Chronicle of the Middle East and North Africa

Riyadh Seeks Leading Economic Role in Middle East

By 2030, the Saudi government hopes to transform Riyadh into a prominent hub for international businesses by establishing regional headquarters for 480 foreign corporations.

Riyadh Leading Economic Role
General view of Riyadh. FRANCK FIFE / AFP

Ali Noureddine

This article was translated from Arabic.

Saudi Crown Prince Muhammad bin Salman met with Dmitry Kirkentzes, secretary-general of the International Bureau of Exhibitions, in December 2022 to discuss Riyadh’s proposed status as the host city for Expo 2030.

With South Korea, Italy, and Ukraine also vying to host the event, the kingdom has been actively promoting its bid since March 2022.

Regional economic competition

The Kingdom of Saudi Arabia has been putting all of its diplomatic and political resources into attempting to win over as many nations as it can to back its candidacy to host Expo 2030. To emphasize the significance of this international event, the crown prince has even personally traveled to the nations whose votes he hopes to garner.

The Expo, which is held every five years, brings together countries and international enterprises to discuss ideas, innovations, and the latest developments in business and technology. With a history that dates back to 1851, it is currently the third-largest global event in terms of attendance, trailing only the Olympic Games and the FIFA World Cup.

Vision 2030, Saudi Arabia’s comprehensive development plan, is a key component of the country’s interest in hosting the event in Riyadh in some seven years’ time. By luring in foreign businesses and establishing Riyadh as a significant global financial hub, this strategy hopes to make the city an economic powerhouse in the region. This plan is well complemented by holding the Expo in Riyadh, which will strengthen the city’s economic standing.

The hosting of events such as the Expo demonstrates how competitive the Gulf nations are to become the region’s leading economic hub. Dubai sponsored the 2020 edition in an effort to increase the emirate’s economic and investment appeal to foreign businesses.

The FIFA World Cup was held in Qatar, and all the infrastructure improvements made before the event will help the country achieve its economic objectives. These initiatives, which are a component of each nation’s Vision 2030 plan, illustrate the region’s continued competition to become a major economic force.

Saudi steps to enhance Riyadh’s economic position

The Saudi Kingdom’s efforts to improve its economic standing and promote itself as a regional economic powerhouse continue with its proposal to host Expo 2030. The Kingdom has been working diligently to entice foreign businesses to relocate their regional headquarters to Riyadh and expand their investment in the nation under the direction of Crown Prince Mohammed bin Salman.

To achieve this, the Saudi government announced a decree in February 2021 that will take effect in 2024 and mandate that foreign businesses having contracts with the public sector establish a regional center in the Kingdom. Choosing Saudi Arabia as their regional headquarters instead of the United Arab Emirates is the goal of this decision, which is intended to influence global businesses.

Within two years of the declaration, foreign businesses will have to decide whether to set up shop in the Emirates or work with the Saudi public sector.

The majority of businesses are likely to choose to keep a relationship with the Saudi government given the substantial volume of business with the Saudi public sector compared to the UAE.

Saudi Arabia has put in place a number of incentives for international businesses, including a 10-year Saudization (a regulation put in place by the Ministry of Labor mandating that businesses employ Saudi nationals on a quota basis) policy exemption and a 50-year income tax exemption. Additionally, the procedure for getting visas for workers and their families has been simplified, and businesses will be given preference in government tenders.

The King Abdullah Financial District, one of the special economic zones developed in the Kingdom, grants businesses tax and government transaction exemptions. These zones, with their well-developed infrastructure, are anticipated to draw financial institutions and administrative centers seeking a business friendly environment. Saudi Arabia is also made more competitive by the expansion of free markets and the decrease of customs taxes.

Riyadh is seeking to compete with the Dubai model, which mixes a free market with tax breaks and government intervention to produce a competitive business climate. To replicate what Dubai was able to do in the past, the Kingdom is making comparable efforts to turn Riyadh into a financial hub.

Saudi Arabia is moving in a new direction under Crown Prince Mohammed bin Salman that emphasizes “moderation, openness to the world, and the elimination of radical beliefs.” This has led to a rise in government spending on entertainment activities, a relaxation of dress and lifestyle restrictions, and the opening up of venues for music festivals.

Riyadh is becoming a more desirable location for foreigners to live and invest in because to these social developments, which also assist initiatives to improve the city’s economic standing. The social landscape’s liberalization has boosted Riyadh’s economy by bringing up new investment opportunities in the leisure and hospitality industries.

Positive and promising results

Saudi Arabia has made great strides in the previous two years, and as a result of this effort, more than 7,000 foreign businesses entered into direct negotiations with the government to open regional offices in the Kingdom. Over 70 reputable worldwide businesses, including Samsung, Siemens, Deloitte, Unilever, KGMG, PepsiCo, PricewaterhouseCoopers, Dimension Data, Halliburton, and Philips, among others, have already elected to relocate their regional headquarters to Riyadh by 2022.

By 2030, the Saudi government hopes to transform Riyadh into a prominent hub for international businesses by establishing regional headquarters for 480 foreign corporations. A comprehensive strategy comprising 25 Saudi government organizations has been developed to accomplish this goal in order to lure foreign businesses and create incentives.

The efforts of Saudi Arabia have raised concerns for Dubai, which has traditionally benefited from being the main financial center in the Arab Gulf region. This has led the UAE to seek alternative economic and financial roles outside the mantle of the Kingdom of Saudi Arabia, unconnected to the political rapprochement that have governed the two countries’ relationship in the past.

As a result, there are fears that the economic competition between the two countries may escalate into tension, especially if Saudi Arabia takes further measures to corner international companies and force them to relocate from Dubai to Riyadh.

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