Success Cases: International Companies in Saudi Arabia
As Saudi Arabia continues its ambitious journey
outlined in Vision 2030, the Kingdom has emerged as a pivotal destination for
global businesses seeking strategic expansion into the Middle East and
beyond.
Recognizing its strategic position at the
crossroads of three continents and robust infrastructure, Saudi Arabia serves
as a trade hub between the MENA region and the Globe. Paired with a
comprehensive suite of incentives, this presents unparalleled opportunities for
multinational corporations (MNCs) to establish Regional Headquarters (RHQs) in
the Kingdom.
Through the case studies we’ll explore below, we
aim to provide you with lessons from some of the greatest market penetration
and growth case studies in the Kingdom of Saudi Arabia and share our
understanding of the Saudi initiatives that made the nation a fertile ground
for international success.
- Success Stories
Amazon
Overview: Amazon’s acquisition of Souq.com marked a significant milestone in the e-commerce landscape of Saudi Arabia.
Key Developments:
- Launch of Amazon.sa: Amazon rebranded Souq.com to Amazon.sa in 2020, expanding its range of products and services available to Saudi customers.
- Logistics Network: Amazon has established a robust logistics and fulfillment network in the Kingdom, ensuring fast and reliable delivery services.
- Market Growth: The rebranding and expansion have led to a surge in online shopping, contributing to the growth of the e-commerce sector.
- Customer Reach: Amazon.sa has significantly increased the accessibility of global and local products for Saudi consumers.
- Amazon acquired Souq.com for $580 million in 2017
Data Center Launch:
- AWS will launch data centers in Saudi Arabia in 2026, investing over $5.3 billion.
- Capabilities and Benefits: The cloud region will allow secure content storage, faster workloads, and enhanced speed for users.
- AI Technology Support: AWS, alongside Google and Microsoft, plans increased investments to support AI technology adoption
- Local Collaborations: Customers in the region using AWS include Saudi Telecom Company, Seera Holding, and Mobily
- Strategic Discussions: AWS and Apple were in talks with Riyadh in 2017 about investing in Saudi Arabia.
- AI Hub Initiative: Saudi Arabia’s Public Investment Fund is promoting the kingdom as a hub for AI activity, leveraging its energy resources and funding capacity.
Amazon Fulfillment Center in Riyadh
New Facility:
- Launched the most advanced fulfillment center in Riyadh, incorporating AI, machine learning, and over 2.5 km of conveyance equipment. Logistics Network
- Amazon’s network includes two fulfillment centers, three sort centers, over 25 delivery stations, and partnerships with small and medium businesses. Job and Skill Development
- Offers training, upskilling, and mentoring programs for employees. Sustainability Commitment
- The facility is powered 100% by electricity and features energy-efficient systems, including LED lighting and advanced HVAC controls. Support for Local Economy:
- Collaboration with Monsha’at aims to host 40,000 Saudi sellers by 2025, utilizing Fulfilled by Amazon (FBA) services. Expansion Impact:
- Doubles storage capacity in Saudi Arabia with a 390,000 square foot facility capable of storing over nine million products.
‘Saudi Made’ storefront
- Amazon Saudi Arabia has launched a ‘Saudi Made’ storefront.
- The storefront features locally-produced items with the ‘Made in Saudi’ certification.
- This initiative aims to promote Saudi products on Amazon’s platform.
- It supports small and medium-sized businesses and entrepreneurship in Saudi Arabia.
- The launch was announced at the 2023 ‘Made in Saudi’ exhibition.
- It follows a cooperation agreement between the Saudi Exports Development Authority and Amazon Saudi Arabia.
- The agreement was signed by Abdulrahman Al-Thukair (CEO of SEDA) and Abdo Chlala (country manager of Amazon Saudi Arabia), in the presence of Bandar Alkhorayef (minister of industry and mineral resources).
New Businesses Entering the Saudi Market
Alibaba Cloud
Overview: Alibaba Cloud, the cloud computing arm of Alibaba Group, has expanded its services to Saudi Arabia, aiming to leveragesupport the Kingdom’s digital transformation goals under Vision 2030.
Key Developments:
- Data Center Launch: Alibaba Cloud launched a new data center in Riyadh in 2022, providing cloud computing services to businesses and government entities in Saudi Arabia.
- Strategic Partnerships: Alibaba Cloud has partnered with STC and other institutions to enhance cloud infrastructure and promote regional innovation.
