Department Of Management Sciences

Subject: International Business

Topic: Country Project Report

Submitted To: Mr. Shahid Nawaz

Submitted By: Syed Waleed Bukhari

(518)

Muhammad Arif Anwar (515)

Class: BBA (hons.) Morning, 7th

Semester
PART
FIRST
About Your Selected Country for Project
 Chapter No. 01: The Introduction and History of Saudi Arabia
History of Saudi Arabia:
The History of Saudi Arabia in its current form as a state began with its foundation in
1932 by Abdulaziz Al Saud, although the human history of the region extends as far as 20,000
years ago. The region has had a global impact twice in world history.
1. In the 7th century it became the cradle of Islam and the first center of the caliphate.
2. From the mid-20th century the discovery of vast oil deposits propelled it into a key
economic and geo-political role.
At other times, the region existed in relative obscurity and isolation, although from the 7th
century the cities of Mecca and Medina had the highest spiritual significance for the Muslim
world, with Mecca becoming the destination for the annual pilgrimage.
Saudi Arabia traces its roots back to the earliest civilizations of the Arabian Peninsula. Over the
centuries, the peninsula has played an important role in history as an ancient trade center and as
the birthplace of Islam, one of the worlds major monotheistic religions. Since King Abdulaziz
Al-Saud established the modern Kingdom of Saudi Arabia in 1932, its transformation has been
astonishing. In a few short decades, the Kingdom has turned itself from a desert nation to a
modern, sophisticated state and a major player on the international stage.

Early History:
The first concrete evidence of human presence in the Arabian Peninsula dates back
15,000 to 20,000 years. Bands of hunter-gatherers roamed the land, living off wild
animals and plants.

As the European ice cap melted during the last Ice Age, some 15,000 years ago, the
climate in the peninsula became dry. Vast plains once covered with lush grasslands gave
way to scrubland and deserts, and wild animals vanished. River systems also
disappeared, leaving in their wake the dry river beds (wadis) that are found in the
peninsula today.

This climate change forced humans to move into the lush mountain valleys and oases.
No longer able to survive as hunter-gatherers, they had to develop another means of
survival. As a result, agriculture developed first in Mesopotamia, then the Nile River
Valley, and eventually spreading across the Middle East.

The development of agriculture brought other advances. Pottery allowed farmers to

store food. Animals, including goats, cattle, sheep, horses and camels, were
domesticated, and people abandoned hunting altogether. These advances made
intensive farming possible. In turn, settlements became more permanent, leading to the
foundations of what we call civilization language, writing, political systems, art and
architecture.
 Kings of Saudi Arabia (1932present)
Reign
Name Lifespan Reign end Notes Family Image
start
Abdulaziz
Son of Abdul
26 November
Ibn 22 Rahman bin
1876 9 9 November
Saud September Faisal and Saud
November 1953
1932 Sarah Al
1953 (aged 76)
Sudairi

Son of Ibn
Saud 12 January 1902 9 2 November Saud and
23 February November 1964 Wadhah bint Saud
1969 (aged 67) 1953 (deposed.) Muhammad
bin 'Aqab
Son of Ibn
Saud and
Faisal 14 April 1906 2 25 March
Tarfa bint
25 March November 1975 Saud
Abduallah bin
1975 (aged 68) 1964 (assassinated.)
Abdulateef al
Sheekh
Son of Ibn
Khalid 13 February Saud and Al
25 March 13 June
1913 13 June Jawhara bint Saud
1975 1982
1982 (aged 69) Musaed bin
Jiluwi
Son of Ibn
Fahd 16 March 1921 Saud
13 June 1 August
1 August and Hassa Saud
1982 2005
2005 (aged 84) bint Ahmed Al
Sudairi
Son of Ibn
Abdullah 1 August 1924 Saud
1 August 23 January
23 January and Fahda Saud
2005 2015
2015 (aged 90) bint Asi Al
Shuraim
Son of Ibn
Salman Saud
31 December 23 January
Incumbent and Hassa Saud
1935 (age 81) 2015
bint Ahmed Al
Sudairi
An Ancient Trade Center:
Located between the two great centers of civilization, the Nile River Valley and Mesopotamia,
the Arabian Peninsula was the crossroads of the ancient world. Trade was crucial to the areas
development; caravan routes became trade arteries that made life possible in the sparsely
populated peninsula. The people of the peninsula developed a complex network of trade routes to
transport agricultural goods highly sought after in Mesopotamia, the Nile Valley and the
Mediterranean Basin. These items included almonds from Taif, dates from the many oases, and
aromatics such as frankincense and myrrh from the Tihama plain. Spices were also important
trade items. They were shipped across the Arabian Sea from India and then transported by
caravan.

The Birth of Islam:

Around the year 610, Muhammad PBUH, a native of the thriving commercial center of Makkah,
received a message from God (in Arabic, Allah) through the Angel Gabriel R.A. As more
revelations bid him to proclaim the oneness of God universally, the Prophet Muhammads PBUH
following grew. In 622, learning of an assassination plot against him, the Prophet PBUH led his
followers to the town of Yathrib, which was later named Madinat Al-Nabi (City of the Prophet)
and now known simply as Madinah. This was the Hijrah, or migration, which marks the
beginning of the Islamic calendar.
Within the next few years, several battles took place between the followers of the Prophet
Muhammad PBUH and the pagans of Makkah. By 628, when Madinah was entirely in the hands
of the Muslims, the Prophet PBUH had unified the tribes so successfully that he and his
followers reentered Makkah without bloodshed.

