gulf consulting house (gch)

Gulf Consulting House (GCH)

1

GCH

We would like to welcome you first and thank you for

attending this discussion.

Today we will focus on the new rules and instructions

issued by SAGIA concerning the foreign companies

in contracting & construction sectors.

2

Gulf Consulting House

GCH is a consultancy office based in ( Eastern

province - AlKhobar) and Riyadh, Kingdom of Saudi

Arabia and Manama In Kingdom of Bahrain.

Our major service is to register foreign companies

and provide after registration consultancy services.

GCH registered more than 1000 Company. GCH is

also a consultancy office dealing with more than 30

embassies in the Kingdom of Saudi Arabia. You are

always welcomed to visit our website to get more

information about GCH services and latest news

and events by visiting www.gch-saudi.com

3

http://www.gch-saudi.com/







SAGIA’s New Investment Policy

SAGIA is now applying a very strict and conservative policy

regarding issuing new licenses as well as renewing existing

licenses. This is in fact a reaction to the relatively easy

process which SAGIA applied few years ago and which led

foreign companies to enter the Saudi market. Some of

those investing companies (as per SAGIA) had negative

effect on Saudi Economy.

4


SAGIA is now welcoming big players into the market. They

are being very selective now. An example of those

companies working under the sectors of contracting, IT and

communication.

Even for other sectors , the registration requirements has

been changed depending on the targeted activities in KSA.

5


SAGIA Committee has the right to decide whether to

accept or reject issuance of new licenses and/or renewing

existing licenses files if it deems no “Added value" for the

Saudi Market.

For Example, SAGIA Committee in Riyadh is the only

entitled entity to license a new company and not like before

when it was allowed for SAGIA – Damamm to approve

License. Such new procedure affected even the duration of

licensing new companies.

6

1. SAGIA issued new rules and conditions for those

already registered foreign construction and contracting

companies in KSA. Any registered foreign contracting

company must with a period of 12 months from the date

of renewing its license to comply and apply the new

conditions adopted by SAGIA.

2. SAGIA even contacted and sent for all current investors

by e-mail, fax or SMS notifying them about those new

compliance rules.

How new SAGIA Policy will be applied on registered investors in

KSA

7

The followings are the new conditions adopted by

SAGIA to be applied on your companies since your

companies’ activity in KSA falls under the construction &

contracting.

SAGIA will be requesting from you to sign an

undertaking to apply and comply with the followings

within a period of no more than (12) twelve months

from the date of submitting to SAGIA the obligatory

undertaking letter:

What are those new Rules applied on current Contracting and Construction Companies ?

8

Commitments & Undertakings

1- To separate between operating and maintenance activity

and the activity of construction and building so as not to

combine the two activities into one license if the number

of employees is less than 300 employees.

Such separation will off course require from investing

companies to submit new documentations to revise their

License, AOA and CR.

9


2- To replace the phrase (execution of contracts) with the

phrase (construction and building - for activities in the field

of construction and building) or by the phrase

(management of maintenance, operation and cleaning -

for activities in management services, maintenance and

operation and cleaning).

10


3- The adoption of the areas of classification issued by the

Ministry of Municipal and Rural Affairs (MOMRA) as a

reference for the identification and description of the

activities related to the construction activity, building,

management and maintenance actively operating and

cleaning issued by SAGIA

11


4- Obtaining an insurance against company’s errors in

execution of the project.

12


5- Provides an unconditional and irrevocable bank

guarantee in the name of SAGIA by 2% of the financial

limits for 3rd Class of the classifications for the targeted

activity. Such guarantee remains valid and enforceable

until the write-off the commercial registration. In Addition

to the above mentioned, a bank guarantee of 2% of the

average value of the projects executed annually (which is

higher). 13

Financial limits set out below are in accordance with the decision of the Council of Ministers No. 155

date 5/6/1429.

14

Explanation for Classes/ Fields Buildings

Concrete buildings

Precast buildings

Steel Buildings (steel)

Roads

Earthworks for the construction of roads,

including (backfill , leveling & compaction)

Pavers

Runways

Bridges

Tunnels

Railways

Water Works & Sewage

Water purification plants & sewage

Water & sanitation

Storm water drainage networks

Water reservoirs

Irrigation & drainage projects

Water pumping stations & sewage

Electrical Work

Power plants

Energy conversion plants

Power Transmission & Distribution

Street Management

Traffic lights

Solar power plants

Cathodic protection

The uninterruptible power units

19

Explanation for Classes/ Fields E-Business

Transmission system & visual voicemail

Equipment of audiovisual studios

Production control functioning system

Monitoring , safety & security System

Medical / laboratory electronic equipment

Supply & installation of devices & computer

equipment (computers, networks & extensions).

