Saudi Arabia announced on Monday that it will stop signing contracts with foreign companies from 2024 unless their regional headquarters are based in the Kingdom, part of a push to give more of the Kingdom’s economic opportunities to countries that will hire local talent and compete with neighboring cities in other Gulf nations.
The decision is only limited to government contracts and does not affect the private sector’s investments and contracts that operate according to its own governance rules, according to reported comments by Saudi Arabia’s minister of finance Mohammed Al-Jadaan.
Saudi Arabia’s Minister of Investment Khalid Al-Falih.
“If a company refused to move their headquarters to Saudi Arabia it is absolutely their right and they will continue to have the freedom to work with the private sector in Saudi Arabia,” Al-Jadaan said, per Reuters. “But as long as it is related to the government contracts, they will have to have their regional headquarters here.”
Foreign firms have long used the United Arab Emirates as a home base for their regional operations, including for operations within Saudi Arabia’s borders. But Saudi Arabia wants those doing business with the government to be locally based, hiring Saudis and contributing to the Kingdom’s economic and social growth.
The decision is in-line with Vision 2030 and has been in the works for some time, according to Saudi Minister of Investment Khaled Al-Falih. Al-Falih said that 24 international companies have said they intended to move their regional headquarters to Riyadh. The decision to limit government procurement and investment contracts to companies located in Riyadh will be an additional motivating factor for the request of hundreds of international companies to be present in the financial district of the Saudi capital, according to Arab News.
“Competition is required, and the decision does not contradict the rules of competition. It will rather support the presence of international companies near neighboring countries, thus providing investment opportunities for global companies, which will be present in the region near the decision-making areas,” Al-Falih said.
“The decision … will reflect positively in the form of creating thousands of jobs for citizens, transferring expertise, and localizing knowledge, as it will contribute to developing local content and attracting more investments to the kingdom,” Al-Falih added via Twitter.
The decision is the latest putting Saudis first in Crown Prince Mohammed bin Salman’s push to open up the Kingdom and diversify its economy.