Introduction:

Saudi Arabia officially known as the Kingdom of Saudi Arabia (KSA) is an Arab state
in Western Asia constituting the bulk of the Arabian Peninsula. With a land area of approximately
2,150,000 km2 (830,000 sq mi), Saudi Arabia is geographically the fifth-largest state in Asia and
second-largest state in the Arab world after Algeria. Saudi Arabia is bordered by Jordan and Iraq
to the North, Kuwait to the northeast, Qatar, Bahrain, and the United Arab Emirates to the east,
Oman to the southeast, and Yemen to the south. It is separated from Israel and Egypt by the Gulf
of Aqaba. It is the only nation with both a Red Sea coast and a Persian Gulf coast, and most of its
terrain consists of arid desert or barren landforms.

The area of modern-day Saudi Arabia formerly consisted of four distinct regions: Hejaz, Najd,
and parts of Eastern Arabia (Al-Ahsa) and Southern Arabia ('Asir). The Kingdom of Saudi
Arabia was founded in 1932 by Ibn Saud. He united the four regions into a single state through a
series of conquests beginning in 1902 with the capture of Riyadh, the ancestral home of his
family, the House of Saud. Saudi Arabia has since been an absolute monarchy, effectively a
hereditary dictatorship governed along Islamic lines.

The ultraconservative Wahhabi religious movement within Sunni Islam has been called "the
predominant feature of Saudi culture", with its global spread largely financed by the oil and gas
trade. Saudi Arabia is sometimes called "the Land of the Two Holy Mosques" in reference to Al-
Masjid al-Haram (in Mecca), and Al-Masjid an-Nabawi (in Medina), the two holiest places in
Islam. The Kingdom has approximately a total population of 27.2 million (2010 estimate) , of
which 20 million are Saudi nationals and 8 million are foreigners.

Capital:
Riyadh is the Kingdom's capital with an estimated population of around five million, the main
Saudi government offices are also situated here. Other key cities are Jeddah, the commercial
capital which is located on the Red Sea coast and Dammam on the Arabian Gulf.

Languages:
The official language of Saudi Arabia is Arabic.

Business Language(s):
While Arabic is the official language of the State, English is widely used as a business language.
It is not rare that business contracts are made in Arabic, but it should be no problem to have a
translation in English.

Currency:
The Currency of Saudi Arabia is Saudi Riyal.
Exchange Rates:
Gross Domestic Product (GDP):
The Gross Domestic Product (GDP) in Saudi Arabia was worth 646 billion
US dollars in 2015.

The Gross Domestic Product per capita in Saudi Arabia was last recorded
at 21312.82 US dollars in 2015.

Gross National Income (GNI):

The Gross National Income in Saudi Arabia was 1.546 trillion PPP dollars
(2013).
The Gross National Income Per Capita in Saud Arabia is 53,640 PPP dollars (2013).
 Chapter No. 02: The Political Economy of Saudi
Arabia

Political System:
Saudi Arabia is an absolute monarchy. However, according to the Basic
Law of Saudi Arabia adopted by royal decree in 1992, the king must comply
with Sharia (Islamic law) and the Quran, while the Quran and the Sunnah
(the traditions of Muhammad PBUH) are declared to be the country's
constitution. No political parties or national elections are permitted. Critics
regard it as a totalitarian dictatorship. The Economist rates the Saudi
government as the fifth most authoritarian government out of 167 rated in
its 2012 Democracy Index.

In the absence of national elections and political parties, politics in Saudi

Arabia takes place in two distinct arenas: within the royal family, the Al Saud,
and between the royal family and the rest of Saudi society. Outside of the Al-
Saud, participation in the political process is limited to a relatively small
segment of the population and takes the form of the royal family consulting
with the ulema, tribal sheikhs and members of important commercial
families on major decisions.

Economic System:

Saudi Arabia has an oil-based economy with strong government controls over major economic
activities. Even though Saudi Arabia is considered to have a mixed economy, the Saudi king and
his advisors still make quite a lot of the countrys economic decisions, especially those related to
oil. Saudi Arabias economy depends predominantly on oil, its main export. Oil funds the
countrys education, defense, transportation, health, and housing.

Over half of Saudi Arabias GDP comes from oil production. The government owns the oil and
other major industries; however, private ownership of small businesses is increasing. Saudi
Arabia is trying to encourage more private businesses to boost the economy and decrease the
countries dependence on oil. It also has commercial manufacturing and financial industries.

Legal System:

The legal system of Saudi Arabia is based on Sharia (Theocratic Law), Islamic law derived
from the Qur'an and the Sunnah (the traditions) of the Islamic prophet Muhammad. The sources
of Sharia also include Islamic scholarly consensus developed after Muhammad's death.
Nevertheless, Sharia remains the primary source of law, especially in areas such as criminal,
family, commercial and contract law, and the Qur'an and the Sunnah are declared to be the
country's constitution.

Criminal law punishments in Saudi Arabia include public beheading, hanging, 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.
 Chapter No. 03: Saudi Arabias Culture
1. National Culture:
Islam is the official and only legal religion in Saudi Arabia. Over 90 percent of Saudis are Sunni
Muslims, and nearly all of these are followers of strict Wahhabi Islam. The remaining 10 percent
are Shia Muslims, concentrated in the eastern coastal region along the Persian Gulf. The majority
of the approximately 7 million foreign workers in Saudi Arabia are Sunni Muslims, with the
largest numbers from:
Bangladesh (1 million)
Pakistan (900,000)
Egypt (750,000)
Palestine (250,000)
India (1.4 million)
Philippines (800,000)
Sri Lanka (300,000)
Approximately 100,000 Westerners live in Saudi Arabia; the majority of them are Americans.

