Goldman Sachs has become the first Wall Street bank to complete its regional headquarters (RHQ) program in Saudi Arabia and has received a license to establish its Middle East base in Riyadh. The kingdom’s new rules, which came into force on January 1, 2024, require companies to have regional headquarters in Saudi Arabia with at least 15 employees, including senior senior executives overseeing operations in other countries. To attract these firms, Saudi Arabia is offering 30-year tax breaks and the ability to continue doing business with its government entities, including the $1 trillion Public Investment Fund.
Announced in 2021 to limit “economic leakage” (a term used by the Saudi government to describe government spending that benefits companies without a significant presence in the country), the RHQ program is part of the kingdom’s ambitious Vision 2030 plan to attract foreign capital, create jobs for its young and educated workforce, and diversify the economy away from oil. Saudi Arabia’s non-oil revenues reached 50% of GDP in 2023, the highest recorded share. Moreover, the introduction of new rules has increased the kingdom’s competition with the United Arab Emirates, the leading trade and financial center in the Middle East. Traditionally, most global firms have managed their activities in the region from offices in Dubai, while maintaining small offices in Saudi Arabia.
The strategy is working. To date, according to Investment Minister Khalid Al-Falih, more than 400 international companies have received licenses for regional headquarters in the kingdom, including tech giants Amazon, Alphabet, Google and Microsoft, consulting and accounting firms such as PwC and Deloitte , as well as multinational corporations producing consumer goods. such as PepsiCo and Unilever. However, global banks have been more reluctant to move to Riyadh, citing concerns about the clarity of the overall regulatory environment and doubts about the Saudis’ willingness to meet the needs of a Western workforce unaccustomed to the country’s strict social and cultural rules. However, global banks are unlikely to cede sole control of the lucrative and relatively untapped Saudi Arabian market to Goldman Sachs for much longer.