Key Considerations for Businesses Entering Saudi Arabia
Mandatory 20% Employment of Nationals in Engineering Roles
Understanding Cultural Differences, such as Time Perception
Monitoring Oil Price Trends Which Can Affect Contracts
Mohammed bin Salman, Crown Prince of Saudi Arabia, attended the US-Saudi Investment Forum in Washington last November. As part of the ‘Vision 2030’ initiative, South Korean companies see a positive outlook for entering Saudi markets. However, there are warnings against impulsive actions due to distinct differences in culture, language, and religion, as well as risks related to supply chains and manpower.
The mismatch between manpower demand and supply is particularly notable. According to a representative from the Korea Trade-Investment Promotion Agency (KOTRA) in Riyadh, South Korean companies struggle to find technically skilled partners in Saudi Arabia. Conversely, individuals like Khalid, a computer science graduate from a Saudi university, express difficulty in securing employment opportunities with Korean firms in the area.
South Korean firms are actively training local manpower. For example, Hyundai Motor Company has partnered with the Human Resources Development Fund (HRDF) in Saudi Arabia to participate in an engineer training program. With the Saudi government’s ‘Saudization’ policy mandating that at least 20% of engineers are Saudi nationals, companies are being urged to adapt their workforce structures to focus on local manpower.
Cultural differences, such as time perception, also pose challenges. Local business representatives note that the pace of work in Saudi Arabia differs from that in Korea, advising patience even if outcomes are not immediate. Understanding the nuances of Saudi regulations is also vital, as discrepancies between the formal regulations and their actual implementation may exist.
Respecting religious practices is crucial. A construction company representative mentioned the importance of adhering to local standards in aspects such as work attire, meal provisions, and rest area management, including creating dedicated spaces for female employees and ensuring the availability of halal meals.
Lastly, businesses should pay attention to oil price trends, as these are vital for companies planning to enter Saudi Arabia. While Saudi Arabia is known as an oil-rich nation, the prospects differ by industry. Due to recent oil price declines, Saudi Arabia’s government finances have worsened, leading to the cancellation or delay of certain oil and petrochemical plant projects. Some segments of the large-scale ‘Neom City’ project are also affected by this situation.