built over many years, provides a competitive advantage to Almarai and
gives credibility and a point of differentiation to all consumer offerings. Almarai
recognizes the overriding importance of maintaining consumer trust in the
brand, and, therefore, relentlessly dedicates its resources towards equity and
brand building programs that are grounded in market research and are
generated from genuine consumer insights.
� As market leader, Almarai, with its ongoing investment into extensive
consumer research, is well placed to drive category development and
innovation in the GCC markets of the future, thus creating platforms for
growth and ensuring sustained profitability in the years to come.
� Business activities
Over the years, we have become a popular feature of family life
throughout our region and beyond thanks to the sheer excellence of our
products. We consistently delight our consumers with premium quality food
and beverages that are fresh, nutritious, healthy – and irresistible. We’re
always working to innovate and create new treats and delicacies for our
consumers. But one thing will never change: our determination to stay faithful
to our founding principles by delivering quality products you can trust and
love. Why not explore our great range of Dairy Liquids, Yoghurts & Desserts,
Foods, Juices, Bakery treats and Poultry.
� Dairy Liquids
� Yoghurts & Desserts
� Foods
� Juices
� Bakery
� Poultry
� Infant Formula
� Our Brand
Delivering quality, enriching lives
� Vision statement
To be the consumers’ preferred choice by leading in our chosen markets with
superior food and beverage products.
� Mission statement
To provide quality, nutritious food and beverages that enrich our consumers’
lives every day.
� Our values
Adaptable, Sharing, Passionate, Innovative, Respect, Excellence
“Our unswerving commitment to healthy living means we only deliver fresh
and delicious products to the people we care about most – our consumers.”
Welcome to Almarai - Quality You Can Trust
Our website is packed with facts about the premium quality food and
beverages that have made Almarai a trusted household name across Saudi
Arabia and beyond. We’ve created this website with you in mind. Visit My
Almarai, for example, and use our interactive apps to explore a world of
fascinating topics from around the globe. You can also find out more about
the vision and values that inspire our people to go the extra mile for our loyal
consumers and customers – and our communities. In short: if you want to
know more about how Almarai is working to enrich your life, you’ve come to
the right place!
Dairy production flow chartDairy production flow chart
3.3 COMPARATIVE POSITION OF THE COMPANY
The GCC dairy and juice market is supplied by over 40 domestic and
multinational companies. Production and distribution facilities near target
markets provide a distinct competitive advantage, particularly for short‐life dairy
products. In our view, brand loyalty and price competitiveness are paramount for
market share growth. Brand loyalty is cultivated through a track record of quality,
consistency and availability. Almarai products have been available for over 30
years and thus can benefit from cross‐generational referral, where the consumer
gained brand exposure at childhood. Dairy, juice, cheese, butter and bread are
everyday use items.
A consumer is more likely to try other brand thanswitch retailers if the
desired brand is not available, suggesting brand elasticity and an opportunity to
pull customers from competitors. Further, we believe demand for Almarai’s
products is price sensitive where the ability to pass cost increases to consumers
is constrained. In the event of product specific price hikes, the probability of
losing customers to competitors rises. However, increases in input costs are
likely to affect producers in tandem. Historically, the Saudi dairy market
witnessed consecutive price wars in 2000 and 2001. As a large‐scale integrated
dairy company, we believe Almarai can weather the onset of future price wars.
Dairy Products
Fresh milk and long‐life dairy products comprise 57% of Almarai's
revenues. As of 2008, Almarai had captured the GCC’s leading position in the
dairy and fresh milk market with 28% and 21% market share, respectively. In the
plain UHT milk segment, Almarai increased market share by 23% primarily at
the expense of Saudi, which lost share by 11% in 2008. While in the flavored
UHT milk segment, Al Safi has a dominant position but Almarai has posted
sizeable growth (+51%) over the last two years in contrast to competitors that
are witnessing declining sales. In the laban and zabadi segment, Almarai enjoys
the dominant position with43% and 36% market share. The main competitors
are Al Safi and Nadec with combined market share of 22% (laban) and 20%
(zabadi).
