Saudi Arabia's Vision 2030: Foreign Investment Bidding Landscape, Risks, and Opportunities

Since the 1970s, Saudi Arabia has had a clear understanding of the unsustainability of its oil-based economy. In recent years, the rise of the renewable energy economy has intensified the kingdom's sense of urgency. As a major economic engine in the Middle East, Saudi Arabia is pushing infrastructure development and economic diversification through its Vision 2030 plan. The goal of this plan is to reduce the kingdom’s over-reliance on oil revenues, pursue sustainable economic growth, and enhance its global competitiveness. Today, Saudi Arabia’s economic landscape is gradually expanding from oil dominance to include new sectors such as tourism, manufacturing, technology, and renewable energy. In 2023, Saudi Arabia’s GDP surged to approximately $1.05 trillion, making it one of the fastest-growing economies globally, with Vision 2030 already showing early success.

Bidding is one of the key means through which Saudi Arabia drives its economic transformation. The kingdom has allocated SAR 600 billion (approximately $160 billion) for bidding projects, offering extensive opportunities for foreign enterprises, especially Chinese companies, particularly in the construction, energy, and technology sectors. By participating in critical projects such as large-scale infrastructure development, renewable energy, and smart city projects, foreign companies can play a significant role in Saudi Arabia's economic transformation.

China’s expertise and experience in power and infrastructure have gained unprecedented attention in Saudi Arabia. Khalid Al-Falih, Saudi Arabia’s Minister of Investment, has noted that about 750 Chinese companies are currently operating in the kingdom, spanning sectors such as infrastructure, energy, and emerging technologies. These companies have been involved in several large-scale Saudi projects, such as the NEOM project. For instance, China State Construction Engineering Corporation (CSCEC) collaborated with local Saudi firms to secure a $2 billion contract for the Diriyah project, tasked with developing new urban areas. Additionally, Chinese photovoltaic company Jinko Solar has established a photovoltaic module production base in Saudi Arabia, with plans to reach an annual capacity of 20GW, contributing to Saudi Arabia’s green energy transition.

While many Chinese companies have entered the Saudi market, the truly profitable sectors are mainly concentrated in power and infrastructure, where China has significant experience and expertise. However, Chinese companies targeting consumer markets have found it challenging to achieve short-term profitability. For example, Meituan’s food delivery platform Keeta has struggled to gain an advantage against local competitors such as HungerStation and Jahez.

Therefore, this article will focus on the bidding market in the infrastructure sector. For Chinese companies, entering the Saudi market requires not only a deep understanding of the bidding process but also a thorough grasp of Saudi culture, relevant legal regulations, and key local stakeholders. Special thanks to Sean Zou, co-founder of Firm Hill, for his interview and invaluable insights. Through interviews with EqualOcean and former senior officials from Saudi Arabia's General Contractor Management Authority, we have identified several key enterprises and institutions that play pivotal roles in project planning and execution within Saudi Arabia’s bidding market. These companies' performance and influence in their respective sectors not only drive the kingdom's development but also provide essential collaboration opportunities for bidding companies.

Saudi Cultural and Legal Context: In Shanla, Everything Is God’s Will

Any company entering Saudi Arabia must understand that it is a religion-driven society, where religion deeply influences all aspects of life. Business decisions may provoke strong reactions on cultural or religious grounds, so foreign companies must exercise caution when formulating strategies. Gaining a comprehensive understanding of Saudi Arabia's unique cultural, legal, and business environment is critical when entering the market.

For Chinese companies, understanding the Saudi cultural background is vital. The label of being an "outsider" has long been a challenge for multinational companies in the Middle East, even for Western companies with years of experience in the region. For new entrants, especially Chinese companies, this issue of identity can be even more pronounced. Although high-profile marketing strategies can quickly attract attention, in the Middle Eastern context, this approach can backfire. Thus, foreign companies should maintain a low profile and adopt a cautious communication style when bidding in Saudi Arabia.

Notably, Saudi Arabia’s legal system is based on Sharia (Islamic law), and all business activities must comply with Islamic financial principles. For example:

Prohibition of Interest (Riba): Under Sharia law, charging interest is illegal. Saudi financial transactions focus more on profit-sharing and risk-sharing, such as the Mudaraba and Musharaka models. Foreign companies working with local banks must select compliant financial products like Sukuk (Islamic bonds).

Prohibition of Uncertainty (Gharar): Sharia law strictly limits uncertainty in transactions. All contract terms must be clear and transparent, ensuring both parties fully understand the agreement. This is especially crucial in complex projects or long-term partnerships.

Despite the series of reforms Saudi Arabia has implemented in recent years to facilitate foreign market entry, foreign companies still need to navigate sector-specific restrictions and localization requirements. In sensitive sectors such as energy and defense, foreign companies are required to operate in partnership with local entities.

"While payment collection is not an issue, the difficulty in executing and winning bids for Saudi projects far exceeds the norm."

