Page 11 - MEOG Week 07 2021

MEOG POLICY MEOG

Firms face pressure to move

regional HQs to Saudi

SAUDI ARABIA COMPANIES were told this week that they must start the countdown for services firms collabo-
relocate their regional headquarters to Saudi rating with state-owned Saudi Aramco, though
Arabia if they want to continue having access to there may be some ambiguity about Aramco’s
government contracts. position, given that around 1.7% of the compa-
The move, which will be brought into effect ny’s shares have been sold on the Tadawul All
on January 1, 2024, comes as Riyadh seeks to Share Index (TASI), the Saudi stock exchange.
create jobs and turn the capital into one of the Given the importance of the hydrocarbons
world’s top 10 city economies. industry, it may be that Riyadh will ringfence it
Speaking to the Saudi Press Agency, an offi- from the new legislation to ensure global com-
cial said that once the policy is implemented, petitiveness. However, Aramco has been pushing
Saudi will cease contracting with companies pri- local content through various significant initia-
marily based elsewhere in the region, with the tives, of which the in-Kingdom total value-add
legislation applying to those working with Saudi (iktva) is the most important, and forms a major
agencies, institutions and government-owned part of its commitment to Saudi Vision 203.
funds. With many energy companies having built a
The source noted that the decision had been Gulf base in the UAE, the move will represent
taken to incentivise the localisation of business a clear challenge to the Emirates’ domination of
by foreign companies “to [create] more jobs, foreign direct investment (FDI) as the Kingdom
limit economic leakage, increase spending effi- seeks to knock it from the top spot.
ciency, and guarantee that the main goods and That being said, Aramco already requires
services purchased by the different government strict compliance with local content from all for-
agencies are made in the Kingdom with appro- eign partners and the company is building out
priate local content”. the King Salman Global Maritime Industries
No further clarity was provided on the defi- Complex at Ras Al Khair and the King Salman
nition of ‘region’; however, the source did say Energy Park (SPARK), both located in the East-
that regulations related to the decision would be ern Province, where joint ventures are being
issued later this year. developed to promote local energy services and
In the oil and gas sector, this news is likely to innovation.™

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