Submitted to:

GUJARAT TECHNOLOGICAL UNIVERSITY, AHMEDABAD

Institute:

N.R.VEKARIA INSTITUTE OF BUSINESS MANAGEMENT STUDIES,

JUNAGADH.

CONTENT

1.1DEMOGRAPHIC PROFILE OF THE COUNTRY

We the students of N. R. Vekaria Institute of Business Management Studies,

have gone through research upon “Saudi Arabia”, in which we have studied

about the contemporary demographic, economic, industry tread and

commerce, political, social, technological, environmental and legal scenario.

We found that population growth of the country, economic growth, literacy

rate, death rate, birth rate, religion, language, festivals and many more things.

Every nation has its own history or etymology. This Global Country

Study Report would provide immense information about Saudi Arabia’s

current condition.

HISTORY:-

Saudi Arabia is not only home land of Arab peoples, it is thought that

the first Arab originated on the Arabian Peninsula, but also the home land of

Islam, the world’s second largest religion Muhammad found Islam there, and it

is located in two holy places of pilgrimage Mecca and Medina.

The kingdom of Saudi Arabia is entirely the creation of king Abdul Aziz

Bin Saud (1882 – 1953). A descendant of Wahhabi leaders, he seized Riyadh

in 1901 and set himself as leader of the Arab nationalist movement. The

current king of Saudi Arabia is Abdullah.

POPULATION:-

The US Bureau of the census based on statistic from population

censuses, has given estimated information about the population of Saudi

Arabia. If you look at the chart of the population of Saudi Arabia can find that

the demography is burgeon every year. In 2000 it was about 22,023,510 but in

the last data shown that it grown at 26,534,500.Saudi Arabia’s population is

more than Riyadh, Mecca, medina and other native cities. The population of

major cities such as, Riyadh the capital of Saudi Arabia 4.725 million, Jeddah

30234 million, Mecca 10484 million, whereas, Medina 1.104 million. The

population of the capital and up to cities defined urban agglomeration with

population at least 7,50,000 people. According to the World Bank’s report the

refugee population by territory of origin in Saudi Arabia was last approximately

at 667 in 2010.In total population 90% are Arab, 10% Afro-Asian. Health

expenditure was 5.6 % in 2008

Year Population (July est.)

2012 26,534,500

2011 26,131,700

2010 25,731,780

2009 28,686,630

2008 28,146,660

2007 27,601,040

2006 27,019,730

2005 26,417,600

2004 25,795,940

2003 24,293,840

LITERACY:-

There is no universal definition of literacy according to most of the

experts and educationists a person who has ability to read and write they call

him\her literate. In the Saudi Arabia majority population is comprised of Arab.

They have whopping amount of money because they are biggest oil producing

country but they never think about educate themselves and their children as

well.

According to United Nations Educational, Scientific and Cultural

Organization (UNESCO) Institute for statistics provided this information. The

adult female literacy was 80.2 and adult male 89.5 in 2009. Primary

completion ratio of boys 86.9 and girls 89.5, total 88.2. On top of that if we

look at the total net enrolment ratio in primary education of both gender 86.9

and particular boys 87.7 and girls 85.1 in 2009. They most probably familiar

with one language, it is Arabic. They do not know other language especially

English. They follow one religion Muslim. Education expenditure was 5% of

GDP in 2009.

� RELIGION:-

Religion is sacrosanct thing, everyone have faith, trust and conviction

upon it. In the Saudi Arabia Islam is undoubtedly main religion. 96% of Arab

people follow Islam, Christianity is 3.5% of the total population and Hinduism

is practiced by 0.6 % of total population. On top of that followers of Baha’i are

0.1 % of the total population.

Most of the Saudi Arabian people are followers of Sunni Sect. The

major religion destination of Saudi Arabia includes Kaba and Black Stone in

Mecca, Mount Arafat, Quba, Mosque in Medina, Al- Masjid al- Haram in

Mecca.

1.2 ECONOMIC OVER VIEW OF SAUDI ARABIA

The petroleum sector accounts for roughly 45% of budget revenues,

55% of GDP, and 90% of export earnings. About 40% of GDP comes from the

private sector. Roughly five and a half million foreign workers play an

important role in the Saudi economy, for example, in the oil and service

sectors. The government is encouraging private sector growth to lessen the

kingdom's dependence on oil and increase employment opportunities for the

swelling Saudi population.

The government has begun to permit private sector and foreign

investor participation in the power generation and telecom sectors. As part of

its effort to attract foreign investment and diversify the economy, Saudi Arabia

acceded to the WTO in 2005 after many years of negotiations. With high oil

revenues enabling the government to post large budget surpluses, Riyadh has

been able to substantially boost spending on job training and education,

infrastructure development, and government salaries.

DEFINITION:

This entry briefly describes the type of economy, including the degree

of market orientation, the level of economic development, the most important

natural resources, and the unique areas of specialization. It also characterizes

major economic events and policy changes in the most recent 12 months and

may include a statement about one or two key future macroeconomic trends.

� GEOGRAPHY

• Full country name: Kingdom of Saudi Arabia

• Population: 25.7 million (The World Fact book, 2010)

• Border countries: Jordan, Iraq, Qatar, UAE, Oman, Yemen, Kuwait.

• Climate: hot and humid with desert conditions, although winter

temperatures in the northern regions can fall below freezing.

• Terrain: mostly barren and uninhabited, includes the largest sand desert

in the world, mountains and salt flats, gravel plains and sand dunes.

• Natural hazards: sand and dust storms. Saudi Arabia has numerous

volcanoes including Harrat Rahat, Harrat Khaybar, Harrat Lunayyir and

Jabal Yar, however they have seen little activity in the last few centuries.

1.3 OVERVIEW OF INDUSTRIES TRADE AND COMMERCE IN THE SAUDI ARABIA

Saudi Arabia permitted only to Saudi and Gulf Cooperation Council

nationals to engage in trading activities and to register as commercial agents.

To attract more foreign investors to do business in the country, Saudi Arabia

eased recently its restrictions to allowed foreign individuals and companies to

engage in trading activities through a joint venture partnership with a Saudi

individual or entity. Since its adhesion to the World Trade Organization

(WTO), Saudi Arabia has liberalized the wholesale, retail, and franchise

sectors.

Saudi Arabia allows foreign investors to establish joint ventures and

retain a 51% share. The foreign partner’s capital requirement is set at USD

5.3 million and his equity share can be increased to 75% after 3 years from

the contract date. For industrial activities, foreign investors are allowed to

establish a 100% foreign company and can also trade in the products they

manufacture. A Saudi joint-venture partner is a requirement for any entity or

individual to practice individual professions, such as law, medicine, accounting

and financial services, architect and engineers, and other similar professions.

� INDUSTRIES IN SAUDI ARABIA

1. Oil and Gas

2. Financial Service

3. Engineering and construction services

4. Insurance Sector.

5. Food and Beverage

6. Electrical Power Systems

7. Education and training

1.4 OVERVIEW OF DIFFERENT ECONOMIC SECTORES OF SAUDI ARABIA

Saudi Arabia, despite moves to diversify its economy, is still almost

entirely dependent upon oil. Petroleum sales provide the kingdom with 90

percent of its export earnings and 75 percent of its annual budget revenues.

Saudi Arabia is a founding member of the Organization of Petroleum

Exporting Countries (OPEC) which was founded in Baghdad, Iraq, in

September of 1960 to unify and coordinate members' petroleum prices.

In 1998, industry, which included oil production, contributed 47 percent

of GDP and employed 25 percent of the total workforce of 7 million.

Agriculture contributed just 6 percent of GDP and employed 12 percent of the

workforce, while the services sector contributed another 47 percent and

employed 63 percent of the workforce.

Economy of Saudi Arabia

100 Saudi Arabia Riyal Note

Currency Saudi Arabia Riyal

(SAR)

Fiscal year Calendar year

� Economy of Saudi Arabia:-

Statistics Percentage/Amount

GDP Growth Rate 3.2%

Inflation Rate 5 %

Unemployment Rate 10.9%

Reserve of foreign Exchange and gold $556.2 billion

1.6 PRESNT TRADE RELATIONS AND BUSINESS VOLUME OF DIFFERENT PRODUCTS WITH INDIA

India and Saudi Arabia enjoy cordial and friendly relations reflecting

centuries old economic and socio-cultural ties. These ties increased many

folds following the visit of the Custodian of Two Holy Mosques King Abdullah

to India in 2006, and the visit of HE Prime Minister of India to the Kingdom in

2010. However, there is huge scope for expansion of economic and

commercial ties between India and Saudi Arabia.

� Economic and Commercial Relations

India is the 5th largest market for Saudi exports, while Saudi Arabia is

the 3rd largest market in the world for Indian import. During the year,2010-

2011 bilateral trade between India and Saudi Arabia reached more than

US$25 billion.

The import of crude oil by India forms a major component of bilateral

trade with Saudi Arabia being India’s largest supplier of crude oil, accounting

for almost one-fifth of its needs.

India main export to Saudi Arabia cathodes and sections of cathodes

of refined copper, benzene, floating docks, basmati /non-basmati rice, pipeline

for oil and gas, meat, compressors used in refrigerating equipment, tea,

manmade yarn, fabrics, made-ups, cotton yarn, primary and semi-finished iron

and steel, chemicals, plastic & linoleum products, machinery and instruments,

edible fruits and nuts, meat products etc.

India imports from Saudi Arabia are petroleum and petrochemical

products. Saudi Arabia is the largest supplier of crude oil to India. It provides

around a quarter of India’s crude imports.

� India-Saudi Arabia Bilateral Trade:-

Financial year

(April-March)

India’s import From

Saudi Arabia

($)billion

India’s Exports

to Saudi Arabia

($) billion

Total

Trade($)

billion

2005-06 1632.34 1809.77 3442.11

2006-07 13373.44 2586.15 15959.59

2007-08 19,470.30 3,711.16 23,181,46

2008-09 19,972.74 5,110,38 25,083,12

2009-10 17,097.57 3,907,00 21,004.57

2010-11 20,385.28 5,227.19 25,612.46

2011-12 (Apr-

Dec)

23,048.30 3,935.82 26,984.68

1.7 PESTEL ANALYSIS

PESTEL analysis is concerned with external environmental

influences on a business. The acronym stands for the Political, Economical,

Social and Technological issues that could affect the strategic development of

a business.

