Saudi Arabia lays down Dubai challenge by luring multinationals

Saudi Arabia has lured a coterie of 24 multinationals to set up regional headquarters in Riyadh as the Gulf kingdom seeks to turn its capital into a business hub to rival Dubai’s dominance.

US engineering group Bechtel and Indian hotelier Oyo are among the companies that will establish regional headquarters, according to Fahd al-Rasheed, president of the Royal Commission for Riyadh City.

The announcement from the multinationals, which came during a Future Investment Initiative conference held in Riyadh last week, marks another step towards a rehabilitation of Crown Prince Mohammed bin Salman’s ambitious economic reforms, which were thrown into turmoil by the gruesome murder of journalist Jamal Khashoggi in 2018.

Multinationals now appear more comfortable with the reputational risk attached to the kingdom, which is also mired in a bloody war in Yemen, as they eye potential profits from Prince Mohammed’s plan to cut the country’s dependence on oil and overhaul the economy.

As revealed by the Financial Times, the ministry of investment and the royal commission have in recent weeks been pitching to multinationals, asking them to pledge to open regional headquarters in Riyadh.

Multinationals tend to base their regional operations in the commercial hub of Dubai, with some opting for oil-rich Abu Dhabi or Bahrain, which has historically acted an offshore bridge into Saudi Arabia.

Whichever trajectory you think Saudi’s economy will take, the country will still have the largest Arab economy

But they are increasingly factoring in the outsized nature of the Saudi economy within the region. In recent months, companies such as Google, Alibaba and Amazon have all boosted their presence in the kingdom.

“Imagine the Middle Eastern digital economy 10 years in the future: whichever trajectory you think Saudi’s economy will take, the country will still have the largest Arab economy; it will still have more oil than God and a population nearly the size of Canada’s,” said Sam Blatteis, a former Gulf head of government relations for Google, who now advises tech firms on market entry.

Executives and consultants have in recent years spent an increasing amount of time in the kingdom, flying in and out to advise on the opening up of the economy. However, few are keen to relocate there, citing Riyadh’s lower standard of living than the United Arab Emirates.

In the announcement last week, the 24 multinationals cited economic potential as the reason for setting up regional headquarters. Bechtel, for example, recently won the mandate to project-manage building “The Line”, a futuristic 170km city strip planned in Neom, the crown prince’s most adventurous domestic development.

Several senior executives at Oyo, the Indian hotel group backed by SoftBank’s Vision Fund, will move to its new regional headquarters in Riyadh’s King Abdullah Financial District, a massive business park comprising 59 towers in the north of the city that has struggled to attract tenants.

Saudi Arabia, which plans to step up tourism plans in the coming years, has become an important market for Oyo, said its Middle East head, Manu Midha, who currently works between Riyadh and Dubai.

The Middle East franchise of Canadian coffee chain Tim Hortons is also moving its regional headquarters to the Saudi capital.

500 Startups, a US venture capital firm, said opening its regional headquarters in Riyadh reflected the growth of deal flow and size over the past few years with technology playing an increasingly central role in the growth of entrepreneurship in Saudi Arabia.

Siemens Mobility also confirmed that it would set up Gulf headquarters in Saudi Arabia “to engage in potential transportation projects.” However, Siemens AG, the separately-managed parent, will retain its regional headquarters in the UAE, it said.

At the conference, Prince Mohammed said he plans to turn Riyadh into one of the top ten largest city economies in world, up from its current position of 40. His blueprint envisions increasing the 7.5m population to around 20m by 2030.

Khalid-al-Falih, minister of investment, said the private sector would also play a central role in the government’s plans for 6 trillion Saudi riyals of investments in the capital.