HQ move is beneficial to all without exception

February 18, 2021
Ali Muhammad Al-Hazmi

IN a historic decision that does not need any explanations, Saudi Arabia announced a halt to government agencies’ contracting with any foreign commercial company or establishment that does not have its regional headquarters in Saudi Arabia. This gives a clear message that it is we who deserve first in hosting the regional headquarters of these foreign companies.

These companies have a large share of government contracts and projects, in addition to the fact that the Kingdom is a major and important market for these companies in terms of individual purchases of goods and services. Everyone will benefit from this decision, whether they are consumers or foreign companies themselves and the Kingdom’s economy as a whole.

At the consumer level, they will directly benefit from the reduced direct and indirect costs of these firms. In addition to this, some companies can take advantage of a huge scale of savings, especially in industries with very high fixed costs, such as the automobile industry. All of this will lead to lower average costs and prices for consumers and will increase the disposable income of families and enable them to buy more goods and services.

As for foreign companies, they will benefit from government contracts, large projects, and the purchasing power of consumers. In addition to that, with the transfer of their regional headquarters, these companies will be able to access markets that they did not reach before due to the Kingdom’s geographical location. It will enable some foreign companies to enhance their position as a trusted brand in the world.

Economically, moving the headquarters of foreign companies to Saudi Arabia is a guarantee for creating more job opportunities, which in turn will reduce unemployment rates, and the people of this country will gain new experiences. One of the pillars of the Kingdom’s Vision 2030 is the localization of industries of all kinds in addition to increasing the percentage of local content. The government decision is sufficient to achieve this goal in the medium term.

We cannot overlook one of the Kingdom’s objectives, which is raising the proportion of foreign investment to six percent of gross domestic product (GDP). With this decision, we are on the right path to achieve this goal. The influx of foreign exchange coming from foreign companies will contribute, actively and effectively, to creating foreign reserves that will be able to defend the riyal against other currencies.

We do not forget that these companies will contribute to creating added value in terms of developing and deepening the financial sector institutions and developing the Saudi capital market, through the initial offerings of these companies in the Saudi market, in addition to the banking transactions represented in deposits, borrowing and other financial transactions.

February 18, 2021
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