Saudi Arabia has set a January 2024 deadline for foreign companies to move their regional headquarters to the kingdom or risk losing lucrative government contracts. This ultimatum, part of Crown Prince Mohammed bin Salman's plan to transform Riyadh into a major business and finance hub, is causing significant scrambling among multinational firms. Many companies, accustomed to locating their regional HQs in places like Dubai, are struggling with the lack of clarity regarding regulations, taxation, and potential incentives. This move is seen by some executives as an aggressive tactic to strong-arm global companies, departing from traditional "carrot" incentives towards a "big stick" approach.
Initially, Saudi Arabia offered incentives like a 50-year corporate tax holiday under "Programme HQ" to attract companies, but only 24 multinationals had provisionally agreed. The subsequent ultimatum, announced in February, suggests a more forceful strategy after the initial incentive-based approach did not yield the desired number of commitments. While Saudi officials highlight a $220 billion plan to revamp Riyadh and social reforms, many executives express concerns about the liveability and the overall business environment, questioning whether a "superficial nameplate" in Riyadh would suffice.
Over 500 licenses for regional headquarters have been granted since 2021, including to major companies like Amazon, Microsoft, and Boeing. However, obtaining a license and actually establishing an operational headquarters are distinct. Firms have six months from licensing to establish their HQ, with requirements such as having a managing director based in Saudi Arabia and holding board meetings in Riyadh. Executives report ongoing confusion, vague requirements, and a lack of coordination among Saudi regulators, leading some Wall Street banks to explore loopholes. Adobe, for example, plans to establish an HQ by 2025, reportedly enticed by offers of free rent, while Goldman Sachs' plans remain largely unconfirmed despite an earlier report of acquiring a license.
The deadline has reinforced Saudi Arabia's stance against companies operating outside its borders. The mandate is perceived as a direct challenge to Dubai, which traditionally housed most regional HQs in the Middle East. Despite the potential for lucrative contracts, including with the $925 billion Public Investment Fund, many executives remain hesitant, citing the kingdom's conservative social environment and human rights record as factors making it less attractive for foreign talent compared to the UAE. The overall economic cooling in the kingdom and cutbacks on ambitious mega-projects further complicate the appeal for businesses to fully relocate their operations and staff to Riyadh.
