Foreign companies wishing to participate in Saudi government investment opportunities must move their headquarters to the kingdom by 2024, the minister says.
Saudi Arabia’s finance minister says Riyadh and Dubai will have healthy competition “after announcing that foreign companies wishing to participate in Saudi government investment opportunities must relocate their headquarters to the kingdom by 2024.
Mohammed al-Jadaan told Reuters news on Monday that the two cities will “continue to build together” and reaffirmed that Dubai has “its own competitive advantage”.
However, the finance minister said international companies must “make a choice” and establish their regional headquarters in the country or be excluded from government contracts.
Named the “HQ Project”, the movement aims to push foreign companies to open a permanent, domestic presence that would help create local jobs.
Foreign businesses have been using the nearby United Arab Emirates (UAE), and in particular the emirate of Dubai, as a platform for their regional operations, including Saudi Arabia.
There was no immediate response from the UAE to the decision by Saudi Arabia.
Saudi agencies, institutions and government-owned currencies will cease to award contracts to foreign companies, effective January 1, 2024, the Saudi government news agency SPA announced.
But the foreign companies will still be free to work with the private sector, al-Jadaan said.
“If a company refuses to move its headquarters to Saudi Arabia it is entirely right for them and they will have the freedom to work with the private sector in Saudi Arabia,” al-Jadaan told Reuters.
“But as far as government contracts are concerned, they need to have their main regional office here. “
He said some departments will be exempt from the decision, and detailed rules will be issued by the end of 2021.
“Saudi Arabia has the largest economy and population in the region, although our share of regional headquarters is very small, currently less than 5 per cent. You can imagine what this decision means for FDI (foreign direct investment), knowledge transfer and job creation, ”said al-Jadaan.
Saudi Arabia’s de facto governor, Crown Prince Mohammed bin Salman, has pledged to open the kingdom and strengthen its economy under an ambitious reform strategy aimed at diversifying the oil-dependent economy , attracting foreign investment and creating jobs for millions of young Saudis.
The “Project HQ” direction was made in line with the announcement of the strategic goals of the nation’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 their intention to move their regional headquarters to Riyadh, Bloomberg reported.
Al-Jadaan said Saudi Arabia has a place in the current business environment and that the government will complete legal and regulatory reforms and improve the quality of life so that companies and individuals feel comfortable moving there.
Saudi Arabia is expected to see GDP growth of 2.8 percent this year, according to a Reuters quarterly analysis of analysts released in January, down from the 3.1 percent expected three months ago.
The median forecast for its GDP contract in 2020 improved to 4.4 percent from 5.1 percent. The economy is expected to grow 3.2 percent next year and 3.1 percent in 2023.
“Saudi Arabia’s economy will continue to recover over this year. But with oil production just gradually ramping up and fiscal policy remaining tight, 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 its average seven-day COVID-19 growth rate nearly tripled, is expected to grow 2.2 percent this year – cut from the 2.7 percent growth expected four years ago. months.