Saudi Arabia: Contracting with Foreign Companies Now Tied to Regional Headquarters

Saudi Arabia intends to stop contracting any foreign company or commercial institution headquartered outside the Kingdom. (Asharq Al-Awsat)
Saudi Arabia intends to stop contracting any foreign company or commercial institution headquartered outside the Kingdom. (Asharq Al-Awsat)
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Saudi Arabia: Contracting with Foreign Companies Now Tied to Regional Headquarters

Saudi Arabia intends to stop contracting any foreign company or commercial institution headquartered outside the Kingdom. (Asharq Al-Awsat)
Saudi Arabia intends to stop contracting any foreign company or commercial institution headquartered outside the Kingdom. (Asharq Al-Awsat)

Saudi Arabia is holding on to its decision that foreign companies will be required to base their regional headquarters in the Kingdom, which enters into effect on January 1, 2024.

The government issued more than 180 licenses to international companies to move their regional headquarters after it announced the decision to stop contracting with entities that do not adhere to the state's direction at the beginning of 2024.

Last week, the Saudi cabinet approved contracting regulations for firms that do not have regional headquarters in the Kingdom.

Experts believe the government granted foreign companies a long and sufficient period to prepare their regional headquarters in Saudi Arabia and not risk losing hundreds of billions of dollars in lucrative government contracts.

Specialists confirmed to Asharq Al-Awsat that companies that announced the transfer of their regional headquarters to Saudi Arabia will benefit from competition for business and government procurement.

Economics Professor at the University of Jeddah Salem Baajaja explained that the Kingdom's decision to stop contracting with foreign companies or institutions that do not have a regional headquarters in the country limits economic leakage and generates more jobs for citizens.

Baajaja stated that the government has given companies a sufficient period to move their regional headquarters, and now it is time to stop contracting with parties that do not adhere to this decision.

Economic expert Ahmed al-Jubeir told Asharq Al-Awsat that with the decision entering into force, dealing with entities that do not implement the Kingdom's directives will be prohibited.

Jubeir added that this approach confirms the government's intention to generate more jobs and ensure efficient spending.

Halting contracts

The decision came a few days before the government's deadline so that foreign companies and institutions could move their regional headquarters to the Kingdom and avoid the risk of losing contracts with public agencies in the future.

The controls aim to regulate the contracting of government agencies with companies that do not have a regional headquarters in Saudi Arabia or with any relevant party.

The following business and procurement controls are excluded, and the estimated cost shall not exceed $266,000. Under public interest requirements, the Minister can amend this amount, cancel this exception, or temporarily suspend it.

The Ministry of Investment, in coordination with the Ministry and the General Authority for Foreign Trade, has prepared a list of companies that have no regional headquarters in Saudi Arabia and periodically updates it or whenever needed. The list has been published on the e-portal.

The controls stated that government agencies should not invite companies with no regional headquarters in Saudi Arabia or any relevant party to participate in their limited competitions except in some instances.

Government agencies will only invite companies with regional headquarters in Saudi Arabia or any relevant party to participate in their limited competitions in one of the following cases:

- The conditions require up to one qualified competitor other than companies with no regional headquarters in Saudi Arabia or relevant parties to carry out the business or secure the required purchases.

- The existence of an emergency can only be dealt with by inviting companies that do not have a regional headquarters in the Kingdom or relevant parties.

According to the controls, government agencies that contract with any company and related parties not headquartered in the Kingdom must prepare a report that includes the reasons for the contract.

They must also provide the General Auditing Bureau and the Governmental Spending and Projects Efficiency Authority with a copy of the report within 30 working days of signing the contract.

Under the regulations, the Ministry of Investment will establish a committee for "the exception of government agencies' contracting controls with companies and related parties not headquartered in Saudi Arabia."



Dollar Rises ahead of Fed; Turkish Lira Drop Reins in G10 Currencies

Banknotes of Japanese yen are seen in this illustration picture taken September 22, 2022. REUTERS/Florence Lo/Illustration/File Photo
Banknotes of Japanese yen are seen in this illustration picture taken September 22, 2022. REUTERS/Florence Lo/Illustration/File Photo
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Dollar Rises ahead of Fed; Turkish Lira Drop Reins in G10 Currencies

Banknotes of Japanese yen are seen in this illustration picture taken September 22, 2022. REUTERS/Florence Lo/Illustration/File Photo
Banknotes of Japanese yen are seen in this illustration picture taken September 22, 2022. REUTERS/Florence Lo/Illustration/File Photo

The dollar rallied on Wednesday ahead of the Federal Reserve's decision on interest rates, but retreated from the day's highs after markets stabilized from an early shock caused by the detention

of Turkish President Tayyip Erdogan's main rival.

Traders are also digesting the Bank of Japan's earlier decision to hold interest rates steady, while the Fed's policy decision later will be crucial for investors eager to know what the central bank makes of Trump's policies and their impact on the US economy, and how that affects the rate outlook.

Fed policymakers are widely expected to keep rates on hold, and will also release new economic projections at the conclusion of the meeting later in the day, Reuters reported.

Feeding into an earlier rally in the dollar was news out of Turkey which saw the lira briefly tumble by the most in a day on record, rippling through major currencies as investors shifted into safe-haven assets.

By 1226 GMT, the euro was down 0.3% versus the dollar to $1.091, having fallen as much as 0.6% earlier. Even so, it remains near a five-month high of $1.0955 scaled in the previous session.

"The news from Turkey is having an impact on G10 currency markets and risk appetite in general," said Jane Foley, head of FX strategy at Rabobank.

"But I would think some of the initial impact of what's happened will begin to filter out from some of the euro trade once the market has become a bit more accustomed to it."

The yen weakened against the dollar, which rose 0.3% to 149.805 in volatile trade as investors mulled the BOJ decision to hold rates steady and comments from Governor Kazuo Ueda .

The widely expected BOJ decision underscored policymakers' preference to spend more time gauging how mounting global economic risks from higher US tariffs could affect Japan's fragile recovery.

"The decision to leave monetary policy unchanged itself is not a surprise, so its impact on exchange rates is limited. However, the earlier-than-usual timing of the announcement seems to have led financial markets to initially interpret that the BOJ (did not consider) bringing forward a rate hike," said Hirofumi Suzuki, chief FX strategist at SMBC.

Adding to nervousness among investors, Israeli airstrikes pounded Gaza overnight, while US President Donald Trump and Russian President Vladimir Putin failed to reach an agreement on a Ukraine ceasefire.

The more risk-sensitive currencies edged lower, with sterling down 0.2% at $1.29795, not far from the previous session's four-month high of $1.3010, while the Australian and New Zealand dollars fell 0.4% and 0.5%, respectively.

Against a basket of currencies, the dollar ticked up 0.2% to 103.55, coming off a five-month low of 103.19 on Tuesday.

The dollar has fallen nearly 4% for the month, pressured by Trump's erratic approach to tariffs and as fears mount of a recession in the world's largest economy.

Traders are currently pricing in nearly 60 basis points of Fed rate cuts by the year end.

"The March FOMC meeting will likely be all about policy uncertainty. The Fed will almost certainly stay on hold, emphasising patience over panic," said analysts at Bank of America Securities.

"The (Summary of Economic Projections) forecasts and distribution of risks are both likely to reflect stagflation: weaker growth and higher inflation."