Jeddah: The mandatory rule by Saudi Arabia for foreign firms that bid for government contracts to establish their regional headquarters in the Kingdom came into effect from Monday.
The new regulation will boost the country’s non-oil economy as part of Vision 2030 where it is aiming to increase foreign direct investment. The regulation, which requires firms to set up a local base in the kingdom or risk losing out on contracts of government and its entities. It is to be noted that most contracts are awarded by government entities whether ministries or its agencies.
The regional headquarters programme, an initiative by the Ministry of Investment and the Royal Commission for Riyadh City, aims to attract multinational companies by offering a range of benefits including liberal issuance of visas and premium support services including a 30-year tax break. Riyadh, the capital city of Saudi Arabia, has become the new regional headquarters for more than 200 international companies.
The companies that had already relocated their regional headquarters include PepsiCo, DiDi, Unilever, Siemens, KPMG, Novartis, Baker Hughes, Halliburton, Philips, Flour, Schlumberger, SAP, PwC, Oyo, Boston Scientific and Tim Hortons. However, it has relaxed the norm in exceptional cases. The estimated cost of the works and procurements is less than one million Riyals, or the works and procurements conducted outside the Kingdom can be awarded without having regional headquarters in Saudi Arabia, according to media reports.
Also, foreign companies that offer services or commodities are sole providers in their field and emergencies that can only be addressed by them can bid for contracts. However, authorities will only be able to approve them if they are technically superior and 25% cheaper than the next best offer, or if there are no competing offers, said reports.
An Exemption Committee would review and approve exemptions in this regard, news reports said.
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