As the world’s biggest oil exporter, Saudi Arabia’s economy has relied on oil for many years. Oil still dominates Saudi’s GDP, exports, and government revenues. The reliance on it means that the economy is hostage to oil prices, therefore Saudi Arabia is vowing to change its relationship with oil.
Mohammed Bin Salman, the Crown Prince of Saudi Arabia, has pledged to create a number of reforms in the country, including the country’s focus on oil.
In an effort to diversify the economy, Saudi Arabia will not sign any contracts with any foreign company that does not have a regional HQ in the Kingdom, starting January 1st, 2024. This decision only affects a firm’s ability to work with the Saudi government. Foreign investors and companies can continue to deal with the private sector and enter the Saudi economy.
Foreign firms have long used the United Arab Emirates for regional operations, including for Saudi Arabia. Therefore, imposing on foreign companies to create a permanent, in-country regional presence will benefit the Saudi economy greatly. The move will create thousands of jobs for citizens, transfer expertise, and attract more investors to the Kingdom of Saudi Arabia, the Saudi Minister of Investment wrote on Twitter.
Moreover, the decision will increase the efficiency of state spending, keep capital within the country, and ensure that goods and services purchased by the Saudi government are produced locally. The Saudi Press Agency (SPA) reported that 24 companies announced their intention to open a regional office in the Kingdom, including PepsiCo and Tim Hortons.
References:
1)El-Erian, M. A. (2016, May 16). Saudi Arabia's attempt to reduce reliance on oil has the WORLD RAPT. Retrieved February 19, 2021, from https://www.theguardian.com/business/2016/may/16/saudi-arabia-reduce-reliance-oil-vision-2030
2)Gamal, R., & Azhar, S. (2019, July 25). Old habits die hard: Saudi Arabia struggles to end oil addiction. Retrieved February 19, 2021, from https://www.reuters.com/article/us-saudi-oil-aramco-analysis-idUSKCN1UK0L4
3)Staff, R. (2021, February 15). Saudi Arabia won't work with foreign firms without regional HQ FROM 2024. Retrieved February 19, 2021, from https://www.reuters.com/article/us-saudi-company-idUSKBN2AF1NB
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