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Navigating Saudi Arabia’s RHQ Program: Solutions for Growth and Compliance

Navigating Saudi Arabia's RHQ Program.

Overshadowed by Saudi Vision 2030, a growing openness to tourism, and highly-publicized professional sporting leagues like LIV, Saudi’s Regional Headquarters (RHQ) program was more quietly introduced.

Yet, despite receiving far less attention, the RHQ program will play an equally critical role in accelerating the Kingdom of Saudi Arabia’s shift towards a more diverse, digitally driven economy.

Effective January 1, 2024, this program requires multinational companies to establish regional headquarters in the Kingdom to remain eligible for government contracts.

This article examines the RHQ program, its impact on specific sectors, and strategies that foreign companies can adopt to continue growing their businesses in Saudi Arabia.

Background: Saudi Vision and the RHQ Program

For decades, the strength of Saudi Arabia’s economy has been heavily dependent on oil, which accounts for 84 percent of exports and 40 percent of GDP.

Large oil reserves have enabled the Kingdom to amass substantial wealth and finance ambitious infrastructure and development projects. However, this has also made the economy vulnerable to fluctuations in global oil prices.

Recognizing these challenges, Saudi Arabia launched Saudi Vision 2030.

Saudi Vision 2030

Launched in 2016, Vision 2030 is an ambitious framework aimed at diversifying Saudi Arabia’s economy and reducing its dependence on oil.

The plan outlines key areas for development, including tourism, technology, healthcare, renewable energy, and entertainment, intending to transform the Kingdom into a more sustainable and globally competitive economy.

Saudi Vision 2030 aims to position the country as an international business hub through foreign investment, innovation, and support for a digitally driven economy.

Regional Headquarters Program

As a cornerstone of Vision 2030, the Regional Headquarters Program was designed to encourage multinational companies to establish their regional headquarters within the Kingdom.

RHQ aligns with Saudi Vision 2030 and the Kingdom’s ambitions to drive growth across various non-oil sectors. It offers specific incentives to companies that establish a regional headquarters in the Kingdom, but more importantly, it limits companies that do not.

How Multinational Companies Are Navigating RHQ

While in Saudi Arabia, I encountered companies whose mission was to help MNCs expand business into the Kingdom. One of these companies was Innovation-SA.

As a leading integrated solution and business support service provider in the Kingdom, Innovation-SA offers a full suite of services, from strategic consulting to market research, technology implementation, and operational optimization.

They provide end-to-end solutions to businesses across various sectors aiming to establish or expand their businesses in Saudi Arabia.

The IT Manager from this company introduced me to the RHQ program and detailed how his organization helps businesses navigate its mandates. For further information about Innovation-SA and its solutions, please contact Mr. Mohammed Zaki via email at zaki@innovation-sa.com.

Saudi Phone Numbers and Call Forwarding

One of the key challenges that businesses face when setting up their regional headquarters and expanding their operations in the Kingdom of Saudi Arabia is business support and customer communication.

Often, these businesses will have some presence in Saudi Arabia, but most of their customer-facing operations, like sales and support, are handled internationally.

These companies need Saudi phone numbers, but they don’t always have staff in Saudi Arabia who can answer their calls.

So, we help multinational companies expand to Saudi Arabia by providing phone numbers and call forwarding solutions to route incoming calls from their KSA phone numbers to sales and support centers overseas.

For example, a UK-based company can set up an in-country +966 customer support hotline but route the calls to their main office line or PBX in London. This enables the company to maintain a convenient phone presence in the Kingdom without decentralizing its customer-facing operations.

Phone Number Types

Businesses can choose between different Saudi phone number types depending on their unique needs:

  • Toll-free numbers: preferred by larger enterprises. 800 numbers can only be dialed from within Saudi Arabia.
  • Unified numbers: good for multinational companies that wish to project an established brand within the Kingdom. 9200 numbers can be dialed worldwide.

With years of experience doing business in the Middle East, our team of experts can help your company navigate telecom complexities in the region. If you’re unsure which phone number type will best suit your business, we can serve as a consultant to help you decide on the best option.

At-Risk Sectors Resulting from RHQ

Foreign companies benefit from having a regional headquarters in Saudi Arabia. These benefits include specific tax incentives, streamlined administrative processes, and regulatory support tailored to foreign businesses.

But while the associated benefits can be a reason to establish an RHQ, specific sectors doing business with the government are at risk by not establishing a headquarters in the Kingdom:

The Saudi Arabia Regional Headquarters (RHQ) Program, effective from January 1, 2024, mandates that multinational companies (MNCs) establish their regional headquarters within the Kingdom to qualify for government contracts. This policy significantly impacts sectors that frequently engage in government procurement.

This policy significantly impacts some sectors more than others:

  • Construction and Infrastructure: ambitious futuristic projects like Neom will require significant construction and infrastructure work.
  • Defense and Aerospace: given the Kingdom’s investments in defense, companies in this sector are directly impacted by the RHQ requirement to secure government contracts.
  • Healthcare and Pharmaceuticals: Saudi Arabia is focused on improving healthcare services, which opens opportunities for MNCs in this sector, provided they meet specific requirements for government contracts.
  • Financial Services and Banking: As Saudi Arabia diversifies its economy, the financial sector plays a crucial role. Banks and financial institutions must comply with the RHQ mandate to engage in government-related financial projects.

Beyond the sectors most directly affected by the RHQ Program, several industries present lucrative opportunities for foreign companies, especially concerning government contracts:

  • Travel and Tourism: The Kingdom’s Vision 2030 includes developing tourism infrastructure, which creates opportunities for foreign companies in hospitality, entertainment, and related services.
  • Education and Skills Training: With a growing emphasis on education, there is a demand for international expertise in educational services and vocational training programs to help Saudi citizens prepare for “jobs of the future.”
  • Renewable Energy: Saudi Arabia is investing heavily in renewable energy projects, aiming to generate a significant portion of its energy from renewable sources. This sector offers substantial opportunities for foreign investment and partnerships.

Conclusion

As Saudi Vision 2030 seeks to diversify the economy, and the RHQ Program continues to drive MNCs to establish their presence in the Kingdom, business support services offered by third-party companies and international telecom solutions can help businesses comply and remain eligible for government contracts.

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