Business Corruption

Companies should be aware that bureaucratic procedures in Saudi Arabia remain cumbersome, even though the US Department of State 2011 notes that red tape can generally be overcome with persistence.

According to an October 2009 article by Arab News, petty corruption is rampant in Saudi public agencies that grant licences to private companies, and businesspeople claim that even the most simple tasks cannot be achieved without paying bribes or gifts to public officials. Government procedures normally take some time to be completed, but can reportedly be completed faster if bribes are paid and vice versa. For example, related to the approval of imported cosmetic products, an anonymous Arab businessman claims to pay up to RSA 10,000 for each product to get the procedures and permits done quickly. In total, bribes could reach up to RSA 100,000, depending on personal connections.

Political Corruption

Although there are no accurate estimates of the level of corruption in Saudi municipalities or any other governmental sector, a municipal employee interviewed by Arab News in 2009 asserts that it is high. Arab News reports that a court sentenced 16 municipal employees to fines of between RSA 3,000 and RSA 100,000 and prison sentences for having accepted bribes in July 2009. One of the men was found guilty of taking an RSA 180,000 bribe to issue a licence for a building whose owner had not fulfilled stipulated conditions. Another local public official had accepted RSA 50,000 to issue a commercial licence to a businessman.

In a corruption and bribery scandal involving USD 373,000 in the municipality of Taif, a Jeddah court had postponed the issuance of a verdict three times as of August 2009. In 2008, the court had convicted 16 officials of the municipality of Taif. Sentences included prison, dismissal, and fines. Seven others accused were absolved of all charges, while two businessmen were fined USD 40,000 each, according to the US Department of State 2010.

Arab News also reports that corruption is particularly rampant in the Ministry of Health, and National Council members demanded the resignation of Health Minister Dr. Hamad Al-Manie for inefficiency and corruption in his ministry in July 2008. That same year, eight health officials in Madinah were accused of taking bribes from 13 Saudi and foreign businesspeople. The bribes were taken for granting licences to open, move or transfer ownership of a number of pharmacies.

In September 2010, a Medina Control and Investigation Board report revealed financial and administrative corruption and abuse of power by senior officials at the Medina branch office of the Ministry of Hajj, dealing with Saudi religious affairs. Violations identified included appointment of unqualified employees to high-ranking positions, nepotism, and abuse of government property, according to the US Department of State 2010.

Frequency

The World Bank & IFC: Doing Business 2011:
- Building a warehouse in Saudi Arabia requires a company to go through 12 administrative steps, which take an average of 89 days at a cost of 43.8% of per capita income and is more efficient than the average for OECD countries.

World Economic Forum: The Global Competitiveness Report 2010-2011:
- Business executives give government administrative requirements (permits, regulations, reporting) in Saudi Arabia a score of 4 on a 7-point scale (1 'extremely burdensome' and 7 'not burdensome at all'), constituting a competitive business advantage for the country.