Fruit Juices
In 2007, the GCC’s total beverage market was 15.5 billion liters, of
which juices formed 9%. Rani and Al Rabies are the leading companies in
GCC juices with market shares of 13% and 12% respectively. Almarai
places third with a 10%. This segment is expected to grow 4.2% annually in
the near term. While carbonated drinks dominate the beverage segment;
the demand for fruit juice is also on the rise. An increasing under‐25
population is driving the demand for sports and energy drinks. Almarai’s
market share increases from 2004’s 4% reflect its ability to leverage brand
strength to grow new business lines.
Bakery
The GCC bakery industry was estimated at SAR 15 billion in 2008
with Saudi Arabia comprising 45% of the market. The industry caters to
health conscious and premium customers – trending towards development
of high fiber‐content products. In the bakery snack segment the demand for
salty snacks is on the wane while those with added ingredients (fortified
with vitamins or antioxidants) are gaining market share. Although wheat
prices are expected to drop thereby countering the recent round of pricing
increases (North American retail bread prices increased 60%in 2008),
bakeries are expected to maintain current retail prices. However we believe
GCC producers may face greater resistance in passing on future price
increases. The GCC plus Yemen’s bakery industry is expected to grow at a
CAGR of 5% between 2009 and 2013 versus 3% between 2002 and 2007.
Al‐Hasa Automatic Bakeries has created a GCC presence through
manufacturing, marketing and distribution of bakery and confectionery
products. Al‐Hasa maintains a strong presence in KSA through its large
distribution network and plans to increase market share through new
products.
Poultry
In 2006, Saudi Arabia’s chicken consumption was some 900,000
tonnes (40kilograms per capita) and ranked one of the world’s highest on a
per capitabasis. Fifty‐five percent of poultry meat consumed is produced
locally withthe remainder imported mainly from Brazil and France. Despite
government subsidies and rising demand, the country’s poultry producers
are facing intense competition from cheaper Brazilian imports driving local
firms to seek higher subsidies and import tariffs. Poultry imports are
expected to increase 4% in 2009 due to a recent cut in import tariffs aimed
at curbing food inflation.FAPRI predicts broiler meat trade in Saudi Arabia
to increase from 482,000 metric tons in 2009 to 600,000 in 2018, while
broiler meat production is expected to rise from565,000 metric tons in 2009
to 699,000 in 2018.HADCO is the fifth largest producer, with 26 million
birds, holding 4% of KSA’s market. We believe foreign poultry producers
pose a key threat to
Almarai based on cost advantages.
Infant Formula
The estimated GCC market size is 40,000 tons per annum and the
entire demand is met through imports. Established brands, Abbott and
Nestle, pose key competition to Almarai based on decades of experience
and brand presence. Nestle traces its roots from 1867 when the first infant
cereal was developed by Henry Nestlé. In 1934, Nestle entered the Middle
Eastern market exporting products from its headquarters in Switzerland. In
1997, operations were consolidated in the region covering 13 countries. In
2001Nestle unveiled its regional headquarters in Dubai. Abbott has a long
history in the global infant formula market starting from1925. It was the first
to introduce nutritional formulas for pre‐term infants in 2002 and the first to
introduce organic infant formula in 2006.