Identifying PESTEL influences is a useful way of summarizing the

external environment in which a business operates. However, it must be

followed up by consideration of how a business should respond to these

influences.

The table below lists some possible factors that could indicate important

environmental influences for a business under the PESTLE headings:

Political

Factors

The Kingdom of Saudi Arabia is a monarch ruled by King

Abdullah. The country is governed by Islamic laws. The

country is politically stable and undergoing political

reforms though in a slower pace. Local body elections

were held in 2005 for the first time and more reforms are

expected in the coming years

Economical

Factors

Saudi Arabian economy is mostly controlled by the government,

followed by the formation of Supreme Economic Council in

but private participation is on the increase 1999. The

economy that is highly dependent on the oil sector has

started diversifying into other sectors. Six new economic

cities are being built across Saudi Arabia

Technological

Factors

Currently, Saudi Arabia is becoming a technological

focused. The spending on connectivity and human

resources has been increased. With the growing private

sector, systems with advanced and innovative technologies

are being installed. Efforts are also being made to make IT

an integral part of the Saudi Arabian educational system

Social Factors The country’s population has increased from 5 million to

28 million in less than 30 years. The country continues to

import talented individuals and non-Saudis account for one-

fourth of the population. The industry and services sector

account for 88 per cent of the labor force. Technical

educationis emphasized more to keep pace with the global

technological changes.

POLITICAL If ever there was a perfect example of a 21st century absolute monarchy it would be Saudi Arabia. The king is the absolute ruler of the country and he is aided by a largely familial team of advisors. All the major important positions in the Saudi government are occupied by members of the Al Saud family, a formidable dynasty comprising of nearly 7,000 individuals. There is a Council of Ministers that is responsible for presenting legislation to the king; that performs like the Roman Senate during the reign of the Caesars. In other words, a toothless Legislative branch of government that is subservient to the Executive. In any case most members of the Council have individual ties to the royal family, therefore represent the king’s interests. Succession is decided by the king as he appoints a Crown Prince who is his direct heir and a Deputy Prime Minister who assumes power if the King and Prince are ill-disposed to rule.

The politics of Saudi Arabia takes place in the context of an absolute

monarchy founded upon the tenets of Islam. The King of Saudi Arabia is both

head of state and the head of government, but decisions are, to a large

extent, made on the basis of consultation among the senior princes of the

royal family and the religious establishment. The Qur'an is declared to be the

constitution of the country, which is governed on the basis of Islamic law

(Shari'a).

Government is dominated by the vast royal family, the Al Saud, which

has often been divided by internal disputes and into factions. The members of

the family are the principle political actors. Political participation outside of the

royal family is limited, but there has been pressure for some time to broaden

participation. In recent years, there has been a rise in Islamist activism, which

has also resulted in Islamist terrorism.

.3 Political changes in Saudi Arabia

Ashfaqur Rahman

The seismic political changes taking place in the Middle East today seem

to have little effect on Saudi Arabia. There is no discernible opposition in that

country. Nor is there any cry for political change or for economic reforms. So

what is happening there?

Saudi Arabia is a kingdom at the centre of the Middle-East and occupies

a strategic position in the global scheme of things. US is dependent on its oil

resources so is Europe and some major Asian countries.

Yes, Saudi Arabia is a kingdom and a strong monarchy. Its legitimacy

depends on governance based on a strict interpretation of Islam.

The present king, His Majesty King Abdullah bin Abd ul Aziz who is in his

late eighties, leads a government which symbolises The Political System

of Saudi Arabia

ENVIRONMENTAL

Article 32 of the Royal Decree on the “Basic System of Governance” has

declared that the Government of the Custodian of the Two Holy Mosques is

committed “to protect and develop the environment and prevent pollution”. This has

created a mandate to translate this important message into concrete actions on the

policy, strategy, and program and project level.

In recognition of the importance of the environment at the national and

international level, the environmental policy framework of the Kingdom was

restructured by the establishment of the Ministerial Committee on Environment

(MCE) under the chairmanship of HRH the Second Deputy Premier and Minister of

Defence and Aviation, and the Inspector General. The MCE is the highest

environmental authority in the Kingdom and has been designed to address both policy

and implementation issues. The MCE is represented by the Ministers of Agriculture

and Water, Industry and Electricity, Finance and National Economy, Foreign Affairs,

Health, Interior, Municipal and Rural Affairs, and Petroleum and Mineral Resources

as well as the president of King Abdul-Aziz City for Science and Technology

(KACST) and the president of MEPA who has been designated as the Secretary

General of MCE. The MCE is assisted by a preparatory committee chaired by HH

Assistant to HRH the Second Deputy Premier and Minister of Defence and Aviation,

and the Inspector General.

ECOLOGICAL FACTORS

Ecological mainly included on the bases of Weather, Climate & Climatical change, Natural environment, Economic development & pollution, Green marketing, Environmental pollution Act, Increase in pollution and role of government, Environment protection Act. 47

Ecological concepts such as food chains, population regulation, and productivity were first developed in the 1700s, through the published works of microscopist Antoni van Leeuwenhoek (1632–1723) and botanist Richard Bradley (1688?–1732).[4] Biogeographer Alexander von Humbolt (1769–1859) was an early pioneer in ecological thinking and was among the first to recognize ecological gradients, where species are replaced or altered in form along environmental gradients, such as a cline forming along a rise in elevation. Humbolt drew inspiration from Isaac Newton as he developed a form of "terrestrial physics." In Newtonian fashion, he brought a scientific exactitude for measurement into natural history and even alluded to concepts that are the foundation of a modern ecological law on species-to-area relationships

Weather

Saudi Arabia has mainly two season summer and winter, Rainfall is low in the country, especially in the central region. Here, normally, a change in season is

preceded by a rain or dust storm. The dusty season usually takes around 40 days to conclude with the dust storm hitting then letting up every few days. In the

southwestern coastal areas it rains quite regularly with high humidity in the summer, but there is very little rainfall in the capital city of Riyadh and the northern parts of the

Red Sea coast. 48

The peak winter falls during the months of December and January while peak summer hits during June and July. From May to September, daytime temperature reaches 45°C

or higher throughout the country with slightly cooler coastal temperatures.

During peak winter (December-January): The breadth of temperature between day and night in the desert is very important. At night, temperature usually drops quite radically and is often well below zero degrees. February-May & November: It is neither too cold nor too hot. It is rather moderate weather and there is no great difference in temperature between days and nights. During peak Summer (June-July): Too hot. Temperature during the night is hot August-October: It is rather hot during the day. Evenings are warmer.

SOCIAL

The Saudi population is by all standards a very young population. In 2006 estimates, 38.2% of Saudis were under the age of 15, 59.4% were 15-64 years old and only 2% were 65 and older. The median age for males is 22 and females 19.4. Access to education is limited by gender with women having limited access to education. There are only 8 universities in Saudi Arabia with 6 of the 8 being accessible to women.

2.5 EFFECT OF SOCIAL ENVIRONMENT ON BUSINESS SOCIETY

Business organizations strive to survive by the efficient use of the factors

of production and other facilities of the society. This process puts

organizations in an interdependent relation with the government, the

community at large and the environment. Such interdependence gives rise to

a series of broader responsibilities to society in general (Mullins, 2005).

Mullins further illustrates that the social responsibilities are both internal and

external to the organizations.

Presently, there is an increasing concern with the social responsibilities of

organizations. This is reflected in part by the extent of government action and

legislation on such matters as, for instance, employment protection, equal

opportunities, company’s acts, consumer law, product liability and

safeguarding the environment (Mullins, 2005). Based on this the social

responsibilities of organizations have turned into a legal requirement.

Business Stakeholders

Palmer and Hartley (2002) argue that business organizations should act

in a socially responsible manner for two self-evident reasons: one philosophic

and the other pragmatic. Philosophically, models of a responsible society

require organizations to do their part along with the family and other social

institutions (the schools, the religious institutions, etc.).

Pragmatically, organizations have to take account of the society’s values,

otherwise they will be isolated and therefore their long-term survival will be

jeopardized.

LEGAL The Kingdom of Saudi Arabia is an absolute monarchy ruled by the al-Saud family. The current monarch, King Abdullah bin Abdul Aziz (hereinafter referred as to King Abdullah or the king) entered the throne in 2005. The huge al-Saud family is extended to the members of the tribe, who are often appointed to central leading positions in society (Thunander 2010:165- 166). Article 39 in the Basic Law of the Kingdom stipualates that political parties are prohibited in the country and in the municipal council elections in 2005, women were not allowed to vote. When these elections were announced there were no criteria or instructions for voting or for running in the elections. The Ministry of Justice did support the right of voting for women but voiced objections were projected, mainly from the conservative religious establishment. The Minister of Interior decided that women were not allowed to vote due to the lack of sex-separated polling place and that the municipal meetings would have to be sex-separated for women to attend

(Freedom House 2010:62th paragraph from above). Alongside the royal family the religious establishment has a lot of influence. Highest in the hierarchy is the conservative ulema, the religious scholars who together with other religious institutions issue fatwâs, legal opinions. The ulema controls the mutawwa which is the powerful religious police whose function is to uphold the morality and religion among people.

