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As economic progress stalls, Saudi looking to entice multinationals to relocate to Riyadh

US Treasury Secretary Steven Mnuchin takes part in a panel discussion during the Future Investment Initiative (FII) forum at the King Abdulaziz Conference Centre in Saudi Arabia's capital Riyadh, on October 30, 2019. - Top finance moguls and political leaders were expected at a Davos-style Saudi investment summit, in stark contrast to last year when outrage over critic Jamal Khashoggi's murder sparked a mass boycott. Organisers say 300 speakers from over 30 countries, including American officials and heads of global banks and major sovereign wealth funds, are attending the three-day forum. (Photo by FAYEZ NURELDINE / AFP) (Photo by FAYEZ NURELDINE/AFP via Getty Images)
US Treasury Secretary Steven Mnuchin takes part in a panel discussion during the Future Investment Initiative (FII) forum at the King Abdulaziz Conference Centre in Saudi Arabia's capital Riyadh, on October 30, 2019 [FAYEZ NURELDINE/AFP via Getty Images]

Saudi Arabia is in talks with a number of multinationals in a bid to lure them into setting up operations within the kingdom. According to Yasir Al-Rumayyan, the governor of the Public Investment Fund (PIF) – the sovereign wealth fund of the Gulf monarchy, Riyadh is "already in discussion with a number of companies in the health sector."

Al-Rumayyan disclosed details of Crown Prince Mohammed Bin Salman's grandiose plan to diversify the kingdom's economy to the Financial Times. He said that talks were underway with electric car start-up Lucid Motors, in which the Saudis have invested $1.3 billion to acquire a 67 per cent stake, to establish a manufacturing facility in the kingdom, and with "many" companies in SoftBank's Saudi-backed $100 billion Vision Fund.

"The next step is to go forward in getting them to the kingdom," Al-Rumayyan is reported saying. Al-Rumayyan also spoke of the possibility of Saudi oil giant Aramco listing more of its shares "if the valuation is right", and that the state oil company itself was considering a "massive" programme of asset divestments.

READ: Saudi suffers fifth straight quarter of economic contraction

Attracting foreign companies to relocate their operations to Riyadh is vital to Mohammed Bin Salman's vision which promises to create more jobs for the country's growing youth population and his plan to diversify from oil. With multinationals not as keen to relocate their operations, the crown prince has launched a campaign to poach firms from Dubai.

Under the initiative, dubbed "Programme HQ", Saudi authorities are said to be offering incentives to blue-chip companies in sectors such as IT, finance and oil services to relocate to Riyadh, according to consultants advising the government and executives who have heard the pitch.

Analysts have questioned how the PIF will be able to finance its vast commitments, particularly as Saudi Arabia has been hit by the coronavirus pandemic and low oil prices. Some have also spoke of a "credibility gap" with their modernisation vision.

Pointing to the mega flagship development project of Crown Prince Mohammed bin Salman, a Gulf based analyst said to the FT earlier in the month: "It's very difficult to see how the money stretches out, not only to go into Neom but into all the other megaprojects and ambitions they have. If they get to half of what they are expecting, great. But at the moment there's a credibility gap between what is being said and what is being done."

Al-Rumayyan said that more funding would come from a combination of loans, dividends from its holdings, government cash injections and the privatisation of Saudi companies it owns, beginning as early as this year.

READ: Saudis delay jobless figures again, raising doubt about pledge to youth

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