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Saudi Arabia has a thriving commercial sector, with private companies active in the import of consumer products as well as the export of Saudi Arabian manufactured goods.

Newcomers to Saudi Arabia routinely express surprise at the quantity, quality and variety of consumer goods. As they would in the U.S. or Europe, shoppers in modern Saudi Arabia have many choices and unlimited goods to select from. Stores and modern malls in many cities and towns are complemented by old-fashioned souqs (markets). Business is brisk at Saudi stores and franchise outlets. Long-established local trading companies offer prestigious automobiles, electronics, foodstuffs and the latest industrial and consumer equipment and products.

An impressive infrastructure supports this bustling marketplace. Sophisticated, efficient shipping companies and the Saudi Arabian Ports Authority oversee tons of cargo from major ports in the Red Sea and Arabian Gulf. Fleets of trucks and a host of aircraft transport all the imports - plus a growing volume of goods produced in Saudi factories - to shops across the Kingdom. Behind the scenes, knowledgeable business owners, aided by government programs, are injecting new vigor into an already dynamic commercial and trading sector.

Fueled by its vast oil revenues, Saudi Arabia has made impressive progress in diversifying its economy and stimulating the growth of its private commercial sector. Those steps plus changing demographics have helped produce a marketplace like few others in the world. Much of the private sector's growth reflects the spending power of a rapidly growing population of young, educated middle-class Saudis. According to the 1995 census, two-thirds of the population is under the age of 26.

Spending power also characterizes the Saudi consumer market. The gross domestic product (GDP) grew by 8.6 percent to 136 billion dollars in 1996. Low utility and living costs, interest-free loans, a stable currency and a low inflation rate (less than one percent in 1996) drive substantial discretionary spending by the average Saudi.

The Saudi government is firmly committed to assuring the country a dependable, long-range non-oil based economy. Several enticements in the form of new regulations mirror its attempts to inject more openness and competition into the market. The government has reduced price subsidies, applied for admission to the World Trade Organization (WTO) and passed a new law enabling foreigners living in the Kingdom to own shares on the local stock market.

Attractive tax relief benefits are inducing foreign companies to form joint ventures with Saudi partners. To boost the private sector further, the government is revising its 30-year-old foreign investment law, in order to attract more foreign investors. Plans are also underway to privatize several state-run organizations, which will increase liquidity of funds in the country.

Commercial Exhibition

Company site

Exhibitions held regularly in Riyadh and other cities help establish closer commercial ties and joint ventures with companies from around the world.

The Saudi Council of Chambers of Commerce and Industry anticipates that the private sector's contribution to the GDP will continue to increase. Chamber studies estimate the private industrial sector's exports at eight billion Saudi riyals (2.1 billion U.S. dollars) in 1996.

Increased domestic consumer demand was evident in Saudi commercial banks, which financed 6.3 percent more loans in 1996, including 30 percent more automobile loans during the first three quarters of 1996. Purchases of foodstuffs took the second biggest jump, increasing by 27 percent. Machinery imports rose 14 percent; building materials by 12.6 percent; home appliances by 8.9 percent; and textiles and clothing increased by 6.9 percent.

Top Saudi trading companies distribute and sell all these goods throughout the Kingdom. Many have their headquarters in Jeddah, where there are extensive port facilities. Such is the case for Haji Alireza & Co. Ltd., one of the oldest trading companies in Saudi Arabia. The Alireza firm has experienced consistent growth since it was established in 1945.

Part of the Alireza story includes Xenel Industries, one of the top 10 privately-owned Saudi companies and a true multinational. Sheikh Alireza's four sons - Muhammad Ahmad, Abdullah, Hisham and Khalid - created the company a quarter of a century ago. At the end of 1995, Xenel employed 2,500 and reported annual sales of nearly one billion dollars. Though still a relatively young company, Xenel is engaged in seven principal areas of activity.

Saudi Exhibition

product exhibition

The participation of tens of thousands of people at exhibitions in the Kingdom every year provides Saudi Arabian companies an opportunity to present their products and services to the general public.

From the beginning, the four brothers, all of them in their 20s, focused on their goals and sought partnerships abroad. ''We gained a number of successes in joint venturing with foreign companies and forming industrial projects," according to Muhammad Alireza, chairman of Xenel. At one point the company had as many as 30 joint ventures. Most were bought out during the 1980s, but the company maintains alliances with several major U.S., European and Far Eastern companies.

