Saudi Arabia is increasing pressure on international firms to shift their Middle East hubs to the kingdom. It plans to stop signing contracts with businesses that are headquartered elsewhere in the region. The announcement means there will be an increase in competition. The Kingdom is posing a direct challenge to neighbors, specifically the UAE, as a regional rivalry heats up. Both countries are trying to diversify their economies to depend less on oil and gas.

UAE’s Head Start

The UAE’s most famous emirate, Dubai, began to build the appropriate infrastructure to attract companies from international airlines, international schools, and huge commercial centers over 30 years ago. It is also a leader in health, educational systems, and has hosted huge global events. Dubai is also distinguished by its luxury and quality of life, demographic and social diversity, which makes it a source of attraction for multinationals and international institutions.

Saudi’s Edge

Saudi Arabia’s announcement came as its leaders realized it could also become an investment hub, and the Middle East headquarters for international companies. The announcement states that those who have not moved their regional headquarters by 2024 will not have a place in the nation’s market. Saudi wants to promote foreign investment as it is suffering from high unemployment rates.

Riyadh represents 50% of the Gulf economies and 25% of the economic activity of Arab countries. This number is significant especially with the boom in business and economic transformations Saudi Arabia is witnessing today.

In the past few months, a number of companies including PepsiCo, Schlumberger, Deloitte, and PwC have announced that they will move to Saudi’s capital, Riyadh.

Sulaiman Al-Assaf, Economic Consultant and Member of the Saudi Economic Society said to WAYA; “In the short term, neighboring cities like Dubai will be affected but in the long run, this is beneficial for all GCC countries while headquarters will be in Saudi companies will expand throughout the region. We predict that 200 international firms will move to the Kingdom which will be good for others in the region as companies will find it easier to expand there. It will expedite logistics and technology transfers. God willing, this will be a win-win for all.”

Trouble in the GCC

Saudi may have is the largest consumer market in the region, however, it currently has a share of less than 5% of the region’s headquarter offices. Its tactic to increase this number has been described as “forced attraction” by Dubai’s former finance chief, Nasser Al-Shaikh.

Experts predict that the intensity of competition between the UAE and Saudi will continue to rise. By 2034, both countries are expected to exhaust their wealth from oil and gas exports, which is why both are racing to secure investments and headquarters from international players. The pandemic accelerated the competition, due to its impact on oil and gas prices which prompted the Gulf countries to focus on the necessity of economic diversification.

For years, international corporations have used the UAE as a springboard for their regional operations, including for Saudi Arabia.