While Saudi Arabia has long been a key market for many multinational corporations, these have often headquartered themselves elsewhere in the region, with only a secondary presence in the Kingdom. This is changing, however, as the market opens up more to international businesses and a new policy begins to take effect. Known as Programme HQ, this new policy aims to attract multinationals and other businesses to Riyadh, with the ambition of making the capital one of the world’s top-10 city economies by 2030.
The programme combines Riyadh’s development with the objectives of Vision 2030, the Kingdom’s long-term development plan. At the same time, companies that establish regional offices in Saudi Arabia also stand to benefit from a range of incentives and the country’s diversifying economy as ease of doing business rapidly improves.
Rules & Regulations
Programme HQ is a joint initiative by the Ministry of Investment and the Royal Commission for Riyadh City (RCRC), formerly the Riyadh Development Authority, the government authority in charge of the capital’s development.
Launched in February 2021, the programme stipulates that foreign companies wishing to do business with the Saudi government and its associated entities, such as the $620bn Public Investment Fund (PIF), will have to set up their regional headquarters in Riyadh by January 1, 2024.
Foreign multinationals that do not establish regional headquarters in the city will still be able to conduct business with the Kingdom’s private sector. However, as many private sector outfits rely on government contracts, the scope for this may be limited.
The programme defines multinationals as companies with at least two subsidiaries or branches in at least two countries other than Saudi Arabia and its country of incorporation, illustrating the point that the programme is aiming to catch the larger players in the regional economic space. This means that multinationals will have to apply for a licence and relocate their regional headquarters or be excluded from a host of highly lucrative contracts.
The programme also offers some unique incentives. These include a 10-year exemption from Saudiisation quotas (see overview), government tendering services, visa limit exemptions for foreign employees, a one-stop-shop for organising all these elements and additional incentives for companies establishing offices in Riyadh’s King Abdullah Financial District.
Competitive Business
Companies participating in the programme will be able to take advantage of headquartering in an economy that the World Bank expects to see grow by 7% in 2022. They will also be able to benefit from participating in Saudi Arabia’s rapidly developing business ecosystem. Recent reforms have made it significantly easier to start a business and trade across borders while boosting minority shareholder protection.
Reforms focusing on facilitating foreign ownership and access to capital markets, as well as those targeted at the judiciary such as bankruptcy proceedings, have improved the business climate in line with Vision 2030. Further reforms are in the pipeline.
At the same time, government- or PIF-backed projects in the Kingdom drawing in multinationals include NEOM, a $500bn city being built in the country’s north-west, and Qiddiya, a large entertainment city on a 334-sq-km site outside Riyadh.
Local Benefits
Programme HQ will benefit Riyadh considerably, with the RCRC estimating that for every job brought to the city, 2.5 jobs more will be created. The programme will have contributed an estimated $18bn to the local economy and created some 30,000 new jobs by 2030.
As of October 2021 some 44 companies had received licences. As the programme’s deadline nears, those numbers are to increase as multinationals shift to the Kingdom’s evolving marketplace.
Read More from OBG
