Saudi Arabia and UAE’s rivalry intensifies in race for foreign investments. The two Gulf neighbors have reached the point where they are enacting laws that contravene their common Gulf Cooperation Council goals.
Intense competition between Gulf Cooperation Council members and geographical neighbors Saudi Arabia and the United Arab Emirates to attract foreign investments and foreign billionaires has reached the point where they have begun enacting laws that contravene their common GCC orientation.
In 2022, Saudi Arabia, the largest of the GCC countries, attracted foreign investments worth $8 billion. The UAE did not announce results for 2022 but said that it attracted investments worth $20 billion in 2021. Cumulative foreign investments in Saudi Arabia amount to $1 trillion and in the UAE to $171 billion.
Saudi Arabia and UAE’s rivalry intensifies in race for foreign investments
Seeking to consolidate its position as a leading logistics center in the region and to attract more foreign investment while diversifying the country’s economy away from oil, Saudi Arabia revealed its first integrated economic zone, which will be tax-exempt for companies for up to 50 years. This means the emergence of a fierce competitor to the Dubai port of Jebel Ali.
A source told The Media Line that at least 500 companies have so far moved their regional headquarters from Dubai in the UAE and Manama in Bahrain to Riyadh and Jeddah in Saudi Arabia, in order to be able to conduct direct government contracts. The source added that “the volume of companies that have moved to Saudi Arabia exceeds $6 billion.”
The UAE is home to most of the regional multinational companies, and it is set to introduce a 9% corporate tax next year in lieu of 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 being offered by Saudi Arabia include “tax exemptions.”
Al-Falih’s statement came after companies raised fears about the fear of double taxation if they moved their offices to more than one country, especially in the absence of an agreement to prevent double taxation between Saudi Arabia and other Gulf countries.
Saudi market largest among Gulf countries
Companies that move to Riyadh are seeking to obtain a share of the Saudi market, the largest among the Gulf countries. According to 2022 figures, the Saudi population constituted more than 55% of the Gulf population of 57 million and Saudi gross domestic product amounted to about $770 billion. Meanwhile, according to 2021 figures, the population of the UAE was about 9.5 million and its GDP was about $415 billion.
The Saudi-Emirati competition also increased after Riyadh issued a decision regarding the exclusion of goods manufactured in free zones or produced by Israeli companies from the customs tariff privileges granted to imports from the Gulf states.
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