JEDDAH, 1 August — The Cabinet decision allowing foreign contractors to operate in the Kingdom without a Saudi agent will open up the economy further to foreign investment and will put an end to cover-up practices rampant in the sector, informed sources told Arab News yesterday.
The Council of Ministers decided on Monday to annul a 25-year-old law that regulated the relationship between the foreign contractor and his Saudi agent. The law was a burden on foreign investors as it caused the cost of projects to shoot up.
In accordance with the law, a foreign contractor had to give five percent of the contract value to his Saudi agent.
Sources at the Riyadh Chamber of Commerce and Industry said the Cabinet took the decision in response to demands from contractors.
Hussein Shubokshi, a prominent Jeddah businessman, said the decision would increase competition between Saudi and foreign contractors. He urged Saudi contractors to establish large companies by merging smaller firms as they will face stiff competition from outside.
He said foreign contractors are likely to win contracts for building railways, electricity plants, telecommunications projects and public schools. American and European investors have already offered $3.5 billion investments to construct new buildings for government schools.
Foreign contractors, the chamber sources said, may have to open offices in the Kingdom, to represent their activities and deal with government departments.
“They have to spend more than five percent of the contract value on such offices. The office will be responsible for the mistakes of the foreign company before the Saudi judiciary,” the sources added.
