A flurry of ribbon-cutting ceremonies has hit the Saudi capital as multinational corporations are scrambling to meet a January deadline to open regional headquarters in the Gulf kingdom. Failure to do so could result in missing out on lucrative government contracts.
Senior executives and Saudi officials are frequently seen coming together to inaugurate new offices, expressing their admiration for the Kingdom and its rapid economic growth, which made it the fastest-growing G20 economy in the past year.
The regional headquarters (RHQ) program was introduced in February 2021 as part of Saudi Arabia’s efforts to compete with Dubai, a popular base for global companies operating in the Middle East. Despite concerns from some executives about the lack of clarity in the Saudi program, the investment ministry confirmed that the January 1 deadline is non-negotiable.
Multinational companies operating under the RHQ Program will be given priority in bidding for government-funded projects in Saudi Arabia. Only those with a regional headquarters in the Kingdom will be eligible to participate in tenders and obtain contracts offered by government entities.
The latest data reveal that 162 regional headquarters licenses have been granted across various sectors including pharmaceuticals, IT, and construction, with more applications currently under review.
Analysts are observing whether companies involved in the program are genuinely embracing Saudi Arabia as the regional center or simply complying to retain access to government funds. They believe it is a test to gauge the willingness of foreign businesses to align with Saudi initiatives, such as the NEOM mega-city project and new airline and airport facilities.
The Riyadh government describes a regional headquarters as an office providing strategic direction, management, and support services for company subsidiaries, branches, and affiliates in the Middle East and North Africa. Even though IHG Hotels & Resorts recently inaugurated a new office in Riyadh, the company plans to continue operating its offices in Dubai and other locations in the region.
The Saudi investment ministry has emphasized the benefits for companies establishing regional headquarters in the country, such as the ability to apply for unlimited work visas and a 10-year waiver on quotas for hiring Saudi nationals. However, the specifics of tax relief for participating firms remain unspecified, leaving executives with uncertainty.
Despite the challenges, Laurent Germain, CEO of French construction engineering firm Egis Group, stands by his decision to establish a regional headquarters in Saudi Arabia. He sees it as a vital move to meet the country’s ambitious foreign investment goals, rather than a rivalry with Dubai.
Overall, this program is seen as an opportunity for foreign companies to establish a presence in Saudi Arabia but also as a test to determine their commitment to the Kingdom’s vision for the future.
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