When I first went into business four decades ago, virtually all the Kingdom’s commercial dealings with European, American and Japanese companies were done through Lebanese middlemen. Those individuals in fact did very little apart from presenting themselves as go-betweens — for which they got a fixed commission for whatever Saudi traders imported. In those days the Saudi market was relatively small and foreign companies seldom established direct business links with local merchants. At times the middlemen, who usually dealt with several merchants simultaneously, received commissions of up to 20 percent of the value of purchases by Saudi companies. Because traders had to scramble for a middleman, they were left to fight among themselves with the middlemen emerging as winners. Things have changed over the years and domestic Lebanese disputes forced Saudi traders to set up direct links with foreign companies and deal with them without needing middlemen. But this state of affairs did not last long. With the emergence of Dubai as a free zone and commercial hub, foreign companies rushed to the emirate.
Encouraged by the privileged service free of bureaucracy and other pointless complications, companies from all over the world rushed to build factories, open branches and liaison offices or appoint resident agents to deal with the region.
The result has been that transactions with neighboring states must be carried out through these agents. I discovered this on a recent visit to Germany, where I went to an international electronics fair. Most of the firms taking part in the fair refused to deal directly with Saudi traders, saying such dealings were conducted through their offices or agents in Dubai — of course for a handsome commission. The agents refuse to appoint representatives in the Kingdom. This practice has inflicted heavy losses on Saudi businesses, with the local consumer also being victimized. The problem must be addressed by the Ministry of Commerce and Industry and the chambers of commerce. Otherwise, Saudi business will continue to suffer and eventually be destroyed.
Arab News From the Local Press 7 May 2003
