Beyond Borders: Seizing Opportunities in Saudi Arabia’s Dynamic Business Market
The business environment in the Kingdom of Saudi Arabia (KSA) has undergone a substantial transformation in recent times. With its strategic location, abundant resources, and rapidly evolving economic landscape, the country has become a compelling destination for global companies seeking fresh prospects. Saudi Arabia boasts one of the world's top 20 economies, ranking as the largest economy in both the Arab world and the Middle East. These developments are closely aligned with the bold Vision 2030 initiative, aimed at diversification of its economy, boosting job creation, and attracting top talent to the Kingdom. As a result, Saudi Arabia is actively opening its doors to various industries, offering a wide range of opportunities for international businesses.
Saudi Arabia holds a unique position, located at the crossroads of three continents and the intersection of both emerging and developed markets. Its population, standing at 32.2 million, is a tapestry of cultures and nationalities, with approximately 13.5 million (42%) expatriates calling the Kingdom home. The total population has jumped 34.2% in the last 13 years due to KSA’s economic transformation. The growing presence of international professionals in Saudi Arabia represents a real-world manifestation of employee mobility, where the global workforce converges to contribute to the nation's progress.
KSA also has one of the youngest populations globally, with 63% of Saudis under the age of 30. This youth demographic offers significant advantages for the country's ambitions to diversify including a skilled, innovative, and cost-effective workforce, fostering entrepreneurship, and accelerating technology adoption over the long term. Their fresh perspectives and digital proficiency can drive the growth and competitiveness of Saudi Arabia's economy on a global scale.
In August, the International Monetary Fund predicted that Saudi Arabia would this year become one of the world’s fastest-growing economies on the strength of sweeping pro-business reforms and a sharp rise in oil prices and production. The Kingdom’s transformative efforts will not only redefine the economic landscape but also foster an environment of innovation and collaboration that holds the promise of long-term business growth.
Economic Growth and Diversification
The establishment of Special Economic Zones (SEZs) like NEOM, a giga project anticipated to be 33 times the size of New York City and nearly equivalent to the size of Belgium, has played a pivotal role in driving Saudi Arabia's economic transformation. Special economic zones are designated geographical regions that encourage particular activities, including investment, trade, and job creation, by offering distinct advantages and legal structures that deviate from the broader national economic framework. NEOM is set to attract approximately one million visitors by 2025 and five million by 2030. The launch of four additional special economic zones in April this year, with incentives for international companies, marked a milestone on Saudi Arabia’s path to becoming a global business and investment powerhouse.
The diversification strategy encompasses various industries, including manufacturing, technology, tourism, finance, and sports. For instance, the Kingdom was recently awarded the 2034 FIFA World Cup and is in the running to host the Expo 2030. These events are bound to attract millions of international visitors, spurring infrastructure development, driving growth in the sports sector, and promising long-term benefits for the nation. By nurturing these non-oil sectors, Saudi Arabia seeks to create a more balanced and robust economy capable of withstanding global economic uncertainties. The Kingdom’s National Investment Strategy (NIS) is anticipated to be a driving force behind the expansion and diversification of the economy, aligning with several key objectives outlined in Vision 2030. These objectives encompass boosting the private sector's share of the GDP to 65%, elevating the contribution of Foreign Direct Investment (FDI) to GDP to 5.7%, augmenting the proportion of non-oil exports to GDP from 16% to 50%, and positioning Saudi Arabia among the top 10 economies in the Global Competitiveness Index by the year 2030.
The Regional Headquarters Initiative
A crucial element of Saudi Arabia's economic transformation is the Regional Headquarters Initiative (RHQ). The RHQ program is a collaborative effort between the Ministry of Investment (MISA) and the Royal Commission for Riyadh City (RCRC), aimed at encouraging global companies' regional headquarters to move to Saudi Arabia. The initiative has been met with great enthusiasm by numerous international companies. By setting up RHQs in KSA, these businesses can effectively tap into the growing regional markets in the Middle East and North Africa (MENA). This is especially appealing for companies seeking to expand their influence in the region, as Saudi Arabia's strategic location provides access to the overall Middle East market of over 400 million people. As of now, Saudi Arabia has granted licenses to more than 160 regional centres through the Regional Headquarters Program, which the Saudi government unveiled in February 2021. Under this program, starting from January 1, 2024, Saudi authorities will significantly reduce their contractual agreements with multinational companies that do not establish a regional headquarters in Saudi Arabia, with only limited exemptions being applicable.
Furthermore, Saudi authorities have introduced additional incentives for employees working at regional headquarters. These incentives encompass permitting foreign spouses under family residency visas to obtain work authorisation and extending the age limit for dependent male children to obtain a family residence permit up to 25 years, a notable increase from the previous age limit of 18. In addition to incentives, the government has been actively supporting the development of RHQs by providing streamlined processes for business setup and ongoing support in accessing local markets. This comprehensive approach has facilitated a smoother transition for companies looking to establish themselves in the region.
Employee mobility and workforce diversity
Employee mobility plays a crucial role in the ongoing economic transformation of Saudi Arabia, and this significance is prominently showcased in the rapid growth of the tourism sector. The Kingdom has set an ambitious target of creating over one million jobs within the tourism industry by 2030, an endeavour that is not only geared towards boosting employment but also underlines a deliberate strategy to attract global talent and seamlessly integrate it into the local job market. With a vision of the tourism sector contributing significantly to the country's GDP, Saudi Arabia is actively tapping into the international talent pool. The aim is to harness the expertise and skills of professionals from diverse backgrounds, who can play a crucial role in shaping the sector's future. This strategic approach is not limited to the tourism industry alone, it mirrors a broader commitment to embracing global talent as a means to foster economic development and innovation in various sectors.
A remarkable story of transformation
The Kingdom's forward-looking approach, bolstered by business-friendly policies and a visionary roadmap, is laying the foundation for a prosperous and diversified economy. As global enterprises increasingly recognise the vast potential within Saudi Arabia's borders, the nation's allure continues to grow. What sets this transformation apart is its multifaceted nature, marked by the increasing inflow of foreign investments, the establishment of regional headquarters under the RHQ initiative, and the pivotal role played by global mobility. These dynamic elements collectively contribute to a vibrant business environment that holds immense promise for both international corporations and professionals. As Saudi Arabia continues to embrace transformation, the country is on a trajectory to solidify its status as a key influencer on the global stage.
About Fragomen
Fragomen is the world’s largest provider of immigration and corporate advisory services with extensive presence in the Middle East, including five practices across three regional business hubs in the UAE, Qatar and Saudi Arabia. With a network of Fragomen offices and local partners, the firm provides support to companies with their employees’ KSA application process in their home country in coordination with teams based in Riyadh, Al Khobar, Neom & Jeddah.
Fragomen Corporate Services Division is continuing to support companies looking to set up their RHQ in KSA in close collaboration with the RHQ Leader and his team at the Ministry of Investment.
For further information, contact hhussain@fragomen.com
www.fragomen.com/
