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."



Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)

Telecommunications companies listed on the Saudi Stock Exchange (Tadawul) achieved a 12.46 percent growth in their net profits, which reached SAR 4.07 billion ($1.09 billion) during the second quarter of 2024, compared to SAR 3.62 billion ($965 million) during the same period last year.

They also recorded a 4.76 percent growth in revenues during the same quarter, after achieving sales worth more than SAR 26.18 billion ($7 billion), compared to SAR 24.99 billion ($6.66 billion) in the same quarter of 2023.

The growth in the revenues and net profitability is the result of several factors, including the increase in sales volume and revenues, especially in the business sector and fifth generation services, as well as the decrease in operating expenses and the focus on improving operational efficiency, controlling costs, and moving towards investment in infrastructure.

The sector comprises four companies, three of which conclude their fiscal year in December: Saudi Telecom Company (STC), Mobily, and Zain Saudi Arabia. The fiscal year of Etihad Atheeb Telecommunications Company (GO) ends on March 31.

According to its financial results announced on Tadawul, Etihad Etisalat Company (Mobily) achieved a 33 percent growth rate of profits, bringing its profits to SAR 661 million by the end of the second quarter of 2024, compared to SAR 497 million during the same period in 2023. The company also achieved a 4.59 percent growth in revenues to reach SAR 4.47 billion, compared to SAR 4.27 billion in the same quarter of last year.

The Saudi Telecom Company achieved the highest net profits among the sector’s companies, at about SAR 3.304 billion in the second quarter of 2024, compared to SAR 3.008 billion in the same quarter of 2023. The company registered a growth of 4.52 percent in revenues.

On the other hand, the revenues of the Saudi Mobile Telecommunications Company (Zain Saudi Arabia) increased by about 6.69 percent, as it recorded SAR 2.55 billion during the second quarter of 2024, compared to SAR 2.39 billion in the same period last year.

Commenting on the quarterly results of the sector’s companies, and the varying net profits, the head of asset management at Rassanah Capital, Thamer Al-Saeed, told Asharq Al-Awsat that the Saudi Telecom Company remains the sector leader in terms of customer base expansion.

He also noted the continued efforts of Mobily and Zain to offer many diverse products and other services.

Financial advisor at the Arab Trader Mohammed Al-Maymouni said the financial results of telecom sector companies have maintained a steady growth, up to 12 percent, adding that Mobily witnessed strong progress compared to the rest of the companies, despite the great competition which affected its revenues.

He added that Zain was moving at a good pace and its revenues have improved during the second quarter of 2024. However, its profits were affected by an increase in the financing cost by SAR 26.5 million riyals and a rise in interest, while net income declined significantly compared to the previous year, during which the company made exceptional returns.