Key competitors profile :
Milk
Laban
Zabadi
Desserts
Other
dairy
products
Butter
Cheese
Fruit
juice
Almarai
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Nestle
Yes
No
Yes
Yes
Yes
No
No
Yes
Al safi
danone
Yes
Yes
Yes
Yes
Yes
No
No
Yes
Sadafco
Yes
No
No
Yes
Yes
No
Yes
Yes
Nadec
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Kraft
No
No
No
Yes
No
Yes
Yes
No
KEY FINANCIAL HIGHLIGHTS OF THE LAST FIVE YEARS – RESULTS, ASSETS, LIABILITIES AND KEY INDICATORS
�
Key Financial Highlights
Year ended 31 December
(SAR Million) 2012 2011 2010 2009 2008
Operational Performance
Total sales 9,883 7,951 6,931 5,869 5,030
Cost of sales (6,372) (4,954) (4,195) (3,503) (3,031)
Gross profit 3,511 2,997 2,736 2,366 1,999
Selling and distribution expenses (1,617) (1,213) (1,046) (887) (751)
General and administration expenses
(221) (266) (230) (200) (187)
Share of Results of Associates and (25) (42) (6) (2) -
Impaiment Loss - (160) - - -
Financing cost and bank charges (157) (135) (121) (148) (125)
Income before zakat 1,491 1,180 1,333 1,129 936
Zakat (51) (33) (26) (29) (25)
Minority Interest 1 (7) (22) (3) (1)
Net income 1,441 1,140 1,285 1,097 910
Balance Sheet
Net operating working capital 932 805 660 711 837
Property, Plant and Equipment 13,416 10,508 7,867 6,282 4,704
Biological Assets 901 818 770 735 639
Net operating assets 15,249 12,131 9,296 7,728 6,180
Intangible Assets - Goodwill 1,335 821 793 793 549
Investment and Financial Assets 295 907 981 995 529
Net Assets 16,880 13,859 11,071 9,517 7,258
Net debt 8,305 6,749 4,679 3,951 3,499
Employee termination benefits 287 243 206 166 128
Deferred Tax (Net) 116 88 - - -
Total Equity 8,171 6,778 6,185 5,400 3,631
Net Capital Employed 16,880 13,859 11,071 9,517 7,258
Total Assets 19,519 15,656 12,571 10,987 8,181
Total Liabilities 11,348 8,879 6,386 5,587 4,550
Cash Flow
Cash Flow from Operating Activities 2,384 1,924 1,965 1,802 1,016
Cash Flow used in Investing activities
2,933 3,237 2,189 1,711 1,572
Dividend paid 512 516 455 380 270
Key Indicators
Return on sales 14.6% 14.3% 18.5% 18.7% 18.1%
Return on Shareholders’ Equity* 20.2% 17.7% 22.3% 25.6% 27.3%
Return on Total Equity* 19.3% 17.7% 22.6% 26.9% 27.2%
Return on Net Operating Assets* 12.2% 14.2% 17.1% 18.7% 19.7%
Net debt to equity ratio 101.6% 99.6% 75.6% 73.2% 96.4%
Current ratio 96.8% 91.8% 115.0% 151.5% 136.5%
Revenue growth rate 24.3% 14.7% 18.1% 16.7% 33.4%
Dividends payout ratio 34.7% 45.4% 40.3% 41.9% 42.0%
Shares Issued (in millions) 400 400 400 384 379
Earnings per Share (SAR)** 3.60 2.85 3.21 2.86 2.40
Dividend Proposed 500 518 518 460 382
3.4 PRESENT POSITION AND TREND OF BUSINESS (IMPORT/EXPORT) WITH INDIA/GUJARAT DURING 3 YEARS
Introduction
India and Saudi Arabia are old business partners: their trade relations go back
several centuries in time. Today, the bilateral business ties are being steadily
expanded and further strengthened by continuous interaction and cooperation,
including regular exchange of business delegations. Besides being a major trade
partner, India sees the Kingdom as an important economic partner for investments,
joint ventures, transfer of technology projects and joint projects in third countries.
Trade
Saudi Arabia is the 4th largest trading partner for India: The value of the two-way
trade between the two countries in 2011-12 exceeded US$ 36 billion. Saudi Arabia is
the 14th largest market in the world for Indian exports and is destination of more than
1.86% of India’s global exports. On the other hand, Saudi Arabia is the source of
6.35% of India’s global imports.
For Saudi Arabia, India is the 5th largest market for its exports, accounting for 7.55%
of its global exports. In terms of imports by Saudi Arabia, India ranks 9th and is
source of around 3.27% of Saudi Arabia’s total imports.
