Saudi Arabia Pushes Companies to Relocate Headquarters to Kingdom
Saudi Arabia will stop doing business with foreign companies with regional headquarters outside the kingdom starting in 2024, state media said Monday, in a move aimed at boosting investment amid high unemployment.
"Saudi Arabia intends to cease contracting with companies and commercial institutions with regional headquarters not located in the kingdom," the official Saudi Press Agency (SPA) reported, citing an unnamed official source.
"The cessation will include agencies, institutions and funds owned by the government and will take effect January 1, 2024."
The decision seeks to "create more jobs, limit economic leakage, increase spending efficiency and guarantee that the main goods and services purchased by the different government agencies are made in the kingdom," it added.
Saudi Arabia has been struggling to attract foreign investment, a key pillar of Crown Prince Mohammed bin Salman's "Vision 2030" plan to diversify the oil-reliant economy.
Under a previous government initiative known as "Program HQ", Saudi Arabia had offered multi-national companies tax breaks and incentives to relocate their regional headquarters to the kingdom.
Many companies based for years in the neighboring United Arab Emirates and other Gulf capitals -- which permit alcohol and offer a relatively more liberal lifestyle -- have privately expressed reservations about moving their headquarters to the conservative kingdom.
However, SPA said "24 international companies announced their intent to move their regional headquarters to Riyadh" at last month's Davos-style Future Investment Initiative forum in the capital.
Monday's announcement comes as the petro-state battles high unemployment and a sharp coronavirus-triggered economic downturn.
Joblessness in Saudi Arabia touched 14.9 percent in the third quarter of 2020, dipping slightly from an all-time high of 15.4 percent in the previous quarter, official data showed last month.
"The impact of COVID-19 pandemic continues to affect the Saudi labor market and the economy," Saudi Arabia's General Authority for Statistics said in a statement last month.
The crown prince said in January that Saudi Arabia's sovereign wealth fund will invest $40 billion annually in the domestic economy over the next five years, as the kingdom seeks to boost job creation.
Last year, the twin shocks of the coronavirus pandemic and a drop in oil prices prompted the top crude exporter to triple its value-added tax and suspend a monthly allowance to civil servants to rein in a ballooning budget deficit.
The highly unpopular austerity measures were implemented even as the kingdom continues to boost spending on a slew of megaprojects, including the planned $500 billion NEOM megacity on the kingdom's Red Sea coast.