The Ministry of Finance of Saudi Arabia on Monday confirmed that international companies which intend to receive government contracts from the government will soon have to relocate their headquarters to the country. The government will implement this policy in 2024.
Saudi Arabia’s government chose to take this step to encourage foreign companies to establish a corporate presence in the country. By doing so, the number of local jobs would increase. However, although Saudi Arabia will stop presenting government contracts to international companies without headquarters there, these companies may continue working with figures in the country’s private sector.
During an interview by telephone, Minister of Finance Mohammed Al-Jadaan said, “If a company refused to move their headquarters to Saudi Arabia, it is absolutely their right(. They) will continue to have the freedom to work with the private sector in Saudi Arabia, but as long as it is related to the government contracts, they will have to have their regional headquarters here.”
Many foreign companies which expand business operations to the Middle East do not establish headquarters in Saudi Arabia. Such companies often prefer to do so in the United Arab Emirates. As a result, the neighbouring country receives large quantities of foreign investment, making it a major global business hub.
On this matter, Al-Jadaan commented, “Saudi Arabia has the largest economy and population in the region, (but) our share of regional headquarters is negligible, less than 5% currently. You can imagine what (this decision means) in terms of FDI (foreign direct investment), knowledge transfer, and job creation.”
According to Al-Jadaan, the current business environment in Saudi Arabia can easily improve further. He also said that the government intends to implement judicial and regulatory reforms. These reforms will likely improve the country’s overall quality of life. Such an improvement would in turn cause people and companies to become more willing to relocate to Saudi Arabia.
Saudi Arabia’s government also plans to introduce economic reforms. Through these reforms, it expects to attract much foreign investment. The government also expects to create many jobs for the country’s youth while also diversifying the country’s oil-dependent economy by way of the reforms.
The world’s leading oil exporter and second-largest oil producer, Saudi Arabia’s oil and gas sector generates around 50% of the country’s gross domestic product (GDP). Around 70% of the country’s export earnings find their source in the same sector.
Financial experts expect the continued growth of Saudi Arabia’s economy. The country’s GDP will likely increase by around 3.7% in 2021. In 2022, the GDP will probably grow once again. The current estimate of Saudi Arabia’s GDP growth in 2022 stands at 2.9%.
16th February 2021 14:58
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