Skyline of Riyadh in Saudi Arabia.
Simon Dawson | Bloomberg | Getty Images
DUBAI, United Arab Emirates — Saudi Arabia, in a bold and unexpected move, announced late Monday that by 2024 its government would cease doing business with any international companies whose regional headquarters were not based within the kingdom.
The news has investors, bankers and expat workers buzzing — and scratching their heads.
Saudi Arabia in recent years has pitched itself as a location for HQ offices in its campaign to create private sector jobs and diversify its economy as part of Crown Prince Mohammed bin Salman’s Vision 2030.
But what began as a pitch to global head offices has now become an ultimatum for some: either relocate your headquarters to the kingdom, or lose out on lucrative government contracts. And the move, regional analysts and finance professionals say, appears to be targeted at the region’s current headquarters hub: Dubai.
“The Kingdom of Saudi of Arabia intends to cease contracting with companies and commercial institutions with regional headquarters not located in the Kingdom. The cessation will include agencies, institutions and funds owned by the government and will take effect January 1st, 2024,” Saudi state agency SPA reported on Monday.
So far, the policy appears only to apply to firms doing business with the government; those that don’t move their head offices to Saudi Arabia can still work in the private sector.
The Saudis are “trying to lure companies out of Dubai, I expect, and elsewhere,” Ryan Bohl, a Middle East analyst at risk consulting firm Stratfor, told CNBC.
One UAE-based financier, who spoke anonymously due to having business operations in Saudi Arabia, described the move as “clearly targeting the UAE” and a “jab in the face” to Dubai.
“It’s a terrible decision,” the financier, a longtime veteran of the region, added. “It’s anti-common market, it’s anti-competition, and it’s essentially corporate bullying.”
Saudi officials feel differently. While the kingdom’s finance and investment authorities did not respond to CNBC requests for comment, Minister of Investment Khalid Al-Falih tweeted that the decision “will be reflected positively in the form of creating thousands of jobs for citizens, transferring expertise, and localizing knowledge, and it will also contribute to developing local content and attracting more investments to the Kingdom.”
The government aims to significantly increase Saudi Arabia’s current share of less than 5% of the region’s HQ offices.
UAE officials have so far been quiet, but Dubai’s former finance chief Nasser Al-Shaikh had some critical words for the kingdom.
The decision “contradicts the principle of the unified Gulf market,” Al-Shaikh wrote on Twitter Monday night.
“Forced attraction is not sustainable and most effective is to improve the environment,” he said, arguing that as the largest market in the region already undergoing major development, Saudi…
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