— Sean Zou, Co-Founder of Firm Hill

Unveiling the Full Bidding Process in Saudi Arabia: Key Steps from Submission to Winning

Based on comprehensive interviews and research insights, EqualOcean has summarized a handy guide for participating in the bidding process in Saudi Arabia. This guide aims to help readers understand the critical milestones and requirements of the Saudi bidding process.

Before participating in bidding in Saudi Arabia, companies must thoroughly understand the local business etiquette and cultural differences. Paying attention to these details not only helps companies resonate more deeply with local personnel but also facilitates smooth cooperation with local businesses.

When bidding in Saudi Arabia, foreign companies must first ensure that their company registration and employment ratios comply with localization policy requirements. Saudi society is highly hierarchical, and business decisions are often made by top leadership. Therefore, establishing direct connections with decision-makers is crucial. In addition, trust and relationships are the foundation of business success. Foreign companies must invest time in building long-term relationships with potential clients or partners, rather than merely offering the lowest price. Lastly, Saudi Arabia’s perception of time can be flexible. While it is essential to submit bid documents on time, meetings and negotiations may be delayed. Foreign companies must demonstrate patience and respect for local culture and religious customs.

The success of foreign companies in Saudi Arabia depends not only on their business strategies but also on their ability to keenly understand and flexibly adapt to cultural and legal differences. EqualOcean analysts, after interviewing Saudi managers, shared some practical bidding advice. In Saudi Arabia, the bidding process for foreign companies is highly meticulous, requiring careful time management from the preparation stage to contract signing. This is especially crucial when cooperating with government projects or large enterprises, as mastering the key steps and time requirements of each stage is essential for success.

Step 1: Market Research and Project Evaluation

Before bidding, foreign companies need to conduct comprehensive market research and project evaluation to ensure that the selected project aligns with their technical capabilities, financial strength, and strategic goals.

Project Information Gathering: Foreign companies should closely monitor Saudi government tender platforms, such as the Etimad platform, regularly checking for the latest tender announcements and project details. For private projects, companies must immerse themselves in the local market to seize bidding opportunities.

Prequalification: For large-scale projects, the Saudi government often requires companies to go through a prequalification process to ensure they possess sufficient financial strength and technical capabilities. Companies need to submit financial reports, project experience, and technical resources. Prequalification usually takes 1-2 weeks, and only companies that pass this stage can proceed to the formal bidding phase.

Step 2: Preparation and Submission of Bidding Documents

Once prequalified, companies enter the formal bidding document preparation stage. Saudi bid documents can range from a few thousand to over ten thousand pages, with technical requirements and material standards far more complex than those in other countries. For example, some construction projects may require the use of specific materials from Saudi Arabia's "whitelist." Some companies fail to carefully review the bid documents and overlook material requirements, resulting in invalid bids or disputes during contract execution. Therefore, companies must pay close attention to the selection of materials and suppliers, ensuring compliance with local standards.

Certain companies have encountered significant issues during contract execution due to inadequate understanding of bid document details, especially regarding cost estimates for materials like timber. These issues, often overlooked during bid document review, can lead to severe legal and financial risks later. To avoid similar situations, companies should thoroughly review the bid documents during preparation and ensure that every clause is fully understood through legal counsel and professional translation services.

While many companies view the Middle East as a region of wealthy "oil-rich nations," the local sensitivity to pricing cannot be underestimated. The region has long relied on a low-cost workforce from India and Pakistan while depending on professional services from Europe and the U.S., making them highly focused on cost-effectiveness. During the bidding process, how to provide the highest standards at the lowest price and cost becomes a key focus.

Foreign companies must also ensure full compliance with all registration and workforce localization requirements during the bidding process. Selecting a reputable local partner is crucial, as it can not only help companies integrate into the market faster but also significantly improve the chances of winning bids. Lastly, time management is critical, as Saudi Arabia follows a strict bidding schedule, requiring companies to respond flexibly to key deadlines and ensure timely submission of all materials.

Additionally, companies must balance cost control and competitiveness during bidding while avoiding the strategy of "low-bid wins followed by post-contract modifications." In some markets, companies win bids with low prices, later applying for contract modifications to increase profits. However, in the Saudi market, contract execution is highly strict, and modification approvals are complex with low success rates.

EqualOcean analysts discovered through interviews that some Middle Eastern sectors, such as engineering equipment, occasionally extend bid submission deadlines. Analysts speculate that this could be because some European or U.S. companies have not completed their bid documents, and the deadline extension provides them additional time, giving them a "green light."

This situation reveals Saudi preference for Western companies. Therefore, the establishment of joint ventures between Chinese and European or U.S. companies not only enhances technical competitiveness but also increases local recognition for projects. Past cases show that although Chinese companies have won numerous projects in Saudi Arabia, many tenders are still captured by Western firms. In large-scale infrastructure projects, the consortium model has proven to be a key to success.

Step 3: Bid Evaluation and Selection

Once the bid documents are submitted, the Saudi government will thoroughly evaluate all bids based on the following criteria:

Technical Capability: Evaluating whether the company has the technical resources, experience, and management capabilities to complete the project. The technical proposal should clearly describe how the company will meet the project’s requirements.

