Saudi Arabia has said its tariff agreement on imports from neighboring Gulf countries will exclude goods made in free zones or from Israel.
According to a ministerial decree published Saturday in the Saudi official gazette Umm al-Qura, products coming out of free zones across the six-member Gulf Cooperation Council will be handled as if they were foreign imports.
The decree also excludes goods using input from Israel, or from firms partially or fully owned by Israeli companies, from preferential tariffs.
In the neighbouring United Arab Emirates, free zones – where firms operate under a different set of regulations than the rest of the country – are a key pillar of the economy.
Saudi Arabia has been increasing pressure on international firms to shift their Middle East hubs to the kingdom, posing a direct challenge to Dubai as a regional rivalry heats up.
“Saudi Arabia will exclude from the GCC tariff agreement goods made by companies with a workforce made up of less than 25 percent of local people and industrial products with less than 40 percent of added value after their transformation process,” the decree said.
The decree comes about four months after it was announced that, starting on January 1, 2024, the Saudi government and state-backed institutions will stop signing contracts with foreign companies that base their Middle East headquarters in any other country in the region.
The move is intended to limit “economic leakage” and boost job creation, an official said.
The decision is the latest measure designed to encourage firms to beef up their presence in Saudi Arabia’s capital of Riyadh, supporting a broader plan to diversify the economy of the world’s largest crude exporter.
Saudi Crown Prince Mohammed bin Salman has pushed a $800 billion strategy to double the size of the city and turn it into a global hub. While earlier steps included incentives to move, Monday’s announcement is an implicit threat – setting up firms to lose out on billions of dollars of deals unless they relocate their regional headquarters.
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