The Saudi Arabia pavilion is on view at Expo 2020 in Dubai, United Arab Emirates on Monday, October 18, 2021. The Crown Prince of Saudi Arabia wants businesses, their employees and their families to relocate to the kingdom. The once ultra-conservative capital Riyadh now promises a lifestyle where concerts, cinemas, world-class sporting events and transactions are in abundance. The Expo pavilion represents part of the charm offensive. (Jon Gambrell / AP)
RIYAD, Saudi Arabia – Upon arrival at Dubai International Airport, travelers can pick up a free guide to the city’s top attractions and events. Oddly enough, this month’s “Time Out-DXB” coverage draws visitors to Saudi Arabia. Featuring an image of the ancient fort of the kingdom of Diriyah near the Saudi capital, it reads: “Welcome to Arabia. A journey you never imagined”.
The landlocked and once ultraconservative capital of Riyadh presents itself as a city of concerts, cinemas, world-class sporting events and transactions; a city where renovated cultural heritage sites wait to be discovered, distinguishing Saudi Arabia from other Arab Gulf capitals defined by sprawling malls and high-rise hotels.
The pitch is part of Saudi Arabia’s plan to grab the spotlight and the title of the region’s top place to do business. Currently, the more glamorous emirate of Dubai is considered the region’s hub for finance and tourism. The kingdom no longer wants consultants and executives to arrive for a few days, only to come back immediately and spend the income elsewhere.
There are incentives – or, some say, penalties – for businesses to consider: Saudi Arabia has told companies they have until early 2024 to move their regional headquarters to the country or lose business. lucrative government contracts that run the region’s largest economy. .
This is the latest move by Crown Prince Mohammed bin Salman, the day-to-day ruler of the kingdom, who was empowered by his father, King Salman, to reform the economy and reduce his dependence on oil for his income. The 36-year-old prince wants companies, their employees and their families to move to the capital, Riyadh.
Some investors and their shareholders, however, remain suspicious of the prince. Four years ago – at the same Ritz-Carlton hotel where a key investment forum was held last week and where 44 multinational companies announced plans to establish a regional headquarters in Riyadh – Prince Mohammed oversaw the unprecedented detention of Saudi business leaders, princes and officers. in an alleged anti-corruption sweep. The campaign, described by critics as a shakedown, took place largely outside the courts and the public. He also cemented the crown prince’s grip on power.
Some of the companies that are now moving their headquarters to Riyadh had already signed agreements to do so earlier this year, while others were announced for the first time. In total, the list includes multinational names like PepsiCo, Siemens Mobility, Unilever, Deloitte, Halliburton, Schlumberger and Baker Hughes.
“We are convinced that it is a win-win,” Saudi Investment Minister Khalid al-Falih told The Associated Press in an interview on the sidelines of the forum. “It’s important for us, but it’s even more important for companies because they will have the advantage of being closer to decision-makers.”
He said the intention “is not to penalize businesses” but to show them access to the “largest market in the region”. Saudi Arabia is the only Arab nation among the Group of 20 countries representing 80% of the world economy.
Al-Falih was in Los Angeles and Washington DC shortly before the Riyadh summit to try to win over more US investment in Saudi Arabia. He is well known internationally, having previously served as Saudi Minister of Energy and CEO and Chairman of oil giant Aramco.
The government hopes the âRegional Headquarters Attraction Programâ will add $ 18 billion to the local economy and create 30,000 new jobs over the next decade.
Job creation and economic diversification are at the heart of Prince Mohammed’s Vision 2030 project to transform the country. He must inherit a country where more than a third of the population is under 14 and over 60% is under 35. The public sector can no longer absorb or pay the salaries of most Saudis. The prince is partly relying on the $ 450 billion Public Investment Fund, the kingdom’s sovereign wealth fund, to generate jobs and non-oil economic growth through state-backed megaprojects, like the 50 billion dollars in Diriyah just outside Riyadh featured on the cover of Dubai Airport magazine.