Project Execution Plan: Assessing whether the company’s execution plan is reasonable, whether the timeline meets the project’s needs, and whether the company can handle unforeseen circumstances.

Financial Feasibility: Evaluating whether the company’s bid price is reasonable, whether its financial position is stable, and whether its financing plan is viable.

Step 4: Standstill Period and Feedback

After the evaluation process, the Saudi government establishes a 5-10 day standstill period. During this time, unsuccessful bidders can raise objections and submit written appeals. An independent review committee is assigned to examine the appeals, ensuring fairness and transparency throughout the bidding process.

Step 5: Contract Signing and Project Launch

After the standstill period ends, the winning bidder receives a notification of award and enters the contract signing phase. The contract must comply with Saudi law, particularly the Saudi Commercial Contracts Law, and is typically drafted in Arabic. After signing, the project officially begins. Companies must ensure a thorough understanding of all contract terms and prepare all necessary resources to ensure the project proceeds as planned.

Post-award challenges for companies mainly revolve around uncertainties in contract execution and project delivery. In interviews with EqualOcean analysts, companies indicated that payment collection in Saudi projects is typically not an issue. Instead, the challenge lies in finding the right people to streamline the entire execution chain. For instance, a Chinese company’s construction vessel was forced to stay in a Saudi port for one and a half months because no government officials processed the port entry documents, leading to high detention fees and significantly increasing project costs. This was largely due to governance issues within the local Saudi government, where companies have no choice but to cooperate rather than press demands. Finding the right people and partners becomes a key pain point for many companies venturing abroad.

Analysis of Saudi Bidding Process: A Case Study of NEOM

NEOM (New Enterprise Operating Model) is Saudi Arabia's ambitious vision for a future city, covering 26,500 square kilometers. It aims to create a futuristic urban center powered by renewable energy, artificial intelligence, and smart transportation systems, encompassing infrastructure, technological innovation, and various other sectors. Located along the Red Sea coast, NEOM is a key component of Saudi Arabia’s Vision 2030 plan. After understanding the general bidding guidelines, we can further explore the specific requirements of bidding through the NEOM project.

First, companies must register on the Ariba platform, a globally renowned electronic procurement and supply chain management platform. Many large-scale projects, including NEOM, use Ariba for supplier registration and bidding management. Through the Ariba platform, suppliers can submit corporate information and legal documents online to participate in bidding for Saudi government projects, including NEOM. The platform not only streamlines the bidding process but also ensures transparency and fairness in procurement.

The first step in registering as a NEOM supplier is completing initial self-registration on the NEOM official website. This stage is critical as companies submit basic information and authorization documents to confirm their legal ability to represent the company in the bidding process.

After passing the self-registration phase, companies proceed to fill out the Supplier Registration Questionnaire. This questionnaire provides NEOM with more detailed information about the company's background, legal qualifications, and financial status, laying the groundwork for final approval.

Once the questionnaire is submitted, NEOM conducts a final review of all the information provided. Upon approval, companies receive an official approval email confirming their status as a registered NEOM supplier. With this approval, companies can participate in NEOM’s bidding opportunities and other related business activities.

If the review is not successful, NEOM will notify the company via email, explaining the reasons for rejection and offering necessary suggestions and guidance. Companies can modify their application based on this feedback and resubmit it for another review.

NEOM’s electronic procurement system, facilitated by platforms like Ariba, represents an integral part of Saudi Arabia’s push towards digital transparency and efficiency in the bidding process. Through careful adherence to the steps outlined above, foreign companies can successfully navigate the complex bidding environment in Saudi Arabia and take advantage of significant opportunities like the NEOM project.

Conclusion and Outlook

Saudi Arabia's Vision 2030 strategy clearly expresses the nation's urgency to transform within the global economic shift. To reduce its dependence on oil, Saudi Arabia aims to diversify its economy and explore new development pathways. In this context, the current state, risks, and opportunities of foreign investment bidding become particularly significant.

Foreign companies entering the Saudi market face various challenges, mainly centered around compliance and cultural differences. Saudi Arabia's legal regulations and business environment are complex, and foreign firms may encounter difficulties in adapting to these requirements. Additionally, understanding and integrating into the local business culture is essential for the success of foreign companies.

Despite these risks, Saudi Arabia's economic transformation presents foreign companies with a wealth of opportunities, especially in sectors such as infrastructure, technology, and renewable energy. The Saudi government is actively attracting foreign investment and offering various incentives, creating favorable conditions for Chinese companies to invest in these key areas.

To seize these opportunities, Chinese companies must gain an in-depth understanding of the Saudi market dynamics. This involves a comprehensive analysis of the policy environment, market demands, and competitive landscape. By building strong partnerships with local businesses and government entities, Chinese companies can position themselves advantageously in Saudi Arabia’s development, fostering mutually beneficial outcomes.

Overall, under the guidance of Vision 2030, the opening and diversification of the Saudi market offer foreign companies vast growth potential. Chinese enterprises now have a prime opportunity to play a significant role in this transformative journey, contributing to and benefiting from Saudi Arabia's economic evolution.