Legal system of Saudi Arabia The legal system of Saudi Arabia is based on Sharia, Islamic law derived from the Qu'ran and the Sunnah (the traditions) of the Islamic prophet Muhammad. The sources of Sharia also include Islamic scholarly consensus developed after Muhammad's death and analogical reasoning by Muslim judges. Its interpretation by judges in Saudi Arabia is influenced by the medieval texts of the literalist Hanbali school of Islamic jurisprudence. Uniquely in the Muslim world, Sharia has been adopted by Saudi Arabia in an uncodified form. This, and the lack of judicial precedent, has resulted in considerable uncertainty in the scope and content of the country's laws. The government therefore announced its intention to codify Sharia in 2010. Sharia has also been supplemented by regulations issued by royal decree covering modern issues such as intellectual property and corporate law. Nevertheless, Sharia remains the primary source of law, especially in areas such as criminal, family, commercial and contract law, and the Qu'ran and the Sunnah are declared to be the country's constitution. In the areas of land and energy law the extensive proprietorial rights of the Saudi state (in effect, the Saudi royal family) constitute a significant feature. The current Saudi court system was created by King Abdul Aziz, who founded the Kingdom of Saudi Arabia in 1932, and was introduced to the country in stages between 1927 and 1960. It comprises general and summary Sharia courts, with some administrative tribunals to deal with disputes on specific modern regulations. Courts in Saudi Arabia observe few formalities and the country's first criminal procedure code, issued in 2001, has been largely ignored. Decisions are made without juries and usually by a single judge. King Abdullah, in 2007, introduced a number of significant judicial reforms, although they are yet to be fully implemented. Criminal law punishments in Saudi Arabia include public beheading, 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. In addition to the regular police force, Saudi Arabia has a secret police, the Mubahith, and "religious" police,

the Mutawa. The latter enforces Islamic social and moral norms. Western-based human rights organizations, such as Amnesty International and Human Rights Watch, have criticized the activities of both the Mubahith and the Mutawa, as well as a number of other aspects of human rights in Saudi Arabia. These include the number of executions, the range of offences which are subject to the death penalty, the lack of safeguards for the accused in the criminal justice system, the treatment of homosexuals, the use of torture, the lack of religious freedom, and the highly disadvantaged position of women. Additionally, Albert Shanker Institute and Freedom House have stated that "Saudi Arabia's practices diverge from the concept of the rule of law. The primary source of law in Saudi Arabia is the Islamic Sharia derived from the Qu'ran and the traditions of Muhammad contained in the Sunnah.[2] It also includes ijma, or scholarly consensus on the meaning of the Qu'ran and the Sunnah developed after Muhammad's death, and Qiyas, or analogical reasoning applied to the principles of the Qu'ran, Sunnah and ijma.[20] Court structure The Sharia court system constitutes the basic judiciary of Saudi Arabia and its judges and lawyers form part of the ulema, the country's religious leadership. However, there are also extra- Sharia government tribunals which handle disputes relating to specific royal decrees. Final appeal from both Sharia courts and government tribunals is to the King and all courts and tribunals follow Sharia rules of evidence and procedure. The Sharia courts have general jurisdiction over most civil and criminal cases. At present there are two types of courts of first instance: general courts and summary courts dealing with lesser cases.Cases are adjudicated by single judges, except criminal cases if the potential sentence is death, amputation or stoning when there is a panel of three judges.There are also two courts for the Shia minority in the Eastern Province dealing with family and religious matters.Appellate courts sit in Mecca and Riyadh and review decisions for compliance with Sharia. Judges The judicial establishment, in the broadest sense, is composed of qadis, who give binding judgements in specific court cases, and muftis and other members of the ulema, who issue generalized but highly influential legal opinions (fatwas). The Grand Mufti, the highest religious authority in the country, is the most senior member of the judicial establishment, and his opinions are highly influential among the Saudi judiciary. The judiciary proper (that is, the body of qadis) is composed of about 700 judges. Qadis generally have degrees in Sharia law from an Islamic university recognized by the Saudi government with, in many cases, a post-graduate qualification from the Institute of Higher Judiciary in Riyadh. The training received from such Sharia law degrees is entirely religious in character and is based on the Qu'ran and centuries old religious treatises with no reference to, for

example, modern commercial issues. Although most judges have been educated and appointed under the current system, some of the older judges received the traditional qadi's training of years of instruction by a religious mentor in a mosque. The capabilities and reactionary nature of the judges have been criticized. The main complaint reportedly made by Saudis privately is that judges, who have wide discretion in interpreting the Sharia, have no knowledge, and are often contemptuous, of the modern world. Reported examples of judges' attitudes include rulings banning such things as the children’s game Pokémon, telephones that play recorded music, and sending flowers to hospital patients. Saudi judges come from a narrow recruitment pool. By one estimate, 80% are from Al-Qassim province, the conservative religious heartland of Saudi Arabia in the center of the country. Senior judges will only allow like-minded graduates of select religious institutes to join the judiciary and will remove judges that stray away from rigidly conservative judgments. Recent reforms and developments The Saudi system of justice has been criticized for being slow, arcane, lacking in some of the safeguards of justice and unable to deal with the modern world. In 2007, King Abdullah issued royal decrees with the aim of reforming the judiciary and creating a new court system. The reforms have yet to be implemented in full but, once they are, will include the creation of a Supreme Court and the transfer of the Board of Grievances' commercial and criminal jurisdictions to a restructured general court system. New specialist first instance courts will be established comprising general, criminal, personal status, commercial and labor courts. The Sharia courts will therefore lose their general jurisdiction to hear all cases and the work load of the government's administrative tribunals will be transferred to the new courts. Another important change is the establishment of appeal courts for each province. It has been claimed that the reforms will establish a system for codifying Sharia and incorporating the principle of judicial precedent into court practice. • King Abdullah who since coming to the throne has ordered a number of reforms of the judiciary In 2009, the King made a number of significant changes to the judiciary's personnel at the most senior level by bringing in a younger generation. For example, as well as appointing a new Minister of Justice, a new chairman of the Supreme Judicial Council was appointed. The outgoing chairman was known to oppose the codification of Sharia. The king also appointed a new head of the Board of Grievances and Abdulrahman Al Kelya as the first chief justice of the new Supreme Court. Law enforcement The police department of the Saudi Ministry of the Interior is divided into three forces: the regular police, secret police and the religious police.The Department of Public Safety is the

official name of the regular police force and handles most day-to-day police activities.It is a highly centralized force and is usually headed by a member of the royal family. The secret police, or mubahith, deals with domestic security and counter-intelligence. It runs the `Ulaysha Prison in Riyadh, where it holds its prisoners. The United Nations' Working Group on Arbitrary Detention has objected to arbitrary detention by the Mubahith at `Ulaysha. The religious police, or mutawa (or Mutaween, their official name being Committee for the Promotion of Virtue and the Prevention of Vice) enforce Islamic codes of behavior. Numbering about 20,000 men untrained in law enforcement, the mutawa ensure that there is strict separation of the sexes in public, that businesses close at prayer time, pressure women to wear traditional dress and, in some areas, prevent them driving cars. Often accompanied by a police escort, the mutawa can order the detention and arrest of "violators". Criticism of the mutawa by Saudis has grown since 2002, when 15 schoolgirls died in a fire at their school in Mecca after the mutawa allegedly prevented male rescuers from entering because the girls were not veiled.

TECHNOLOGICAL Compared with other neighbouring Arab countries in the area, Saudi Arabia was late in adopting modern communication technologies, and highly resistant to it. There were several reasons for this. First Saudi Arabia has not been colonized. This isolated it from the rest of world development. Second the geographical nature of the land. Most of the land is desert. The mentioned two reasons have reflected on the people’s life and created cultures that view the world from a point of view of fear. There were more than one stage in transferring, and introducing modern communication technology to Saudi Arabia. We will lock at each stage in this paper media wise, first telegraph, then radio broadcast, then television, video, and last we will look at the Internet. In each stage we will try to describe the political, societal and cultural effect, and change of the media in the Saudi society. New communication Technology This part of the paper discusses the introduction and diffusion of new communication technology, namely Videocassette Recorder VCR, Direct –To-Home Satellite (DHS), and the Internet.

Technology Assessment Framework Provides a concise but comprehensive description of how impacts in the economy are derived from government support of technology development by companies.

HAL has developed a reputation for thorough economic and social analysis. The focus of many federal S&T programs, and the rationale for continued federal support, has shifted towards clearly serving the needs of stakeholders and demonstrating benefits. We have used our technology assessment methodology in support of federal and provincial departments and agencies interested in determining these benefits. The methodology has been shown to be a useful tool in providing structure and consistency to our quantitative and qualitative assessments. FRAMEWORK OVERVIEW A concise but comprehensive description of how impacts in the economy are derived from technological activity is essential to provide a common understanding of the roles of the different participants. The HAL Technology Assessment Framework shown below provides this description. It has been used to: � Explain the factors and considerations influencing the translation of technology into economic impacts; � Guide preparation of the questions for studies to insure that key information is collected; and � Present results from studies in a common format for analysis.

The HAL Technology Assessment Framework has five main parts. Central to the framework is the Study Company that undertakes contracted activities, technology development activities, and product development, production and marketing activities. The Study Company is influenced and assisted by the government through the procurement of goods and services, the activities of government laboratories, and government programs. The study company, in turn, influences the rest of Canadian industry by forming formal and informal alliances with other companies, and by unintentional diffusion of skills and knowledge to other companies. The Study Company also affects the Canadian users of its goods and services by providing quality and productivity improvements in their activities. In the end, the activities of the study companies, Canadian government, Canadian Industry, and Canadian Users result in impacts on the Canadian economy in the form of infrastructure 40 Economic returns from technology come from the commercialization and application of the technology rather than from its development. When assessing the potential payoff from technology development, it is these downstream benefits that must be identified and estimated. Traditionally, impacts have been thought of in terms of direct wealth creation - stimulating the economy through the production and sale of tangible goods in the economy, usually by the private sector. In addition, we know that technology can enhance the social well-being of a country (the public good), and the infrastructure. Research into infrastructure improvement, such as faster communications systems or improved methods and codes, ultimately contribute to productivity, wealth creation and the public good. Wealth Creation Wealth creation comes from the production and sale of goods and services. Impacts include: � Employment effects; � Trade of goods and services; � Productivity effects; and � Exports and import substitution. Infrastructure In its broad context, infrastructure comprises: � Physical structures including buildings, facilities, machines, equipment, experimental apparatus, instruments, communications, libraries, databases, computers, software and the operating systems and procedures specific to each structure. � � Institutional structures and systems including management systems, regulations, standards, codes, laws, dispute resolution mechanisms, etc.; � � Knowledge, information and technology; � Human resources with experience and expertise; and � Social and cultural values, codes, habits, rituals, heritage, expectations, etc.

ECONOMICAL OVERVIEW

This entry briefly describes the type of economy, including the

degree of market orientation, the level of economic development, the most important

natural resources, and the unique areas of specialization. It also characterizes major

economic events and policy changes in the most recent 12 months and may include a

statement about one or two key future macroeconomic trends.

