Saudi Arabia asked international companies to move their regional headquarters to the capital or lose out on public contracts. It works.

Saudi Arabia

A man walks past the headquarters of Saudi Basic Industries Corp (SABIC) in Riyadh, Saudi Arabia on October 27, 2013. Faisal Al Nasser / REUTERS

  • On Wednesday, Saudi Arabia said 44 global companies are moving their regional headquarters to the capital Riyadh.

  • The kingdom boldly told companies in February that it would not do business with them if they did not move their headquarters there.

In February, Saudi Arabia issued a bold ultimatum to multinational companies: move your regional headquarters to the country by 2024, otherwise the government will stop trading with you.

The announcement was part of a full-scale push by Crown Prince Mohammed bin Salman to make the capital Riyadh a global center for finance, business and logistics, so the kingdom would be less dependent on the oil that makes up 70% of its exports, according to OPEC.

Investors and expats refused the idea at the time, and many said it was a trick to remove businesses from Dubai in the neighboring United Arab Emirates, where 90% of the workforce are foreigners. A veteran financier described it as “anti-competition” and “corporate bullying”, according to CNBC.

But the tactics seem to work. Saudi Arabia announced on Wednesday that 44 international companies, including PepsiCo, Siemens and Unilever, will establish their regional headquarters in Riyadh. reported local news.

Hosam Alqurashi, director of the kingdom’s regional headquarters program, said in the announcement that the capital is now “witnessing the largest art movement since the Renaissance.” according to Arab News.

The new sum is higher than the original 24 companies, which said in January that they would relocate their regional offices Dubai to Saudi Arabia.

Back then, officials tried to lure companies with a 50-year corporation tax holiday and exemptions for employment quotas.

The February ultimatum took another turn. “Everyone is freaking out. We are used to governments offering carrots, but this time a big stick has come out of the bag,” a regional head of a multinational company told Financial Times back then. “Honestly, it’s offensive.”

Despite the setback, Fahd al-Rasheed, president of the Royal Commission of Riyadh City, told Reuters that the goal of the Saudis is not to “dismantle” business in neighboring countries.

“We simply say – you need to have your regional headquarters here, because it’s not just a contract economy that you get in and out of. We want to see you with us in the long run.” he said Wednesday.

Al-Rasheed added that Riyadh wants to get 480 companies to establish regional headquarters there by 2030 – also deadline the Crown Prince set to diversify the Saudi economy.

Yet the Kingdom may have some difficulty in copying Dubai’s success.

The assassination of Saudi agents in 2018 on journalist Jamal Khashoggi, who had been critical of the royal family, degraded the global reputation of the kingdom and Prince Mohammed Bin Salman, leaving its sovereign wealth fund vulnerable, said Joel Rubin, a former deputy foreign minister. CNBC earlier this year.

Saudi Arabia has in recent years tried to throw its hard conservative reputation with reforms like lets women drive cars and open cinemas for the first time in decades. But it has not yet offered a lifestyle on a par with the freedoms that foreigners in Dubai can enjoy, such as the freedom to drink, expats told CNBC.

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