Saudi Arabia vs UAE for Regional HQs: Strategic FDI Trends in the Gulf

Aggressive reforms and incentives are reshaping FDI flows into Saudi Arabia, attracting regional HQs, while the UAE remains a stable, globally connected hub. Investors must weigh Saudi Arabia’s high-growth potential against the UAE’s established business environment for strategic regional positioning.

By Giulia Interesse

For years, the United Arab Emirates (UAE) has been the dominant hub for regional headquarters (RHQs) in the Middle East, attracting multinational corporations (MNCs) with its business-friendly policies, world-class infrastructure, and strategic location. However, a shift seems underway. In 2024, Saudi Arabia experienced a sharp rise in foreign direct investment (FDI) for setting up RHQs, nearly doubling the number of projects compared to the previous year, while the UAE saw a 31 percent decline in RHQ projects.

This trend highlights the growing competition between the two Gulf economies. Saudi Arabia’s Vision 2030 reforms, coupled with regulatory incentives like its mandatory RHQ policy for government contracts, are reshaping the investment landscape. Meanwhile, the UAE, despite its strong economic foundations, faces increasing pressure to maintain its position as the preferred destination for corporate headquarters.

This article examines the key drivers behind these changes, compares the investment environments of both nations, and explores what these shifts mean for businesses looking to establish a presence in the region.

Saudi Arabia: Rising regional HQ investments

Saudi Arabia’s rapid ascent as an RHQ hub is underpinned by a sweeping set of legal and regulatory reforms aimed at improving its business environment. Over the past two years, the Kingdom has introduced multiple policy changes to attract foreign investment, streamline corporate operations, and enhance legal certainty—further reinforcing its Vision 2030 goals.

One of the most significant shifts has been the implementation of the RHQ mandate, which requires foreign companies seeking government contracts to establish a regional headquarters in the country. This has driven a surge in RHQ relocations, with over 120 multinational firms moving their bases to Riyadh in the first quarter of 2024 alone—an increase of 477 percent year-on-year, according to real estate consultancy Savills.

In tandem, the New Investment Law eliminates the previous requirement for foreign investment licenses, replacing it with a more streamlined investment register overseen by the Ministry of Investment. This change removes barriers to market entry and places foreign investors on equal footing with Saudi businesses, providing stronger protections against expropriation and clearer mechanisms for dispute resolution.

Further labor law amendments align Saudi regulations with global standards, improving employment conditions and making the Kingdom more attractive to international talent. Key updates include:

• Extended parental benefits: Maternity leave increased from 10 to 12 weeks, along with three days of paternity leave.
• Simplified probationary periods: A single 180-day probation period replaces the previous two-stage system, reducing administrative complexity for employers.
• Enhanced dispute resolution: Clearer grievance-handling mechanisms promote fair and predictable outcomes in employer-employee conflicts.

Additionally, the Companies Law and Civil Transactions Law have modernized corporate governance and commercial contract regulations. The Companies Law clarifies corporate structures, board elections, and financial reporting, making it easier for firms to navigate the Saudi market. The Civil Transactions Law, meanwhile, codifies contractual obligations and dispute resolution principles, increasing transparency and predictability for investors.

Beyond legal reforms, Saudi Arabia’s investment drive is bolstered by giga-projects such as NEOM, the US$500 billion futuristic city, and an ambitious target to attract US$100 billion in annual continued momentum.

Also Read: Riyadh Only Arab City to Rank on Savills Latest Growth Hubs Index

UAE: Decline in regional HQ investments

The UAE continues to be a key player in FDI across the Middle East, maintaining its status as the top recipient in the MENA region. Despite increasing competition from Saudi Arabia, the UAE remains a preferred hub for multinational companies, particularly those seeking to establish RHQs. Inflows of FDI into the UAE have remained strong, reaching US$22.7 billion in 2022 with a steady annual increase. The government has set an ambitious target of attracting US$150 billion in FDI by 2030, reinforcing its commitment to maintaining a globally competitive investment landscape.

