More companies set up Saudi HQs as deadline nears

Hewlett Packard Enterprise

• Foreign companies must have Saudi headquarters
• Number grows before January cut-off
• Lack of Riyadh office space a problem

Saudi Arabia has had limited success so far in its plan to tempt major companies to open regional headquarters in the kingdom, but more are obliging as the deadline to do so draws nearer.

Among the companies relocating their main offices – or at least creating a presence in the kingdom – are international names such as PwC, Bupa and Hewlett Packard.

Doing so is a prerequisite for access to government contracts worth SAR1 million ($266,000) or more, and Saudi Arabia set a deadline of 1 January 2024 for businesses operating in the region to rehome.

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Saudi investment minister Khaled al Falih has warned he will not accept “a superficial nameplate saying ‘This is the regional headquarters’”.

He expects businesses to have executive staff and C-suite in the kingdom, with operations in other countries reporting to the Saudi Arabian head office.

Greg Hastings of PRO Partner Group, which helps businesses set up in the Gulf, said there has been a spike in interest in Saudi Arabia ahead of the deadline.

“Specifically for regional HQs, we have seen a 59.3 percent increase in inquiries in 2023 versus 2022, so we are seeing evidence of them being written into 2023 budgets and executed ahead of January 2024,” he said.

Working within the rules

Nonetheless, companies seem to be finding workarounds to boost their presence in Saudi Arabia without sacrificing UAE ties seen as less risky. 

In a typical move, US IT company Hewlett Packard Enterprise in February opened a Middle East headquarters in Saudi capital Riyadh, but its Dubai office continues as its Africa base. 

London-based private health insurance firm Bupa in June opened an office in Riyadh for its Bupa Arabia business, while Bupa Global Middle East operates out of Dubai. 

British consultancy PwC, meanwhile, renamed its Saudi presence in June as a regional headquarters. It also ramped up its Saudi Arabia employee count from 1,000 in 2018 to 2,000 today.

But others have still not committed.

Chinese mobile phone maker Huawei opened a cloud data centre in Riyadh earlier this month, but has not yet formally committed to shifting its regional headquarters there from Dubai and Manama. 

One problem is office space, said Faisal Durrani of real estate consultancy Frank Knight: “The challenge for most is the dearth of prime Grade A space, particularly in cities such as Riyadh.” 

There are no recent statistics to indicate how the policy is faring. Last October, it was announced that a total of 70 international companies had been issued licences to relocate their regional headquarters Riyadh, but no further updates have been released.

The Saudi Ministry of Investment declined to comment. 

Gulf competition

The requirement to set up base in the kingdom was seen as a shot across the bow of much smaller Dubai in the UAE, in particular.

The emirate has branded itself over the past two decades as a liberal oasis in a conservative region, from which companies can manage their regional operations.  

Now the Saudi government is moving mountains to attract more money and expats, touting a new business-friendly approach that is underpinned by extensive social and economic reforms.

The kingdom is aiming to diversify its economy away from a reliance on oil and is pushing ahead with ambitious plans under the Vision 2030 programme.

“Moving headquarters to the kingdom is not necessarily going to move the needle in the short run,” said James Reeve, chief economist at Jadwa Investment in Riyadh. 

He said it would take time to assess the policy’s success: “It’s about getting firms to properly base themselves there, creating a hub for their activities in Saudi and the broader Gulf.” 

Saudi Arabia’s aims to be a Gulf business destination could receive a boost as it hits its aviation goals. It is launching two new carriers – Neom Airlines and Riyadh Air – and is embarking on a programme of airport expansion, including the proposed King Salman International Airport. Its intended 120 million passengers a year by 2030 far exceeds Dubai International Airport’s 90 million.

But the UAE is still far ahead, despite having a population less than one-third the size of Saudi Arabia’s 36 million. 

The UN World Investment Report 2023 shows that in 2022 foreign direct investment to the UAE was up 10 percent on the previous year at $22.7 billion, while Saudi FDI slumped to $7.9 billion from a 10-year high of $19.3 billion. 

John Martin St Valery, director of the British Business Group in the UAE, said there was no sign the Saudi directive was dampening interest in the rest of the Gulf: “We’re seeing a surge in new member applications averaging one new member per day. Around one-third of these are new arrivals from the UK.”