- STC Group and Alibaba Group have established Alibaba Cloud in Riyadh, Kingdom of Saudi Arabia, with an initial capital investment of $238.3 million (SAR 894 million).
https://www.capacitymedia.com/article/2a4u8qgk5a68b1gl8sgsg/news/stc-and-alibaba-launch-alibaba-cloud-in-saudi-arabia#:~:text=stc%20Group%20and%20Alibaba%20Group,million%20(SAR%20894%20million).
Boston Dynamics
Overview: Boston Dynamics, a pioneer in robotics, has entered the Saudi market with innovative solutions to support various sectors, including logistics, construction, and security.
Key Developments:
- Strategic Collaboration: Boston Dynamics has collaborated with Saudi entities to deploy its advanced robotics technologies in large-scale projects, enhancing efficiency and productivity.
- Robotics Initiatives: The company is involved in several initiatives to integrate robotics into smart city projects, aligning with Saudi Arabia’s Vision 2030 objectives.
Netflix
Overview: Netflix, the global streaming service, has significantly increased its focus on the Saudi market, aiming to cater to the growing demand for digital entertainment.
Key Developments:
- Local Content Production: Netflix has invested in producing original content in Arabic, collaborating with Saudi filmmakers and creators to develop series and movies that resonate with local audiences.
- Subscription Growth: The company’s strategic entry into the market has led to a substantial increase in subscriptions, reflecting the high demand for streaming services in Saudi Arabia.
- Netflix has partnered with SPT a saudi based production company 15 young talents in Saudi through on set training and work shops.
- Netflix and Saudi Arabian production and financing group Telfaz11, have struck a partnership to produce 9 new films,
Rivian
Overview: Rivian, an American electric vehicle automaker, has made a strategic entry into the Saudi market, reflecting the growing interest in sustainable transportation solutions.
Key Developments:
- Investment from PIF: The Public Investment Fund (PIF) of Saudi Arabia has invested in Rivian, supporting the company’s plans to introduce electric vehicles in the Kingdom.
- Sustainability Goals: Rivian’s entry aligns with Saudi Arabia’s Vision 2030 sustainability goals, aiming to reduce carbon emissions and promote the use of electric vehicles.
Rivian
- In 2018, the Public Investment Fund (PIF) of Saudi Arabia invested $1 billion in Lucid Group Inc., followed by an additional $600 million in 2021 when Lucid went public. IPO and Market Impact:
- Rivian raised about $11.9 billion during its IPO, making it the largest IPO of 2021. The truckmaker marketed 135 million shares at $72 to $74 per share after increasing the initial range from $57 to $62.
Moderna
Overview: Moderna, Inc. is a biotechnology company renowned for pioneering mRNA technology to create transformative medicines. Founded in 2010 and headquartered in Cambridge, Massachusetts, the company’s primary focus has been developing mRNA vaccines and therapies for various diseases, including infectious diseases, cancer, and rare diseases.
Key Developments:
- Production Facility: Moderna is setting up a manufacturing facility in Saudi Arabia to produce mRNA vaccines locally, ensuring a steady regional supply and enhancing the Kingdom’s self-sufficiency in vaccine production.
- Clinical Trials: The company is collaborating with Saudi health authorities to conduct clinical trials, aiming to adapt its vaccines to local health needs and regulatory requirements.
- Healthcare Workforce Development: As part of its partnership, Moderna is investing in training programs for Saudi healthcare professionals, focusing on biotechnology and advanced pharmaceutical manufacturing techniques.
- Saudi Arabia is planning to invest SAR 500 million ($133 million) in a factory to boost local vaccine and medicine manufacturing, aiming to become a regional biotechnology center. Investment Agreement:
- The Saudi Authority for Industrial Cities and Technology Zones (Modon) signed an agreement with the Vaccine Industrial Company to establish a 42,000 square meter plant in Sadeer City, creating approximately 150 jobs. Local and Export Focus:
- The factory will produce vaccines for seasonal flu, COVID-19, chickenpox, pneumococcal, and meningitis, boosting exports. Private Sector Investment:
- Modon attracted SAR 2.8 billion in private sector investments during Q2 2023, a 23% increase from the same period in 2022. Academic Research and Development:
- Saudi Arabia dedicated SAR 14.5 billion to academic R&D in 2021. Biotech Ecosystem:
- The kingdom needs more private venture funding to support biotech development, as noted by Dr. Walid Tohme from Strategy& Middle East. Sovereign Wealth Fund Initiative:
- The Public Investment Fund (PIF) launched Lifera, a pharmaceutical investment company, in June 2023. Lifera will produce insulins, vaccines, and plasma therapeutics, creating partnerships with local and international companies. Pharmaceutical Industry Growth:
- Analysts expect the Saudi pharmaceutical industry, valued at nearly $12 billion in 2023, to grow to over $15 billion by 2027 and nearly $20 billion by 2032. International Partnerships:
- Companies like Novartis, Pfizer, Moderna, Sanofi, Merck, and GlaxoSmithKline have established a presence in Saudi Arabia through direct investments or partnerships. Regulatory Reforms:
- Government reforms are encouraging investment and supporting local industry development. New Manufacturing Facilities:
- Lifera, Sanofi, and Arabio plan to set up vaccine manufacturing facilities in the kingdom.
