Overseas investors flock to Saudi Arabia: the most attractive blue ocean, the most difficult market to break into

I believe that every Chinese person going overseas has felt the Saudi craze that has been heating up in the past two years.

In terms of resource endowment and market potential, Saudi Arabia is blessed with unique advantages: located between the three continents of Europe, Africa and Asia, it is the only country with both the Red Sea and Persian Gulf coastlines, and is also the country with the highest oil production and exports in the world; World Bank data show that in 2022, Saudi Arabia's per capita GDP was US$30,436, ranking 20th in the world; 70% of its 35.95 million population are under 30 years old.

In 2016, the Saudi government, which was in a financial crisis due to the continuous decline in oil prices, announced to the world a national transformation plan called "Saudi Arabia Vision 2030", trying to reduce its reliance on energy exports as a single economic pillar. This economic reform initiative, known as the Saudi version of "reform and opening up", also created good opportunities for Chinese companies to enter the Saudi market. From e-commerce, financial technology, smart logistics, to game social networking, AIGC, clean energy, and digital infrastructure, Chinese companies in various fields have come to Saudi Arabia to explore the potential and possibilities of this new blue ocean.

But this is also a country that is gradually moving from a closed state to an open state. Religious barriers, cultural barriers, differences in business environment, and differences in workplace concepts have caused obstacles and difficulties for many companies and people going overseas.

In Saudi Arabia, it costs at least 30 million Saudi riels (about 60 million RMB) to register a retail trading company that is 100% foreign-owned. This figure is enough to block many small and medium-sized enterprises. This is an acquaintance society where the spirit of contract has not yet been popularized. The prerequisite for doing business is to "find the right person", and the partner who chats with you happily on WhatsApp may disappear in the blink of an eye. In order to meet the Saudi government's requirements for desertification rate, foreign companies need to recruit a group of local people to "support" them. A project that can be completed in two weeks in China needs to be extended to two months here, and companies that require overtime work on weekends may face government fines or warnings.

We found three senior overseas entrepreneurs who have taken root in Saudi Arabia: a female executive who moved her family to Saudi Arabia because she was optimistic about the development potential of the Middle East e-commerce and logistics industries; a professional who caught the "Saudi fever" and taught himself Arabic to join the Sino-Saudi trading company; and an entrepreneur who has lived in Saudi Arabia for nearly ten years and transformed from the Middle East general manager of JollyChic, a star e-commerce company in the Middle East, to establish a Saudi MCN company. Their sharing of Saudi Arabia's business environment, workplace atmosphere, industry status, and overseas advice also restored a more real and tangible Saudi Arabia under the filter of the craze.

Riyadh street scene

You must do in-depth market research before coming to Saudi Arabia

Don't have high expectations

Zhang Tianfang , Chief Express Officer of AJEX Logistics Services (a joint venture between Ajlan Brothers Holding Group and SF Express International), has lived in Saudi Arabia for three years.

In 2018, I was doing market research in the Middle East. At that time, I judged that the opportunity to develop the Middle East was very good: on the one hand, its logistics industry was not as competitive as that in Southeast Asia, nor as difficult to enter as that in South Asia. At the same time, it did not have the high threshold of the European and American markets and the already difficult-to-shake logistics giants. In addition, the reform and opening up of the Middle Eastern countries was also integrated with the "Belt and Road" policy of our country. The e-commerce and logistics industries were in a period of rapid development, which would bring some exploration opportunities and prospects. Of course, there is another blue ocean market in the world, which is Latin America, but I have never been exposed to the Latin American market in the past. It happened that there was already a project in progress in the Middle East, so I moved my family to Saudi Arabia in 2021.

Before I officially came to Saudi Arabia to work and live, I had been here on business trips twice. Objectively speaking, Saudi Arabia's infrastructure and urban appearance are far from the international metropolises we are familiar with. I often joke with my friends that you should never have expectations for Riyadh, just think of it as a small county town in your hometown, and not even a small county town around the provincial capital, but perhaps a small satellite county town of a second- or third-tier city.