The manufacturing sector has expanded widely since 1976, when the

government established the Saudi Basic Industries Corporation (Subic) in order to

diversify the economy. Its initial goal was to expand the manufacturing potential of

sectors of the economy related to petroleum. Since then manufactures, many

associated with Subic, have included rolled steel, petrochemicals, fertilizers, pipes,

copper wire and cable, truck assembly, refrigeration, plastics, aluminum products,

metal products, and cement. Small-scale enterprises have included baking, printing,

and furniture manufacturing.

Economical

• Since the discovery of oil in 1938 has grown to be among the wealthiest

nations.

• Produces more than 5% of the total production of petro -chemicals in the

world.

• Capitalist Economy.

• GDP (PPP) $622 Billion and Growth 3.7%.

• 40% of GDP from private sector.

• As part of its effort to attract foreign investment and diversify the economy, Saudi Arabia

acceded to the WTO in 2005 after many years of negotiations.

Role of financial market in Saudi Arabia As of December 2010, there were 23 licensed banks, of which 20 were active (Table

4). Of these, 12 are Saudi incorporated banks whose assets account for 98 percent of

banking system assets, or more than half of total financial system assets and 85

percent of GDP. As a percentage of GDP,bank assets and credit are comparable to

those in other countries with similar characteristics. As in other GCC countries, loan

portfolios are concentrated, reflecting limited lending to sectors such as SMEs and

housing. Credit concentration risk has been mitigated by high capital requirements,

but the small volumes of SME and housing finance may have adverse

implications for economic growth and the welfare of the population. Sharia-compliant

products are offered by commercial banks based on a single license for commercial

banks. While all banks provide Sharia-compliant products, some banks provide only

these products. SAMA considers the two types of banks as one system with different

products.

The banking sector is fairly concentrated :

The three largest banks together have a share of asssets and deposits of about 45

percent, and each of the next four has a share exceeding 5 percent. The dominant

shareholders of the three largest banks are state entities, the fourth largest is linked to

a family business group, and the next three have ties to major international banks. All

banks with state participations appear to be run on a commercial basis. In addition, all

banks but the largest (state-owned) are listed. This reflects a policy designed to ensure

arm’s-length relationships between banks and the large family-owned groups and to

promote investments in banks by Saudi nationals. The market shares of the long

established institutions have not been significantly affected by the entry of new banks

in recent years. SAMA licensed two domestic banks in the mid-2000s, as well as

several branches of foreign banks. The two new banks account for only 3 percent of

banking assets; and foreign branches remain niche players with a 2 percent market

share.

INTRODUCTION OF INDUSTRIALIZATION IN SAUDI AREBIA Although industrialization is relatively recent, in Saudi Arabia, it has witnessed a steady

development, during which distinguished accomplishments were achieved. These are

attributed to the importance of the industrial sector and the support it receives from the

government owing to its role in achieving strategic and economic goals of the country.

The efforts exerted by the government for the support of industrial development

covered several basic spheres including implementation of required infrastructure,

construction of Jubail and Yanbu industrial cities, construction of industrial cities in

various regions of the Kingdom, establishment of Saudi Industrial Development Fund

(SIDF), and continued provision of other industrial support and incentives. The response

and cooperation of the private sector with the governmental plans and efforts have an

effective impact on actualization of the industrial development's achievements. In the

following, we review, in brief, some of the industrial progress indicators in Saudi Arabia

over the past years.

REIATIONSHIP OF SAUDI ARABIA WITH WTO AND I.M.F

Saudi Arabia's WTO Membership and the Implications for its

Top Firms

Saudi Arabia’s acceptance as the 149th member of the World Trade

Organization (WTO) has been widely celebrated as a milestone in the

Kingdom’s private sector reform and the liberalization of its economy.

It took 12 years for Saudi Arabia, the world’s largest oil producer, to complete

negotiations to join the WTO – the second-longest accession period after

China, which negotiated for 14 years before becoming a member.

There were many in Saudi Arabia who resisted joining the WTO. Some feared

that WTO free trade rules would limit the Kingdom’s right to restrict the import

of goods prohibited under Islam, including pork, alcohol and pornography.

There were concerns among small Saudi firms that joining the WTO would

trigger overwhelming international competition.

Talks also dragged on due to US and European insistence that Saudi Arabia

make its industries and regulations more transparent. The US took time to

accept that the Kingdom’s economy was sufficiently open for membership.

Petrochemical producers in Europe were equally worried that maintaining

cheap domestic oil and gas would give Saudi firms an unfair advantage. In the

end, all parties agreed on the final details, and in mid-December Saudi Arabia

will be attending the next WTO meeting in Hong Kong as a full member.

Joining the WTO will have important implications for the Saudi economy, its

key industries and its local companies. Entry into the WTO poses a great

challenge to the Saudi private sector, which must complete preparations to

operate in a competitive environment. This applies most of all to the services

sector, which stands to be the most affected by the influx of foreign

companies.

Location : Geneva, Switzerland

Established : 1 January 1995

Created by : Uruguay Round negotiations (1986-94)

Membership : 149 countries (on 11 December 2005)

The World Trade Organization (WTO) is an international organization dealing

with the rules of trade between nations.

At its heart are the WTO agreements, negotiated and signed by the bulk of the

world’s trading nations and ratified in their parliaments. Through these

agreements, WTO members operate a non-discriminatory trading system that

spells out their rights and their obligations.

Each country receives guarantees that its exports will be treated fairly and

consistently in other countries’ markets. Each promises to do the same for

imports into its own market. The system also gives developing countries some

flexibility in implementing their commitments.

Commerce and Industry Minister Dr. Hashem Yamani said that Saudi Arabia

made “far-reaching, very substantial and commercially meaningful

concessions and commitments on goods and services.” However, it is still

unclear exactly what kind of changes Saudi Arabia will be obligated to

undertake.

It is clear from early conversations with relevant parties that there will be

significant changes in the following areas:

. Foreign ownership in services sectors, such as retail and distribution;

. Producers and distributors of liquefied natural gas will have to operate on the

basis of normal commercial considerations, based on the full recovery of costs

and a reasonable profit;

. Gradual lowering of trade barriers and expanding market access for foreign

goods; and

. Opening of the insurance sector to foreign operators.

Many of Saudi Arabia’s top companies have grown over the years thanks to

protective regulations. However, others have been operating in a competitive

environment for many years. In analyzing the implication of Saudi Arabia’s

entry into the WTO, it is important to look at the individual sectors and

recognize how WTO membership will affect each sector differently.

Oil and Petrochemicals: Saudi Arabia’s two largest firms, Saudi Aramco and

Saudi Basic Industries Corp. (SABIC), are direct beneficiaries of the lower

cost of hydrocarbons in the Kingdom. Historically, it has been the norm for

these firms to pass on the savings downstream. However, despite initial

statements to the contrary, it is possible that this policy will be significantly

limited with the entry into the WTO and Saudi Aramco and SABIC may be

forced to sell domestically at world market prices. This would adversely affect

the profitability of local petrochemical producers.

. Banking: Recent economic growth driven by high oil prices and increased

government expenditure has resulted in greater private sector activity and

hence greater domestic liquidity. This is the primary reason for the flourishing

of the Saudi banking sector. Entry into the WTO is likely to have a positive

effect on the financial services sector as it will continue increasing economic

activity and growth. The Saudi banking sector has been very profitable despite

the relatively high level of competition. The Kingdom’s entry into the WTO is

unlikely to result in any lower activity for the sector.

. Insurance: With the WTO entry, Saudi Arabia agreed to allow foreign

insurance companies to operate in the Kingdom. This is likely to put pressure

on the National Company for Cooperative Insurance (NCCI), the government

insurance company. However, the sector will flourish as new companies get

licenses and foreign companies introduce international best practices to the

field.

. Telecommunications: Prior to entering into the WTO, Saudi Arabia had

committed to introduce competition to the telecommunications sector. As the

Kingdom offers the third GSM license and allows private operators of land

lines, the former government monopoly Saudi Telecom Co. (STC) is likely to

lose additional market share. However, the telecom market as a whole is likely

to continue displaying robust growth as penetration rates increase and the

foreign-owned businesses drive additional growth.

3.1 INTRODUCTION OF THE COMPANY

� Company overview

A proud heritage, a positive future and a relentless commitment to quality

“Our success is driven by a combination of factors. Our dedicated team

under the leadership of our supportive Board and visionary management. Our

state-of-the-art infrastructure, incorporating centralized farms and advanced

processing plants. And our talent for innovation reinforced by world-class

marketing and distribution expertise.”

� Inspired vision

Our success story begins in 1977. It was around then that HH Prince

Sultan bin Mohammed bin Saudi Al Kabeer, our visionary Chairman,

recognized an opportunity to transform Saudi Arabia’s traditional dairy farming

industry to meet the needs of a rapidly expanding domestic market.

Under his guidance and patronage, numerous agricultural projects

were launched to achieve his vision. Starting with fresh milk and laban

processing, the scale and scope of these initiatives soon expanded to

incorporate modern dairy farms and state-of-the-art processing plants.

� Commitment through investment

During the early 1990s, Almarai entered a period of restructuring and

reinvestment that took it from a decentralized structure to a centralized

structure. The aim: to establish ourselves as a low-cost producer so that our

consumers can enjoy high-quality products at an affordable price.

In line with this model, we replaced five decentralized processing plants

with our first central processing plant. We also replaced ten small

decentralized dairy farms with four large dairy farms in Al Kharj in the central

region.

In late 2005, we commissioned a second, larger central processing

plant, incorporating a new cheese plant. We also commissioned two new

super-farms. In the same year, we moved from being a privately owned

company to a publicly listed company and now have around 70,000

shareholders. At the end of 2011, our market capitalization exceeded SAR23

billion.

Diversifying success

Our growth strategy encompasses diversification through innovation,

geographical expansion and organic growth.

� Bakery

In 2007, we entered the bakery products market by acquiring Jeddah-based

Western Bakeries. Two years later, we started the construction of a new

bakery facility in Al Kharj. We continue to develop our bakery portfolio with

innovative products and new distribution channels.