Xenel Industries has built Saudi Cable Company into the biggest cable business in the Middle East. Its Hidada firm employs about 1,000 workers in four factories that produce nine metal-product lines ranging from transmission towers to gratings, and cranes to nuts and bolts. Other Xenel companies are involved in petrochemicals, health care, transport, infrastructure, operations and maintenance, construction and systems.

Although family-owned companies dominate the private sector in Saudi Arabia today, most encompass several subsidiaries. Such is the case of two family businesses active in the automobile sector, the Abdul Latif Jameel Group and E.A. Juffali Brothers. Saudi Arabia is the largest and most sophisticated car market in the Middle East; imports totaled about 500 million dollars in 1996 and are expected to increase about five percent over the next two years.

Established in Jeddah in 1955, the Jameel Group has expanded its activities to other Middle Eastern countries, the United Kingdom, United States and Asia. In addition to its automobile and electronics trade, Jameel engages in real estate, consumer financing and marketing. In 1995, the Group employed 6,200 people and reported a sales turnover of 12 billion riyals (3.2 billion dollars).

Also based in Jeddah, Juffali has proven to be a formidable competitor. For five decades, Juffali has supplied a broad-based line of products and equipment and is also among the top companies involved in manufacturing, construction and the petrochemicals industry.

Juffali became the first private firm to be awarded the concession to form a public power utility. Since that landmark project in Taif in the late 1940s, Juffali has expanded into telecommunications, transportation, air conditioning and other products and services. Distribution and trading activities include sophisticated computers, telecommunications and medical equipment as well as farm equipment, chemicals and motor vehicles.

Arabia Electric, a Juffali-Siemens joint venture, supplies X-ray, ultra- sound, dental units and sophisticated CT and MRI imaging machines used in medical diagnosis. Other Juffali subsidiaries and joint ventures include Saudi Ericsson, Arabian Air Conditioning Company, Carrier Saudi Services and Steel Products Company. Most of the major newspaper, magazine and book publishers in the Kingdom use printing presses, photo typesetting equipment, printing equipment and graphic arts products distributed by Juffali.

Commercial Firm

Commercial Firm

Saudi Arabian commercial firms act as a conduit not only for the transfer of goods and services, but also for managerial and marketing skills.

When it comes to consumer products, Yusuf Ibn Ahmad Kanoo continues to reign as one of the top 10 companies in Saudi Arabia. Khalid Kanoo, managing director of the Kanoo Group, credits the company's success to discipline, hard work, entrepreneurial spirit and diligently persuading foreign companies that there are great advantages in investing in Saudi Arabia. ''The opportunities in Saudi Arabia for products and services are tremendous," says Mr. Kanoo. ''For those who are willing to work hard, the opportunities in Saudi Arabia will always be better than anywhere else in the world. The country has a sizable population and the liquidity of funds available for products ranging from software programs to pipelines. All it requires is seizing the opportunity and focusing on it."

His credo reflects the attitude of Yusuf Ibn Ahmad Kanoo, the firm's namesake. It is said that at the age of 15, Yusuf borrowed money to import dates, wood and rope and sold them to the dhow captains and consumers in Saudi Arabia and Bahrain. The company began diversifying during the 1930s, moving into the shipping business and later into pearl diving and travel. Kanoo Group has also taken initiatives in retailing, most recently opening a Sears Roebuck store in Riyadh and JC Penney in Dammam. In other trading activities, the company supplies government, oil companies and industries with building materials, engineering products and water-purification chemicals, fire and security systems, steel and plastic pipes and fittings, and other industrial products. In addition to its trading activities, the Kanoo Group maintains its strength in the shipping industry, insurance and business services.

Another internationally recognized trading company, the Olayan Group, evolved when its founder began building the company more than five decades ago. In that short time, Sulaiman Al-Olayan's organization is one of the top ten companies in the Kingdom. Its diversified trading and manufacturing holdings now encompass more than 30 operating subsidiaries, associated companies and joint ventures.

One of the largest private companies worldwide, the Olayan Group's strategic partners in the Kingdom include Coca-Cola, Xerox, Kimberly-Clark, Nestle, colgate Palmolive, and Bechtel. The Olayan Group employs more than 2,000 people with reported net assets of more than $3.5 billion dollars.

The nine-year-old Alesayi United Company, has soared to become one of the top trading companies. Alesayi, established in Jeddah in 1988, focused on consumer goods early on, trading in clothing, automobile spare parts, electrical materials, sports equipment, furniture and decorating items and electronics.

Wisely marketing to a youthful, growing populace, Alesayi has formed alliances with Universal, Sybex, Hushpuppies, Venta, Gildamarx, Sega, Sport Engineering, Californians Inc. and Carpet of Worth. In addition to its trading activities, the firm offers travel services.