Local Culture:
Saudi Arabian culture mainly revolves around both Islamic and tribal values. Islam's two holiest
sites, Mecca and Medina, are located in the country. Five times every day, Muslims are called to
prayer from the minarets of mosques which are scattered around the country. The weekend
begins on Thursday due to Friday being the holiest day for Muslims.

Dress:
Saudi Arabian dress follows strictly the principles of hijab (the Islamic principle of modesty,
especially in dress). The predominantly loose and flowing but covering garments are helpful in
Saudi Arabia's desert climate. Traditionally, men usually wear an ankle-length shirt woven from
wool or cotton (known as a thawb), with a keffiyeh (a large checkered square of cotton held in
place by a cord coil) or a ghutra (a plain white square made of finer cotton, also held in place by
a cord coil) worn on the head.
Women's clothes are decorated with tribal motifs, coins, sequins, metallic thread, and appliques.
Women are required to wear an abaya or modest clothing when in public.

Religion:
Due to the legal framework of the country, which does not provide legal protection for freedom
of religion, the public practice of non-Muslim religions is prohibited. According to a 2009 Pew
Forum report, 97 percent of the total populations are Muslims.
 Education (Literacy Rate 2013):
Literacy rate is the percentage of people ages 15-24, 15 and above whom can both read and write
with understanding a short simple statement about their everyday life.

Ages In
Percentage
Youth Female 15-24 99.14
Youth Male 15-24 99.30
Youth Total 15-24 99.22
Adult Female 15 and Above 91.37
Adult Male 15 and Above 96.53
Adult Total 15 and Above 94.43

2. Organizational Culture:

Power Distance:
Saudi Arabia scores high on this dimension (score of 95) which means that people accept a
hierarchical order in which everybody has a place and which needs no further justification.
Hierarchy in an organization is seen as reflecting inherent inequalities, centralization is popular,
subordinates expect to be told what to do and the ideal boss is a benevolent autocrat

Individualism:

Saudi Arabia, with a score of 25 is considered a collectivistic society. This is manifest in a close
long-term commitment to the member 'group', be that a family, extended family, or extended
relationships. Loyalty in a collectivist culture is paramount, and over-rides most other societal
rules and regulations. The society fosters strong relationships where everyone takes
responsibility for fellow members of their group. In collectivist societies offence leads to shame
and loss of face, employer/employee relationships are perceived in moral terms (like a family
link), hiring and promotion decisions take account of the employees in-group, management is
the management of groups.

Masculinity:
Saudi Arabia scores 60 on this dimension and is thus a Masculine society. In Masculine countries
people live in order to work, managers are expected to be decisive and assertive, the emphasis
is on equity, competition and performance and conflicts are resolved by fighting them out.
Uncertainty Avoidance:
Saudi Arabia scores 80 on this dimension and thus has a preference for avoiding uncertainty.
Countries exhibiting high Uncertainty Avoidance maintain rigid codes of belief and behavior and
are intolerant of unorthodox behavior and ideas. In these cultures there is an emotional need for
rules (even if the rules never seem to work) time is money, people have an inner urge to be busy
and work hard, precision and punctuality are the norm, innovation may be resisted, security is an
important element in individual motivation.

Long Term Orientation:

The normative nature of Saudi Arabian society can be seen in its low score of 36 on this
dimension. People in such societies have a strong concern with establishing the absolute Truth;
they are normative in their thinking. They exhibit great respect for traditions, a relatively small
propensity to save for the future, and a focus on achieving quick results.

Indulgence:

One challenge that confronts humanity, now and in the past, is the degree to which small children
are socialized. Without socialization we do not become human. This dimension is defined
as the extent to which people try to control their desires and impulses, based on the way they
were raised. Relatively weak control is called Indulgence and relatively strong control is called
Restraint. Cultures can, therefore, be described as Indulgent or Restrained.
 Chapter No. 04: Ethical Issues in Saudi Firms

Social Issues:

Human Rights:
The Government's human rights record in Saudi Arabia remains poor.
Citizens have neither the right nor the legal means to change their
government. Security forces continued to abuse detainees and prisoners,
arbitrarily arrest. In addition there were allegations that security forces
committed torture. On October 1, the Council of Ministers approved a new
law regarding punitive measures that would forbid harming detainees and to
allow those accused of crimes to hire a lawyer or legal agent. The law
became effective in November; however, at year's end, there were no
reports of its implementation. Prolonged detention without charge is a
problem. Security forces committed such abuses, in contradiction to the law,
but with the acquiescence of the Government. The Government infringes on
citizens' privacy rights. The Government prohibits or restricts freedom of
speech, the press, assembly, association, religion, and movement. However,
during the year, the Government continued to tolerate a wider range of
debate and criticism in the press concerning domestic issues. Other
continuing problems included discrimination and violence against women,
discrimination against ethnic and religious minorities and strict limitations on
worker rights.

Corruption:
Corruption is perceived as significant. Saudi Arabia ranks 63rd out of 180
countries in Transparency Internationals Corruption Perceptions Index for
2009, a significant improvement over 2008. The absence of transparency in
government accounts and decision-making encourages a perception of
corruption among members of the royal family and in the executive branch.
Government procurement is an area of concern. Bribes, often disguised as
commissions, are reportedly commonplace. Only 43% of the total
businesses are free from corruption.

