JEDDAH, 10 October 2005 — Advertisers and businessmen are expressing surprise and disappointment over a government policy change that will significantly reduce the number of rooftop billboards and increase their costs of doing business.
Last week, Jeddah Municipality announced that posting billboards on rooftops, malls or gas stations no longer would be allowed in accordance with instructions from the Ministry of Municipality and Rural Affairs. The policy also prohibits lease renewals for the billboards. A number of investors, company owners and ad agencies met Saturday to review the fallout from the government decision.
Agency owner Abdul Rahman Al-Tamami said the decision deprives the private sector and small companies — more than 60 percent of the market — from honorable competition.
He also said the smaller companies may face bankruptcy as they will be unable to compete with a handful of large companies that dominate the market. Al-Tamami urged that Saudization targets should be applied to the large companies as a condition to bid in auctions for advertising sites.
He also said the removal of thousands of billboards would cause a crisis in the advertising market and a spike in prices. He expects location auction costs to rise by more than 50 percent.
An investor in the advertising sector, Majed Al-Malki, said the ministry decision weakens national companies, which in light of the Kingdom’s coming entry into the World Trade Organization could lead to a multinational takeover of the Saudi advertising industry through mergers and joint contracts that could control the manufacture of billboards. He estimated the direct job loss from the policy to be about 300 in Jeddah alone.
Al-Malki commented that the ministry would lose revenue from advertising fees that now amounts to more than SR100 million annually. Many of the participants expressed their disappointment that the ministry made the surprise move without any consultation of the concerned businesses.
According to the new policy, affected billboards posted before the announcement are to be removed after the lease expires without any contract renewal. As for other, unregulated boards, they are to be removed immediately or owners will face fines. Inside billboards, such as those in malls, are to be removed within seven days of written notification, or the municipality will confiscate them and bill all removal costs to the owner and the real estate agent involved. Such inside boards must not hinder shoppers’ movements or threaten their safety.
The new policy also states all billboards will be leased by bid in a public auction conducted by the public/general administration for investments. Bids will include site rent plus the advertising fees based on specified sizes.
Regarding advertising poster sizes, a high-ranking official at the municipality explained that the bidding process in the past was not well organized. People made bids for one size poster and later enlarged the size of the display without paying the appropriate fees, sapping revenue in the deception.
The process of posting advertisements will be re-regulated. In the future, the bidding process will be monitored to avoid such deceptions and the resultant drains on government resources.