Riyadh street scene

Many people think that life in Saudi Arabia is very boring, but I think it's okay after staying here for a long time. For example, I like fitness very much. Saudi Arabia now has gyms specifically for women, with very professional equipment. You know, there are no men in a gym, which is actually a great thing for a female fitness enthusiast.

But this gender segregation made me experience cultural shock when I first arrived in Saudi Arabia. For example, women are not allowed to use the swimming pools in many hotels in Saudi Arabia. It was even more exaggerated when I first came on a business trip in 2019. At that time, all restaurants were divided into family sections and single sections. There were eight of us in our group. Because I was a girl, I had to sit in the family section, which was separated from the outside by a small curtain. Once in a second-tier city in Saudi Arabia, when we went to a restaurant for dinner, my colleague begged the boss for a long time before I was let in. I became the first female customer received by this restaurant in decades since its establishment, and a foreign female customer.

In Saudi Arabia, many restaurants have separate ordering areas for men and women.

But now, with the continuous advancement of Saudi Arabia's "Vision 2030", we can see that many changes have taken place in the country: restaurant seats will no longer be divided into male and female areas; many hotels also allow women to use gyms and swimming pools, but the time for men and women to use them will be separated; last year, Saudi Arabia also opened the country's first mixed-use gym for men and women, which was opened in the embassy district, mainly for foreigners, and the membership fees are very expensive.

One change I have clearly felt in recent years is that as the political and economic exchanges between China and Saudi Arabia have become increasingly close, the locals have become more and more accepting of the Chinese. When I first came to Saudi Arabia in 2019, Saudis would try to greet me in Japanese or Korean when they saw an East Asian face; in 2023, the locals would first say "hello" enthusiastically when they saw me. (Background information: In September 2023, the Saudi government included Chinese as the second official foreign language in the teaching curriculum and required all middle schools to allocate the fourth teaching period on Sundays and Mondays to Chinese teaching.)

For example, Liyad has a landmark tourist area, Boulevard World, which is a bit like the "Window of the World" in Shenzhen, showing architectural styles and cultural customs from all over the world. A large Chinese area is specially built here, and the Chinese area is placed in the most conspicuous position at the entrance.

Saudi Arabians are increasingly accepting Chinese products, which is particularly evident in car brands. Many of my local friends ask me which Chinese car is better. They have already assumed that Chinese cars are great and they should choose the best. They told me that when they visit 4S stores, they find that Chinese cars have better configurations than Japanese, Korean, European and American brands at the same price.

The logistics industry I am engaged in is currently in a stage of rapid development in Saudi Arabia. In its national transformation strategy "Vision 2030", Saudi Arabia proposed to raise Saudi Arabia's Logistics Performance Ranking from 49th to 25th. My interpretation of this strategic goal is that the Saudi government wants to do a big business, including not only developing the logistics industry itself, but also improving logistics infrastructure and building a business environment for upstream and downstream logistics industries. For example, Jizan will be built into a regional port benchmarking the Khalifa Port in the UAE; Riyadh will be built into a regional air transportation hub.

However, Saudi Arabia's logistics infrastructure is still relatively rudimentary. Not only does the construction of roads need to be improved, but a complete national address database also needs to be popularized. In fact, the Saudi government has been promoting an address database system called national address. Saudi citizens must go to Saudi Post to register their national address. If they do not register, they will not be able to pay water, electricity and internet fees. However, e-commerce platforms have not yet absorbed this address system.

Specifically, our domestic e-commerce has a very powerful address database and fuzzy matching capabilities. For example, if we write the name of a community, it can automatically match it to a certain street in a certain province, city, district, etc. However, in Saudi Arabia, many e-commerce platforms will choose to provide consumers with a more convenient ordering method in order to allow consumers to place orders quickly, that is, to let them write the address details in a free text way. In daily life, the locals' understanding of "address" is not a step-by-step address like "province-city-district", but they prefer to use a descriptive way to describe where their home is.

