Academic journal article Journal of Competitiveness Studies

The Perfect Saudi Retail Recipe? Food for Thought

Academic journal article Journal of Competitiveness Studies

The Perfect Saudi Retail Recipe? Food for Thought

Article excerpt

INTRODUCTION

The countries in the west of Asia are often referred to as the Gulf region, Middle East and North Africa (MENA) region, or the Gulf Cooperation Council (GCC). This is a strategically located, politically sensitive, and economically booming region. In the heart of this region is the Kingdom of Saudi Arabia, which is the largest of these countries by area and also one of the largest by the size of its population.

Saudi Arabia has four main geographic regions. Najd, in the center, is the seat of political power in Saudi Arabia. Riyadh, the capital and the largest city in the country, is a part of this region. Ha'il and Qassim, the two other regions, are known for producing much of the county's agricultural produce. The Najd area has sustained nomadic pastoral production for generations and has been the home of Saudi Arabia's main Bedouin communities. To the west of Najd are the areas of Hijaz and Asir along the Red Sea. Hijaz includes the cities of Jeddah, Makkah, and Medina and attracts a continuous influx of pilgrims throughout the year. Jeddah is a seaport and a commercial center. Hijaz has agricultural oases and a history of tribally organized nomadic pastoralism. The seaports of Hijaz and Asir also have populations traditionally oriented towards the sea for trade or fishing, a characteristic they share with the Eastern Province. The largest oasis, Al-Ahsa, is in the Eastern province and provides dates, as well as other crops. The main cities in the Eastern region are Dammam, Al-Khobar, Dhahran, and Jubail.

The Kingdom of Saudi Arabia came into existence in 1932, when the areas controlled by Abdulaziz Al-Saud were unified and he was proclaimed the king. Since then, the country has been ruled by the Saud dynasty and stability in governance has been preserved as a result of established government policies. During the MENA political crisis (the "Arab Spring"), around 2010, Saudi Arabia emerged as a stable country and was more secure as an investment destination when compared to other countries in the region. The present ruler, King Abdullah has initiated a number of reform policies to improve economic and social conditions in the country.

The Saudi Arabian economy has consistently performed well, with annual growth averaging nearly five percent (CDSI, 2014). In the first six five-year development plans (1970-2000), the government emphasized the development of infrastructure and programs in response to social needs. The focus gradually shifted to developing a diversified economy, which also required policy changes to promote technology development. The eighth development plan (2005-2010) identified the need to develop the technical skills of the country's workforce, a goal that was only achievable because of the government's strong revenue position. The focus of the ninth plan (2010-2014) is to improve the employment rate and build a more competitive economy.

Since Saudi Arabia gained membership in the World Trade Organization (WTO) in 2005, the government has opened up certain economic sectors--including banking, retail, telecom, Information Technology (IT), and franchise distribution services--to increase Foreign Direct Investment (FDI). With the new FDI Law, the number of sectors on the 'negative list', where foreign investment was restricted, has declined and foreign investors are no longer required to have local partners or own real estate for company activities in order to enter the market. They are allowed to transfer money from their enterprises outside the country and can hire foreign employees. The minimum capital requirements to establish business entities have been eliminated in most cases.

Although various sectors have been opened for foreign investment, there is a preference for Saudi nationals. This is due to concerns about the country's 11.7 percent unemployment rate (CDSI, 2014). The government fears that unemployment, if not addressed, might become a severe social problem, given increasing prices and the country's growing income inequality. …

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