How Saudi business environment was reinvigorated by structural and legal reforms

RIYADH: Saudi Arabia is all set to become one of the most sought-after destinations for businesses thanks to the ongoing structural and legal reforms led by economic goals outlined in the Kingdom’s Vision 2030 blueprint.

From providing tax benefits for foreign companies establishing their headquarters in the Kingdom to offering special incentives, Saudi Arabia is slowly but steadily emerging as the hot spot for businesses in the Middle East and North Africa region.

According to official figures, 44 international companies have already moved their regional headquarters to Saudi Arabia. The prospects are improving, with at least 80 firms being issued regulatory clearances to establish their offices in the Kingdom.

According to Talat Hafez, an economic and financial analyst, Saudi Arabia’s regional headquarters program aims to increase foreign direct investments and bolster the economy.

“It will help the Saudi treasury by a number of factors. It will widen the business market in the Kingdom, create purchasing power and enhance Saudi Arabia’s export capabilities, especially when considering the diversity of the businesses these companies are bringing,” said Hafez.

In recent months, several noted firms, including PwC Middle East and Egypt’s Intella, inaugurated their regional headquarters in Saudi Arabia, indicating Saudi Arabia’s investment-friendly evolution.

Hafez added that establishing regional headquarters by foreign companies in Saudi Arabia could help local talents hone their skills.

“Saudi economy will benefit from the transfer of the know-how and job creation for Saudi nationals, while the companies will benefit from the increase in their businesses and sales, especially since more than 80 percent of their revenues in the region are generated from Saudi Arabia,” Hafiz said.

According to Hafiz, Riyadh is the most preferred location for foreign companies that wish to open their regional headquarters in Saudi Arabia, as the capital city contributes over 45 percent to the non-oil gross domestic product of the Kingdom.

Hafiz further noted that companies that wish to open their regional headquarters in Saudi Arabia will not face any challenges.

“I don’t believe that they will face any difficulties or challenges, simply because most of the companies, if not all who are considering moving their regional offices to the Kingdom, they were already operating in Saudi Arabia and they have longstanding experience of the way of doing business in the Kingdom,” added Hafiz.

To further accelerate the inflow of foreign direct investments to Saudi Arabia, Prime Minister Crown Prince Mohammed bin Salman, in May, announced the launch of four special economic zones in Riyadh, Jazan, Ras Al-Khair and King Abdullah Economic City, north of Jeddah.

These economic zones will be crucial in providing foreign investors with the support required for vital and promising sectors, such as technology, logistics and industry.

“These zones provide and grant foreign investors with a number of business opportunities and concessions that allow them to do business smoothly in the Kingdom, which includes the relaxation of Saudization requirements and other investment motivations,” added Hafez.

Affirming Saudi Arabia’s evolution in emerging as a global trade hub, total anchor investments in its four special economic zones reached SR47.2 billion ($12.6 billion) as of May,

Even though Saudization requirements are relaxed in these zones, foreign companies that employ Saudis will get special incentives.

“The incentives were decided after a very careful study of regional and global benchmarks. One of these incentives, which is very important, probably to investors, is the exemption from Saudization requirements. Yet, they will receive the requirements from HRDF if they choose to hire Saudis,” said Minister of Human Resources and Social Development Ahmed Al-Rajhi.