Treatment of labor

Salary and Wages:

Saudi Arabias labor regulations are relatively flexible. The non-salary cost of
employing a worker is low, and dismissing an employee (mostly expatriates)
is not burdensome. Regulations on work hours are fairly flexible.
Under Saudi Arabia's sponsorship, or kafala, system, migrant workers are
tied to a Saudi sponsor, either a company or an individual. The foreign
workers are not allowed to enter the Kingdom of Saudi Arabia for two years if
they resign or quit their job. Only very few companies offer a release
statement that their worker can quit the company and join a different
company. Due to this most companies take advantage of the situation and
treat their workforce poorly and as a majority of the workers sustain
themselves or help their poor families they do not quit the company nor
complain in fear of losing their job.

Female Employees:
A part of the women who are forced to go out and seek jobs to sustain
themselves or help their poor families might find themselves prey to all sorts
of harassment. The majority of the women who suffer from harassment are
expatriate maids. About 1.5 million women from countries like Indonesia, Sri
Lanka and the Philippines, work in Saudi Arabia. Many of them work in order
to provide for their families back home, but labor laws have largely failed to
ensure protections for them on both sides of the globe.

The burden of servicing exorbitant debts from recruitment fees can put
pressure on migrant women not to report workplace abuses for fear of losing
their jobs and income.

Saudi Arabia's criminal justice system can also be a serious problem for
migrant female domestic workers. Punishments for this range of crimes
include imprisonment, lashes, and, in some cases, death. Within the justice
system, they are likely to experience uneven or severely delayed access to
interpretation, legal aid, and access to their consulates.

Discrimination against Women:

Saudi Arabia is one of the four countries in the world that has not granted
women the right to vote. Saudi Arabia also has one of the highest driving
ages in the world at 25 but it does not allow women to drive. Again citing
religious reasons, the government does not allow women to ride even
bicycles.

Women of all ages and unmarried children require the consent or the
accompaniment of a close male relative or spouse to leave the country.

Child Abuse:
According to the TIP 2009 report, children as young as seven are led to
believe that they are being wed to Saudi men but they become domestic
servants, or even prostitutes in some cases upon arrival. While the
government retains anti-human trafficking legislation, the penalty for
violation regarding children and migrant workers are very light. Upon
violation, the violators only prevented from recruiting migrants for five years
rather facing any jail sentences or paying for fine.
 Chapter No. 05: Saudi Arab Trade Policy

In 2005, Saudi Arabia became the 149th country to join the World Trade
Organization (WTO). As part of WTO commitments, the countrys trade
regime should become more transparent and more accommodating to non-
Saudi businesses. Saudi business and laws still favor Saudi citizens, and
Saudi Arabia still has trade barriers, mainly regulatory and bureaucratic
practices, which restrict the level of trade and investment.

Nevertheless, the Government has liberalized the wholesale, retail, and

franchise sectors, allowing foreign investors to establish joint ventures and
retain a 51% share. The foreign partners capital requirement is set at $5.3
million (SR 20 million) and his equity share can be increased to 75% after 3
years from the contract date. All industrial enterprises are open to non-
Saudis, and they can also trade in the products they manufacture.
Restrictions on individual professions also are in force, such as who can
practice law, medicine, accounting and financial services, architect and
engineers, and other similar professions. A Saudi joint venture partner is a
requirement for any entity or individual to practice the above-mentioned
professional services.

Other trade barriers include:

Commercial Disputes Settlement:
There is not yet a transparent, comprehensive legal framework in place for
resolving commercial disputes. Saudi commercial law is still developing, but
in 1994 the Saudis took the positive step of joining the New York Convention
of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
However, dispute settlement in Saudi Arabia continues to be time-consuming
and uncertain. Even after a decision is reached in a dispute, effective
enforcement of the judgment can still take years.

In October 2007, King Abdullah issued a royal decree to overhaul the

Kingdoms judicial system, to train judges and build new courts. The decree
establishes two Supreme Courts, a general court and an administrative court,
and specialized labor and commercial tribunals.

Business Visas:
All visitors to Saudi Arabia must have a Saudi sponsor in order to obtain a
business visa to enter Saudi Arabia. Business visitors and foreign investors
can apply through the Saudi Arabian General Investment Authority (SAGIA)
for a visitor visa at the Saudi Embassy or Consulates in the United States.
Saudi Arabia has also begun to implement a decree stating that sponsorship
for certain business visas are no longer required. Based on new instructions,
the issuance of a visitors visa should be affected within 24 hours from the
application date.

While most business visas are valid for only one entry for a period of up to
three months, the Saudi Embassy in Washington has begun issuing a 5-year
multiple entry visa for selected business people, taking into consideration
the principle of reciprocity. Finally, the Saudi Ministry of Foreign Affairs is
currently examining the issuance of a visitors visa at ports of entry for
selected nationalities.

Delayed Payments:
This issue is an important concern for affected American companies. The
Government, due to past fiscal constraints, had in the past fallen into arrears
on payments to private contractors, both Saudi and foreign. Some
companies carried Saudi Government receivables for years before being
paid. The Government appears committed to clearing remaining arrears, but
the problem persists. U.S. companies should check with the U.S. Embassy or
Consulates if a problem arises.

Intellectual Property Protection:

Saudi Arabia recently undertook a comprehensive revision of its laws
covering intellectual property rights to bring them in line with the WTO
agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs).
The Saudi legal system protects and facilitates acquisition and disposition of
all property rights, including intellectual property. The Saudi Government
recently updated their Trademark Law (2002), Copyright Law (2003), and
Patent Law (2004) with the dual goals of TRIPs-compliance and effective
deterrence against violators. In 2008 the Violations Review Committee
created a website and has populated it with information on current cases.

