Takeaways for BGR – MBA Class of 2015

BGR - Session 5Case:“Saudi Arabia: Getting the House in Order” – HBS, March 19, 2008

Despite its fairly advanced infrastructure, both real and financial, its sensible

monetary and fiscal policies, and the gradual steps that are being taken towards

modernizing the socio-economic fabric of the Saudi polity, Saudi Arabia remains

essentially a tribal society that lacks a robust system of laws and regulation,

that is embued with archaic notions of privileges/preferences, and that has a

manifestly inept work force without the necessary work ethic.

The Saudi body politic is underpinned by a long-standing compact between the

House of Saud (the royal family) and the puritanical Wahhabi Ulema in terms of

which most aspects of political --- essentially temporal --- power has been conceded

to the House of Saud while the Wahhabi Ulema have retained authority over religious

affairs, the judiciary, and education (albeit both parties are trying to make

inroads into the domain of the other). A business entity that engages in any

form of commercial activity in Saudi Arabia without realistically factoring in the

aforegoing is not likely to be successful.

Perhaps, Saudi Arabia is the best example of a business environment where an

enterprise has to be extremely nimble and navigate adroitly between de jure

contours and de factopossibilities.

Extremely important to have a well-placed and respected Saudi, preferably from the

royal family, as a partner and advisor. However, since it is difficult to have much

confidence in the Saudi judicial process and in the enforcement of contractual rights,

it is better to avoid direct equity investment by the Saudi partner/advisor.

Basic principal: with due circumspection latch on to, and buy, privilege – it is a cost of

“doing business” in Saudi Arabia. Further, it would make sense to set up business

enterprises in port cities of Saudi Arabia that are essentially of a technologically

advanced or capital intensive nature and staffed by highly skilled/technical

“imported” employees i.e. “ cutting edge ” enterprises operating at the border with

minimal Saudi involvement.

Steer clear away from anything that can even remotely be construed as un-Islamic or

against Arab tradition. When in doubt, obtain a “fatwa”.

BGR MBA Class of 2015 (Semester IIIB Nov 5 – Dec 27, 2014)