� Poultry

In 2009, we added poultry products to our portfolio through the acquisition of

Hail Agricultural Development Company (HADCO). After investing in a world-

class production facility, we launched the new premium poultry brand –

Alyoum.

� Geographical expansion

Paving the way for geographical expansion beyond GCC, we pooled our

respective expertise in dairy and juice with PepsiCo. In 2009, we launched a

joint venture together – the International Dairy and Juice (IDJ) Company.

Today, Almarai is capable of delivering high quality products to more than

48,000 customers within the Gulf Cooperation Council (GCC) daily.

� Positive future

We continue to invest intensively in technologically advanced

production facilities while recruiting high-caliber people with the skills and

experience to optimize their performance.

Almarai Co, the largest dairy company in Saudi Arabia by market value,

operates dairy farms and processes food, in addition to marketing dairy

products and fruit juices. The name Almarai means ‘green pastures’ in

Arabic.

The firm began 2009 in bold fashion as it looks to consolidate its

presence in the Kingdom and expand overseas. It announced in February it

was entering into a joint venture with drinks giant PepsiCo to invest in dairy

and juice processors in the Middle East, South East Asia and Africa. Known

as International Dairy and Juice, the venture will be 52 percent owned by

PepsiCo and 48 percent by Almarai.

A month later, Almarai announced it would invest $173m to build a

baby-formula food plant. The company would start selling baby-food products

within 18 months of the investment, it said in a statement.

The Almarai success story unfolded in 1976, when HH Prince Sultan

bin Mohammed bin Saud Al Kabeer recognized the potential to transform

traditional dairy farming in Saudi Arabia in order to meet the needs of a

burgeoning domestic market. Under his visionary guidance and patronage,

numerous agricultural projects were developed towards achieving this

objective, and what began with the processing of fresh milk and laban soon

expanded into modern dairy farms and state-of-the-art processing plants.

In 1991, having already achieved significant market leadership, Almarai

entered a Restructuring and Reinvestment Phase. Recognizing the long-term

strategic competitive advantages, Almarai also undertook a major investment

programme involving a total capital expenditure in excess of SAR 1,100

million between the years 1993 and 1997. It was during this period that the

first Central Processing Plant was commissioned with a large capacity

potential for both existing and new products whilst allowing room for further

expansion in the years to come. Almarai also set up four large dairy farms,

each with capacity for 10,000 animals; these were built and equipped with the

latest technology.

By 1998, Almarai entered the Growth and Utilizing Competitive

Advantages Phase with a strengthened market leadership position and

consequently as a low-cost producer achieving remarkable margins and

profitability, the Company was now in a strong position to face an increasingly

competitive market situation.

Between 2002 and 2005 Almarai has invested more than SAR 3,000

million in the expansion of its farming, operations and distribution activities.

The most significant development has been the commencement of its second

production facility (CPP2) at a cost of approximately SAR 700 million. This

facility which was completed in 2005 consists of three production facilities: for

fresh dairy liquid, fruit juices and cheese. Utilizing modern storage

technologies and sophisticated processing facilities, this new facility has been

designed to deliver long

One of the mainstays of its success is the Company’s unique ability to

maintain and deliver high quality products. With this intrinsic attribute

combined with a strong understanding of consumer tastes and preferences

acquired through intensive consumer research

establish itself as a leader in dairy and dairy

countries.

ALMARAI PRODUTS

Fresh

dairy

• fresh milk and laban• natural and fruit yogurts(zabadi)• dairy desserts

Longlife

dairy

• UHT milk and cream• Evaporated milk• Whipped cream

Fruitjuices

• Assorted fruits

Cheeze &butter

• Butter and Butter ghee• Triangle andteen cheese• Slices,spredable cheese

Bakery

• Filled puffs,Rolls,Croissants• Pound cakes,Cup cakes• Bread,Waffle,Ma'moul

facility which was completed in 2005 consists of three production facilities: for

fresh dairy liquid, fruit juices and cheese. Utilizing modern storage

technologies and sophisticated processing facilities, this new facility has been

r long-term benefits to the business.

One of the mainstays of its success is the Company’s unique ability to

maintain and deliver high quality products. With this intrinsic attribute

combined with a strong understanding of consumer tastes and preferences

acquired through intensive consumer research - Almarai today continues to

establish itself as a leader in dairy and dairy-related sectors in the GCC

fresh milk and labannatural and fruit yogurts(zabadi)dairy desserts

UHT milk and creamEvaporated milkWhipped cream

Assorted fruits

Butter and Butter gheeTriangle andteen cheeseSlices,spredable cheese

Filled puffs,Rolls,CroissantsPound cakes,Cup cakesBread,Waffle,Ma'moul

facility which was completed in 2005 consists of three production facilities: for

fresh dairy liquid, fruit juices and cheese. Utilizing modern storage

technologies and sophisticated processing facilities, this new facility has been

One of the mainstays of its success is the Company’s unique ability to

maintain and deliver high quality products. With this intrinsic attribute

combined with a strong understanding of consumer tastes and preferences -

Almarai today continues to

related sectors in the GCC

PRODUCTS OF THE COMPANY

Sales

Increased by 14% SAR 2,146 million

Net profit

Increased to SAR 386 million

Commercial borrowings

Converted all commercial borrowing to Islamic borrowing.

Initial public offerings Successfully floated 30% of the co. ‘share

capital on the Saudi stock exchange.

New production facility

Completed the construction of our second production facility at a cost SAR 700 million.

Sales distribution network

We now operate 31 sales deposits 22 in Saudi Arabia and 9 in the other GCC countries delivering to 27000 retail outlets.

ITS ROLE IN THE ECONOMY OF SAUDI ARABIA

The Company markets a range of food and beverage products under

the Almarai brand, principally through retail outlets. The product range

includes fresh and long-life dairy products, which are made primarily from

fresh milk, as well as fruit juices, cheese, butter and some non-dairy products.

Almarai is an integrated organization spanning the food supply chain from

dairy farms through to retail stores.

The origins of the Company date back to 1977 when HH Prince Sultan

bin Mohammed bin Saud Al Kabeer, recognizing the potential to transform

traditional dairy farming in Saudi Arabia to meet the needs of a rapidly

growing country, developed a number of agricultural projects which began

with the processing of fresh milk and laban and soon thereafter expanded into

dairy farms, fresh processing plants and cheese processing plants.

In 1991, the Restructuring and Reinvestment phase started with the

establishment of Almarai Company Trading Limited at which point the Almarai

brand had already achieved market leadership. Almarai was well positioned to

benefit from the economic upturn in the region during that period.

Recognizing the long-term strategic competitive advantages that would

accrue to low cost fresh dairy producers, Almarai undertook a major

investment programmed involving a total capital expenditure in excess of SAR

1,100 million in the five years from 1993 to 1997.

A single large fresh processing plant, CPP, was commissioned with

capacity for both existing and new products for ten years forward, and

allowance for further expansion. Four large dairy farms, each with capacity for

10,000 animals, were built incorporating the latest technology.

By 1998, Almarai entered the Growth and Utilizing Competitive

Advantages phase with a strengthened market leadership position being a low

cost producer, as witnessed by its margins and profitability. The Company

was now in a strong position to face an increasingly competitive market

situation.

In 1999, Almarai initiated a major fresh milk and laban price promotion

in Saudi Arabia. Consumer demand proved extremely responsive and Almarai

made very significant market share gains without adverse effect on overall

profitability. The price sensitivity of milk and laban in Saudi Arabia was again

in evidence as retail prices of milk and laban fell once more in the summer of

2001. Almarai continued to experience growth in volume and market share

mitigating the negative impact of lower sale prices on margins.

� Mission Statement:

Almarai’s mission is to make its food and beverage products the

preferred choice of families throughout its target markets. Almarai’s mission

statement clearly positions it in the consumer food business in the Middle

East. It has established itself as a leader in the dairy and related sectors in the

GCC region.

� Competitive Advantages :

The Almarai brand is instantly recognizable throughout the GCC.

Consumers view the brand as a symbol of quality, value and freshness and

within the industry and wider business community Almarai is renowned for

quality, technical superiority, efficiency and brand awareness.

Almarai has avoided dependence on individual aspects of its business

and is not excessively dependent on any one of the following:

The Company has established and sustained an extremely profitable

dairy business in difficult physical circumstances by its ongoing commitment

to excellence in its people, processes and technologies. As a result Almarai

has attained a high level of capability and expertise throughout its diverse

range of activities, including:

Marketing expertise, particularly in identifying and satisfying consumer

needs Sales expertise, particularly in providing cost effective customer

service Coverage and effectiveness of chilled distribution network Integrated

food supply chain with proven planning and information capability Modern and

advanced asset base Proven sophisticated processing and farming

technologies supported by access to proven technical experts in all major

disciplines - farming, processing and engineering.

Almarai is managed by a skilled and experienced senior team, with

strength in depth across the organization. Senior personnel are drawn from a

variety of backgrounds and nationalities and combine expertise, experience

and local knowledge.

� Key aspects of Almarai’s management expertise include:

Skilful planning particularly in balancing product demand with raw milk

supply Management of the chilled chain and its impact on delivered product

quality Field sales management information and know-how Accurate short

and long-term sales forecasting Integrated financial, information, planning and

control systems.

3.2 STRUCTURE, FUNCTIONS AND BUSINESS ACTIVITIES OF THE COMPANY

� Structure

In August 2005, Almarai became a publicly listed company on the

Saudi Stock Exchange (TASI: 2280). Valued at SAR 2.3 billion, the IPO

floated 4.5 million shares at SAR 512 each, representing 30% of the total

shares.

The remaining 70% was retained by major shareholders including

HH Prince Sultan bin Mohammed bin Saud Al Kabeer (37.2%) and The

Savola Group (28.2%) which is one of Saudi Arabia’s largest companies in

the edible oil and sugar industries. Subsequently, the 1‐for‐3 stock dividend

increased outstanding shares to 20 million, which split 5‐to‐1 in April 2006.

In March 2007, Almarai issued an additional 9 million shares to the Al

Omran family in consideration for the Western Bakeries acquisition,

increasing total shares outstanding to 109 million.