Imported Imported Imported
% of %
market change
Exporters value in value in value in
share 2006 -
2005 2006 2007
2007 2007
'World 346 224 404 222 444 800 100.0 10.0
'Ireland 151 941 171 921 165 141 37.1 -3.9
'United
States of
America 48 108 58 226 62 881 14.1 8.0
'United
Kingdom 23 017 28 125 35 608 8.0 26.6
'Denmark 18 467 24 556 31 708 7.1 29.1
'Egypt 24 148 22 689 23 405 5.3 3.2
Milk powder not exceeding 1.5% fat, Milk and cream powder unsweetened
exceeding 1.5% fat, Milk and cream nes sweetened (HS 040210, HS
040221 and HS 040299)
The total value of the imports of milk powder not exceeding 1.5% fat (HS
040210) was US $ 188.6 million in 2007. Table 25 indicates that the major
competitors in this market were New Zealand and Australia with market
shares of 67% and 17% respectively. There was an increase of 53% in the
imports of this product between 2006 and 2007.
The imports in the milk and cream powder unsweetened exceeding 1.5% fat
(HS 040221) were worth US $ 226 million in 2007. The major competitors in
this market were the Netherlands, New Zeeland, Malaysia and Ireland, with
market shares of 21%, 18%, 11% and 9% respectively as can be seen in
table 26.
The value of imports by Saudi Arabia of milk and cream nes sweetened (HS
040299) were US $ 135 million in 2007. The major competitors in this market
were the Nederland’s, Denmark, Malaysia and Germany as can be seen in
table 27.
Competitors in Saudi Arabia's market for Milk and c ream nes sweetened
Imported Imported Imported Imported Imported % of %
market change
Exporters value in value in value in value in value in
share 2006 -
2003 2004 2005 2006 2007
2007 2007
'World 115 260 166 873 110 144 97 939 135 030 100.0 37.9
'Netherlands 66 852 102 073 48 307 33 008 50 157 37.1 52.0
'Denmark 10 172 17 241 26 403 10 269 21 499 15.9 109.4
'Malaysia 8 071 23 313 11 464 12 564 20 662 15.3 64.5
'Germany 4 543 3 355 6 651 18 550 19 488 14.4 5.1
'France 13 151 14 494 4 963 9 642 11 235 8.3 16.5
Consumer market for milk products in Saudi Arabia Sales value is expected to reach just more than SR 4 billion in 2009. Semi-
skimmed fat-free fresh and UHT milk drive demand for drinking milk in 2009.
There was slight movement in unit price in 2009, because of massive
domestic milk production. There was a drop in the sales of milk power and a
negative CAGR of 1.9 % is expected for milk power up to 2014.
3.5 POLICIES AND NORMS OF SAUDI ARABIA FOR ALMARAI COMPANY
REGISTRATION PROCEDURES:
Companies have to register with the GIA, and an application should be fully
completed and submitted.
The GIA has to accept or decline the completed applications within 15 days for
small projects; and 25 days for large scale projects.
The GIA has the right to accept or reject any application without going back to the
agency concerned.
If the GIA did not accept or reject the application on the time that was mentioned
above, the application is considered approved.
TAXATION
The Kingdom of Saudi Arabia has undertaken major tax reforms in the last
decade. These reforms include the tax law and the administration and
computerization of tax work.
Saudi Arabia has concluded tax treaties with many countries. In the last five
years, the Kingdom has signed 23 tax treaties. Moreover, there are
approximately 16 treaties awaiting signature, and another 14 treaties under
negotiation. These treaties are in line with world trends and in accordance with
rules set by relevant organizations concerned about reforming tax.
INVESTMENT COMPANIES:
Investment companies should be established by a decree of the GIA President.
Investment companies can take any legal form under the companies’ law or civil
law, subject to joint stock companies that put up their shares for public
subscription or limited stock partnership companies.
Investors and investment projects may appeal decisions taken by the GIA or
Agencies involved by applying in writing to the decision-making authority or the
President of the Authority within 30 days, following notification of the decisions.
The party appealed to should decide on the appeal within 20 days of its
submission.
The decision-making authority elapsed without a decision.
If the appeal was rejected, the appellant is entitled to submit his appeal to the
Prime Minister.
The Prime Minister should make a decision within 10 days or refer it to the
Council of Ministers to make such a decision. The Council of Ministers should
make a decision within 30 days.
Investors and investment projects have the right to appeal decisions taken by any
of the decision-making authorities mentioned above, by filing directly with the
competent court or through an arbitration tribunal.
Investors and investment projects may select one of the following arbitration
procedures to settle disputes:
The Standardized Agreement for Arab Capital Investment in Arab Countries.
