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Tit for tat Saudi-UAE rivalry heating up

The UAE and Saudi are increasing the stakes in a competition to attract regional business, FDI, talent, and revenues. It seems that for every action, there is a counter-reaction

The Saudi Crown Prince wants to transform the capital into an international hub for business and talent Officials talking to 7,000 companies around the world about opening regional headquarters in the kingdom Pushing FDI to $100 billion a year is part of a larger plan, envisaging more than $3 trillion in Saudi investment

The UAE and Saudi are increasing the stakes in a competition to attract regional business, FDI, talent, and revenues. It seems that for every action, there is a counter-reaction. 

Saudi Crown Prince Mohammed bin Salman wants to transform the capital into an international hub for business and talent – a push that’s increasingly posing a challenge to the neighboring UAE, where Dubai has long been the regional home base for global firms. Competition is heating up as the kingdom overhauls an oil-dependent economy and eases social restrictions, making Saudi a significantly larger market and a more attractive place to do business.

One of the bonuses they’re offering is a plan to turn Riyadh’s King Abdullah Financial District into a special zone with offshore status and tailored incentives for different sectors, pending approval from higher authorities.

“If they’re in the King Abdullah Financial District we’ll treat them as if they are abroad,” he said.

Other incentives include easing visa and sponsorship processes for foreigners and their families. Al-Rasheed said that spouses of foreign employees will be able to get work permits and their adult children will be able to stay – a contrast to policies in some other Gulf countries. Restrictive rules that require foreign employees in Saudi Arabia to get “exit visas” to leave the country, even on vacation, will also be “liberalized,” Al-Rasheed said.

44 companies make Riyadh their HQ

In late October, Saudi announced it had licensed 44 international companies to set up regional headquarters in the capital Riyadh.

Among the 44 companies are multinationals in sectors such as technology, food and beverages, consulting, and construction including Unilever, Baker Hughes, Siemens, and Philips, a press release said.

In February 2021, the kingdom said it would give foreign firms until the end of 2023 to set up headquarters in the country or risk losing out on government contracts.

The new headquarter establishments would add $18 billion to the economy and provide around 30,000 job opportunities by 2030, the president of the Royal Commission for Riyadh City, Fahd al-Rasheed, said in a statement.

English translation: Welcome to the biggest economy in the world

He expects the 44 firms to move to Riyadh within a year, adding the target was 480 companies by 2030. But, from the start of 2024, the government and state-backed institutions will stop signing contracts with foreign companies that base their Middle East headquarters elsewhere in the region.  

The kingdom earlier this year said 24 companies had signed agreements to establish main regional offices, including PepsiCo, Schlumberger, Deloitte, PwC, and Bechtel, rather than oversee operations remotely from the UAE’s Dubai emirate.

European law firm DWF Group said recently that Riyadh would become its regional headquarters for business services.

However, at the recent Saudi annual “Davos in the Desert” Future Investment Initiative (FII) investment summit where the 44 company announcement was made, some attendees told Reuters there were continued uncertainty around regulations and taxes, as well as high operational costs and lack of a skilled local workforce. They cited the kingdom’s sudden move in May 2020 to triple its VAT as one example. 

Saudi officials are, in fact, talking to 7,000 companies around the world about opening regional headquarters in the kingdom, offering tax breaks and other incentives.

Firms that move their HQs will get exemptions from work visa limits, eased regulations, and help with the relocation of staff, Saudi officials said.  

Credibility

Saudi Arabia could have a credibility problem if it keeps shifting the goalposts for the amount of foreign investment it wants to turn its vision of a future beyond oil into a reality, financial sources and analysts said.

The kingdom has raised the stakes again, saying it wants $100 bn in annual FDI by 2030, a new goal that many analysts consider overambitious.

“(It) does raise eyebrows as to how it looks quite unattainable, particularly that over the past four quarters FDI has totaled $18.6 bn and the total FDI inflow since the start of 2011 is only equal to $92.2 bn,” said Capital Economics economist James Swanston.

To be consistent with its GDP target, the $100 billion goal means the economy would have to expand by 150% to reach $1.75 trillion by 2030.

Progress on NEOM, Vision 2030’s $500 billion signature project, also remains difficult to assess, adding to concerns about the kingdom’s financial transparency, according to Reuters.

The planned megacity in the desert, announced in 2017 and backed by PIF, is studying its economic and legislative framework, NEOM Chief Executive Nadhmi al-Nasr told Reuters.

Asked how many contracts had been awarded, or how much had been spent, he declined to give detailed answers.

“Honestly, we don’t pay much attention at this time of the progress on how much we awarded, because this is just the start of a long journey. When your ambition is to create almost a country within a country, you’re talking big … we’re not ready to start talking about how much we spent,” he said.

However, giving details of project spending, investments achieved and foreign commitments might help Riyadh gain more credibility, particularly given the size of its targets, analysts said.

Pushing net FDI to $100 billion a year is part of a larger plan envisaging more than $3 trillion in investment in the domestic economy by 2030.

Saudi awarding citizenships

Saudi King Salman has approved granting Saudi citizenship to a selection of distinguished talents, with unique expertise and specializations in religious, medical, scientific, cultural, sports, and technological fields.

The move supports Saudi Vision 2030 by creating an attractive environment that enables investing in and retaining exceptional creative minds.   

Following the announcement, Saudi granted citizenship to a group of expatriates including doctors, clerics, and academics, becoming the second Gulf Arab state to introduce a formal naturalization program for foreigners with exceptional skills this year.

Foreigners in Saudi usually have renewable visas valid for only a few years and tied to employment.

In January, the UAE announced a scheme that would grant citizenship to investors and other professionals including scientists, doctors, and their families. 

UAE retiree visa

Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, announced while chairing a Cabinet meeting at Expo 2020 Dubai: “Today, we approved the conditions for granting residency to an expat retiree… We welcome everyone to our country.” 

As per the amendment, if the retiree fulfills certain criteria, he/she will be eligible for retirement residency. The criteria are: a single property or more than one property worth 1 million dirhams ($272,000, evaluation to be carried out by the related entity in each Emirate), or a bank deposit of no less than 1 million dirhams, or an active income of no less than 180,000 dirhams ($49,000) per annum.

Earlier in September 2018, the UAE Cabinet had approved a law to provide retired residents over the age of 55 a long-term renewable visa for a period of five years.

The initiative will strongly contribute to the growth of tourism and also attract high-net-worth individuals to the UAE. There are around eight million expat workers in the UAE and it’s estimated that a sizeable proportion of the white-collar community might want to retire in the country.