Tariffs and non-tariff barriers:

Tariff Barriers:
Most basic consumer goods (rice, tea, unroasted coffee, barley corn,
etc.) are exempt of duty.
No tariffs on equipment, ordnance, arms and munitions for military
purposes, an export letter is required.
Import surcharges may occasionally be levied. Port fees may be levied
on goods which are exempt of customs duties.
The most common rate is 5 per cent, with a 20 per cent rate being
levied on commodities for which there are domestic substitutes.
Tobacco is subject to a 100 per cent import duty.
 Shipments in transit are not subject to duty.
 Non Tariff Barriers:
Consolidated shipments are not allowed. Back-to-back shipments
consigned to forwarding agents are not allowed for duty exempted
shipments.
Customs clearance is done at the airport and seaport customs
warehouses. There are no bonded warehouse facilities and a
consignee's authorization letter to the broker is required.
Temporary import on bond (duty on deposit) is permitted only to the
importer under the special arrangements and prior approval from the
Ministry.
Customs duty for general commodities is five per cent, some are 12
per cent and a 20 per cent rate is applied to imported goods which
have a domestic substitute.
Net /gross weight of shipments shown in all shipping documents should
match.
A ban exists on EU imports of meat due to the Creutzfeldt-Jakob
disease scare.
Import licenses are required for flour, rice and sugar.
The import of arms and ammunition is strictly controlled.
The import of alcoholic beverages, flour, pork, 14-carat gold and a
range of prefabricated buildings is prohibited.
Commercial agencies are limited to Saudi citizens and imports may be
made only through such agents.
Chapter No. 06: Foreign Direct Investment
Saudi Arabs Top 10 Imports (2015):
The following product groups represent the highest dollar value in Saudi Arabias import
purchases during 2015. Also shown is the percentage share each product category represents in
terms of overall imports into Saudi Arabia.
1. Machines, engines, pumps: US$26.8 billion (15.8% of total Saudi imports)
2. Vehicles: $25 billion (14.7%)
3. Electronic equipment: $19.5 billion (11.5%)
4. Iron or steel products: $5.8 billion (3.4%)
5. Gems, precious metals: $5.8 billion (3.4%)
6. Pharmaceuticals: $5.6 billion (3.3%)
7. Iron and steel: $4.7 billion (2.8%)
8. Cereals: $3.9 billion (2.3%)
9. Medical, technical equipment: $3.7 billion (2.2%)
10. Plastics: $3.6 billion (2.1%)

Saudi Arabs Top 10 Exports (2015):

1. Oil: US$164.1 billion (76.9% of total exports)
2. Plastics: $15.2 billion (7.1%)
3. Organic chemicals: $10.2 billion (4.8%)
4. Ships, boats: $2.5 billion (1.2%)
5. Aluminum: $2 billion (1%)
6. Machines, engines, pumps: $1.8 billion (0.8%)
7. Inorganic chemicals: $1.5 billion (0.7%)
8. Vehicles: $1.3 billion (0.6%)
9. Dairy, eggs, honey: $1.2 billion (0.6%)
10. Electronic equipment: $1.1 billion (0.5%)
 Chapter No. 07: Regional Economic Integration

International economic integration means full economic union among a

group or groups of countries. Frequently this is also called 'total' economic
integration in distinction of some other international arrangements involving
closer economic cooperation or some degree of integration such as free
trade areas, customs unions, and common markets. From Islamic point of
view any arrangements are welcome as long as it would lead to the
establishment of closer-co-operation or stronger ties among Muslims.

The Arab League was the first to call for agreements for economic
cooperation among Arab counties. It made the proposal some forty years ago
before most of the international economic cooperation projects now
underway were even mooted. But the Arab politicians paid no enough
attention to economic cooperation and integration and began to talk about
political and military cooperation. Economic cooperation was thus omitted
from their agenda. The Arab League has never been able to grasp the
importance of the economy as a means of realizing political goals. Business
and commerce were things that Arab politicians looked down on. They
considered them the effects, not the causes, of political action. But now, with
the emergence of various international blocs, the issue no longer needs to be
argued.

However, reviewing all attempts of cooperation, alliances or integration

among Arab or Islamic countries in the last four decades we find big projects
at the beginning and very little or nothing was left at the end. Some of
these projects are:

1. Arab fund for economic and social development

2. Kuwait Fund for Arab Economic Development

3. Council of Arab Economic Unity

4. Gulf Cooperation Council (GCC)

5. Arab Bank for Economic Development in Africa

6. Arab Maghreb Union: Algeria, Libyan, Mauritania, Morocco, Tunisia

(AMU)

7. Arab Monetary Fund (AMF), 1976

8. Arab Trade Financial Program (ATFP)

9. Arab Common Market, 1964

10. Arab Free Trade Zone

 1. Arab fund for economic and social development:

The Arab Fund for Economic and Social Development (AFESD) is a Kuwait-based pan-
Arab development finance institution. AFESD was founded in May 16, 1968. Its first meeting
was held on 6 February 1972.

All member-states of the Arab League (Saudi Arabia, UAE, Oman, Qatar, Yemen, Djibouti,
Somalia, Bahrain, Kuwait, Iraq, Syria, Lebanon, Palestine, Jordan, Egypt, Sudan, Libya, Algeria,
Tunisia, Morocco and Mauritania) are members of the AFESD. As of 2003, it held around
US$7.3 billion in assets.

The AFESD was established by agreement of the Economic and Social Council of the Arab
League.

Objectives:
\

2. Kuwait Fund for Arab Economic Development:

KFAED was founded in December 1961 by the Minister of Finance Sheikh Jaber Al-Ahmad Al-
Jaber Al-Sabah.

Objectives:

The Fund may provide assistance to a variety of destinations, including:

Central and regional governments, public utilities and other public institutions.
 Development institutions, both of them international, regional or local and in particular
the development finance institutions.

