A Subsidiary of an MNC in Saudi Arabia - Research Paper Example

Best Company, Inc, 2011). All these factors are set to affect political and financial stability of Saudi Arabia. The paper will look into the political and financial risks that will affect a subsidiary of an MNC coming to do business in Saudi Arabia for the first time. Political Risk The political risk in Saudi Arabia is moderate. Saudi Arabia is among the six countries that frame the Gulf Cooperation Council (GCC). The objectives of GCC are formulation of consistent regulatory environment, cooperation of the private sector, and the establishment of a common currency.

The regional political unrest, mainly in Bahrain, is a major concern for Saudi Arabia. There are expectations that King Abdullah will go on with his reform agendas in the next few years (A.M. Best Company, Inc, 2011). There are pressures mounting on the ruling House of Saud and several factors are set to compromise the political stability of the Kingdom. The first factor is the long-term implications of the population explosion in the Kingdom in the past 25 years. Population explosion linked with rapid urbanization, insufficient education system, persistent and increase in the numbers, and the lack of employment opportunities is straining the Saudi Arabia social fabric.

The extensive unemployment among the young males is because of the education system that has failed to equip them with the necessary skills required to match the “Saudi Arabia’s requirements for a modern economic, commercial and industrial workplace” (Corbett, 2006). The labor market of Saudi Arabia is unable to sustain the huge number of new entrants together with the increasing number of educated women looking for employment. The state education system has failed to generate productive members in the society and thus, it has underpinned the employment problem.

Primary and secondary education is based on the religious curriculum and this education material has been under criticism because it has encouraged students to be prejudiced towards the other religions apart from Islam. The resultant effect has been that some Saudi Arabians have become vulnerable to radicalization and terrorist recruitment. Political instability fears are due to the succession issues and, perhaps, they may be a western obsession that is frequently accompanied by the failure to acknowledge how senior princes of the Kingdom have achieved collaboration in the past years.

The succession debate has put a lot of pressure on the political stability of the nation. The debate is focusing on the time the leadership will go to the next generation. Despite the present pressures, Saudi Arabia is proving its resilience and it has started adapting to the challenges. As the reforms gather speed, the projections for long-term stability are improving. Short-term measures include effective measures to contain terrorism threat. In the meantime, the royal family “will continue to work towards addressing the underlying causes of instability, attempting to reinvigorate confidence in its leadership among the Saudi Arabian public” (Corbett, 2006).

Financial Risk The financial system risk in Saudi Arabia is low. Saudi Arabia business environment is average and the reliability and availability of corporate financial data or information varies widely. The collection of debt sometimes proves to be difficult because of the poor administration framework. The