70 multinationals secure Riyadh licence after Saudi HQ ruling

Reuters

• Rivalry between Saudi and UAE to be top business hub heats up
• Kingdom created authority to provide incentives for investment projects 
• UAE watching Saudi and will look for innovative ways to stay ahead

A total of 70 international companies have so far been issued licences to relocate their regional headquarters to the Saudi capital Riyadh as part of a major push to attract more overseas investment.

The updated figure, revealed in a new report by Saudi Arabia’s Ministry of Investment (Misa), represents a significant increase compared to a year ago.

Misa also revealed that it has partnered with 25 public agencies to help attract new firms to Riyadh through its Regional Headquarter Programme (RHQ).

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At the annual Future Investment Initiative conference in October 2021, Misa announced a list of just over 20 multinational companies that had signed a memorandum of understanding.

Most of these companies were in sectors that depend heavily on the Saudi government for business, such as engineering and construction, pharmaceuticals and medical devices, technology products and services and consulting.

On January 1 2024, the Saudi government and state-backed institutions will stop signing contracts with foreign firms that base their Middle East HQs outside the kingdom, it was announced last year.

One of the latest companies to commit to Riyadh headquarters is Aldenham Education Group (AEG), the company behind Aldenham School, one of the UK’s oldest private schools, founded in 1597.

Its expansion into Saudi Arabia was the result of Misa’s RHQ.

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Shahram Hashemi, managing partner of AEG, said: “While we considered in which market to expand, AEG performed market analysis which revealed Saudi Arabia as the second most attractive destination for us globally.

“The short term for us is promising, but we are looking beyond this and working to open a number of schools across the kingdom as we anticipate demand continuing to rise dramatically.”

In a research note earlier this year, Imad Al-Abdulqader, head of Albright Stonebridge Group’s office in Riyadh, said: “No company that does business in Saudi Arabia can afford to ignore this. Despite some short-term uncertainty, the long-term direction is clear.”

Jan Kamphuisen, head of Albright Stonebridge Group’s UAE office, added: “UAE leadership is closely watching Saudi Arabia’s next moves and will look for innovative ways to stay ahead. Smart companies will seek to build stronger relationships in both countries.”

Saudi Arabia has also created a new authority to provide both financial and non-financial incentives for investment projects as its rivalry with the UAE heats up to become the top regional business hub.

The establishment of the National Incentives Committee by the Council of Ministers was described by analysts as a “major development” in Saudi’s investment policy.

The list of incentives released to date covers a wide range including but not limited to tax incentives, government subsidies in a variety of sectors, relaxed Saudisation requirements and discounts on government fees. 

“While the extent of these incentives is still unclear, past precedent suggests that they may be quite generous, depending on the project,” noted Sarah Al-Shawwaf, senior vice president of Albright Stonebridge Group, who cited the US-based electric car-maker Lucid Group as an example.

It received up to $3.4 billion in financing and incentives from the Saudi government to establish a new factory in the kingdom.

According to Misa, 928 new foreign investment licences were issued in the third quarter of 2022, up nearly nine percent annually although slightly down on the previous quarter.

The construction and retail sectors led Q3 licence issuance with 234 and 233 licences respectively, while manufacturing was also popular with 186.

Foreign direct investment inflows continued to grow in the first half of 2022 following a bumper 2021, which saw a 257 percent jump from 2020. In the second quarter of this year, inflows totalled $2.1 billion, up 6.6 percent compared to Q1.

“Saudi Arabia’s economic landscape is changing,” said Khalid Al-Falih, its Minister of Investment.

“Guided by the belief that growth cannot be achieved alone, the kingdom has embarked on a journey to create long-lasting partnerships with the global private sector.

“The kingdom’s transformation keeps unlocking vast potential for investment in a market that is experiencing consistent growth and leading economic development among the G20.”