Institutions that are carrying out joint projects between a number of developing countries,
mixed and private establishments with legal personality, which have the character of a
development does not aim merely to make a profit is limited. And it requires that these
facilities are manufactured by one or more of the developing countries and enjoys their
nationality.

(In cases where the borrower is not benefiting from the state loan, the Fund typically requires an
agreement with that State to ensure the fulfillment of the obligations of the borrower according
to the loan agreement held with him)

3. Council of Arab Economic Unity

The Council of Arab Economic Unity (CAEU) was founded in May 30, 1964, following an
agreement in 1957 by the Economic Council of the Arab League.

Founded by Egypt, Iraq, Jordan, Kuwait, Libya, Mauritania, Palestine, Saudi Arabia,
Sudan, Tunisia, Syria, United Arab Emirates and Yemen.

Objectives:

According to The Economic Unity Agreement approved on June 3, 1957, the Council of Arab
Economic Unity desires to "Organize and consolidate economic relations among the States of the
Arab League on bases that are consistent with the natural and historical links among them; and to
provide the best conditions for flourishing their economies, developing their resources and
ensuring the prosperity of their countries.

The organization is devoted to achieving economic integration within a framework of economic

and social development and to promoting freedom of movement for labor, capital, and services.
In 1964 it approved a decision to create an Arab Common Marketwhich Egypt, Iraq, Jordan,
Libya, Mauritania, Syria, and Yemen announced an intention to jointo promote
Arab integration by reducing tariffs. Although initial efforts to establish the market were
unsuccessful, new proposals were put forward in the 1980s and 90s.

4. Gulf Cooperation Council (GCC):

Gulf Cooperation Council (GCC) was established in 25 May 1981.

Its member states are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the
United Arab Emirates.
Objectives:

Among the stated objectives are:

Formulating similar regulations in various fields such as religion, finance, trade, customs,
tourism, legislation, and administration

Fostering scientific and technical progress in industry, mining, agriculture, water and
animal resources

Establishing scientific research centers

Setting up joint ventures

Unified military (Peninsula Shield Force)

Encouraging cooperation of the private sector

Strengthening ties between their people

Establishing a common currency

5. Arab Bank for Economic Development in Africa

The Arab Bank for Economic Development in Africa (BADEA) was established pursuant to the
resolution of the 6th Arab Summit Conference at Algiers (28th November 1973). The Bank
began operations in March 1975.
Objectives:
The objectives of BADEA are: To assist African countries with large balance-of-payment
deficits, to provide technical assistance, and to sponsor Arab investments in Africa
through investment guarantees and export financing.
A fundamental focus of BADEA since its establishment has been to help alleviate poverty
in Africa and to encourage economic growth by supplying much needed financing.

The banks investments cover a broad array of public sectorsincluding transportation,

agriculture, health care, education, and energyas well as the private sector.

Its lending programs focus on infrastructure projects to help create a more-sustainable

investment environment in impoverished African countries and microcredit to support
small and medium-size enterprises.
 BADEA also runs a debt-relief program to help heavily indebted poor countries in the
region.

6. Arab Maghreb Union (AMU):

The Union was established on 17 February 1989 when the treaty was signed by the member
states in Marrakech.

The Arab Maghreb Union (AMU) is a trade agreement aiming for economic and future political
unity among Arab countries of the Maghreb in North Africa.

Its members are the nations of Algeria, Libya, Mauritania, Morocco and Tunisia.

Objectives:

The main objectives of the AMU Treaty are to strengthen all forms of ties among
Member States (in order to ensure regional stability and enhance policy coordination), as
well as to gradually introduce free circulation of goods, services, and factors of
production among them.

Common defense and non-interference in the domestic affairs of the partners are also key
aspects of the Treaty.

The Treaty highlights the broad economic strategy to be followed, namely, the
development of agriculture, industry, commerce, food security, and the setting up of joint
projects and general economic cooperation programs.

Finally, the agreement provides the possibility for other Arab and African countries to
join the Union at a later stage.

7. Arab Monetary Fund (AMF):

The Arab Monetary Fund (AMF) is a regional Arab organization, founded

1976, and operational from 1977. It is a working sub-organization of the
Arab League. Its Headquarter is in Abu-Dhabi.

Member Countries (22) are: Jordan, United Arab Emirates, Bahrain, Tunisia,
Algeria, Djibouti, Saudi Arabia, Sudan, Syria, Somalia, Iraq, Oman, Palestine,
Qatar, Kuwait, Lebanon, Libya, Egypt, Morocco, Mauritania, Yemen, and
Comoros.

Objectives:

The fund aims at contributing to the achievement of the following objectives:

1. Correcting disequilibria in the balance of payments of member States.

2. Striving for the removal of restrictions on current payments between

member States.

3. Establishing policies and modes of Arab monetary co-operation.

4. Rendering advice, whenever called upon to do so, with regard to

policies related to the investment of the financial resources of member
States in foreign markets.

5. Promoting the development of Arab financial markets.

6. Paving the way towards the creation of a unified Arab currency.

7. Promote trade among member States.

8. Arab Trade Financial Program (ATFP):

ATFP was established in 1989. The Arab Trade Financing Program (ATFP) is a
specialized multi Arab financial institution with a mission to promote Arab trade and to
increase the competitive capabilities of the Arab producers and exporters.

Beneficiary countries of the Arab Trade Financing

Program:

Africa: Algeria, Djibouti, Egypt, Libya, Morocco, Mauritania,

Somalia, Sudan, and Tunisia.
 The Middle East: Bahrain, Iraq, Jordan, Kuwait, Lebanon, Oman,
Palestine, Qatar, Saudi Arabia, Syria, the United Arab Emirates, and
Yemen.

