DUBAI — When CSG opted to shift its regional
headquarters this year from Dubai to Riyadh, it marked an early win for Saudi
Arabia and proved a surprisingly easy move for the US technology firm: the new
office was up and running in just two months.
اضافة اعلان
CSG is among several foreign companies that agreed earlier
this year to set up regional offices in Saudi Arabia rather than overseeing
operations remotely from Dubai, the buzzing commercial hub in neighboring
United Arab Emirates.
A Saudi ultimatum in mid-February has prompted some firms to
rethink their strategy: from 2024, companies seeking state contracts in the
Middle East’s biggest economy must have offices in the kingdom.
But, alongside this blunt approach, the government has
launched sweeping economic and social reforms to attract investors, aiming to
make the kingdom an easier place to live and work in and cutting the red tape
that long deterred them.
“The serious weight that the Saudi government is putting
behind their initiatives — backing that up with real action — is really very
encouraging,” James Kirby, who heads CSG’s Europe, Middle East and Africa
operations in London, told Reuters.
“I would expect that other companies would follow suit.”
Dubai, a global city with one of the world’s busiest
airports — at least in pre-pandemic times — alongside fancy hotels and
restaurants, may still rule as the region’s business center.
But Saudi Arabia is playing an aggressive game of catch up.
The state news agency SPA said in early February that 24 international firms
had signed agreements to establish main regional offices in Riyadh, the capital
of the world’s biggest oil exporter.
The list included PepsiCo, Schlumberger, Deloitte, PwC, Tim
Hortons, Bechtel, Robert Bosch and Boston Scientific, SPA reported.
In response to Reuters’ requests for comment, Bechtel
confirmed they had set up a regional headquarters in Saudi Arabia. PwC said it
had a regional consulting office in Riyadh and Deloitte said it was ready to
act as a “strategic partner” to help Saudi Arabia achieve its goals. Bosch said
it was exploring business opportunities in the kingdom.
Others companies on the list did not respond.
‘Significant progress’
Under economic changes pushed by the kingdom’s de facto
ruler, Crown Prince Mohammed bin Salman, Saudi Arabia has jumped 30 places
since 2019 in the World Bank’s ease of doing business rankings. It now ranks at
62, although that lags the UAE at 16.
“We have made significant progress in recent years in key
reforms – introducing 100 percent foreign ownership across a number of sectors
as well as a number of other reforms,” Saudi Investment Minister Khalid
Al-Falih told Reuters in an email.
Obtaining a foreign investor license now requires two
documents, not 12, and can take three hours, not three days.
The Royal Commission for Riyadh City has told Saudi media it
planned to attract 500 foreign companies by 2030.
To help achieve this, Saudi Arabia has unveiled a raft of
initiatives. Its sovereign wealth fund aims to launch a new airline to compete
with Gulf carriers and new hotels are planned. Riyadh, a huge urban sprawl, is
building a metro system, while some social restrictions, such as a ban on
cinemas, have been eased in the religiously conservative Muslim nation.
But there are many gaps still to fill if it is to rival
Dubai. Not least, Riyadh needs more international schools to attract skilled
expatriates and their families, executives say.
“Dubai wasn’t built in a day, and its path was relatively
organic. Saudi is looking to achieve its objectives at an unprecedented pace,
but is this a case of more haste, less speed?,” said Ali Al-Salim, co-founder
of Dubai-based Arkan Partners, an alternative investments consulting firm.
Pause for thought
Investors have other worries too. Saudi Arabia has faced a
barrage of Western criticism over its rights record.
For Saudi Arabia, which built its wealth on vast oil
reserves, the need to attract investors and diversify is increasingly pressing
as the world seeks to reduce its reliance on fossil fuels.
Yet giving foreign firms an ultimatum to set up in the
kingdom might hinder rather than help its cause, said Jim Krane, research
fellow at Rice University’s Baker Institute in Houston, saying it “smacks a bit
of desperation and arbitrariness.”
“That’s one of the things that’s probably going to give
corporations and their executives a bit of a pause before moving ahead,” he
said.
Dubai, which snatched the regional crown from nearby Bahrain
in the 1990s, has already shown it is ready to fight to keep its title. Dubai’s
ruler has announced a five-year plan to increase air and shipping routes by 50
percent and to more than double tourism and hotel capacity over the next two
decades.
Yet the race to attract businesses does not necessarily mean
a binary choice of Riyadh or Dubai, as CSG has shown. The Nasdaq-listed firm
may be shifting its regional operations to Riyadh, but it has no plans to shut
its Dubai office.
“I don’t personally see companies winding up their
operations in Dubai and just moving to Saudi,” said Daniel Bateman at
AstroLabs, which helps firms set up Saudi offices.
“I can see a two-pronged attack on the Middle East ... where
you have a strong presence in both the UAE and Saudi.”