Hyperloop Transportation Technologies
Overview: Hyperloop Transportation Technologies (Hyperloop TT) is an innovative transportation company dedicated to developing high-speed, sustainable transportation systems. Founded in 2013 and headquartered in Playa Vista, California, Hyperloop TT leverages advanced technologies to create a vacuum tube-based transportation system that promises to drastically reduce travel times between cities.
Key Developments:
- Feasibility Study: Hyperloop TT has completed an initial feasibility study in collaboration with Saudi authorities, identifying optimal routes and technical requirements for the proposed high-speed transportation network.
- Infrastructure Investment: The project includes substantial infrastructure investments, with the Saudi government committing significant funds to support the development of the Hyperloop system, which promises to revolutionize transportation in the region.
- Sustainability Initiatives: Hyperloop TT’s plans align with Saudi Arabia’s sustainability goals under Vision 2030, utilizing renewable energy sources to power the transportation network and reduce carbon emissions
- The Ministry of Transport is exploring the creation of a Hyperloop Center of Excellence, estimated to generate $4 billion in GDP and create 124,000 high-tech jobs.
IHG Hotels & Resorts:
Overview: IHG Hotels & Resorts is a British multinational hospitality company headquartered in Denham, Buckinghamshire, England. It operates over 5,900 hotels worldwide across several brands, including InterContinental, Holiday Inn, and Crowne Plaza.
Key Developments
- Saudi Headquarters: IHG has opened its Saudi headquarters in Riyadh.
- Investment and Impact: The significant expansion aligns with Vision 2030’s objectives to boost tourism, with IHG’s investments contributing to the Kingdom’s hospitality sector growth and job creation.
IHG Hotels & Resorts
- Saudi Arabia is a priority market for IHG in the Middle East, with 40 operating hotels and 32 in the pipeline.
Recent Signings: - Regent Jeddah, Kimpton in King Abdullah Financial District (KAFD), Hotel Indigo property Oxagon in NEOM. Holiday Inn Express Expansion:
- Memorandum of Agreement to open 12 “Next Generation” Holiday Inn Express hotels across the country. New Resort:
- InterContinental Durrat Al Riyadh Resort & Spa, introduced after a SAR 45 million ($12 million) refurbishment, spans 154,000 sq m of greenery, with a lagoon and private cascades.
Knight Frank:
Overview: Knight Frank is a global real estate consultancy firm headquartered in London. It provides a wide range of services, including commercial and residential property sales, leasing, and property management.
Key Developments:
- Saudi Headquarters: Knight Frank has opened a new office in Laysen Valley, contributing to the development of urban spaces in Riyadh.
- Sustainable Development: The company is involved in projects aligned with Saudi Arabia’s Vision 2030, focusing on sustainable and attractive urban space development.
- Impact: Knight Frank’s presence is expected to bring global real estate expertise to the local market, fostering the development of high-quality, sustainable real estate projects.
Knight Frank announced an agreement with the Saudi Ministry of Municipal and Rural Affairs and Housing (MoMRAH) to advance public parks and urban spaces in Saudi Arabia. - Inauguration Ceremony:The announcement was made at the inauguration of the waterfront development project in Obhur, attended by Prince Badr bin Sultan bin Abdulaziz and other senior officials.
- Shared Vision:Talal Raqaban, Knight Frank’s head of Valuation & Advisory in KSA, emphasized the strategic partnership’s importance for creating vibrant and modern urban environments.
- Investment Attraction:Knight Frank aims to leverage its real estate and investment expertise to attract local and international investors, contributing to the Bahja Initiative and Obhur waterfront development.
Dahua Technology:
Overview: Dahua Technology is a leading provider of video-centric AIoT (Artificial Intelligence of Things) solutions globally. Active in over 180 countries and regions, with operations spanning video surveillance, smart homes, enterprise solutions, and more. Dahua Specializes in smart video surveillance technology, AI-powered solutions, and IoT applications for various sectors.