Main Objectives:

Promoting Inter-Arab Trade is part of AMF objectives.

Promoting inter-Arab trade exchanges & exports of Arab commodities.

9. Arab Common Market:

Arab Common Market was established in 13 Aug 1964, by members of Council of Arab
Economic Unity (CAEU) and came into force on 1 Jan 1965. Common Market Accord, ratified
by Egypt, Iraq, Jordan and Syrian AR, initially for a period of 10 years, with anticipated
franchise for agricultural products by 1970 and industrial products by 1975.

The agreement was amended in 1968 to cover a transition period of only 3 years. Libyan AJ,
Mauritania and Yemen are also now parties to the agreement which provides for increasing free
movement of capital, goods and people among members and reduction of duties on goods and
commodities.

Members: Egypt, Iraq, Jordan, Syrian AR, Libyan AJ, Mauritania and Yemen.

Objectives:

Function as the main preferential trade instrument within Arab Economic Unity;

Provide technical assistance to least developed member states of CAEU (Council of Arab
Economic Unity).

Ultimately achieve:

freedom of personal and capital mobility

freedom of exchange of national and foreign goods and products

freedom of residence, work, employment and practice of economic activity;

 freedom of transport, transit, use of means of transport, ports and civil airports

10. Arab Free Trade Zone:

In 1981, an agreement to facilitate and promote inter-Arab trade was signed, but to little effect.

In February 1997, the League decided to create an Arab Free Trade Area, also known as the
Greater Arab Free Trade Area.

Seventeen of the 22 Arab League states signed on to this agreement, which came into force on 1
January 1998.

The 17 states that are members of GAFTA are: Algeria, Bahrain, Egypt, Iraq, Kuwait,
Lebanon, Libya, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United
Arab Emirates and Yemen. Others are in the process of joining.

Objectives:

Goods produced by any member country shall be treated as national goods as far as the
rules of origin, specifications and measurements, health and security safeguard clauses as
well as local charges and taxes are concerned. However, each member country would
need to observe international rules and provisions for setting safeguard measures as well
as subsidies.

International rules and practices will be observed as far as defining and dealing with
cases of dumping are concerned.

The ability to facilitate the funding of inter-Arab trade and settlement of payments
resulting from such trade

The removal of all non-tariff barriers for member country products.

Allowing member countries to implement agricultural calendars so as to be able to

suspend tariff reductions on a maximum of 10 agricultural commodities during the
months of peak production.
 PART
SECOND
About Your Selected Business
 Brand Elements

Name: Saudis Chunky Bites

Logo:

Slogan: We dont deliver Food We deliver Happiness

URL: https://www.facebook.com/Saudis-Chunky-Bites-741644746011465/

Character:
 Opening a Fast Food Restaurant (Saudis Chunky Bites) In Saudi Arabia
We choose Saudi Arabia for opening a fast food restaurant business; this is because of the
following reasons:

1. PEOPLE:
Despite the enormous natural richness of the country (Saudi Arabia ranks third globally
among the 10 countries with the most plentiful and valuable natural resources like oil, gas,
and strategic minerals) without any doubt the utmost and first important asset of the
Kingdom is its PEOPLE. Always welcoming and hospitable, the Saudis are very supportive
and willing to help other people with a smile on their face.

2. Family is Priority:
Nothing matters more than family in Saudi and you can feel it everywhere: leisure places,
restaurants, malls, shops, public places, etc. are all designed thinking about the families.
Families have preference over singles in any public place and we are offering a family
section in our restaurant so it would be in our benefit.

3. Security:
Despite alarmist and twisted information published in some media, the reality is that Saudi
Arabia is as safe as many western countries in the world. There is relatively little crime in
Saudi Arabia. The level of violence is far less than one would find in a city of comparable
size in the United States, Canada or Europe, and the security level is high. So there will be no
issue of security in our restaurant.

4. Tourism:
Among Saudi Arabia's historical, cultural and scenic attractions are ancient castles, huge sand
dunes and the spectacular coral reefs of the Red Sea and Arabian Gulf. So the tourism in
Saudi Arabia is largely involved. So opening a restaurant in Saudi Arabia would be a great
opportunity for us.

5. A Dynamic Economy:
Significant spending power, an innovative climate, its geographic location and highly skilled
workers- all of these are the benefits of Saudi Arabia as a location for a restaurant business.
 Strategy of International Business

As we are going to open a fast food restaurant in Saudi Arabia, So first of all we have to keep in
mind that the Saudi Arabia is a rich country and is based on the Pillars of Islam. We know that in
Islam there is a concept of Haram and Halal in Saudi Arabia. So we have to follow these rules
and regulations of Islam before delivering our products.

Localization Strategy:
So we follow localization strategy while opening restaurant in Saudi Arabia because we have to
follow the values of localization i.e high localization is required while making a product due to
greater number of Muslims living in Saudi Arabia.

Organization of International Business (Organizational

Architecture)

Structure: (Vertical Differentiation):

Centralized Structure: In our fast food restaurant we make our structure centralized because in
Centralized Structure the Coordination between the high level to low level management is very
strong, Consistency is high, there is only one decision maker and the avoidance of duplication is
high. As we are the owner and responsible for the operations of our business so we use this
structure and keeps decisions in our hand.
 Structure: (Horizontal Differentiation):

Ownership

Administrative Manager

Physical
Marketing Human Finance Interaction Environment Outcome
Manager Resource Manager Quality Quality Quality
Manager Manager Manager Manager

Advertis Recruitment Budgeting Restaurant Dining

ement
Cleanliness Experience
Sales Training Cashier
Support Layout & Food
&
Design Quality
Development Interpersonal
Event
Managem Interaction Menu Menu
ent Design Variety
Problem
Solving Skill
 Incentive & Control System:
Incentive: The wages are to be given to our employees on monthly basis and an additional
bonus of 10% is to be given to the employee who works with motivation and helps in increasing
the sales of the restaurant. As well as we offer an award for the best employee of the year
according to their work and an additional amount in the form of bonus is to be given to him.