The Company markets a range of food and beverage products under

the Almarai brand, principally through retail outlets. The product range

includes fresh and long-life dairy products, which are made primarily from

fresh milk, as well as fruit juices, cheese, butter and some non-dairy products.

Almarai is an integrated organisation spanning the food supply chain from

dairy farms through to retail stores.

The origins of the Company date back to 1977 when HH Prince Sultan

bin Mohammed bin Saud Al Kabeer, recognising the potential to transform

traditional dairy farming in Saudi Arabia to meet the needs of a rapidly

growing country, developed a number of agricultural projects which began

with the processing of fresh milk and laban and soon thereafter expanded into

dairy farms, fresh processing plants and cheese processing plants.

In 1991, the Restructuring and Reinvestment phase started with the

establishment of Almarai Company Trading Limited at which point the Almarai

brand had already achieved market leadership. Almarai was well positioned to

benefit from the economic upturn in the region during that period.

Board of directors

� HH Prince Sultan bin Mohammed bin Saud Al Kabeer Chairman of the Board

� Dr. Abdulraouf M. Mannaa Director

� Abdulrahman bin Abdul-Aziz Al Muhanna Managing Director

� Mohammed Al Damer Director

� Nasser Al Muttawa Director

� HH Prince Naif bin Sultan bin Mohammed bin

Saud Al Kabeer Director

� Dr. Majed M. Al Gassabi Director

� Ibrahim M. Alissa Director

Functions

� The Company aims at maintaining a consistent brand image as a food and

beverage Company that understands consumers’ needs and competes on the

basis of delivering superior quality and value for money to the consumer.

� The Marketing Division comprises dedicated category teams focused on all

elements of the marketing mix; including product development, strategic

brand management, innovation, market research and public relations.

� Almarai’s marketing effort is broadly divided onto four product categories:

Dairy Liquids, Juice, Pots and Foods. Dairy Liquid is made up of fresh, long

life and flavored laban, milk, and super milk. Juices comprise fresh and long

life juices. Pots include yoghurt, ready-to-eat desserts, fruit yoghurts, labneh

and ghiste. Finally, Foods cover processed and natural cheese, butter, butter

ghee, evaporated milk, sterilized cream and tomato paste. All fresh dairy

based products are available in full cream, low fat and skimmed variants.

� Today, Almarai is one of the best loved and trusted brands in the GCC. This

trust, built over many years, provides a competitive advantage to Almarai and

gives credibility and a point of differentiation to all consumer offerings. Almarai

recognizes the overriding importance of maintaining consumer trust in the

brand, and, therefore, relentlessly dedicates its resources towards equity and

brand building programs that are grounded in market research and are

generated from genuine consumer insights.

� As market leader, Almarai, with its ongoing investment into extensive

consumer research, is well placed to drive category development and

innovation in the GCC markets of the future, thus creating platforms for

growth and ensuring sustained profitability in the years to come.

� Business activities

Over the years, we have become a popular feature of family life

throughout our region and beyond thanks to the sheer excellence of our

products. We consistently delight our consumers with premium quality food

and beverages that are fresh, nutritious, healthy – and irresistible. We’re

always working to innovate and create new treats and delicacies for our

consumers. But one thing will never change: our determination to stay faithful

to our founding principles by delivering quality products you can trust and

love. Why not explore our great range of Dairy Liquids, Yoghurts & Desserts,

Foods, Juices, Bakery treats and Poultry.

� Dairy Liquids

� Yoghurts & Desserts

� Foods

� Juices

� Bakery

� Poultry

� Infant Formula

� Our Brand

Delivering quality, enriching lives

� Vision statement

To be the consumers’ preferred choice by leading in our chosen markets with

superior food and beverage products.

� Mission statement

To provide quality, nutritious food and beverages that enrich our consumers’

lives every day.

� Our values

Adaptable, Sharing, Passionate, Innovative, Respect, Excellence

“Our unswerving commitment to healthy living means we only deliver fresh

and delicious products to the people we care about most – our consumers.”

Welcome to Almarai - Quality You Can Trust

Our website is packed with facts about the premium quality food and

beverages that have made Almarai a trusted household name across Saudi

Arabia and beyond. We’ve created this website with you in mind. Visit My

Almarai, for example, and use our interactive apps to explore a world of

fascinating topics from around the globe. You can also find out more about

the vision and values that inspire our people to go the extra mile for our loyal

consumers and customers – and our communities. In short: if you want to

know more about how Almarai is working to enrich your life, you’ve come to

the right place!

Dairy production flow chartDairy production flow chart

3.3 COMPARATIVE POSITION OF THE COMPANY

The GCC dairy and juice market is supplied by over 40 domestic and

multinational companies. Production and distribution facilities near target

markets provide a distinct competitive advantage, particularly for short‐life dairy

products. In our view, brand loyalty and price competitiveness are paramount for

market share growth. Brand loyalty is cultivated through a track record of quality,

consistency and availability. Almarai products have been available for over 30

years and thus can benefit from cross‐generational referral, where the consumer

gained brand exposure at childhood. Dairy, juice, cheese, butter and bread are

everyday use items.

A consumer is more likely to try other brand thanswitch retailers if the

desired brand is not available, suggesting brand elasticity and an opportunity to

pull customers from competitors. Further, we believe demand for Almarai’s

products is price sensitive where the ability to pass cost increases to consumers

is constrained. In the event of product specific price hikes, the probability of

losing customers to competitors rises. However, increases in input costs are

likely to affect producers in tandem. Historically, the Saudi dairy market

witnessed consecutive price wars in 2000 and 2001. As a large‐scale integrated

dairy company, we believe Almarai can weather the onset of future price wars.

Dairy Products

Fresh milk and long‐life dairy products comprise 57% of Almarai's

revenues. As of 2008, Almarai had captured the GCC’s leading position in the

dairy and fresh milk market with 28% and 21% market share, respectively. In the

plain UHT milk segment, Almarai increased market share by 23% primarily at

the expense of Saudi, which lost share by 11% in 2008. While in the flavored

UHT milk segment, Al Safi has a dominant position but Almarai has posted

sizeable growth (+51%) over the last two years in contrast to competitors that

are witnessing declining sales. In the laban and zabadi segment, Almarai enjoys

the dominant position with43% and 36% market share. The main competitors

are Al Safi and Nadec with combined market share of 22% (laban) and 20%

(zabadi).

Fruit Juices

In 2007, the GCC’s total beverage market was 15.5 billion liters, of

which juices formed 9%. Rani and Al Rabies are the leading companies in

GCC juices with market shares of 13% and 12% respectively. Almarai

places third with a 10%. This segment is expected to grow 4.2% annually in

the near term. While carbonated drinks dominate the beverage segment;

the demand for fruit juice is also on the rise. An increasing under‐25

population is driving the demand for sports and energy drinks. Almarai’s

market share increases from 2004’s 4% reflect its ability to leverage brand

strength to grow new business lines.

Bakery

The GCC bakery industry was estimated at SAR 15 billion in 2008

with Saudi Arabia comprising 45% of the market. The industry caters to

health conscious and premium customers – trending towards development

of high fiber‐content products. In the bakery snack segment the demand for

salty snacks is on the wane while those with added ingredients (fortified

with vitamins or antioxidants) are gaining market share. Although wheat

prices are expected to drop thereby countering the recent round of pricing

increases (North American retail bread prices increased 60%in 2008),

bakeries are expected to maintain current retail prices. However we believe

GCC producers may face greater resistance in passing on future price

increases. The GCC plus Yemen’s bakery industry is expected to grow at a

CAGR of 5% between 2009 and 2013 versus 3% between 2002 and 2007.

Al‐Hasa Automatic Bakeries has created a GCC presence through

manufacturing, marketing and distribution of bakery and confectionery

products. Al‐Hasa maintains a strong presence in KSA through its large

distribution network and plans to increase market share through new

products.

Poultry

In 2006, Saudi Arabia’s chicken consumption was some 900,000

tonnes (40kilograms per capita) and ranked one of the world’s highest on a

per capitabasis. Fifty‐five percent of poultry meat consumed is produced

locally withthe remainder imported mainly from Brazil and France. Despite

government subsidies and rising demand, the country’s poultry producers

are facing intense competition from cheaper Brazilian imports driving local

firms to seek higher subsidies and import tariffs. Poultry imports are

expected to increase 4% in 2009 due to a recent cut in import tariffs aimed

at curbing food inflation.FAPRI predicts broiler meat trade in Saudi Arabia

to increase from 482,000 metric tons in 2009 to 600,000 in 2018, while

broiler meat production is expected to rise from565,000 metric tons in 2009

to 699,000 in 2018.HADCO is the fifth largest producer, with 26 million

birds, holding 4% of KSA’s market. We believe foreign poultry producers

pose a key threat to

Almarai based on cost advantages.

Infant Formula

The estimated GCC market size is 40,000 tons per annum and the

entire demand is met through imports. Established brands, Abbott and

Nestle, pose key competition to Almarai based on decades of experience

and brand presence. Nestle traces its roots from 1867 when the first infant

cereal was developed by Henry Nestlé. In 1934, Nestle entered the Middle

Eastern market exporting products from its headquarters in Switzerland. In

1997, operations were consolidated in the region covering 13 countries. In

2001Nestle unveiled its regional headquarters in Dubai. Abbott has a long

history in the global infant formula market starting from1925. It was the first

to introduce nutritional formulas for pre‐term infants in 2002 and the first to

introduce organic infant formula in 2006.