Key Developments
- Joint Venture with ALAT: Dahua Technology has partnered with ALAT, a Saudi tech firm, to establish a joint venture, focusing on manufacturing AIoT products tailored for smart cities and enterprises in Saudi Arabia. Dahua Anticipates rolling out the first product by the end of 2024.
- Strategic Investment: Significant investment to bolster manufacturing capabilities and local supply chains. Dahua’s Saudi subsidiary will continue to operate independently, ensuring seamless service delivery. Saudi Arabia is identified as one of Dahua MENA’s key markets, aligning with Vision 2030 goals of economic diversification and technological innovation.
- Technological Advancements: Dahua Promises enhanced access to cutting-edge AIoT solutions for local distributors, system integrators, and end-users, They also aim to support Saudi Arabia’s push towards smarter cities and safer environments through advanced surveillance and IoT technologies. Dahua Technology partnered with Saudi tech firm Alat to establish a joint venture.
- Investment Amount: The companies will invest $200 million in the business.
- Ownership: The venture will be majority-owned by the Saudi company Alat.
The regional headquarters program in Saudi Arabia aims to drive economic diversification by attracting multinational companies to set up their regional bases in the Kingdom. This initiative is designed to create thousands of jobs for Saudi nationals, boost foreign direct investment, and enhance the local workforce’s skills and capabilities, contributing to a more robust and dynamic economic environment.
- Market Success Factors and Incentives
1. Zero Percent Tax Regime:
o RHQ-licensed subsidiaries can benefit from a 0% tax rate in Special Economic Zones (SEZs) (MISA).
o MNCs setting up RHQs benefit from a 30-year tax relief, including zero percent corporate income tax and withholding tax on RHQ activities.
2. Ease of Staffing and Relocation:
o Employees working in the RHQ, including executives, must reside in Saudi Arabia but can maintain dual residency status.
o RHQs can recruit and retain top global talent regardless of marital status, religion, or gender.
o Senior employees from the RHQ’s affiliates can be relocated to the RHQ without major issues.
3. Operational Flexibility:
o RHQs can have their own subsidiaries with different activities, provided the RHQ’s legal form permits the establishment of subsidiaries.
o RHQs are not intended to conduct commercial activities directly but to support, manage, and provide strategic direction to their branches, subsidiaries, and affiliates operating in the MENA region.
4. Government Support:
o MISA (Ministry of Investment) assists with visa issuance and staffing plans for RHQ employees.
o The RHQ must have at least 15 executive-level employees with residency in Saudi Arabia by the end of its first financial year.
5. Saudization Exemption:
o RHQs are exempt from Saudization requirements for 10 years, facilitating the employment of expatriate talent crucial for regional operations.
6. Visa and Residency Benefits:
o RHQs can issue unlimited work visas for employees, streamlining staffing needs.
o Top executives of RHQs qualify for premium residency, enhancing relocation and retention of global business leaders.
7. Government Tenders:
o Exclusive access to compete for government contracts and tap into the Public Investment Fund (PIF), offering a competitive edge in the market.
8. Operational Support:
o Comprehensive assistance through the Ministry of Investment of Saudi Arabia (MISA) RHQ Care team, ensuring seamless logistical support.
9. Professional Accreditation Waivers:
o Exemption from local professional accreditation requirements for RHQ employees holding valid accreditations from their home countries.
How Access KSA Can Help:
At Access KSA, we specialize in providing tailored advisory services to help multinational companies navigate the process of setting up Regional Headquarters in Saudi Arabia. Our services include:
- Strategic Planning: Assisting with strategic planning and business case development for establishing RHQs in the Kingdom.
- Regulatory Guidance: Offering expert guidance on regulatory requirements and compliance to ensure smooth and efficient setup.
- Visa and Relocation Support: Facilitating visa issuance and relocation processes for expatriate employees and their families.
- Operational Setup: Providing end-to-end support for operational setup, including office space acquisition, staffing, and administrative services.
- Government Liaison: Acting as a liaison with Saudi government authorities to expedite approvals and resolve any issues that may arise during the setup process.
- Ongoing Support: Offering ongoing support and advisory services to ensure the continued success and growth of your RHQ in Saudi Arabia.
Partner with Access KSA to leverage our expertise and comprehensive services, ensuring a successful and seamless establishment of your Regional Headquarters in the Kingdom.
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