The Saudi Arabian cabinet has approved legislation governing contracts with companies lacking regional headquarters in the kingdom.
The Regional Headquarters (RHQ) program is set to take effect on January 1, 2024, following the cabinet’s endorsement, according to a report by Middle East.
In December 2022, the Council of Ministers sanctioned regulations concerning government agencies’ contracts with entities lacking an RHQ in Saudi Arabia and their associated parties.
The legislation excludes government works and purchases valued below SAR1 million.
As the January 2024 deadline approaches for companies to relocate their regional headquarters to Saudi Arabia, failure to comply poses a risk of being ineligible for government contracts totalling hundreds of billions of dollars.
The statement did not disclose specific contracting regulations, leaving uncertainty about whether the Saudi government can award contracts to foreign firms without an RHQ in the kingdom.
This move aligns with Crown Prince Mohammed bin Salman’s efforts to diversify the economy away from oil and attract foreign direct investment.
Despite challenges foreign firms face in meeting the deadline amid unclear regulations, Finance Minister Mohammed Al-Jadaan affirmed the enforcement of the relocation deadline.
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