Saudi Arabia has halted issuing new contracts for western consultancies as the kingdom monitors the economic effects of the US-Iran war, the Financial Times reported, citing company executives.
The executives said the move was to give Riyadh tighter control over public spending as the conflict, which has featured attacks on Saudi infrastructure, puts the kingdom's oil revenue in jeopardy, the FT said.
One of the executives said payments to consultancies have been frozen until July. Earlier, Semafor reported that government units had been ordered to stop payments to strategy advisers, management consultants and law firms. “They are saying 'we are not paying you any time soon, until July,'” the executive said.
State spending has surged under the stewardship of Crown Prince Mohammed bin Salman, whose Vision 2030 economic diversification programme called for the construction of mega infrastructure and luring big-ticket investments.
Those provided a huge opportunity for consultancies, including bellwethers Deloitte, PwC, EY and KPMG, as well as Boston Consulting Group, and McKinsey and Company. These firms have established bases in the kingdom and conducted business under the programme.
Another executive told the FT that the decision has not been formally issued, “but everyone knows and everyone is operating on this basis”.
The ministry, meanwhile, said that it, along with the government, has “always looked to ensure all investments, including consultancy services, provide clear returns in line with the strategic objectives of Vision 2030", a ministry representative reportedly said.
Saudi Arabia, the Arab world's biggest economy, continues to invest heavily in sectors such as infrastructure, tourism and real estate to spur growth in its non-oil sector, but has recently been recalibrating its strategy.
One such move is the positioning of Neom, the $500 billion mega futuristic city at the centre of Prince Mohammed's ambitions, as a logistics hub, with the development of a new trade corridor connecting European and Gulf markets.
