“What is behind Riyadh’s decision to compel international companies to open their regional headquarters in the Kingdom? What are its implications for the economy and the private sector? Will it succeed in implementing the decision at the present time?”
These are examples of questions posed by Saudi and Arab tweeters through a group of messages that captured the interest of a number of economic experts over the past few days.
These labels discuss news reported by the official Saudi Press Agency (SPA) from an unnamed official source that “the Kingdom intends to stop contracting with any foreign commercial company or establishment that has a regional headquarters in the region outside the Kingdom, starting from 2024.”
The Saudi investment minister told Reuters the decision aims to diversify the economy away from oil revenues.
The Saudi tweeters were divided between an enthusiast and an apprehensive, demanding the disclosure of more details about the plan and its possible repercussions on the citizen’s life. They believe that Saudi Arabia sets a challenge to Dubai by luring multinational companies – according to “the Financial Times.”
Some of those who are apprehensive about the decision question think that “the Kingdom’s ability to implement this step with a conservative majority may not accept the changes that will accompany the arrival of foreign companies, in addition to the absence of adequate infrastructure, especially in the financial sectors.”
While other people express their confidence in the ability of their country to compete with the world’s largest capitals in hosting giant foreign companies.
Some pages on Twitter have turned into platforms for analyzing the news, which sparked widespread controversy.
There are those who believe that the decision “represents a challenge to the hegemony of Dubai as an important commercial center.”
On the other hand, other commentators rule out that the Saudi move would provoke a trade war between the two countries.
This is also the conclusion of the former Director General of the Department of Finance in Dubai, Nasser Al-Sheikh, who spoke in a series of tweets about economic integration between the countries of the region, stressing that “every Gulf country has its own competitive advantages and components.”
In another tweet, commenting on the Saudi decision, he said, “Global experiences and history have proven that forced attraction is not sustainable. The most beneficial thing is to improve the (economic and social) environment.”
For his part, Saudi Finance Minister Muhammad Al-Jadaan confirmed in an interview with Reuters that the decision “does not concern Dubai or Abu Dhabi or any other city,” adding that “the matter is related to Saudi Arabia’s right to have its fair share of regional headquarters.”
The Emirati academic, Abdul Khaleq Abdullah, said in a tweet that “the transcontinental companies and banks chose Dubai over the other because of the quality of life, competitive advantages, legislative and social environment and a unique infrastructure. Despite that, a million people are welcome to compete. “
Will Saudi Arabia overcome the challenges?
The Saudi government had announced that companies establishing regional headquarters in Riyadh would be fully exempt from taxes for a period of 50 years, provided they employ Saudi workers for at least 10 years, “according to the Saudi Ministry of Investment.
Despite these temptations, which some see as capable of attracting foreign companies, Saudi experts acknowledge the difficulty of convincing international companies to transfer their headquarters to the Kingdom.
In early February, the Saudi Ministry of Investment revealed that 24 international companies had signed agreements to move their headquarters to Riyadh.
That number falls short of Riyadh’s aspirations, which hope that the policy of attracting headquarters will pump sums of $16-18 billion by 2030.
On the other hand, a report by Bloomberg Economic Agency mentioned that Saudi Arabia’s recent decision raised some investor concerns.
To overcome the challenges, analysts expect the Kingdom to adopt a package of new reforms, similar to the UAE, which recently eased restrictions on the purchase of alcoholic beverages to attract more foreigners.
Also, economists expect Riyadh to offer more exemptions to attract international companies, or to reach an agreement that gives companies the right to work in them in parallel with other countries.
The Middle East and North Africa region includes the regional headquarters of about 346 international companies, of which the Kingdom’s share does not exceed 7%.
The Saudi economy is the largest in the Arab region. It is also the only Arab country in the International Group of 20, which includes the 20 most powerful economies around the world.