The International Convention for the Settlement of Investment Disputes between
the State and Nationals of another State.
Any international or bilateral agreement to which the Republic is a party.
Commercial arbitration rules and procedures of the United Nations Commission
on International Trade Law, at the nearest regional center for international
commercial arbitration using such rules.
Rules and procedures of arbitration within the Republic of Saudi Arabia.
REGISTRATION
(i) A license/ certificate/ permission to import/ export, [except items listed as
restricted items in ITC(HS)]
(ii) Any other benefit or concession under this policy shall be required to furnish
Registration-cum-Membership Certificate (RCMC) granted by the competent
authority in accordance with the procedure specified in the Handbook unless
specifically exempted under the Po
3.6 POLICIES AND NORMS OF INDIA FOR IMPORT OR EXPORT TO THE SAUDI ARABIA
In this study documented early attempts (1890-1924) in agricultural
development in India such as the Royal Commission on Agriculture, the Bombay
plan, the Milk Producers Cooperative at Anand, other post-independence dairy
development plans, the intensive cattle development project, the fourth five-year
plan, the National Dairy Development Board; canalization of imported dried milk,
and milk pricing policy.
The WTO regime is now a reality as India is a signatory under the WTO
rules has opportunity to extend its exports product base. It’s become more open
world trade regime where barriers to trade were reduced. The major dairy
products exported from the country includes skimmed milk powder, whole milk
powder, ghee, butter oil, milk food for babies, butter, milk for babies, milk and
cream etc. The positive trend in export and negative trend in imports was
observed due to the success full implementation of Operation Flood and set of
Government policies regarding international trade.
The growth of dairy sector during last decade has been impressive due to
a set of Government policies which created suitable prize environment for
domestic milk productions well as export of dairy products. In the tenth five-year
plan, five schemes for dairy development have been sanctioned and Rs 51.62
crores was given for dairy development and Rs 284.38 crores for Animal
Husbandry.
For quality of dairy products regulatory environment policy of Government
was implemented in the dairy processing sector like compulsory legislation
MMPO Act 1992, Food Adulteration Act 1954, Standard on Weights and
Measures (Packaged commodities) Rules1977, Export Quality and Inspection Act
1963, Livestock Importation Act 1898 etc. had work successfully in taking the
dairy sector to the international market and compete with the highest.
Indian dairy industry is facing emerging challenges and also has a great
opportunity in global trade with respect to the WTO era. Overall studies in this
regard give pictures of the Indian temporal dairy trade policies and what is the
impact of particular policies on export and imports of selected dairy products. The
present study will be helpful both traders and Government policies
makers/advisory members with respect to the WTO era and in accordance to the
international trade, safeguarding the domestic market, framing new policy after
appraising an earlier policy.
So that the Indian dairy industry prospers further generate employment,
compete in the international market and convert challenges into opportunities in
WTO era by providing suitable trade policy to the Indian dairy industry. Hence, it
was felt necessary that to know the different policies implemented and their
impaction Indian dairy trades. In this context, the present study was taken up with
following specific objectives.
1. To document the existing government policies on imports and exports of dairy
products in India.
2. To study the trends in exports and imports of selected dairy products in India.
3. To study the impact of changes in Government policies on exports and
imports of selected dairy products in India.
4. To study the existing stipulation in selected importing countries on selected
dairy products.
TRENDS IN SELECTED DAIRY PRODUCTS IN INDIA
Different trend equations are fitted depending upon their goodness of fit
and their suitability to assess the trend in exports and imports in value terms of
selected dairy products for all the selected products in the study. The data over
the period 1985 to 2004 were considered. This was divided into two phases i.e.
1985 - 1994 (pre WTO) and 1995 to 2004 (Post WTO) .The cubic functions was
fitted for all the selected products due to its superiority over other functions in
terms of coefficient of multiple determination.
EXISTING STIPULATION IN IMPORTED COUNTRIES
Sr.no.
stipulation
Destination
Bangladesh United arab
emirate Egypt
1 Import restriction Freely with import
license
Only companies
for import
license
Freely with
imported card
2 Pre shipment
inspection(PSI)
Quality inspection
mandatory
Quality
inspection
mandatory by
concern
authority
Quality
inspection
mandatory by
health, supply
and
agriculture.
