Saudi Arabia encourages multinationals to relocate their headquarters to the Kingdom
From 2024, Saudi Arabia will no longer sign contracts with foreign companies unless their regional headquarters are located in the Kingdom. This will include government-owned agencies, institutions and funds, according to a statement from the Saudi Press Agency.
The aim of the decision is to encourage foreign companies dealing with the Gulf state government to base themselves in the Kingdom. This will create jobs as well as ensure that goods and services procured by government agencies are from the Kingdom and also increase the efficiency of spending. At least 24 international companies said they intended to relocate their regional headquarters to Riyadh.
The official Saudi Press Agency (SPA) reported, citing an unnamed official source, that "Saudi Arabia intends to stop contracting companies and commercial institutions with regional headquarters not located in the Kingdom". It added that "the cessation will include government-owned agencies, institutions and funds and will come into effect on 1 January 2024".
He added that the decision aims to "create more jobs, limit economic leakage, increase spending efficiency and ensure that major goods and services procured by the various government agencies are made in the Kingdom".
This follows Saudi Arabia's announcement last month at the Future Investment Initiative (FII) of a strategic plan to make Riyadh one of the world's top ten urban economies.
According to the statement, the new decision would not affect the ability of any investors to enter the Saudi market or continue their business with the private sector. This ultimatum could intensify competition for foreign business and capital between the Kingdom and other Gulf states, especially the United Arab Emirates, its main ally.
Saudi Arabia has been struggling to attract foreign investment, a key pillar of Crown Prince Mohammed bin Salman's 'Vision 2030' economic diversification plan to boost non-oil revenues.
However, many multinationals doing business within the country choose to have regional headquarters in neighbouring Saudi Arabia, the UAE and other Persian Gulf capitals. This is because Saudi Arabia is a much more conservative country while the others offer a more liberal lifestyle and allow alcohol.
The Kingdom has tried to shed its image by allowing cinemas, concerts and sporting events under a government initiative known as "Program HQ". This offers multinationals tax privileges and incentives to bring their headquarters to the Middle Eastern kingdom.
