A surge of ribbon-cutting ceremonies is underway in the heart of Riyadh, the capital of Saudi Arabia, as multinational corporations race against a looming January deadline to establish regional headquarters in the Gulf kingdom or risk losing out on lucrative government contracts. The familiar scene unfolds with executives donning suits and Saudi officials in traditional white robes, coming together to officially open new offices. Amidst the fragrance of incense smoke and the ritualistic sipping of Arabic coffee, they extol the virtues of the country's booming economy, recognized as the fastest-growing among G20 nations last year.
Introduced in February 2021, Saudi Arabia's Regional Headquarters (RHQ) program is perceived as a strategic move to rival Dubai in the neighboring United Arab Emirates—a favored hub for global companies operating in the Middle East. Despite some executives expressing concerns about the lack of clarity on key aspects of the Saudi initiative, the January 1 deadline remains steadfast, as confirmed by the Saudi investment ministry in response to questions from AFP.
According to the ministry, multinational companies participating in the RHQ program will gain a competitive edge in bidding for government-funded projects in Saudi Arabia. Only those with regional headquarters in the Kingdom will be eligible for tenders and contracts issued by government entities. To date, 162 regional headquarters licenses have been granted across various sectors, including pharmaceuticals, IT, and construction, with more applications in the pipeline, according to the ministry.
Analysts are keenly observing whether companies are merely complying with the program to secure access to Saudi funds or are genuinely aligning with the government's vision of positioning Saudi Arabia as the regional center. Kristian Ulrichsen, a fellow at Rice University's Baker Institute, sees the program as an early litmus test of foreign businesses' willingness to embrace Saudi initiatives or seek alternative strategies, such as retaining the majority of staff in the UAE.
The definition of a regional headquarters, as outlined by Riyadh, encompasses an office providing "strategic direction, management, and support services for company subsidiaries, branches, and affiliates in the (Middle East and North Africa) region," according to the investment ministry. Despite challenges, some companies are forging ahead, like IHG Hotels & Resorts, which recently inaugurated its office in Riyadh's financial district. While expressing enthusiasm about the new venture, Haitham Mattar, managing director for the Middle East and Southwest Asia, acknowledged the hurdles in the licensing process.
The investment ministry touts benefits for companies establishing regional headquarters in Saudi Arabia, including the ability to apply for unlimited work visas and a 10-year waiver on quotas for hiring Saudi nationals. However, specific details about tax relief remain undisclosed, leaving executives with lingering questions.
French construction engineering firm Egis Group's CEO, Laurent Germain, expressed no regrets about establishing a regional headquarters in Saudi Arabia last year. He sees the move as aligning with the kingdom's "very ambitious" foreign investment objectives, rather than a direct rivalry with Dubai. Germain emphasized the measures taken by Saudi Arabia to enhance its attractiveness as an investment destination.
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