4) Jobs creation: the entry of foreign companies into retailing in Saudi Arabia will not only create job opportunities but will also ensure quality in them, improving standards of living and life styles. Al Hokair: Eased restrictions on foreign investors: perception vs reality The liberalization of the Saudi retail industry raised concerns among Al Hokair investors regarding the potential loss of the Inditex franchise, which we estimate accounts for 8% of its total stores. We think this risk is overstated for the following reasons: e _ Relationship with parent: Unlike its peers, Al Hokair enjoys favourable access to prime locations in well-located shopping malls owned by its parent shareholder, Al Hokair Group. The group owns and operates 13 shopping malls across Saudi Arabia (1.2m sqm of prime real estate) through its subsidiary Arabian Centres Company. However, we understand that rents are currently negotiated on commercial terms, thereby limiting the risk of a conflict of interest. We do not think the situation will change. e Real estate is key to entering the market: Fashion retailers continue to compete for good-quality real estate in shopping centres and on high streets. Going forward, there is likely to be significant competition between these companies for new sites, especially in prime shopping centres, as they all require similar locations, typically prominent, wide-fronted premises. Zara, in particular, uses its shop windows to advertise its products. e Local manufacturing and distribution network would add execution risks and costs to international retailers such as Inditex: While Saudi Arabia has not yet provided the details and conditions of the potential eased restrictions on foreign investors, we understand that the government is looking to attract investments, diversify its economy and improve Saudization. This means foreign retailers could be asked to set up local manufacturing and distribution networks within Saudi Arabia, which we believe