Saudi to tighten contracting rules; Pressure on foreign firms to set up regional HQs in Kingdom

By Amirtha P S, Desk Reporter
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Saudi Arabia
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Saudi Arabia will stop giving contracts to companies and commercial institutions that have their regional headquarters outside the kingdom from 2024.

“The cessation will include agencies, institutions and funds owned by the government and will take effect January 1st, 2024,” as per the state-run press agency’s report citing an official source.

According to the sources, Saudi Arabia is taking the step with an aim to incentivize the localization of businesses by foreign companies that deal with the kingdom’s government or any of its agencies, institutions and funds. 

With this move, the kingdom further aims to create more jobs, reduce economic leakage, increase spending efficiency, and guarantee that the main goods and services purchased by the different government agencies are made in the country with appropriate local content.

Following the ambitious growth plans of Saudi Arabia, the government has been encouraging multinationals to establish regional offices in the kingdom’s capital and the leadership also aims to position Riyadh among the top 10 city economies in the world, up from number 40 currently.

The source affirmed that such a decision will not affect any investor’s capacity to enter the Saudi market, or to continue their business with the private sector, stating that rules related to this decision will be issued in 2021.

Speaking at the Future Investment Initiative forum last month, Brendan Bechtel, president of the US’s biggest contracting group, Bechtel, stated that his company is relocating its regional office to Riyadh.

Bechtel was one among 24 companies that subsequently signed agreements to establish their main regional offices in Riyadh along with the big accountancy firms Deloitte and PwC, the world’s largest oilfield services company Schlumberger, German engineering business Bosch and soft drinks giant PepsiCo.

Also Read: Saudi PIF launches 5-year strategy for Kingdom’s economy