3
Duty and other
charges for
opening L.C.
Bound duty: 200% Custom duty: 25% Advance income
tax- 3%. Development Surcharge-3.5%. Supplementary
duty - 12%.
Bound duty:
10% Custom duty:
4%
Bound duty:
10% Custom duty:
7%
4 Packing, marking
& labeling
Packing- strong and
should guard against
climate, storage condition, handling (English/
Symbols), disease free
Indian origin written in
large indelible letters
(English) on Label/container.
Packing - strong and should
guard against climate,
storage condition,
Handling. Labels must be in
Arabic Languages.
Packing - strong
and should guard
against climate, storage
condition, handling and
health Certificate
(EIC). Labels must
be in Arabic
languages
5 Weights &
measures Metric system Metric system Metric system
6 Insurance Must be arranged
by importer
Must be arranged by
importer
Must be arranged by
importer
7 Method of
quoting and payment
Pro-forma invoices
Quotes in US$/ INR.
on CF Bangladesh Port. CIF-separately
Shown. Payment must
be by L.C
Pro-forma invoices in US$/
Durham/INR. Payment through
FOB and CF.
Pro-forma invoices
Quotes in US$/INR. Payment through
FOB and CF
8 Public health/
Special certificate
Radioactive test report
(EIC) and certificate of
analysis
Cyclamates free and
Synatary certificate
Radiation inspection
(EIC India)
3.7 PRESENT TRADE BARRIERS FOR IMPORT/EXPORT OF SELECTED GOODS
� TRADE BARRIERS
The importation of pork, firearms and most non-Islamic religious materials
are deemed to be offensive to Islamic principles. Alcohol and used clothing
are also prohibited to be imported into Saudi Arabia. The importation of
certain products requires special approval e.g. agricultural seeds, life
animals, horses, products containing alcohol, etc.
The Arabian blacklisting of foreign firms that support Israel in various ways
can be a barrier. The GCC agreed at the end of 1994 to lift the secondary
and tertiary boycotts on companies trading with Israel, though some
companies on that list have been refused visas, suggesting that the
regulations are still applied selectively.
Saudi Arabia applies the principle of Single Entry Point, by which any
products admitted into the GCC through a GCC customs point may legally
traverse borders within the GCC without further examination or inspection.
However, the land crossing between Saudi Arabia and the United Arab
Emirates still has periodic inspections.
As from the end of December 2007, Saudi Arabia eliminated the
requirement to authenticate import documentation. Some products, notably
agricultural biotechnology products need a certificate from the country of
origin confirming the products fitness for human consumption and sales in
the country of origin. This certificate must be authenticated by the local
chamber of commerce in the country of origin.
Non-food consumer products must have a certificate of conformity issued
under Saudi Arabia’s Conformity Certificate Program (COCP), before
entering the country. This COCP requires every shipment of products sold
in Saudi Arabia to be accompanied by a document certifying that the
product conforms to the relevant Saudi Arabian technical regulation or
standard ("conformity certificate"). The requirement applies to all products,
including domestic products, except those subject to Saudi Arabia‟s
sanitary and phytosanitary regulation.
In February 2009 the Saudi Arabian Department of Customs implemented
a regulation mandating that all items being shipped to Saudi Arabia must
have the country of origin engraved or affixed by a non-removable sticker.
The GCC Customs Union is working toward harmonizing their standards and
conformity assessment systems. Currently Member States continue to apply
either its own standard or a GCC standard, resulting in a complicated
situation for some businesses.
The GCC Standards Committee approved two new standards for the labeling
and expiration periods of food products in May 2008. This new standards
eliminate the long standing requirement that at least one-half of a product’s
shelf life must be valid when a product reaches a port of entry. Officials from
the Gulf Standards Organization (GSO) have stated that GCC Member States
will accept use of the terms "best by" and "best before" as meeting the date
labeling requirement for shelf-stable products.
