From 1 January 2024, the Saudi government and state-backed institutions will stop signing contracts with overseas companies that do not have a base in the kingdom. This is intended to promote job creation and limit ‘economic leakage’.
This is the latest measure designed to encourage companies to increase their presence in the kingdom’s capital, Riyadh, fuelled by Saudi Crown Prince Mohammed bin Salman pushing an $800 billion strategy to double the city’s size and turn it into a global hub.
$6 trillion in investment opportunities over the next decade
Seen as a reward for those businesses that decide to base their regional headquarters in the kingdom, it is also clear that companies that choose not to do so will lose out on billions of dollars of deals.
The decision highlights the regional competition over global commerce and talent that has intensified as Prince Mohammed opens the kingdom’s economy while promising $6 trillion in investment opportunities over the next decade.
The ruling applies to government bodies that go through a Ministry of Finance procurement process; it won’t impact private sector firms or publicly traded companies even if they have state ownership.
An $800 billion strategy to double the size of the city
Come to Riyadh
It is envisaged that the combination of the infrastructure in Riyadh, the incentives that given, and the vast number of business opportunities will attract hundreds of companies to relocate well before 2024. In January 2021, for instance, a group of 24 international firms, including Deloitte, Bechtel and PepsiCo, said at an investment conference organised by Saudi Arabia’s sovereign wealth fund that they were moving their regional headquarters to the kingdom. However, some of those firms already have offices in the kingdom and plan to rename them as regional headquarters while maintaining a presence in Dubai.
If it’s applied stringently, the 2024 decision could provide a formidable incentive. If companies want to deal with Saudi Arabia, they will need to come to Riyadh.