Competition intensifies between Saudi Arabia and UAE for foreign investment

Intense competition between GCC members and geographical neighbors Saudi Arabia and Middle Eastern countries united arab emirates Attracting foreign investment and foreign billionaires has reached the point where they are starting to create laws that go against their shared GCC direction.

Saudi Arabia, the largest country in the GCC, will attract foreign investment worth $8 billion in 2022. The UAE did not release results for 2022, but said it attracted investments worth $20 billion in 2021. Cumulative foreign investment reached $1 trillion in Saudi Arabia and $171 billion in the UAE.

Seeking to strengthen its position as the region’s leading logistics hub and attract more foreign investment while diversifying the country’s economy away from oil, Saudi Arabia Unveiled its first integrated economic zone, which will exempt companies from taxes for up to 50 years. That means a serious contender has emerged in Dubai’s Jebel Ali Port.

A source told The Media Line that so far at least 500 companies have moved their regional headquarters from Dubai in the UAE and Manama in Bahrain to Riyadh and Jeddah in Saudi Arabia to be able to contract directly with the government . “The number of companies transferred to Saudi Arabia exceeds $6 billion,” the source added.

The UAE, home to most regional multinationals, will introduce a 9% corporate tax next year to replace the current free presence. That rate is still lower than Saudi Arabia’s corporate tax rate of 20%.

In a press statement, Saudi Investment Minister Khalid Al-Falih revealed that new temptations offered by Saudi Arabia include “tax exemptions”.

Al-Falih’s statement comes as companies express concern about double taxation if they move offices to multiple countries, especially since there is no agreement between Saudi Arabia and other Gulf countries to prevent double taxation.

Largest Saudi market among Gulf states

Companies moving to Riyadh are seeking to gain a share of the Saudi market, the largest among the Gulf states. According to 2022 data, Saudi Arabia’s population accounts for more than 55% of the 57 million people in the Gulf region, and the Saudi GDP is about 770 billion US dollars. Meanwhile, the UAE has a population of about 9.5 million and a GDP of about $415 billion, according to 2021 figures.

Rivalry between Saudi Arabia and the UAE also intensified after Riyadh issued a decision excluding goods produced in free zones or by Israeli companies from the Gulf state’s import tariff privileges.

Despite all the privileges offered by Saudi Arabia, the UAE still enjoys businessman’s interest And is the headquarters of more international companies. In addition to favorable economic laws, the UAE is favored for its openness and easy access to visas for businessmen, as well as entertainment zones that allow alcoholic beverages, parties and other advantages that Riyadh does not yet offer.

Saudi Arabia is also looking to lure hundreds of Russian billionaires who have made Dubai their business headquarters during the current Russia-Ukraine war. A number of news reports have been released detailing how hundreds of Russian businessmen moved their money, property and companies to Dubai after international sanctions kicked in.

Meanwhile, the UAE has launched the “Project 50” initiative, which aims to attract $150 billion over the next nine years and aims to expand its exports to 10 markets around the world.

“The competition between Saudi Arabia and the UAE is a natural and logical thing. The competition is fair and each country is looking to attract more investment,” author and economic analyst Abdul Rahman al-Jubairi told Media Hotline.

“This game is not born of differences, but of consensus and brotherhood. When the Saudi economy is strong, the UAE economy is also strong and vice versa. We have a very clear European model because there are companies in all European countries. They all have their headquarters, they run smoothly, and all EU countries benefit.”

Speaking of the company’s relocation to Saudi Arabia, Al-Jubeiri said: “A foreign investor first seeks to achieve his personal interests as well as the economic goals of his country.”

Saudi Arabia accounts for 50 percent of the Gulf economy and 25 percent of the total Arab state economy, which “cannot be underestimated, especially in the current period when projects are booming and Saudi Arabia is undergoing economic transformation,” he said.

Amr Mostafa, a business consultant living in the UAE, told the media hotline, “The relocation of several regional companies to Saudi Arabia will not affect the UAE economy much. A presence in Dubai. True, they will open a regional headquarters in Riyadh to comply with Saudi law, but it will be an expansion, not a transfer.”

He continued, “Saudi Arabia [is] With the new laws, now it has moved towards openness and investment, of course, this is a new experience, there will be more openness in the future, of course, there will be agreements between these countries in several aspects. “

However, the CEO of a financial investment firm, who did not want to give his name or the name of his company, told The Media Line, “We were forced to move to Saudi Arabia. We used to work in one of the [other] Gulf countries, but most of our clients are from Saudi Arabia. Saudi authorities began restricting our business, preventing citizens from dealing with us, and money transfers in and out of the company were stopped, forcing us to open a regional headquarters in Riyadh. “