When they invite people to their homes, they usually introduce themselves by saying that the fifth house on the right hand side of the gas station on the street you turn right at is their home. Even the most sophisticated address database system cannot recognize this kind of descriptive language. As a company that focuses on using technology to improve logistics efficiency and quality, AJEX uses WhatsApp robots to interact with recipients and synchronize the location provided by the collector to the operating system and address database in real time, thereby improving the accuracy of the delivery address and the signing rate.

Local people's daily entertainment

In the workplace, I also encountered some difficulties in the internal operation management of the company. Saudi Arabian professionals do not have a clear concept of KPI, OKR and other assessment standards like domestic professionals. We are responsible for the operations of three countries. I spent a lot of time explaining to colleagues in the three countries what KPI is, why it is formulated in this way, and what the formulation logic is.

Moreover, locals are more casual and don’t care much about verbal promises. I have encountered many times that I was chatting well with a local on WhatsApp, but he stopped replying or showed up. So if you want to have business negotiations with locals, you must confirm the specific time and place of the next meeting with him in a warm atmosphere; and send him a message on the same day to double confirm your meeting.

As for gender, before the "Vision 2030", there were very few women employed in Saudi Arabia. (Background information: Between 2017 and 2022, the proportion of Saudi women in the labor market increased from 21.2% to 34.7%, and the economic activity participation rate increased from 17% to 37%.) I am a woman, and my industry is a male-dominated industry. I am not very old, but my title is acceptable. Sometimes when I meet some local customers, they will obviously show surprise, as if to say, in an industry full of men, why did your company send such a young female representative to discuss cooperation with me?

Entering the women's security check channel in front of Riyadh Times Square, men and women need to go through security separately

Although Saudis are often seen as “rich and free”, I don’t feel that the local employees are not diligent enough. Many of our employees come from neighboring countries. They leave their homes and come to work in foreign countries for better career development. These employees will gradually bring in some ambitious Saudis.

When a company's organizational culture is efficient and positive, local young people will be motivated by the atmosphere and management style of the company; and Saudis also know that with the country's strategic transformation, government dividends will become less and less. This is just like when we were young, our parents could get jobs after graduating from college, and the company would provide housing; after the reform and opening up, we need to face fierce competition, find a job and buy commercial housing. Saudi Arabia's young people are now in the midst of such social changes.

I think Saudi Arabia is a bit overheated nowadays, with waves of business delegations emerging one after another. My personal opinion is that Saudi Arabia is currently more inclined to carry out cooperation between central state-owned enterprises at the government level, or large mature enterprises to open branches here , especially in the strategic directions vigorously promoted by the Saudi government, such as new energy, port construction, free trade zone construction, and pharmaceutical-related industries. It will be relatively easy for mature enterprises to find government departments in their corresponding industries to take on some projects. However, for small and medium-sized companies or individual entrepreneurs, it will take longer to find their own breakthroughs in emerging markets.

Take the e-commerce industry as an example. Although Saudi Arabia seems to have a large population base and strong consumer purchasing power, many people fail due to problems with the signing rate and COD. Moreover, the penetration rate of e-commerce in Saudi Arabia is still relatively low, and offline shopping is an indispensable part of their daily life. The weather here is too hot, and there are few public entertainment spaces such as parks and playgrounds, so I really like to go to shopping malls with friends and family for entertainment and leisure. One thing I will talk to e-commerce customers about is that they must first go to offline shopping malls to see what people buy and what the price range is; then make differentiation in products, either sell things that are not available offline, or sell products with a much higher cost performance than offline channels.

Because of the weather, shopping is the main form of entertainment for Saudis.