The Food and Agricultural Import Regulations and Standards (FAIRS)
Country Report can be used to obtain regulatory requirements and import
procedures for food and agricultural imports, imposed by the government of
Saudi Arabia. This report also states that most common non-tariff barriers that
is experienced by U.S. food product exporters in Saudi Arabia are biotech
labeling, production & expiration date regulations, Arabic labeling
requirements, a declaration that animals slaughtered and exported to Saudi
Arabia were not fed with feed containing protein, fat or remnants of animal
Origin, and a Halal Slaughtering certificate for both livestock and poultry meat.
Trade related infrastructure
Saudi Arabia's road-building programme was given priority in the early five-
year development plans. Major arteries include the trans-peninsular highway
and the Tapline road from Dammam to the Jordanian border. Motorways
connect most urban centers.
There are three international airports at Jeddah, Dammam and Riyadh. The
airports at Mecca and Medina can receive international flights bringing religious
pilgrims to the country, but non-Muslims are not permitted to enter either city.
The railway network consists of two lines totaling 1000 km between
Damman and Riyadh. Three new lines that will add 2 800 km are prioritized.
Saudi Arabia has six major ports (Yanbu, Jeddah, Dammam, Jubail, Jizan and
Duba) and two specialized industrial ports at Jubail and Yanbu. There are also
14 minor ports.
There were 28.4m mobile phones in the Kingdom in 2007, equivalent to
116% of the population. This compares with 33% of the population in 2003. In
comparison, landline penetration stood at 16.8% of the population in 2007. In
2007 roughly 25% of the population was internet users.
4.1 POTENIAL FOR IMPORT/EXPORT IN INDIA/GUJARAT MARKET
Positioning of product lines is encouraging:
Our analysis shows that Almarai has a favorable product mix. Its largest
product line, Fresh Dairy, comes under the “cash cow” category with the
remaining product lines coming under the “Star” category.
Almarai’s largest segment, Fresh Dairy, is the single-largest cash generator
for the company, enabling it to invest in other high growth businesses. A slow
growth rate and high market share characterize this segment, indicating that it
has matured. Hence, we believe that the company should not undertake large
organic investments in this business.
The Juice and Bakery segments are emerging as Almarai’s Star segments
with high growth rates and increasing market shares. Products from these two
segments have also established a strong reputation in the market place in a
short period. Additionally, given that these are high-growth businesses, we
believe that Almarai should invest heavily in these segments.
Although the Long Life segment is the best Star product, demand growth is
maturing, with people increasingly preferring fresh milk products. Hence, the
key to growth is by gaining market share through the launch of new and
innovative products. So far, Almarai has fared well here and we expect this to
continue, going forward. Export markets and expansion into newer
geographies outside of the GCC also remain key growth drivers.
We believe that the prospects for the Cheese and Butter market are more
limited than the other products given that consumers are increasingly
choosing diet products. The key for growth in the medium term would be
through innovative products and packaging. Hence, we are of the opinion that
investments in the segment should be relatively small.
4.2 BUSINESS OPPORTUNITIES IN FUTURE
In 2012, Almarai invested SAR 3,182.2 million in continuing the process of
putting the platforms for future growth in place. This investment is spread
across Almarai’s diversified operations:
� POULTRY
The capital investment consists of the design and construction of a state-of-
the-art integrated Poultry Processing facility with a potential capacity of 180
million birds per annum, a rendering plant and the related distribution
infrastructure throughout the GCC countries. These facilities will be
commissioned in the three steps during 2013, with the first primary processing
line to be commissioned during first quarter of 2013.
� DAIRY FARMING, MANUFACTURING AND
DISTRIBUTION
Continued robust growth in our core product groups (dairy, juice, cheese &
butter and bakery) requires investment in our supply chain to serve consumer
demand.
Our farming, manufacturing and distribution capabilities were all improved with
increased capacity to satisfy this growth.
2013 will be a key year for Almarai as the poultry facilities and infant nutrition
plant are commissioned and these new businesses continue to gain
momentum.
ANALYSISTHREATS
4.3 SWOT ANALYSIS
SWOT
ANALYSIS
STRENGTHS
WEAKNESSES
OPPORTUNITIES
ERROR: ioerrorOFFENDING COMMAND: image
STACK: