The Saudi Arabian government announced tonight a decree that outlaws "influence peddling" in government contracts.
The decree also restricts the activities and fees of contract agents who represent foreign businesses in their dealings with the Saudi government.
Among those affected by the decree will be 30 to 40 members of the royal family and other prominent Saudis who have made hundreds of millions of dollars as go-betweens for American and other foreign corporations involved in the $142 billion development plan now under way here and from other foreign business transaction.
An American businessman who has been dealing with the Saudis said here that the new decree "is probably not airtight but it could be the beginning of building a wall" to insulate contracts from influence peddlers.
The announcement was made by Ghazi Al Qusaybi, the minister of industry and electricity Qusaybi said the curbs on "influence peddling" and middleman activities follow the general recommendations made by a U.S. Senate subcommittee that investigated bribes and agent commissions paid overseas by American corporations.
The six-point decree prohibits influence peddling with any government agency, limits agent fees to 5 per cent of a contract price, bars the use of non-Saudi agents, prohibits any agent from representing more than 10 companies, prohibits agent fees on any contract involving military equipment and facilities and on any government-to-government transaction.
The new system will also require that the names of middlemen be included in all contract proposals and that all middlemen or agents, including members of the royal family, must list thier clients in public registers.
Al Qusaybi said the decree will eliminate much of the corruption involved in contracting here "if foreign businesses will cooperate."
He did not name any of the royal family members affected but one of the sons of Crown Prince Fahd was involved in a spectacular case recently. He represented Phillips Netherlands, a huge Dutch electronics firm, in negotiations for a contract to modernize the telephone system of Saudi Arabia. Phillips came in with a $6 billion proposal. The government then announced that Phillips would get the contract without competitive bidding.
This decision created great controversy and, largely through the efforts of Al Qusaybi, was later rescinded. Competitive bids were then received from three combines. Phillips headed one. American Telephone and Telegraph headed another.International Telephone and Telegraph headed the third.
Each bid was roughly half of the original Phillips bid or about $3 billion. The contract went to Phillips last fall and Fahd's son is said to have collected "hundreds of millions as his agent's fee.
Another major scandal involved Adnan Khashoggi, a free-wheeling multimillionare, who was accused by the Northrop Corporation of demanding $450,000 to bribe two Saudi generals to influence defense contracts. Lockheed Aircraft also disclosed that it had paid Khashoggi $105, million in "agent's fees" between 1970 and 1975.
Fortunes have been made from agent's fees by many Saudis, including the family of Ali Alireza, the Saudi ambassador to Washington.
An American businessman said here last night that the new decree "is probably not airtight but it could be the beginning of building a wall" to insulate contracts from influence peddlers.
Two years ago the government announced that agent's fees were no longer acceptable in armament contracts. They also have been eliminated from the $8 billion in construction projects for the military which are being supervised by the U.S. Corps of Engineers, according to Col. Joseph D. Bennett.