When it comes to foodstuffs trade, Al-Aziziah Panda United Inc. ranks at the top. With 29 branch stores, Aziziah supermarkets offer a wide selection of American products. Its superstores also sell clothing and household goods. The chain employs about 1,300 people and reported sales of 495 million riyals (132 million dollars) in 1995, 25 percent more than the previous year.

In Riyadh, Kingdom Holding Company is investing in three huge developments representing an investment of well over a half billion dollars. Retailing figures prominently in Kingdom Center, a 984-foot tower that will house an upscale shopping mall, five-star Four Seasons Hotel, wedding and conference center, offices, sports club, exclusive apartments, a few plush condominiums and headquarters for the United Saudi Commercial Bank and Kingdom Holding.

Another major trading company, A.A. Turki Corporation, commonly known as ATCO, recorded 1.3 billion riyals (346.66 million dollars) in sales in 1995 and employs a work force of 3,500. ATCO shops in Dammam, Riyadh and Jeddah are popular venues for electrical and construction materials. A 30-year-old, diversified conglomerate, ATCO came on the scene during the oil boom and the construction of the East-West Pipeline. Today 18 independent businesses are integrated under the ATCO Group. Its holdings include sophisticated companies that deal with shipping logistics, port services, high-tech automated data controls systems and industrial cleaning services. Trading activities include Arabian Business Forms, ATCO Insurance, foods, products and services for the oil, gas, petrochemical, power-generation and water-conversion sectors. In addition to its Dammam headquarters, the group has offices in Houston and London that maintain independent operations in trading, real estate and investment.

Commercial Exhibition

In a country that attaches great value to private enterprise and initiative, Saudi Arabian commercial companies have grown immensely in size and scope of services in recent decades.

Al-Faisalia Group maintains its ranking as one of the premier private trading companies. Its initial enterprise, Modern Electronics Establishment was founded in 1970. Its downtown Jeddah office employed five people and tallied half a million dollars its first year. Since then, its work force has grown to 750 and sales exceed 400 million dollars. It now distributes audio-visual home entertainment products, computers, medical equipment, and analytical and measurement machinery.

Under its corporate umbrella, Al-Faisalia founded Modern Petro- chemicals Establishment in 1983. It distributes Ethyl Corporation chemicals and represents Rhone-Poulenc, Delta and Grace, whose products serve the petroleum and petrochemical industries. Al-Faisalia began diversifying in 1978 when it founded Al-Safi Dairy, now the largest dairy farm in the world. In another agricultural endeavor, Al-Faisalia created a vegetable farm on more than 490 acres of land north of Makkah.

Commercial Exhibition

The commercial sector attracts large numbers of young Saudis eager to venture into new fields, ensuring the continued growth of this vital arm of the national economy.

Another leader in the electronics trade, the Jeraisy Group, is headquartered in Riyadh, where it was founded in 1958. Today, with six branch offices in the Kingdom, the Jeraisy Group maintains its reputation of offering quality products and services. A private, family-owned business, Jeraisy employs more than 3,000 people and reported sales of 1.3 billion riyals (346.66 million) in 1996.

In addition to these top private trading companies, thousands of smaller companies are reaping healthy profits in Saudi Arabia. Buoyed by interest-free long-term loans provided by government funds, which can be used to cover as much as half the initial start-up cost, most are small or mid-sized operations, that collectively contribute immensely to the commercial and trading sector. These companies import and distribute billions of dollars worth of products annually. Saudi Arabia is one of the top 15 importers in the world, and U.S. exports to the Kingdom total about six billion dollars annually. Additionally, the value and volume of Saudi Arabia's non-oil industrial and consumer products, as well as its exports, have been increasing steadily, further promoting the activities of the private commercial sector.

In addition to electronics products and business machines, Jeraisy trades in office and computer furnishings, graphic arts equipment and micro-frame computer data communication. Jeraisy Computer and Communications Services has been assigned as the distributor for Sun, a well known Internet provider. The Sun-Jeraisy partnership will provide Kingdom-wide access to the Internet as well as hardware, software and support services.

The private commercial sector is expected to flourish even more in the years to come. The government has embarked on a program to further strengthen the role of the private sector in the national economy and has been joined by the Council of Saudi Chambers of Commerce and Industry to prepare the country's business leaders and government entities for changes that will be required by the WTO.

These and other developments will serve to accelerate the growth of the private sector in general, and the commercial sector in particular, during the years to come.

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