Foreign companies wishing to participate in Saudi government investment opportunities must relocate their headquarters to the kingdom by 2024, the minister said.
Saudi Arabia’s finance minister said Riyadh and Dubai “will have healthy competition” after announcing that foreign companies wishing to participate in Saudi government investment opportunities must move their headquarters to the kingdom from here 2024.
Mohammed al-Jadaan told Reuters news agency by telephone on Monday that the two cities “will continue to complement each other” while stressing that “Dubai has its own competitive advantage”.
However, the finance minister added that international companies “will have to make a choice” and establish their regional headquarters in the kingdom or be excluded from public procurement.
Nicknamed “Project HQ”, this initiative aims to encourage foreign companies to open a permanent presence in the country that would help create local jobs.
Foreign companies have for years used the neighboring United Arab Emirates (UAE), and in particular the Emirate of Dubai, as a springboard for their regional operations, including for Saudi Arabia.
There was no immediate response from the UAE to Saudi Arabia’s decision.
Saudi government-owned agencies, institutions and funds will potentially stop awarding contracts to foreign companies as of January 1, 2024, the Saudi government’s SPA news agency said.
Foreign companies will however remain free to work with the private sector, al-Jadaan added.
“If a company refuses to move its headquarters to Saudi Arabia, it is absolutely their right and they will continue to have the freedom to work with the private sector in Saudi Arabia,” al-Jadaan told Reuters.
“But as long as it’s tied to government contracts, they’ll have to have their regional headquarters here.”
He added that some sectors will be exempted from the ruling and detailed regulations will be released before the end of 2021.
“Saudi Arabia has the largest economy and population in the region, while our share of regional headquarters is negligible, less than 5% currently. You can imagine what this decision means in terms of FDI (foreign direct investment), knowledge transfer and job creation, ”al-Jadaan said.
Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman, has pledged to open up the kingdom and strengthen its economy as part of an ambitious reform strategy that aims to diversify the oil-dependent economy , attract foreign investment and create jobs for millions of young Saudis.
The directive was made in accordance with the announcement of the strategic goals of the kingdom’s capital, Riyadh 2030, at the Future Investment Initiative forum held in January.
At the conference, 24 international companies, including Deloitte, PwC, Bechtel and PepsiCo, announced plans to move their regional headquarters to Riyadh, Bloomberg reported.
Al-Jadaan said the current business environment in Saudi Arabia could be improved and the government will complete legal and regulatory reforms and improve the quality of life so that businesses and people feel comfortable in it. move.
Saudi Arabia is expected to see GDP growth of 2.8% this year, according to a quarterly survey by Reuters analysts released in January, up from the 3.1% expected three months ago.
The median forecast for its GDP contraction in 2020 improved to 4.4% from 5.1%. The economy is expected to grow 3.2% next year and 3.1% in 2023.
“The recovery of the Saudi economy will continue during this year. But with oil production increasing only gradually and fiscal policy set to remain tight, the recovery is likely to be slower than in other Gulf states, ”Capital Economics said in a research note.
The UAE’s economy, which in January saw almost tripling its seven-day average daily COVID-19 cases, is expected to grow 2.2% this year – up from the 2.7% growth forecast four months ago .