Control System: In our restaurant we use bureaucratic control System, i.e usage countries laws
and rules & regulations to control our employees.

Cultural Activities
The cultural activities that are to be followed in our restaurant are as follows:

1. The restaurant staff and waiters should wear the Thobe (a cultural dress) to show
respect to the worthy guests.
2. As we now that Saudi Arabia is a Muslim country, so the restaurant will be closed during
prayer times.
3. Incentives should be given to the staff members on the special festivals like Eid-ul-Fitar
Eid-ul-Azha etc.
4. As we know that the Arab Culture values family, so we offer separate lounge for family.
5. During the Holy Month of Ramadan, the restaurant will offer Sehri and Aftari deals.
 Processes
1. Order Taking Process:
(From arrival of the customer to its departure)
As we know that first impression is the last impression. So to add value and built a positive
image in the minds of our customer we follow this process in our restaurant.
Hostess gets the name of the clients upon arrival
Receptionist directs customers to the table
Customers review menu
Customer places order
Waiter places order on order board
Chef takes order
Chef cooks and prepares order
Waiter picks up order and serve food
Customers eat the food
Customers ask for bill
Waiter delivers the bill
Customer pays the bill
Then the receptionist will lead the customer to the door with greetings

2. Service Improvement Process:

To improve the quality system and service of the restaurant, we follow this process in a year.

Get clear on what great service looks like for the restaurant and write it down
Give team the tools that they need
Great Service Doesnt Happen Overnight. There are no fast fixes
Teach Service Every Day
Hire people with a heart for hospitality
Write out a training plan and expectations for every position at the restaurant
Give great service to the staff so the staff can give great service to the customers
Reward the team for great performance
Creates an employee rewards program
Empowering the team to go the extra mile for guests
 Entry Strategy
For opening a restaurant business in Saudi Arabia we will select Wholly Owned Subsidiary
entry strategy because in Wholly Owned Subsidiary everything is under the control of the
ownership and management. All the benefits and costs of the restaurant will be our responsibility.
All the managing and restaurant related problems will be handled through top management and
the top management will consult ownership for the resolving of the problems, no third party will
be involved in restaurant related issues.

Production & Outsourcing (Make or Buy Decision)

In our restaurant we make production decision because we have to serve our customers fresh and
healthy food spontaneously, also because of the benefits of production like we can lower the cost
of production according to the situation and can protect our recipes from our competitors.

Design Required Departments

The required departments for the restaurant would be:

Marketing Department:
This department will assist in generating the sales of the restaurant by using advertisement and
promotional tools to attract customers toward restaurant. The personal relationship individuals
will help others in acknowledgement about the culture of the restaurant.

Human Resource Department:

The human resource department will assist the restaurant by recruiting the best individual
(employee) in the form of Manager, Cook, Waiter and Staff Person, which will ultimately help
the restaurant in maintain their level (class).

Finance Department:
All the financing issues will be handles by the finance department. This department will also
provide the financial services related to concerned problem and helps in budgeting.
References:
https://en.wikipedia.org/wiki/History_of_Saudi_Arabia
http://www.suddefrance-developpement.com/en/country-profiles/saudi-
arabia/presentation.html
http://www.jewishvirtuallibrary.org/jsource/arabs/saudikings.html
https://en.wikipedia.org/wiki/Saudi_Arabia
http://www.saudiembassy.or.jp/En/SA/History.htm
http://www.tradingeconomics.com/saudi-arabia/gdp
http://www.tradingeconomics.com/saudi-arabia/gdp-per-capita
http://www.tradingeconomics.com/saudi-arabia/gdp-per-capita-ppp
https://en.wikipedia.org/wiki/Economy_of_Saudi_Arabia
https://en.wikipedia.org/wiki/Legal_system_of_Saudi_Arabia
http://www.indexmundi.com/facts/saudi-arabia/literacy-rate
https://geert-hofstede.com/saudi-arabia.html
http://www.globaltrade.net/f/business/text/Saudi-Arabia/Trade-Policy-
Trade-Agreements-Trade-Barriers-in-Saudi-Arabia.html
https://www.austrade.gov.au/Australian/Export/Export-
markets/Countries/Saudi-Arabia/Doing-business/Tariffs-and-
regulations
http://www.worldstopexports.com/saudi-arabias-top-10-exports/
http://www.worldstopexports.com/saudi-arabias-top-10-imports/
https://org.uib.no/smi/pao/zineldin.html
http://sauditrade.weebly.com/social--ethical-issues.html
https://en.wikipedia.org/wiki/Council_of_Arab_Economic_Unity
https://www.britannica.com/topic/Council-of-Arab-Economic-Unity
https://en.wikipedia.org/wiki/Gulf_Cooperation_Council#Objectives
https://www.britannica.com/topic/Arab-Bank-for-Economic-
Development-in-Africa
https://www.issafrica.org/profile-arab-maghreb-union-amu#objectives
http://www.amf.org.ae/en/page/objectives-and-means
https://arab.org/directory/arab-trade-financing-program/
http://www.uia.org/s/or/en/1100064203
http://www.bilaterals.org/?-GAFTA-
http://www.bbc.com/news/world-middle-east-14703523