According to a new report by the Wall Street Journal, several US businesses are planning to scale back their operations in Saudi Arabia, alleging that the kingdom has grown hostile towards them.
The report claims that investors have soured on the oil-rich kingdom after a number of foreign firms, including Uber and General Electric, were hit by “surprise tax assessments” which often amounted to tens of millions of dollars.
Meanwhile, drug making companies such as Bristol-Myers Squibb and Gilead Sciences, among others, allege that for years they have unsuccessfully filed complaints in the kingdom saying their intellectual property was being stolen.
The WSJ also says that US construction giant Bechtel Corporation was forced to send contractors home as it was unable to collect over $1 billion in unpaid bills.
In 2016, controversial Saudi Crown Prince Mohammed bin Salman (MbS) launched his ambitious “Vision 2030” project, which sought to reduce Saudi Arabia’s dependence on oil and to diversify its economy.
Part of the plan included forcing foreign companies to move their regional headquarters to Riyadh from Dubai, under threat of losing lucrative government contracts.
However, in 2020, foreign direct investment into Saudi Arabia was only $5.4 billion, a far cry from the $19 billion that Riyadh had set as target, and less than half of the foreign investment acquired a decade earlier.
According to the WSJ, one reason foreign investment has remained so low is “planned projects that didn’t happen.”
Among these is Apple’s failed plans to open a flagship store in Riyadh, as well as Triple Five Group, the developer of the Mall of America, pulling their plans to build a “multibillion-dollar” entertainment complex.
MbS’s plans also took a major hit in 2018 when a team of assassins, reportedly working under his orders, murdered Saudi journalist Jamal Khashoggi at the kingdom’s embassy in Ankara, Turkey.
The WSJ says that this gruesome murder soured “big deals” with Amazon.com, billionaire Richard Branson’s space tourism venture, and Hollywood super agent Ari Emanuel.
In addition, since 2020, the economic crunch caused by the COVID-19 pandemic prompted Riyadh to levy retroactive taxes on dozens of large foreign firms, even forcing them to pay fines after their appeals were rejected by the courts.
This sudden change in tax rules reportedly came on top of an overnight tripling of the value-added tax rate in 2020.
The report also claims that, besides the increasingly hostile Saudi business environment for overseas companies, foreign investors have become “increasingly concerned about their physical safety.”
The WSJ quotes an unnamed foreign businessman who was arbitrarily detained by Saudi authorities. He says he was tortured for publicly criticizing the kingdom’s business laws, calling them “unfair.”