Key competitors profile :

Milk

Laban

Zabadi

Desserts

Other

dairy

products

Butter

Cheese

Fruit

juice

Almarai

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Nestle

Yes

No

Yes

Yes

Yes

No

No

Yes

Al safi

danone

Yes

Yes

Yes

Yes

Yes

No

No

Yes

Sadafco

Yes

No

No

Yes

Yes

No

Yes

Yes

Nadec

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Kraft

No

No

No

Yes

No

Yes

Yes

No

KEY FINANCIAL HIGHLIGHTS OF THE LAST FIVE YEARS – RESULTS, ASSETS, LIABILITIES AND KEY INDICATORS

�

Key Financial Highlights

Year ended 31 December

(SAR Million) 2012 2011 2010 2009 2008

Operational Performance

Total sales 9,883 7,951 6,931 5,869 5,030

Cost of sales (6,372) (4,954) (4,195) (3,503) (3,031)

Gross profit 3,511 2,997 2,736 2,366 1,999

Selling and distribution expenses (1,617) (1,213) (1,046) (887) (751)

General and administration expenses

(221) (266) (230) (200) (187)

Share of Results of Associates and (25) (42) (6) (2) -

Impaiment Loss - (160) - - -

Financing cost and bank charges (157) (135) (121) (148) (125)

Income before zakat 1,491 1,180 1,333 1,129 936

Zakat (51) (33) (26) (29) (25)

Minority Interest 1 (7) (22) (3) (1)

Net income 1,441 1,140 1,285 1,097 910

Balance Sheet

Net operating working capital 932 805 660 711 837

Property, Plant and Equipment 13,416 10,508 7,867 6,282 4,704

Biological Assets 901 818 770 735 639

Net operating assets 15,249 12,131 9,296 7,728 6,180

Intangible Assets - Goodwill 1,335 821 793 793 549

Investment and Financial Assets 295 907 981 995 529

Net Assets 16,880 13,859 11,071 9,517 7,258

Net debt 8,305 6,749 4,679 3,951 3,499

Employee termination benefits 287 243 206 166 128

Deferred Tax (Net) 116 88 - - -

Total Equity 8,171 6,778 6,185 5,400 3,631

Net Capital Employed 16,880 13,859 11,071 9,517 7,258

Total Assets 19,519 15,656 12,571 10,987 8,181

Total Liabilities 11,348 8,879 6,386 5,587 4,550

Cash Flow

Cash Flow from Operating Activities 2,384 1,924 1,965 1,802 1,016

Cash Flow used in Investing activities

2,933 3,237 2,189 1,711 1,572

Dividend paid 512 516 455 380 270

Key Indicators

Return on sales 14.6% 14.3% 18.5% 18.7% 18.1%

Return on Shareholders’ Equity* 20.2% 17.7% 22.3% 25.6% 27.3%

Return on Total Equity* 19.3% 17.7% 22.6% 26.9% 27.2%

Return on Net Operating Assets* 12.2% 14.2% 17.1% 18.7% 19.7%

Net debt to equity ratio 101.6% 99.6% 75.6% 73.2% 96.4%

Current ratio 96.8% 91.8% 115.0% 151.5% 136.5%

Revenue growth rate 24.3% 14.7% 18.1% 16.7% 33.4%

Dividends payout ratio 34.7% 45.4% 40.3% 41.9% 42.0%

Shares Issued (in millions) 400 400 400 384 379

Earnings per Share (SAR)** 3.60 2.85 3.21 2.86 2.40

Dividend Proposed 500 518 518 460 382

3.4 PRESENT POSITION AND TREND OF BUSINESS (IMPORT/EXPORT) WITH INDIA/GUJARAT DURING 3 YEARS

Introduction

India and Saudi Arabia are old business partners: their trade relations go back

several centuries in time. Today, the bilateral business ties are being steadily

expanded and further strengthened by continuous interaction and cooperation,

including regular exchange of business delegations. Besides being a major trade

partner, India sees the Kingdom as an important economic partner for investments,

joint ventures, transfer of technology projects and joint projects in third countries.

Trade

Saudi Arabia is the 4th largest trading partner for India: The value of the two-way

trade between the two countries in 2011-12 exceeded US$ 36 billion. Saudi Arabia is

the 14th largest market in the world for Indian exports and is destination of more than

1.86% of India’s global exports. On the other hand, Saudi Arabia is the source of

6.35% of India’s global imports.

For Saudi Arabia, India is the 5th largest market for its exports, accounting for 7.55%

of its global exports. In terms of imports by Saudi Arabia, India ranks 9th and is

source of around 3.27% of Saudi Arabia’s total imports.

Imported Imported Imported

% of %

market change

Exporters value in value in value in

share 2006 -

2005 2006 2007

2007 2007

'World 346 224 404 222 444 800 100.0 10.0

'Ireland 151 941 171 921 165 141 37.1 -3.9

'United

States of

America 48 108 58 226 62 881 14.1 8.0

'United

Kingdom 23 017 28 125 35 608 8.0 26.6

'Denmark 18 467 24 556 31 708 7.1 29.1

'Egypt 24 148 22 689 23 405 5.3 3.2

Milk powder not exceeding 1.5% fat, Milk and cream powder unsweetened

exceeding 1.5% fat, Milk and cream nes sweetened (HS 040210, HS

040221 and HS 040299)

The total value of the imports of milk powder not exceeding 1.5% fat (HS

040210) was US $ 188.6 million in 2007. Table 25 indicates that the major

competitors in this market were New Zealand and Australia with market

shares of 67% and 17% respectively. There was an increase of 53% in the

imports of this product between 2006 and 2007.

The imports in the milk and cream powder unsweetened exceeding 1.5% fat

(HS 040221) were worth US $ 226 million in 2007. The major competitors in

this market were the Netherlands, New Zeeland, Malaysia and Ireland, with

market shares of 21%, 18%, 11% and 9% respectively as can be seen in

table 26.

The value of imports by Saudi Arabia of milk and cream nes sweetened (HS

040299) were US $ 135 million in 2007. The major competitors in this market

were the Nederland’s, Denmark, Malaysia and Germany as can be seen in

table 27.

Competitors in Saudi Arabia's market for Milk and c ream nes sweetened

Imported Imported Imported Imported Imported % of %

market change

Exporters value in value in value in value in value in

share 2006 -

2003 2004 2005 2006 2007

2007 2007

'World 115 260 166 873 110 144 97 939 135 030 100.0 37.9

'Netherlands 66 852 102 073 48 307 33 008 50 157 37.1 52.0

'Denmark 10 172 17 241 26 403 10 269 21 499 15.9 109.4

'Malaysia 8 071 23 313 11 464 12 564 20 662 15.3 64.5

'Germany 4 543 3 355 6 651 18 550 19 488 14.4 5.1

'France 13 151 14 494 4 963 9 642 11 235 8.3 16.5

Consumer market for milk products in Saudi Arabia Sales value is expected to reach just more than SR 4 billion in 2009. Semi-

skimmed fat-free fresh and UHT milk drive demand for drinking milk in 2009.

There was slight movement in unit price in 2009, because of massive

domestic milk production. There was a drop in the sales of milk power and a

negative CAGR of 1.9 % is expected for milk power up to 2014.

3.5 POLICIES AND NORMS OF SAUDI ARABIA FOR ALMARAI COMPANY

REGISTRATION PROCEDURES:

Companies have to register with the GIA, and an application should be fully

completed and submitted.

The GIA has to accept or decline the completed applications within 15 days for

small projects; and 25 days for large scale projects.

The GIA has the right to accept or reject any application without going back to the

agency concerned.

If the GIA did not accept or reject the application on the time that was mentioned

above, the application is considered approved.

TAXATION

The Kingdom of Saudi Arabia has undertaken major tax reforms in the last

decade. These reforms include the tax law and the administration and

computerization of tax work.

Saudi Arabia has concluded tax treaties with many countries. In the last five

years, the Kingdom has signed 23 tax treaties. Moreover, there are

approximately 16 treaties awaiting signature, and another 14 treaties under

negotiation. These treaties are in line with world trends and in accordance with

rules set by relevant organizations concerned about reforming tax.

INVESTMENT COMPANIES:

Investment companies should be established by a decree of the GIA President.

Investment companies can take any legal form under the companies’ law or civil

law, subject to joint stock companies that put up their shares for public

subscription or limited stock partnership companies.

Investors and investment projects may appeal decisions taken by the GIA or

Agencies involved by applying in writing to the decision-making authority or the

President of the Authority within 30 days, following notification of the decisions.

The party appealed to should decide on the appeal within 20 days of its

submission.

The decision-making authority elapsed without a decision.

If the appeal was rejected, the appellant is entitled to submit his appeal to the

Prime Minister.

The Prime Minister should make a decision within 10 days or refer it to the

Council of Ministers to make such a decision. The Council of Ministers should

make a decision within 30 days.

Investors and investment projects have the right to appeal decisions taken by any

of the decision-making authorities mentioned above, by filing directly with the

competent court or through an arbitration tribunal.

Investors and investment projects may select one of the following arbitration

procedures to settle disputes:

The Standardized Agreement for Arab Capital Investment in Arab Countries.

The International Convention for the Settlement of Investment Disputes between

the State and Nationals of another State.

Any international or bilateral agreement to which the Republic is a party.

Commercial arbitration rules and procedures of the United Nations Commission

on International Trade Law, at the nearest regional center for international

commercial arbitration using such rules.

Rules and procedures of arbitration within the Republic of Saudi Arabia.

REGISTRATION

(i) A license/ certificate/ permission to import/ export, [except items listed as

restricted items in ITC(HS)]

(ii) Any other benefit or concession under this policy shall be required to furnish

Registration-cum-Membership Certificate (RCMC) granted by the competent

authority in accordance with the procedure specified in the Handbook unless

specifically exempted under the Po

3.6 POLICIES AND NORMS OF INDIA FOR IMPORT OR EXPORT TO THE SAUDI ARABIA

In this study documented early attempts (1890-1924) in agricultural

development in India such as the Royal Commission on Agriculture, the Bombay

plan, the Milk Producers Cooperative at Anand, other post-independence dairy

development plans, the intensive cattle development project, the fourth five-year

plan, the National Dairy Development Board; canalization of imported dried milk,

and milk pricing policy.

The WTO regime is now a reality as India is a signatory under the WTO

rules has opportunity to extend its exports product base. It’s become more open

world trade regime where barriers to trade were reduced. The major dairy

products exported from the country includes skimmed milk powder, whole milk

powder, ghee, butter oil, milk food for babies, butter, milk for babies, milk and

cream etc. The positive trend in export and negative trend in imports was

observed due to the success full implementation of Operation Flood and set of

Government policies regarding international trade.

The growth of dairy sector during last decade has been impressive due to

a set of Government policies which created suitable prize environment for

domestic milk productions well as export of dairy products. In the tenth five-year

plan, five schemes for dairy development have been sanctioned and Rs 51.62

crores was given for dairy development and Rs 284.38 crores for Animal

Husbandry.

