Major technology corporations like Amazon.com Inc., Alphabet Inc.’s Google, and Microsoft Corp. are increasing their presence in Saudi Arabia, responding to government pressure.
The Saudi government has declared it will only award contracts to businesses with regional headquarters in the nation.
These three American companies have secured licenses to establish regional headquarters in Riyadh, as indicated by a government database. The approvals were obtained just before the Saudi government’s January 1 deadline.
There has been a surge in efforts by large companies to set up local headquarters towards the year’s end. Other corporations that have recently been licensed include Airbus SE, Oracle Corp., and Pfizer Inc.
In February 2021, Saudi Arabia introduced new rules for state contracts, aiming to reduce ‘economic leakage’ – government spending that benefits companies without significant local presence.
This initiative aligns with Crown Prince Mohammed bin Salman’s economic strategy to retain more government and citizen spending within the country. The government aims to avoid awarding contracts to international firms that merely fly executives in and out of the kingdom.
As part of his efforts to stimulate the economy and attract foreign investment, the Crown Prince, commonly referred to as MBS, has eased various social restrictions.
However, limitations such as the ongoing alcohol ban make some foreign executives hesitant to relocate to Saudi Arabia.
Despite these concerns, Saudi Arabia’s position as the largest economy in the region and its plans to invest trillions of dollars in becoming a tourism and commercial hub are prompting multinationals to reevaluate their Middle Eastern operations.
The Saudi initiative is widely viewed as a move to compete with Dubai, the Middle East’s leading business hub, known for its lifestyle, low taxes, and connectivity.
Most global firms have traditionally managed their Middle East operations from Dubai, maintaining smaller offices in Saudi cities like Riyadh or Dammam.
Microsoft commented via email that Saudi Arabia is part of its CEMA region and it has multiple headquarters across this diverse area, including the Kingdom
Google is in discussions with authorities regarding the new requirements, while Airbus has confirmed its operations in the kingdom comply with local regulations.
Under Saudi regulations, companies setting up a center in Riyadh with at least 15 staff and overseeing operations in two other countries can receive a special HQ license.
In exchange, Riyadh offers incentives such as tax breaks and exemptions from certain employment regulations.
