Saudi Arabia drums up major competition as Middle East’s regional business hub03 Nov. 2021
Saudi Crown Prince Mohammed bin Salman vies to transform the Kingdom into the Middle East's business hub, the push comes from a recent mandate passed on foreign companies needing to have its regional headquarters in Saudi Arabia.
FOREIGN COMPANIES TO ENTER
Saudi Arabia is the talk of the town. Earlier this year, the Kingdom announced that it would no longer work with foreign companies that do not have a regional base in Saudi Arabia from 2024.
The neighboring country UAE and city Dubai has acted as the business hub of the Middle East and is home to many of the global firms. This push comes from the Saudi Crown Prince Mohammed bin Salman’s vision of transforming the Kingdom into an international hub for business and talent and the need to step away from the region’s oil-dependent economy.
Officials in Saudi Arabia are having conversations with over 7000 companies globally about starting up regional headquarters in the Kingdom by offering tax breaks and other incentives, all in the aim of turning the Kingdom into a global business hub that rivals Dubai.
Martin Dufresne, Partner & Design Principal of U+A, a UAE-based architecture and design firm said: “It’s an amazing opportunity for foreign companies to plunge into the varied options and projects here in the Kingdom. And doing so entails understanding the objectives of the government to want to have firms in the Kingdom and the need to be able to work together with developers and contractors to ensure adherence and respect to the prescribed mandate.”
Over 40 multinational companies including Baker Hughes Co., KPMG and Schlumberger have already received licenses last week as part of the new program to facilitate business. Saudi officials have confirmed all these firms will get exemptions from work visa limits, eased regulations and assistance with relocating staff.
The aim is to get 480 major companies with annual revenues of a billion dollars or more set up in Saudi Arabia by 2030. About half the companies that received their permits last week have signed up agreements to relocate regional headquarters to Riyadh in January.
Ronny Froehlich, founder of Golden Scent, a Dubai-based e-commerce firm says, “If you want to be big in the Middle East, you need to be in Saudi - full stop. Maybe in six months, we’ll stand here and it’s full.”
THE BIGGEST MARKET IN THE GULF
While companies previously would have focused on basing themselves in Dubai because of restrictive investment rules or the conservative Islamic atmosphere in Saudi Arabia, they have no reason to do so now - the ongoing reshaping of the Kingdom actively led by the Crown Prince has eased up social restrictions, opened up to tourists, allowed entertainment, cinemas, world-class chefs, concerts and sporting events. There are also rumors of alcohol-bans being relaxed in the Kingdom as Saudi Arabia aims to win back business lost to the other Gulf countries.
From the start of 2024, the government and state-backed institutions will stop signing contracts with foreign companies that base their Middle East headquarters elsewhere in the region.
Most major companies being targeted by Saudi officials don’t have any base across the Middle East region yet. Tom Watson, a partner at Michael Page Middle East said, “Over the last 18 months, we have seen many high profile leaders in the real estate sector moving from across the world looking to be involved in Saudi’s giga-projects.”
The competition for Dubai is that the land to cover in Saudi Arabia is massive. Population alone in the Kingdom is 34 million, three times more than U.A.E, making Saudi Arabia the biggest market in comparison to all the other Gulf countries. It's going to be a tough cookie to bite.
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