Posted: March 23rd, 2023
Saudi Arabia has recently received scrutiny due to its dwindling economy globally, a problem that prompted Crown Prince Mohammed bin Salman to introduce the current economic plan of vision 2030. In this scheme, Saudi has an intention to cease oil overreliance to invest in other revenue generating sectors, including tourism, mining, infrastructure development, renewable energy, culture and entertainment, health innovation, agriculture, and national defense issues (Rice et al., 2016). Vision 2030 also intends to improve private sectors, promote entrepreneurs, create employment opportunities, and bring accountability in the public institutions. Apparently, Saudi Arabia businesses and industries are facing different but common challenges, thus the need for sober approaches to resolving the existing issues.
Vision 2030 has direct effects on retail businesses, especially those in the clothing sector, due to the currently imposed VAT taxations, which have worsened an already deteriorated business environment. Unlike food stuff and dairy products, clothes or accessories are seen as discretionary goods that the customers are required to pay VAT revenue (Reuters’, 2016). As a result, consumer-spending patterns have changed as the discretionary items have become expensive to acquire. In addition, business owners have had to review all their contracts and organizational deals to ensure that they comply with the law by properly addressing the laid down taxation regulations.
The development challenges facing retailers include the production of inferior goods that cannot compete on the global platform. For that reason, it is hard for Saudi private sectors to find their niche and nurture their space on the international export market. Another development challenge for retailers is to keep up with a technologically advanced global market where veterans provide their target clients with flexible and polished products. Digitalization remains a key hindrance to retail advancement, as entrepreneurs are still reluctant to adopt and implementing technology within their organizations (Saudi Industrial Development Fund, 2016). Compliance with the strict rules and regulations enacted by the World Trade Organization (WTO) is the other major challenge facing fragile retail businesses in the Gulf region. In addition, Saudi entrepreneurial retail businesses are run through corrupt administrations and unreliable workforce, as illiteracy levels are high in this country, thus deterring productivity and high performance of firms.
The development issues facing the entire Gulf region and the HR sector are related in that they both have problems with adopting and implementing technological advancement. In fact, there is the current issue of the uncompetitive human workforce and unaccountable administrations, which lead to low performance and unproductivity.
There are several ways of resolving the Saudi Arabian development issues, including transitioning the country to become a knowledge economy by training and impacting skills on the youths so that they can run productive businesses. Entrepreneurship should also be encouraged for the growth of a strong private sector, which can compete globally and represent the country in international market areas or institutions. Innovativeness is also crucial in the production of universally competitive commercial products that are technologically advanced and attractive for the global platform (Oxford Business Group, 2016). In essence, transparency is another area that needs dire resolution, especially for private entities, government agencies, and institutions to abide by the required global regulations and standards of accountability.
The problems facing Saudi are yet to be resolved by the recently implemented vision 2030. In fact, the reasons being that retail businesses have been adversely affected by the enacted VAT regulations. Moreover, retailers are facing challenges in development based on the technological reluctance, production of uncompetitive goods, strict global trade rules, weak labor market, and bad managements. However, the problems can be resolved through transparency, strengthening the private sector, improving literacy levels, and embracing innovativeness through technological advancement.
Oxford Business Group. (2016). Saudi Arabia pursues the twin goals of diversification and a
Knowledge economy. Saudi Arabia Economy. Retrieved from https://www.oxfordbusinessgroup.com/overview/forward-thinking-pursuing-twin-goals-economic-diversification-and-creation-knowledge-economy.
Reuters’, T. (2016). Business Insights: Business trend. SABB Commercial Banking, 2(6), 1-8.
Rice, L. et al. (2016). Saudi Arabia 2016: The business year. Saudi Kuwaiti Finance House, 1-184.
Saudi Industrial Development Fund. (2016). Industry in KSA: Future challenges facing Saudi industries. SIDF. Retrieved from http://www.sidf.gov.sa/en/IndustryinSaudiArabia/Pages/FutureChallengesfacingSaudiIndustries.aspx.
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