If I were to give some advice to those who are interested in exploring this market, I would say don't have too high expectations, be cautious, and make sure to go to Saudi Arabia to conduct in-depth market research and competitive product research so that you can move forward step by step. Don't rush in headfirst.

Pushing something with the Saudis

It depends on whether your relationship is in place

Qing Zheng is an executive at Sino-Saudi Arabia Trading Company. He currently runs the MeetMENA Entrepreneurship Club and has lived in Saudi Arabia for two years.

Before coming to Saudi Arabia to work, my impression of this country was limited to the religious level. It has two holy cities, Mecca and Medina, and citizens have to pray five times a day. The whole country has a strong religious atmosphere. But after actually coming to Saudi Arabia, I found that Riyadh has gradually become secularized, and it is no longer like before, where all the shops would be closed during prayer time.

Another thing that shocked me was that in Saudi Arabia, there were basically no people on the streets from morning to afternoon, but after five or six in the evening, there were more and more people. The weekend here is Friday and Saturday, but Saudi companies have an unwritten rule that Thursday is a free day by default, and you don’t have to wear formal clothes on this day, and you can even be late. Generally speaking, locals start to hang around on Thursday, and their work efficiency is not very high. Friday and Saturday are normal holidays, and Sunday is the first day of the working day, and they haven’t started working yet, so if you cut off the beginning and the end, there are only three days a week when the work status is relatively efficient.

Riyadh Times Square

Many Chinese doing business here feel that Arabs are not very reliable in daily interactions and often break appointments. I think this is firstly because they are slow in action and habitually late. Secondly, I think if it is something very critical and something that has a strong interest in them, the probability of them breaking an appointment is not high.

Another key point is that to promote something with Saudi locals, it depends on whether your relationship is in place. If they already regard you as a friend, then they will be very warm to treat you and consider everything for you; but if the relationship is not in place, it will be difficult to promote things, and they will not follow the spirit of the contract to the letter. Therefore, to do business here, you need to spend a long time to build relationships and constantly create intersections with local people. For example, our company would invite a few local friends to the manor from time to time to sit, drink tea and chat, and slowly build a very deep relationship, so that when we officially discuss business, it will be smooth.

But if they regard you as a friend, they will really do their best to help you. For example, at the end of last year, one of our colleagues had a problem with his residence permit and could not get through customs. He stayed at Riyadh Airport for nearly 20 hours. Later, we asked our previous Saudi partner to help deal with the matter. Although he no longer has a cooperative relationship with us and no interests are tied to us, after receiving our call for help, he drove to the airport at 2 a.m. without saying a word to communicate with the staff and coordinated until 7 or 8 a.m. After handling the matter, he drove our colleague back to his residence.

As for whether they recognize you as a person and accept you as a friend, it depends on whether your values ​​are consistent with theirs, and their values ​​are a cultural background formed by religion: for example, you have to be helpful, generous, sincere and kind, these are some basic prerequisites. On this basis, they will examine whether you are reliable when cooperating with you and whether you can really make them money. There is a common phenomenon in Saudi Arabia: those companies that come here based on the first-mover advantage, after successfully cooperating with locals, the locals will most likely continue to choose to cooperate with this company, and they will not easily change to a second company. Therefore, in Saudi Arabia, it is very important to have a successful experience for the first time.

In the workplace, we should also cooperate with local people according to this principle. When I manage local people, I will talk to them privately about many issues of life and values, and let them treat me as a friend, so that they will be more cooperative. If they don’t recognize you as a person, they will drag their feet. Because in Saudi Arabia, companies are not allowed to take the initiative to fire employees , unless there is clear evidence that the employee has damaged the interests of the company, then they can go through legal procedures to fire them. So they have the confidence to be passive and lazy.