The UAE’s investment climate benefits from its well-developed infrastructure, political and economic stability, and progressive regulatory reforms. Recent changes, including the introduction of corporate tax and expanded free zone incentives, reflect the country’s strategy to balance fiscal sustainability with investor-friendly policies. Business sentiment remains positive, with a majority of foreign firms, including European companies, rating the UAE’s business environment as strong. The country’s reputation as a low-risk, high-opportunity market continues to drive investor confidence, particularly in high-growth sectors such as finance, logistics, green energy, and digital transformation.

However, the UAE’s long-held dominance as the premier location for regional headquarters is now being challenged. In 2024, the country recorded a 31 percent decline in new RHQ projects, a significant shift in comparison to its previous steady growth. The drop coincides with Saudi Arabia’s aggressive push to attract multinational companies through regulatory incentives, including its policy requiring firms to establish headquarters in the Kingdom to access government contracts. This shift has contributed to a redistribution of corporate investments, with some firms relocating operations to Riyadh.

Despite this, the UAE retains several structural advantages. Dubai, in particular, continues to be a leading commercial hub, offering a globally connected financial ecosystem, a business-friendly legal framework, and an established expatriate workforce. The country’s extensive network of free zones remains a major draw for foreign businesses, allowing full foreign ownership and tax incentives. Additionally, the UAE’s M&A activity has remained resilient despite global economic headwinds, with robust dealmaking in industrial manufacturing, financial services, and consumer markets.

Implications for investors in the Middle East

The evolving investment landscape in the Middle East presents both opportunities and challenges for investors as the region undergoes significant transformation. Saudi Arabia’s rapid policy shifts and economic reforms are reshaping FDI flows, while the UAE remains a critical business hub. Investors navigating this dynamic environment must assess how these shifts align with their long-term strategies, sectoral interests, and risk appetites.

Saudi Arabia has positioned itself as a rising destination for foreign investment, backed by strong government support, major economic reforms, and aggressive incentives. The Vision 2030 agenda has accelerated FDI-friendly policies, with a simplified investment framework, enhanced legal protections, and an expanding pool of incentives aimed at multinational corporations. The removal of the foreign investment license requirement and the introduction of an investment register further lower the barriers to entry, while the regional headquarters mandate has been a major driver of corporate relocations to Riyadh. The country’s focus on high-value industries, such as technology, clean energy, and industrial manufacturing, presents significant opportunities for investors looking to capitalize on a rapidly growing business ecosystem. However, the Saudi market remains in a transition phase, and investors must carefully consider the regulatory landscape, localization policies, and the execution of planned reforms.

In contrast, the UAE continues to offer a stable and globally integrated business environment, maintaining its appeal as a preferred base for multinational companies operating in the Middle East. Dubai and Abu Dhabi’s well-established financial infrastructure, legal transparency, and high connectivity provide a strong foundation for investors seeking access to both regional and international markets. While the 31 percent decline in regional headquarters investments signals increasing competition from Saudi Arabia, the UAE remains highly attractive due to its diversified economy, extensive free zones, and established expatriate business networks. Investors focused on sectors such as finance, logistics, technology, and green energy will continue to find the UAE a compelling destination, particularly as it advances its sustainability and innovation agendas. However, the country must adapt to the changing regional landscape by refining its value proposition, potentially through targeted incentives, deeper economic partnerships, and regulatory enhancements to retain its position as the dominant regional hub.

For investors evaluating the Middle East, sector selection and market entry strategies will be crucial. Saudi Arabia offers high-growth potential but requires commitment to localization and regulatory compliance, whereas the UAE provides a well-established, business-friendly environment with strong international linkages. Strategic diversification—leveraging both markets for complementary strengths—could offer the most effective approach, allowing businesses to capitalize on Saudi Arabia’s expansion while maintaining a stable operational base in the UAE.

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