For quality of dairy products regulatory environment policy of Government

was implemented in the dairy processing sector like compulsory legislation

MMPO Act 1992, Food Adulteration Act 1954, Standard on Weights and

Measures (Packaged commodities) Rules1977, Export Quality and Inspection Act

1963, Livestock Importation Act 1898 etc. had work successfully in taking the

dairy sector to the international market and compete with the highest.

Indian dairy industry is facing emerging challenges and also has a great

opportunity in global trade with respect to the WTO era. Overall studies in this

regard give pictures of the Indian temporal dairy trade policies and what is the

impact of particular policies on export and imports of selected dairy products. The

present study will be helpful both traders and Government policies

makers/advisory members with respect to the WTO era and in accordance to the

international trade, safeguarding the domestic market, framing new policy after

appraising an earlier policy.

So that the Indian dairy industry prospers further generate employment,

compete in the international market and convert challenges into opportunities in

WTO era by providing suitable trade policy to the Indian dairy industry. Hence, it

was felt necessary that to know the different policies implemented and their

impaction Indian dairy trades. In this context, the present study was taken up with

following specific objectives.

1. To document the existing government policies on imports and exports of dairy

products in India.

2. To study the trends in exports and imports of selected dairy products in India.

3. To study the impact of changes in Government policies on exports and

imports of selected dairy products in India.

4. To study the existing stipulation in selected importing countries on selected

dairy products.

TRENDS IN SELECTED DAIRY PRODUCTS IN INDIA

Different trend equations are fitted depending upon their goodness of fit

and their suitability to assess the trend in exports and imports in value terms of

selected dairy products for all the selected products in the study. The data over

the period 1985 to 2004 were considered. This was divided into two phases i.e.

1985 - 1994 (pre WTO) and 1995 to 2004 (Post WTO) .The cubic functions was

fitted for all the selected products due to its superiority over other functions in

terms of coefficient of multiple determination.

EXISTING STIPULATION IN IMPORTED COUNTRIES

Sr.no.

stipulation

Destination

Bangladesh United arab

emirate Egypt

1 Import restriction Freely with import

license

Only companies

for import

license

Freely with

imported card

2 Pre shipment

inspection(PSI)

Quality inspection

mandatory

Quality

inspection

mandatory by

concern

authority

Quality

inspection

mandatory by

health, supply

and

agriculture.

3

Duty and other

charges for

opening L.C.

Bound duty: 200% Custom duty: 25% Advance income

tax- 3%. Development Surcharge-3.5%. Supplementary

duty - 12%.

Bound duty:

10% Custom duty:

4%

Bound duty:

10% Custom duty:

7%

4 Packing, marking

& labeling

Packing- strong and

should guard against

climate, storage condition, handling (English/

Symbols), disease free

Indian origin written in

large indelible letters

(English) on Label/container.

Packing - strong and should

guard against climate,

storage condition,

Handling. Labels must be in

Arabic Languages.

Packing - strong

and should guard

against climate, storage

condition, handling and

health Certificate

(EIC). Labels must

be in Arabic

languages

5 Weights &

measures Metric system Metric system Metric system

6 Insurance Must be arranged

by importer

Must be arranged by

importer

Must be arranged by

importer

7 Method of

quoting and payment

Pro-forma invoices

Quotes in US$/ INR.

on CF Bangladesh Port. CIF-separately

Shown. Payment must

be by L.C

Pro-forma invoices in US$/

Durham/INR. Payment through

FOB and CF.

Pro-forma invoices

Quotes in US$/INR. Payment through

FOB and CF

8 Public health/

Special certificate

Radioactive test report

(EIC) and certificate of

analysis

Cyclamates free and

Synatary certificate

Radiation inspection

(EIC India)

3.7 PRESENT TRADE BARRIERS FOR IMPORT/EXPORT OF SELECTED GOODS

� TRADE BARRIERS

The importation of pork, firearms and most non-Islamic religious materials

are deemed to be offensive to Islamic principles. Alcohol and used clothing

are also prohibited to be imported into Saudi Arabia. The importation of

certain products requires special approval e.g. agricultural seeds, life

animals, horses, products containing alcohol, etc.

The Arabian blacklisting of foreign firms that support Israel in various ways

can be a barrier. The GCC agreed at the end of 1994 to lift the secondary

and tertiary boycotts on companies trading with Israel, though some

companies on that list have been refused visas, suggesting that the

regulations are still applied selectively.

Saudi Arabia applies the principle of Single Entry Point, by which any

products admitted into the GCC through a GCC customs point may legally

traverse borders within the GCC without further examination or inspection.

However, the land crossing between Saudi Arabia and the United Arab

Emirates still has periodic inspections.

As from the end of December 2007, Saudi Arabia eliminated the

requirement to authenticate import documentation. Some products, notably

agricultural biotechnology products need a certificate from the country of

origin confirming the products fitness for human consumption and sales in

the country of origin. This certificate must be authenticated by the local

chamber of commerce in the country of origin.

Non-food consumer products must have a certificate of conformity issued

under Saudi Arabia’s Conformity Certificate Program (COCP), before

entering the country. This COCP requires every shipment of products sold

in Saudi Arabia to be accompanied by a document certifying that the

product conforms to the relevant Saudi Arabian technical regulation or

standard ("conformity certificate"). The requirement applies to all products,

including domestic products, except those subject to Saudi Arabia‟s

sanitary and phytosanitary regulation.

In February 2009 the Saudi Arabian Department of Customs implemented

a regulation mandating that all items being shipped to Saudi Arabia must

have the country of origin engraved or affixed by a non-removable sticker.

The GCC Customs Union is working toward harmonizing their standards and

conformity assessment systems. Currently Member States continue to apply

either its own standard or a GCC standard, resulting in a complicated

situation for some businesses.

The GCC Standards Committee approved two new standards for the labeling

and expiration periods of food products in May 2008. This new standards

eliminate the long standing requirement that at least one-half of a product’s

shelf life must be valid when a product reaches a port of entry. Officials from

the Gulf Standards Organization (GSO) have stated that GCC Member States

will accept use of the terms "best by" and "best before" as meeting the date

labeling requirement for shelf-stable products.

The Food and Agricultural Import Regulations and Standards (FAIRS)

Country Report can be used to obtain regulatory requirements and import

procedures for food and agricultural imports, imposed by the government of

Saudi Arabia. This report also states that most common non-tariff barriers that

is experienced by U.S. food product exporters in Saudi Arabia are biotech

labeling, production & expiration date regulations, Arabic labeling

requirements, a declaration that animals slaughtered and exported to Saudi

Arabia were not fed with feed containing protein, fat or remnants of animal

Origin, and a Halal Slaughtering certificate for both livestock and poultry meat.

Trade related infrastructure

Saudi Arabia's road-building programme was given priority in the early five-

year development plans. Major arteries include the trans-peninsular highway

and the Tapline road from Dammam to the Jordanian border. Motorways

connect most urban centers.

There are three international airports at Jeddah, Dammam and Riyadh. The

airports at Mecca and Medina can receive international flights bringing religious

pilgrims to the country, but non-Muslims are not permitted to enter either city.

The railway network consists of two lines totaling 1000 km between

Damman and Riyadh. Three new lines that will add 2 800 km are prioritized.

Saudi Arabia has six major ports (Yanbu, Jeddah, Dammam, Jubail, Jizan and

Duba) and two specialized industrial ports at Jubail and Yanbu. There are also

14 minor ports.

There were 28.4m mobile phones in the Kingdom in 2007, equivalent to

116% of the population. This compares with 33% of the population in 2003. In

comparison, landline penetration stood at 16.8% of the population in 2007. In

2007 roughly 25% of the population was internet users.

4.1 POTENIAL FOR IMPORT/EXPORT IN INDIA/GUJARAT MARKET

Positioning of product lines is encouraging:

Our analysis shows that Almarai has a favorable product mix. Its largest

product line, Fresh Dairy, comes under the “cash cow” category with the

remaining product lines coming under the “Star” category.

Almarai’s largest segment, Fresh Dairy, is the single-largest cash generator

for the company, enabling it to invest in other high growth businesses. A slow

growth rate and high market share characterize this segment, indicating that it

has matured. Hence, we believe that the company should not undertake large

organic investments in this business.

The Juice and Bakery segments are emerging as Almarai’s Star segments

with high growth rates and increasing market shares. Products from these two

segments have also established a strong reputation in the market place in a

short period. Additionally, given that these are high-growth businesses, we

believe that Almarai should invest heavily in these segments.

Although the Long Life segment is the best Star product, demand growth is

maturing, with people increasingly preferring fresh milk products. Hence, the

key to growth is by gaining market share through the launch of new and

innovative products. So far, Almarai has fared well here and we expect this to

continue, going forward. Export markets and expansion into newer

geographies outside of the GCC also remain key growth drivers.

We believe that the prospects for the Cheese and Butter market are more

limited than the other products given that consumers are increasingly

choosing diet products. The key for growth in the medium term would be

through innovative products and packaging. Hence, we are of the opinion that

investments in the segment should be relatively small.

4.2 BUSINESS OPPORTUNITIES IN FUTURE

In 2012, Almarai invested SAR 3,182.2 million in continuing the process of

putting the platforms for future growth in place. This investment is spread

across Almarai’s diversified operations:

� POULTRY

The capital investment consists of the design and construction of a state-of-

the-art integrated Poultry Processing facility with a potential capacity of 180

million birds per annum, a rendering plant and the related distribution

infrastructure throughout the GCC countries. These facilities will be

commissioned in the three steps during 2013, with the first primary processing

line to be commissioned during first quarter of 2013.

� DAIRY FARMING, MANUFACTURING AND

DISTRIBUTION

Continued robust growth in our core product groups (dairy, juice, cheese &

butter and bakery) requires investment in our supply chain to serve consumer

demand.

Our farming, manufacturing and distribution capabilities were all improved with

increased capacity to satisfy this growth.

2013 will be a key year for Almarai as the poultry facilities and infant nutrition

plant are commissioned and these new businesses continue to gain

momentum.

ANALYSISTHREATS

4.3 SWOT ANALYSIS

SWOT

ANALYSIS

STRENGTHS

WEAKNESSES

OPPORTUNITIES

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