The current generation of Saudi young people can be said to be the first generation of Saudi working people. Their parents basically started out in trade or worked in government departments, so it is difficult for them to gain working experience from their parents. But now the Saudi government has requirements for the Saudiization rate of enterprises (background information: Saudi Arabia's Labor Law makes clear requirements on the proportion of Saudi workers employed by enterprises. The proportion of Saudi workers stipulated in different industries is called "sandization rate". Companies that fail to comply with the regulations will be severely punished and may be excluded from government contracts and loans, or their foreign employees' visas and work permits will be suspended.) Many foreign companies only recruit locals to meet the proportion of the Saudiization rate, but they only support them and do not provide locals with good career channels and high salaries, so many Saudis will not have a strong motivation to stimulate their workplace skills.

Because locals lack work experience, when doing management, you first need to extend the project planning time. For example, a project that can be completed in one month needs to be extended to two months. Secondly, don’t expect them to reply to messages on non-working days. You need to seize their time on working days to clearly assign tasks and sort out each time node to help them complete the tasks in an orderly manner.

Of course, changes are also happening. For example, many Saudi young people are starting businesses, entering the formal workplace, and learning workplace experience in the process of starting a business. This requires a gradual process.

Saudi Arabia is really hot right now, and there are indeed many teams coming to inspect the market. Saudis will think that since you come to see me, you should come with a complete plan; but they find that the Chinese seem to be just a cursory visit, saying some polite words, and often there is no follow-up, which has led to them being a little tired of receiving Chinese inspection teams.

Therefore, my advice to large companies with mature business models is, first, prepare what you want to do and your plan; second, you need to find the right people, and use those who have deep experience in the Saudi market to help you find the corresponding relationship; third, after finding the right people, have multiple rounds of discussions with them based on their cultural characteristics. Doing these three things well is almost enough.

I have been working in Saudi Arabia for two years and I feel that I made the right decision. If I had continued to stay in China, I would definitely not be able to achieve the current level of salary and career advancement; in the past two years, I have stepped on the cusp of China-Saudi Arabia economic and trade exchanges, and my vision and network have been greatly improved.

For individuals, I currently recommend three types of people to come to Saudi Arabia to explore opportunities.

One type is expatriates from large domestic companies . Their salaries overseas are definitely much higher than in China, but you have to consider whether you can adapt to the situation here. In the past two years, I have found that there has been a high turnover of young employees in many large companies because life in Saudi Arabia is relatively scarce and poor. You have to consider whether you can really adapt to the situation here, not just how high the salary is. I suggest you come here for a trip first, talk to local friends, and then consider whether to go overseas.

One of Saudi people's daily leisure activities: smoking hookah

The second category is some people who do not have a diploma, but have advantages in Arabic and English . Although they cannot enter large companies like Huawei, they can also enter more traditional trading companies. These companies do not require you to have a strong knowledge structure. As long as you have a language advantage and can work hard, I strongly recommend such people in the workplace to come over.

The third category is that your diploma may not be competitive enough and your language advantage is not strong, but you are a very daring person . You can also start a business, such as opening a milk tea shop with friends. It is also a good opportunity to gain a first-mover advantage in such a window period .

Saudi Arabia requires employees to work overtime on weekends

May be reported

Zeng Haipeng is the co-founder of Saudi MCN agency iShow. He was the Middle East general manager of JollyChic, a Middle East cross-border e-commerce platform, and has lived in the Middle East for nine years.

Before 2015, I served as CMO of Zhiyu, mainly responsible for digital marketing and advertising. Like most cross-border e-commerce companies, we still adopted a rudimentary approach, operating remotely in China and lacking understanding of local market conditions and customers. After our visit to the Middle East in 2015, we found that there was a huge deviation in our understanding of customers and the market, and we had to make some highly localized investments, such as local logistics, warehousing, marketing and services to improve our business. To achieve deep localization, we definitely need a team to stay in the local area.

In 2015, Saudi Arabia had not yet launched its "Vision 2030" and the social atmosphere was still very conservative. For example, women were not allowed to go out alone or interact with the opposite sex alone. Even when the courier came to deliver the package, if only women were at home, they could not open the door to receive the package. In the local area, payment was basically made on delivery. If the door could not be opened, there was no way to pay and receive the package, which further reduced the delivery rate.