Prince Mohammed is also trying to diversify the Saudi economy as part of a global push to shift from burning fossil fuels to cleaner forms of energy. The kingdom has pledged to emit “net zero” by 2060, but does not intend to phase out its production and exports of oil and gas to other countries.
Some investors remain concerned about doing business in the kingdom, said Ayham Kamel, head of the Middle East division of Eurasia Group, a political risk consultancy that advises companies.
He said there is little clarity on tax incentives for companies that will relocate or whether they will need to adhere to a Saudi hiring quota.
The investment minister said the kingdom was struggling to provide answers, after a rocky start in the past five years. âWe didn’t have the well-defined opportunities and we didn’t have the regulations in place,â al-Falih said. “It’s now done or about to be done in the next couple of years.”
Al-Falih said Saudi Arabia wants to be seen as a safe place to do business. He said the self-proclaimed anti-corruption campaign should be seen as a sign that the kingdom is “starting a new page” where foreign investors can find a “level playing field”.
Investors remain coy about Saudi Arabia, even as the numbers improve. Foreign direct investment in the kingdom fell dramatically to $ 1.42 billion in 2017, the year Prince Mohammed stunned the nation by sidelining his more experienced and older cousin to become crown prince. and the year he launched the so-called anti-corruption campaign.
Last year, foreign direct investment reached $ 4.6 billion, but this is even lower than in 2016, when it stood at $ 7.5 billion. The numbers are overshadowed by inflows to neighboring United Arab Emirates, where FDI reached $ 13.8 billion last year.
Some see the kingdom’s ambitions as a direct challenge to the Emirate of Dubai, United Arab Emirates, which exudes luxury and flair with its trendy bars and restaurants, five-star hotels, high-end gyms, endless shops and family beaches adapted to Western lifestyles and Asian tourists. For many, Riyadh remains lackluster in comparison.
Dubai is currently hosting the World Expo. Saudi Arabia last week announced Riyadh’s bid to host the six-month fair in 2030.
Al-Falih dismissed comparisons with Dubai, saying Riyadh is simply claiming what it believes to be its “appropriate place as the capital of the Middle East.”
“We are the largest economy. We are the geopolitical capital of the region,” he added. “And we have the greatest ambition. We have the greatest opportunities.”
Saudi Arabia is home to around 30 million people, two-thirds of whom are Saudi nationals. The United Arab Emirates, with a much smaller territory, is home to nearly 10 million people, including just over a tenth of Emirati.
Dubai strives to maintain its place as the region’s leading tourist, financial and real estate center. In the departures hall of Riyadh International Airport, a large advertisement hangs from the ceiling, presenting an investment opportunity in a new waterfront development in Dubai. To keep foreigners invested longer, the UAE is also relaxing visa rules for residents and investors.
Across the Gulf, rising oil prices have improved sentiment. Oil prices, which averaged $ 84 a barrel in October, also lifted Saudi foreign reserves to nearly $ 466 billion.
The mood at the investment forum in Riyadh largely reflected this. The three-day forum drew more than 1,000 delegates, including several US billionaires and top US hedge fund managers. It came just three years after these same business titans canceled their attendance following international outcry over the murder of Saudi critic Jamal Khashoggi by Saudi agents who worked for the crown prince.
On the opening night, forum guests attended a gala dinner with an open-air concert by American singer Gloria Gaynor in the King Abdullah Financial District, a high-rise complex where Prince Mohammed hopes. that companies will set up their regional headquarters.
Kamel, the analyst, said he expects Dubai to keep much of the region’s global investment. Saudi Arabia, he said, will attract a bit more of the current market share from companies whose main revenue is generated by the kingdom.
Any investor interested in establishing operations in Saudi Arabia will face the fact that Prince Mohammed is at the top of important decision-making.
âIn this kind of emerging market, you bet on leadership and those are strategic choices,â he said. “There is no way to escape it.”