The RHQ program signifies a paradigm shift in the global business dynamics as Saudi Arabia competes with neighbouring UAE
In a move to assert itself as a business hub, Saudi Arabia introduced the Regional Headquarters (RHQ) program in 2021. This initiative is a key component of the ambitious Vision 2030 plan aimed to attract multinational companies. It required them to establish their regional headquarters in Riyadh if they wished to secure lucrative government contracts.
As the January 1 deadline looms, the program has seen remarkable success, with over 180 companies obtaining licences to move their regional headquarters to Saudi Arabia, surpassing the initial target of 160. The move is part of the country’s broader Vision 2030 plan, aiming to diversify the economy and position Saudi Arabia as a trade and finance hub.
The RHQ program signifies a paradigm shift in the global business dynamics as Saudi Arabia competes with neighbouring UAE, particularly Dubai, which has been a traditional favourite for global firms operating in the Middle East. The program’s success has been accompanied by a wave of ribbon-cutting ceremonies in the Saudi capital, where executives and Saudi officials come together to inaugurate new offices.
A Policy to Attract Investors
Multinational companies setting up regional headquarters in Saudi Arabia stand to benefit from several incentives outlined by the investment ministry. These include the ability to apply for unlimited work visas and a 10-year waiver on quotas for hiring Saudi nationals. While the benefits are enticing, some executives remain cautious, emphasising the need for more clarity on tax relief and potential additional costs associated with the move.
Companies such as PwC Middle East and GE Healthcare have recently opened their regional headquarters in Saudi Arabia. The success of the program is not merely measured by the number of licences issued but also by the quality and diversity of companies participating.
Sectors such as pharma, IT, and construction have seen a surge in regional headquarters licences, with 80 companies, including industry giants like Unilever and Siemens, already granted the green light. This diversity signifies a broader acceptance of Saudi Arabia as a hub for various industries.
The RHQ program has not been without its challenges. Executives have expressed concerns about the lack of clarity on key details, particularly regarding the tax regime. However, Minister of Investment Khalid Al-Falih has assured that companies relocating their regional headquarters to Saudi Arabia this year for government contracts would receive tax relief.
This Initiative is a Part of the Ambitious Vision 2030
The government’s goal is ambitious – to have 480 companies open regional headquarters by 2030. The push for this relocation aims to ensure a sustained presence of these companies in the kingdom, contributing to the realisation of Vision 2030 and fostering economic growth. The government’s focus on job creation for Saudi nationals is evident, with two-thirds of the country’s population being under the age of 35.
As the RHQ program gains momentum, so does Saudi Arabia’s commitment to pro-business reforms, including the recent announcement of a $37 billion deal with Boeing and plans to produce 500,000 electric vehicles. The program’s success has positioned Saudi Arabia as the 10th globally in terms of foreign direct investment inflows based on data from 2021 and 2022, attracting FDI worth $33 billion.
The RHQ program also shows the competition between Saudi Arabia and the UAE. In 2021, Saudi Arabia hosted less than 5% of regional company headquarters, contrasting sharply with the UAE, which hosted 76% of companies on the Forbes Middle East list. The RHQ initiative is a deliberate move to challenge the UAE’s monopoly on multinational company headquarters, aiming to make Saudi Arabia the top market in the region.
If successful, the kingdom is poised to achieve its Vision 2030 goals, and by the end of the next five years, the RHQ requirement may become a standard choice for foreign companies seeking a strong presence in the largest regional market.