Saudi Arabia's New HQ Mandate Lures Global Tech Giants, Amazon, Microsoft, Google To Follow

Global tech giants Amazon.Com Inc AMZN, Alphabet Inc GOOG GOOGL Google, and Microsoft Corp MSFT are expanding their presence in Saudi Arabia, driven by the government's mandate requiring companies to establish regional headquarters in the country for state contract eligibility. 

The push is part of Crown Prince Mohammed bin Salman's economic strategy, focusing on reducing 'economic leakage' and keeping government and citizen spending within Saudi borders.

To comply with the Saudi directive set for January 1, these US firms and others like Airbus SE EADSF EADSY, Oracle Corp ORCL, and Pfizer Inc PFE have obtained licenses for setting up regional HQs in Riyadh, Bloomberg reports. 

Also Read: Activists Raise Alarm as Microsoft Invests $2B in Saudi Cloud Facility, Cite Data Privacy Concerns

The Saudi government's initiative, announced in February 2021, aims to limit contracts to international firms without significant local presence, traditionally flying executives in and out.

This policy is a core element of the Crown Prince's broader economic reforms, which include easing gender segregation, allowing women to drive, and expanding public entertainment despite restrictions like the alcohol ban. 

These reforms are part of Saudi Arabia's vision to transform into a tourism and commercial hub, backed by plans for trillions of dollars in investment.

The move will likely be a strategy to rival Dubai, the Middle East's leading business hub, said Bloomberg.

Most multinational companies have historically managed their Middle East operations from Dubai, with smaller offices in Saudi cities. The establishment of headquarters in Riyadh raises questions about their operations in other regional locations.

Microsoft and Google have responded to the requirements, with Microsoft citing Saudi Arabia as part of its more extensive regional operations and Google engaging with authorities. 

Airbus has aligned its setup with Saudi regulations. The Saudi government offers incentives for firms establishing HQs in Riyadh, including tax breaks and hiring exemptions.

However, there's confusion over the application of these rules, especially regarding business types and government entities affected by procurement restrictions, Bloomberg writes. 

The Ministry of Investment announced that over 200 firms received HQ licenses, with companies like Bechtel, PwC, and PepsiCo declaring Riyadh their regional HQ.

Price Actions: AMZN shares traded higher by 1.64% at $147.62 on the last check Monday. MSFT shares traded higher by 0.74% at $370.58.

Also Read: Amazon's Migrant Workers Confront Exploitation at Saudi Arabia Warehouse

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo by Hamza A. Durrani via Wikimedia Commons