Why Companies Are Thinking About The Riyadh HQ The Wrong Way Around
Countries have united over many centuries to ensure economic growth, and as their economies have grown, internal rivalries amongst cities may have occurred. Take the United States, since its independence and over the years, as its economic hubs grew, rivalries between cities may have been, but there was certainly room for the likes of New York, Washington D.C, Boston and California to grow. Europe in its modern form has had plenty of city rivalry, but one thing that makes it so great are those great unique cities from Milan and London, to Paris and Berlin to name a few.
So we look to the Middle East.
There’s been a lot of talk recently about the new regional HQ requirements that Saudi has introduced. Labelled ‘Programme HQ’ in order to attain Governments by 2024, lateral thinking commentators have already focused on the Dubai Vs Riyadh narrative.
The Crown Prince of Saudi Arabia and next in line to be King, Mohammed bin Salman bin Abdulaziz Al Saud, stated on the FII stage some years ago that he sees the Middle East as the new Europe. And this year, on the same stage he outlined the role Riyadh will play in this.
Separate to the NEOM project, the new LINE city, or even the mega tourism projects in the Red Sea, Al Ula and Qiddia. The Crown Prince reiterated the role that the Capital will play in the future. Urbanisation is a trend that isn’t going away, despite some behavioural changes due to the recent pandemic.
This is a Crown Prince who is thinking beyond the 2030 Vision, one who is part of the Al Saud family from the historic Al Diriyah area outside Riyadh. His father, King Salman was Governor of Riyadh for most of his life, this City is very much part of the family.
And, they have a point.
وأوضح المصدر أن القرار يشمل الهيئات والمؤسسات والصناديق التابعة للحكومة أو أياً من أجهزتها. pic.twitter.com/GfPR5JcOQh
— سماشي (@smashitv) February 16, 2021
As a business, if you’re winning contracts, have no vested interest in participating in the fruits of your labour, then what sort of commitment to the country does it show?
The principle stands when a footballer signs with a big club. Big contract for a couple of years, but then chooses to rent a hotel room instead of buying a home, or doesn’t feel settled in a new country because they haven’t invested enough to learn the language. Or a Manager who signs a deal, but commutes from city to city as his family don’t want to move.
All common reasons why these jobs don’t show the real success that they can have. In footballing terms it shows a lock of true commitment, and in this case, again, fans have a point.
For organisations working out what to do with regards to having a regional HQ in Riyadh, there will be most likely many approaches. Some will be looking at this ruling and thinking ‘‘Oh, now I need to look at my top talent and relocate them there’. Those not from the region, who have become accustomed to Dubai, but maybe Riyadh won’t currently have the same lure.
Another perception, and linear way of looking at it, is moving talent. For example, only your CEO could move, the rest can stay, then you can hire local Saudi talent, who are more than capable in many industries, invest in them, and benefit even more as the economy grows.
There isn’t any stipulation as yet to the requirements or definition of an HQ, and HQ’s globally, have been ‘named’ for tax purposes. I remember when I worked for WPP, their headquarters was technically located in Dublin, Ireland because the corporate tax was 12% there as opposed to nearly double that in the UK. However, no senior management was located there.
Saudi Arabia eyes Dubai's crown with HQ ultimatum. The UAE and Dubai has spent years attracting business and shifting to Riyadh is difficult, but some offices in Riyadh could rename as regional headquarters while maintaining a presence in #Dubai. Reuters https://t.co/wemqgFKLeE
— Abdulkhaleq Abdulla (@Abdulkhaleq_UAE) February 17, 2021
A HQ should be where the senior management resides and where the main decisions are made.
If you believe in a region enough to have a presence there, what’s more, to have an actual office there, as opposed to having a partner, then you will know that by having another office in Riyadh, and investing in the talent, you will have an even greater chance of success in this emerging market.
If the ambitious Saudi plans pay off, the economy has the potential to grow far faster than others, given that many industries are at the beginning. So you could be looking at a country with 7-9% GDP growth for some years in the latter part of this decade. Not only that, the GCC, of which Dubai, Abu Dhabi and Riyadh are some of the most prominent cities, making up for 58 million people. The 24 Arabic speaking countries, some global companies definition of the region, has over 340 million people. Why would you not want a regional HQ in Riyadh, with other presence on the ground as well?
As you know, those companies who do believe, who are investing in a presence in the region, by opening up an office – who do choose Riyadh, they should also potentially consider a second office as well in time, in somewhere like Dubai.
Those who are serious about the region will see this as a welcome timeline and further indication that the leadership of KSA are going to come with them on their respective companies ambitions journeys.