At that time, almost all offline public spaces, restaurants, cafes, and even food courts in shopping malls, ordered and sat separately for men and women. Once, one of our colleagues ordered a meal and took the plate to find a seat, but he happened to sit in the girls' area. Fortunately, the local Arabs reminded him, otherwise this incident might have caused more serious consequences; I was refused to check into a hotel once because the hotel was a family hotel. As a single man, I could not check in. I could only check in with my lover or parents; Saudi Arabia is located in a tropical desert climate zone, and the temperature is very high in summer. Once, one of our male colleagues walked to the supermarket opposite his home to buy things in shorts, and was detained by the police. Later, local colleagues came forward to coordinate and settle it.

In Saudi Arabia, single men are not allowed to enter stores marked as Family Only.

I have been in Saudi Arabia for nearly ten years now, and the changes in Saudi Arabia over the past ten years have been earth-shaking. In 2016, after Crown Prince Salman proposed the "Vision 2030", the religious police in the streets of Saudi Arabia were gradually abolished. Before that, the religious police would expel women from public places on the grounds of putting on makeup or doing manicures; in 2017, Saudi Arabia allowed women to drive, and in 2018 allowed foreign women to enter the country. In 2018, Saudi Arabia had its first cinema; in 2019, Saudi Arabia opened tourist visa applications to citizens of 49 countries including China. Although Saudi Arabia's tourism resource development and basic supporting facilities have yet to be improved, it has at least shown its willingness to open up to the world; in 2020, foreign women will no longer have to wear ABAYA (Arab burqa).

I have now founded an MCN company in Saudi Arabia, which may be the only MCN in Saudi Arabia. Localization is still something we need to pay great attention to. Saudi Arabia has a population of about 35 million, of which 30% are immigrants, mainly from Bangladesh, India and other countries. These people are mainly distributed in low-end industries in Saudi Arabia. Their national culture, expression and language accent are quite different from those of Saudis. Saudis generally do not trust outsiders that much, and they have a natural sense of national pride.

Religiously, Saudi Arabia has two holy cities in the Islamic world; economically, Saudi Arabia is the largest economy in the Middle East, with a per capita GDP of more than $30,000, and its citizens generally live a wealthy life. Therefore, whether in terms of economy, politics or religion and culture, Saudi Arabia is a regional power, and its citizens have a natural sense of superiority.

In this case, using an overseas anchor team will definitely not be able to enter the Saudi market. So we use Saudis to manage Saudis , and we cannot use Yemenis, Syrians, Egyptians or Moroccans to manage Saudis. But behind deep localization is a lot of cost investment, because Saudis have a relatively high salary level. An ordinary fresh graduate has a monthly salary of about 12,000 to 14,000 RMB ; and to hire locals, it is necessary to use local companies to sign local employees.

Zeng Haipeng's team works with local people

Taking the trade and retail industries as an example, if foreign capital wants to establish a wholly-owned company in Saudi Arabia, it will cost at least 30 million Saudi riels, nearly 60 million RMB, which is difficult for small and medium-sized enterprises to bear. Currently, Saudi Arabia welcomes foreign capital and foreign companies to enter the domestic market through joint ventures, because this can provide them with employment, generate tax revenue, and boost industrial development.

Managing local people is also difficult. For example, working overtime on weekends is common for Chinese people, but for Saudis, working overtime on Fridays means depriving them of their right to worship, which touches their religious interests, so they may report to the government, and the company will be warned or fined. These cultural conflicts are everywhere in the workplace.

But in general, Saudi Arabia's market potential is still huge, and it is worth exploring opportunities for all industries. But whether it is retail, trade, e-commerce, games, pan-entertainment and social networking, or even artificial intelligence, companies must keep in mind the two points of deep localization and compliance.