Saudi Arabia announced on Monday that it would stop doing business with foreign companies from 2024 with regional headquarters outside the kingdom.
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Saudi Arabia, the world's largest exporter of crude oil,
"intends to stop concluding contracts with companies and commercial institutions whose regional headquarters are not located in the kingdom,"
the agency said. Saudi official SPA press.
The decision, which is due to enter into force on January 1, 2024, aims to
"create more jobs, limit capital flight, increase expenditure efficiency and ensure that the main goods and services purchased by the various agencies governments are made in the kingdom, ”
added SPA.
Saudi Arabia, the largest Arab economy, is struggling to attract foreign capital, yet a pillar of Crown Prince Mohammed bin Salman's “Vision 2030” economic diversification plan aimed at stimulating non-oil revenues.
As part of a previous government initiative, Riyadh had offered multinationals tax breaks and incentives to relocate their headquarters in the Middle East to the kingdom.
Many multinationals doing business in the conservative kingdom prefer to be headquartered in neighboring UAE and other Gulf capitals that offer a relatively more liberal lifestyle and allow alcohol consumption.
According to SPA, 24 international companies have already announced their intention to move their regional headquarters to Riyadh.
Strengthen the presence of multinationals
"Putting pressure on multinationals to establish their headquarters in Saudi Arabia is based on the conviction that foreign companies taking advantage of the Saudi market should strengthen their presence in the country,"
Robert Mogielnicki, professor, told AFP. at the Institute of Arab Gulf States, located in Washington.
“This is ultimately a reassessment of the sustainability of Saudi Arabia's economic development model and not an intentional trade challenge to the United Arab Emirates.
But if it is successful, it will probably have consequences for the Emirates, ”
he continued.
Monday's announcement comes at a time when the kingdom suffers from high unemployment: 14.9% in the third quarter of 2020, a slight improvement from the record 15.4% the previous quarter.
"The impact of the Covid-19 pandemic continues to affect the labor market and the economy"
of the country, noted in January the Saudi statistics institute in a press release.