Saudi Arabia has sent an ultimatum that unless it has a branch in Saudi Arabia by the end of this year, it cannot win a contract with the Saudi government.
Saudi Minister of Economic Planning Al Ibrahim told CNBC at a Future Investment Initiative (FII) event in Riyadh on the 27th that “there are some benefits and incentives to move the regional headquarters to Saudi Arabia.”
Asked if the deadline of January 1, 2024 was still valid, Ibrahim replied, “Yes.” Saudi Arabia announced in February 2021 that it would stop government transactions with foreign companies that do not have regional headquarters in the country, a general interpretation of the move related to Dubai, the emirate of the UAE, competing with Saudi Arabia for the hub of the Middle East economy.
At the time of the announcement, there was strong opposition from companies, which raised questions about whether they could maintain a Western-style life in Saudi Arabia, an Islamic theocracy, or whether they could attract enough foreign talent. “The response (of companies) is very meaningful and positive,” Ibrahim responded. He also explained that investment is soaring as more companies are interested in Saudi Arabia’s undeveloped market. “Ultimately, it will improve Saudi Arabia’s position and procurement policies and have a strong trickle-down effect on businesses and the surrounding economy,” he said.
The plan to attract regional headquarters is part of Saudi Crown Prince Muhammad bin Salman’s project “Vision 2030” to diversify the oil-centric economy and create private sector jobs as the number of people under 30 who make up more than 60% of the population surges, and the construction of Neom City is also part of “Vision 2030.”
The World Bank (WB) predicted that the Saudi economy will shrink 0.9 percent this year due to falling oil production and prices, but the International Monetary Fund (IMF) predicted that Saudi Arabia will maintain a growth rate of nearly 5 percent this year, following 4.8 percent growth in the non-oil sector last year.
EJ SONG
US ASIA JOURNAL
