The UAE and Saudi Arabia, the Middle East’s two powerhouses, are engaged in a no-holds barred competition to claim the coveted title of the region’s business and financial capital. Until some time back, the UAE had virtual monopoly in this regard, with Dubai remaining unchallenged as a magnet for foreign investments. But things have changed of late as Saudi Arabia has embarked on a new mission to diversify its economy away from oil.
Dubai, the commercial heart of the UAE, has long been the undisputed leader in attracting foreign investment. Its liberal regulations, world-class infrastructure, and freewheeling business environment have made it a magnet for multinational corporations seeking a foothold in the region. New initiatives by Saudi Arabia, however, show that the kingdom, with its vast oil reserves and strategic location, is determined to challenge this dominance.
A key battleground in this contest is the race to attract major global corporations to establish their regional headquarters. Traditionally, Dubai, particularly Abu Dhabi, has been the preferred location for such headquarters, offering companies a launchpad for the wider Middle East and North Africa (MENA) region. This advantage was significantly challenged by a recent Saudi move requiring foreign companies bidding for government contracts to base their regional headquarters within the kingdom by 2024. This policy shift, seen by many as a direct shot at the UAE, is part of Saudi Arabia’s ambitious Vision 2030 economic reform program, which aims to transform the kingdom into a diversified economic powerhouse.
The kingdom expects the consequent influx of foreign firms to create a ripple effect on the Saudi economy, generating employment opportunities for both local and international talent. The kingdom’s strategic location, connecting Asia, Africa, and Europe, offers convenient access to a vast market. Additionally, the government has implemented various reforms aimed at improving the business environment, including streamlining regulations and offering tax incentives. These efforts are aimed at positioning Saudi Arabia as a competitive destination for international investors
The implications of this competition are multifaceted. While it could potentially lead to a zero-sum game where one country wins at the other’s expense, there’s also a possibility of a rising tide lifting all boats. The competition could push both nations to further liberalize their economies, streamline regulations, and invest in infrastructure, ultimately benefiting the entire region by creating a more attractive business environment.
However, the rivalry also carries the risk of fragmenting the Gulf Cooperation Council (GCC), a regional economic and political alliance of which both countries are members. A fractured GCC could hinder regional integration efforts and make the member states less competitive on the global stage.
The future of this competition remains to be seen. The UAE, with its established business ecosystem, is unlikely to cede its position easily. However, Saudi Arabia’s vast resources and strategic shift towards economic diversification cannot be ignored. The coming years will be crucial in determining which nation emerges as the undisputed business and financial leader of the Middle East.
Also published on Medium.
