Multinationals in sectors including technology, food and beverages, consulting and construction are among the entities eligible to set up headquarters. They include South Korea's Samsung, Deloitte, Unilever, Baker Hughes and Siemens.
Crown Prince Mohammed bin Salman is spearheading a campaign to make Saudi Arabia a regional business hub. State news agency SPA cited Fahd al-Rasheed, President of the Royal Commission for Riyadh City, as saying the moves would add 67 billion riyals (US$18 billion) to the Saudi economy and create around 30,000 jobs by 2030.
The country has set out a Vision 2030 program ‑ a neoliberal reform agenda aimed at reducing the Kingdom's economic dependence on oil.
Saudi Arabia also needs to reassure foreign investors nervous about putting money into the kingdom due to reputational risks stemming from purported human rights violations at home and in Yemen, and the sour taste left by the murder in 2018 of Saudi journalist Jamal Khashoggi in Istanbul.
The world's top oil exporter and largest Arab economy is also setting a deadline, saying in February it would give foreign entities until the end of 2023 to set up shop in Riyadh or risk losing out on government contracts.
Saudi Minister of Investment Khalid al-Falih told Nikkei Asia that it was not a case of merely competing with the UAE for foreign direct investment.
"We believe all capitals of the Middle East will continue to grow and thrive with the growth of Saudi Arabia. With the achievements of Vision 2030 [and] with the growth of Riyadh, it will create a spillover effect into the region," al-Falih said in the interview.
"Riyadh's economic quality will transform into higher growth sectors such as technology, health care, logistics, advanced manufacturing, food processing [and] financial centers ... centered in Riyadh to serve the broader region."
Al-Falih said his country was working to improve lifestyles for foreigners based in Riyadh.
"We are only starting the climb. This is an escalator we are riding to improve liveability in Riyadh," he said. "We are on a continuous, never-ending journey to improve our liveability [and] ... investment environment. Boosting skills for our talent and improving our competitiveness for the Saudi economy."
Saudi Arabia investment minister Khalid al-Falih speaks to Nikkei Asia in an interview in Riyadh. (Photo by Saudi Ministry of Investment)
But Ryan Bohl, a senior geopolitical risk analyst for intelligence firm Middle East at Stratfor, said it is unlikely that Riyadh will be able to quickly make improvements in legal and banking services, social issues, entertainment and education.
"Riyadh will take years to create the natural pulls needed to get these Asian and International institutions to shift over to Riyadh," he said. "There is a real chance Saudi Arabia weakens these provisions before the deadline, which would reduce the challenge to Dubai's model."
"But even if they don't, the Emirati government might decide to either provide compensation for those that endure Saudi penalties -- create new policies that liberalize the UAE's labor market further to make it an easier place to live and work than Saudi."
During the recent Riyadh Future Initiative Investment Summit, dubbed "Davos in the Desert," international investors were reluctant to speak openly about moving their Dubai headquarters to Riyadh.
"The Gulf region is growing fast enough to sustain offices in multiple jurisdictions," Tarek Fadlallah, CEO of Japanese Nomura Asset Management (Dubai), told Nikkei.
Anthony Habis, head of the Middle East and North Africa for BNY Mellon, said the U.S. investment bank was expanding its presence in Saudi Arabia with its local entity and strategic partnerships. "We are proud to have a Saudi CEO and local team based in Riyadh, and we share in the Saudi Vision 2030 of building capital markets."
Hazem Ben-Gacem, co-CEO of Investcorp Bahrain, lauded Riyadh's recent progress. "Crown Prince Mohammed bin Salman has done an exceptional job to challenge the status quo, not just in terms of structural and fiscal reforms but also on the social front."
Chinese artificial intelligence company Sensetime said it will be growing its presence in Saudi Arabia, but did not comment further.
The assassination of Khashoggi prompted numerous investors, including the CEOs of BlackRock and JPMorgan Chase, to pull out of an investment event in Riyadh in 2018.
A senior consultant who spoke to Nikkei on condition of anonymity said that "reputational risks are still a concern for some international and Asian investors." The person added, however, that while some investors "will be excited by the prospect and level of business activity in Riyadh, others will have social considerations."
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