Saudi Arabia allows 44 international companies to open regional headquarters in Riyadh

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Buildings and the Kingdom Center tower, in Riyadh, Saudi Arabia, January 1, 2017.Faisal Al Nasser/Reuters

Saudi Arabia said on Wednesday it had allowed 44 international companies to set up regional headquarters in the capital Riyadh under pressure from the kingdom to become a regional trading center and compete for foreign capital and talent.

Among the 44 companies are multinationals in sectors such as technology, food and drink, consulting and construction, including Unilever, Baker Hughes and Siemens, according to a press release.

The world’s top oil exporter and largest Arab economy said in February it would give foreign companies until the end of 2023 to set up headquarters in the country or risk losing government contracts.

The move, part of Crown Prince Mohammed bin Salman’s efforts to wean the economy off oil by creating new industries that also generate jobs for Saudis, put the kingdom in competition with the regional trading hub of the United Arab Emirates.

The new headquarters facilities would add 67 billion riyals ($18 billion) to the economy and provide about 30,000 job opportunities by 2030, said Chairman of the Royal Commission for the City of Riyadh, Fahd al -Rasheed, in a statement.

Rasheed told Reuters he expects all 44 businesses to move to Riyadh within a year, adding that some have already done so. He said the goal was 480 companies by 2030.

Earlier this year, the kingdom said 24 companies had signed deals to establish main regional offices – including PepsiCo, Schlumberger, Deloitte, PwC and Bechtel – rather than oversee operations remotely from the UAE emirate of Dubai. .

European law firm DWF Group said on Wednesday that Riyadh would become its regional headquarters for business services.

Rasheed said the move was not intended to dismantle the company’s operations elsewhere.

“We’re just saying – you have to have your regional headquarters here because it’s not just a contract economy that you go in and out of. We want to see you with us for the long haul,” he told Reuters on Wednesday.

UNCERTAINTIES CONTINUE

Rasheed defined the regional headquarters as housing all major decision-making functions, but it was unclear how all the companies themselves define the Saudi headquarters.

Some people in the business community say companies are unlikely to close operations in the UAE and may simply transfer some operations to Saudi Arabia.

Danish wind turbine maker Vestas, which is not on the list of 44 companies, told Reuters in a statement it was moving its Middle East headquarters from Dubai to Riyadh.

Saudi Arabia has launched economic and social reforms aimed at making the kingdom easier to live and work in and cut bureaucracy that has long deterred businesses.

However, some participants at the FII investment summit where Wednesday’s announcement was made, and who spoke on condition of anonymity due to sensitivities, cited continued uncertainty around regulations and taxes. , as well as high operational costs and the lack of skilled local labour.

One example was the kingdom’s sudden decision in May 2020 to triple its value added tax rate. Problems with negotiating power rates would make offshoring much more difficult for manufacturers than for financial firms, some said.

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