Telecommunication Technology

Telephone local & long-distance.

Mobile telecommunication services.

Enhanced communications services.

Communications services using fiber.

Telecommunications services using a dial-up

circuits & custom lines

Core network capabilities.

Client Access Services.

Development of systems, applications &

databases.

Internet services.

20

Explanation for Classes/ Fields Mechanical Works Cooling System Central A/C system Water pumping stations & sewage Water purification plants, sewage treatment plants Ventilation system Elevator / escalator Silos Pneumatic transport networks Container berths Bulk shipments handling networks Conveyor system Mechanical heating system Turbine / steam boilers Power plants Fire control systems

Industrial Works

Factories

Desalination plants

Networks, oil & gas pipelines

Flour Mills

Waste incinerators

Silos

Shipbuilding & Repair Shipyard

Gas containers

Mines & mining industries

21

Explanation for Classes/ Fields planting gardens & organize sites

(landscaping )

streets planting

Gardens

Public parks

Organizing sites

Irrigation systems for gardens

Slaughterhouses

Automatic Slaughterhouses

Regular Slaughterhouses

Marine Works

Repair Ship yards

Jetties

Drilling and fixing of pillars

Deepening & cleaning

Underwater tunnels

Underwater extensions

Barriers / bridges / roads Navy,

Anchors

Dams

Concrete dams

Earthen dams

Drilling wells

Tubular Wells

Manual wells

22


6- Provide organization structure of entity and Saudization

plan provided that the foreigners percentage of managers,

executives, specialists and technicians not to exceed 25%

of the total of admin, executives, specialist jobs for entities

with manpower less than 300 employee.

23


7- Provide an annual report on all projects that awarded to

or executed by the company and the value of each

project. Such project size should commensurate with

entity size and its manpower, execution by subcontracting

should not exceed 20% of each contract value.

24


8- Provide all data, information and the financial statements

to any auditor assigned by SAGIA to audit its financials.

25

Example for Current Licenses

OBJECTIVES:

Performance of contracting works related to

construction, operating and maintenance, repair,

commissioning of: Power Plants and all related works

under the Saudi Arabian General Investment Authority

License No ………………..Dated ………….(H)

26

Changes to be adopted

To rewrite the objectives of the company by

omitting “Performance of contracting works”. And

to rephrase it in away accepted by SAGIA.

To separate between Construction and

Maintenance activities. For companies less than 300 employees in KSA.

To provide a bank guarantee for an amount of

SAR 2.8 Million.

27

How Serious is this issue ?

SAGIA is taking this subject very serious and will apply a

real strict penalties on those companies fail to meet the

new standards (SAGIA stipulated more than 34 violation

acts).

Penalties adopted by SAGIA may result in applying huge

fines and even cancelling the investment license.

28

How Serious is this issue ?

SAGIA Board of Directors Issued on 14/11/1433 (H)

corresponding to 30/09/2012 (G) a new list of acts

considered Violations to SAGIA Regulation, the complete

list of violations can be found in our web site:

www.gch-saudi.com.

29

What will be the case if you did not comply with SAGIA’s new requirements

Unfortunately, it is not an option to negotiate with SAGIA at

this stage about the wording of the undertaking letter. It is

a must to submit this letter as is and you will get 12 months

provisional period after that to “correct” your company

situation to meet new SAGIA requirements. Any company

violates the investment regulation shall be subject for one

or more of penalties to be decided by SAGIA committee.

30

What to do ?

GCH is ringing the bill for a serious issue which you need

to handle and take care about. GCH offers hereby for you

to assist and guide your esteemed companies to apply and

comply with new SAGIA’s instructions and criteria on

Construction Companies

31

What is the Mechanism adopted by SAGIA ?

SAGIA’s Licensing Follow up Department major role is to

check and categories investors into 2 main categories;

Complied with SAGIA Not complied

with SAGIA

32

What is the Mechanism adopted by SAGIA ?

The most important thing is to be Complied with SAGIA

where all services will be provided to the company and this

depend on the discussions with Follow Up Department and

reliable explanation to SAGIA if you cannot comply with

some of those undertakings and find proper solutions.

33

GCH Advice

Take Care !!

Always focus on how your company can comply with those new requirements and keep in mind that not all conditions apply on all companies.

You need to avoid falling in any of restricted acts which may complicate your file in SAGIA.

always shoot for keeping your company updated with all new and most recent regulations and instructions issued by SAGIA and other government departments.

.

34

!

Thank you

35

Phone: +966 (13) 8820570 / +966 (13) 8873041

Fax: +966 (13) 8822147

E-mail: [email protected]

mailto:[email protected]



gulf consulting house (gch)

Documents