A number of multinational companies are busy with the inauguration of new offices in the Saudi capital, Riyadh because they must open regional headquarters before January 2024. Opening these offices is one of the conditions set by the kingdom to obtain government contracts.
Suit-clad executives and Saudi officials in white robes gathered to inaugurate the new office, enjoying Arabic coffee, along with a flurry of praise for the fast-growing G20 member nation.
Saudi Arabia’s regional headquarters (RHQ) program, announced in February 2021, aims to compete with Dubai in the United Arab Emirates, a favorite base for global companies in the Middle East.
Despite complaints from some executives that there remains a lack of clarity regarding the Saudi program, the January 1 deadline still stands, the Saudi Investment Ministry told AFP in a written response.
“Multinational companies that are part of the RHQ Program will be well positioned to bid for projects funded by the Saudi Government,” he said.
Aerial view of the city of Riyadh seen from the Mamlaka Tower, a 99-story skyscraper, in Riyadh, Saudi Arabia.
“Only multinational companies with regional headquarters in the Kingdom are eligible to participate in tenders and contracts submitted by government entities.”
So far, 162 regional headquarters permits have been granted in various sectors, including pharmaceuticals, information technology and construction, “and many others are in process,” the ministry said.
The big question, analysts say, is whether the participating companies are simply qualifying to maintain access to Saudi funds or are truly buying into the government’s vision of Saudi Arabia as a regional hub.
Through Obstacles
Riyadh defines a regional headquarters as an office that provides “strategic direction, management and support services to its subsidiaries, branches and affiliates in the region (Middle East and North Africa),” the Investment Ministry said.
One company, IHG Hotels & Resorts, located its new offices on the 12th floor of a skyscraper in the capital’s financial district, hiring 25 employees from its revenue management, sales, marketing, design and engineering departments.
IHG has been present in Saudi Arabia for almost 50 years, actively pursuing government projects including developments along the Red Sea Coast and plans to open 20 hotels across the kingdom in 2024 and 2025, said Haitham Mattar, Managing Director for the Middle East and Southwest Asia, when inaugurated the office in October.
However, the company also has offices in Dubai and elsewhere in the region, and “we will continue with those offices,” Mattar told AFP.
Regarding the process of establishing a regional headquarters in Saudi Arabia, he acknowledged that there were several obstacles that had to be overcome.
“It took us some time and hurdles to get a license for this office. However, now we are there, and it is very good, and that is what we are happy and positive about,” he said.
‘Ambitious’ Target
The Investment Ministry has pointed out the benefits for companies establishing regional headquarters in Saudi Arabia, including the ability to apply for unlimited work visas and providing a 10-year quota for recruiting Saudi citizens. But it hasn’t been made clear what kind of tax breaks the company might receive, which is a big question for executives.
Skyline view of Riyadh, Saudi Arabia. (Photo: AFP)
Laurent Germain, CEO of French construction engineering firm Egis Group, told AFP he had no regrets about setting up a regional headquarters in Saudi Arabia last year, and he advised other French companies to do the same.
“We are in a situation where now in Saudi Arabia we have the most activity in the Middle East, and it may be so in the next 10 years. That is a reasonable step,” he said.
Germain added that he did not see the regional headquarters program in the context of the Riyadh-Dubai rivalry. But rather as a broader effort to achieve “very ambitious” foreign investment goals.
“They take all the steps they can to increase the attractiveness of the government,” he said. (ah/ft)