Managing MNC-Government Negotiations in Saudi Arabia: The Key Role of Elites

Abstract

This article explores the relationships between multinational corporations (MNCs) and a host country, in this case Saudi Arabia (the Kingdom). The interests of Saudi businesses and the political elite, along with the evolution of their relationship are surveyed. Furthermore, the validity of traditional and two-tier models of bargaining between MNCs and developing countries are assessed in the context of the Kingdom. It is argued that while both models may be useful, the two fail to capture the nature of MNCs-Saudi Arabia bargaining process. These two models are revised and enriched to adequately reflect the Kingdom's specific advantage, the nature of its national firms, and the unique relations it has with MNCs and their home countries. The study concludes that under current global political and economic conditions, the elite and MNCs interests appear to converge around business objectives.

KEYWORDS:

• bargaining model
• global alliances
• global development
• management in Saudi Arabia
• multinational corporations (MNCs)
• relationships

Notes

1. During a lunch (April 2008) with a chairman of a multi-business Arabian corporation, he received several calls from and engaged in conversations with several executives regarding his new venture in the Kingdom. In a matter of minutes he contacted two influential members of the ruling family to be on board of the new venture. Their financial commitment and support for the venture and its partnership with MNCs were immediate and were done through personal contact. That is, the negotiation with MNCs and for that matter any corporation does not need government involvement.

2. FTR International President and CEO after securing the contract in Saudi Arabia sent a letter to Assistant Secretary for Trade promotion, Israel Hernandez, in appreciation of his efforts, stating, “We would like to thank you for laying the ground work and advocating on our behalf in the Kingdom of Saudi Arabia during the U.S. –Saudi Arabia Business Council [trade Mission], which helped greatly in exposing our company to the Saudi officials and the construction market business leaders.” See USSABC (2008).

3. The White House (May 16, 2008) issued a statement to that fact stating “Since 1933, these two nations have enjoyed formal relations. In 1945, during the waning months of World War II, King Abdallah's father—King Abd al-Aziz—met with President Franklin Delano Roosevelt aboard the U.S.S. Quincy in the Red Sea, and the two leaders chose to deepen the strategic relationship between the two countries. The President's visit today builds on this tradition of friendship and close cooperation. It is in the spirit of that meeting that the United States and Saudi Arabia have completed four critical agreements … These agreements further cement the longstanding U.S.-Saudi friendship and close cooperation to help bring peace and stability to the region and its people.”