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."
