Saudi Arabia permits exemptions to enable government contracting with international companies lacking regional headquarters

RIYADH — Saudi Arabia has taken a new step toward enhancing the flexibility of its investment environment by permitting exceptions that allow government entities to contract with international companies lacking a regional headquarters in the Kingdom. These exemptions are governed by specific regulations designed to preserve spending efficiency and ensure the timely execution of strategic projects. The Local Content and Government Procurement Authority has notified all relevant entities of the mechanism for submitting exemption requests through the “Etimad” digital platform. This measure seeks to strike a balance between adherence to the “Relocation of Headquarters” decision that came into effect from the beginning of 2024, and the practical requirements of projects involving highly specialized technical expertise or strong financial competitiveness. Under the government’s earlier decision, contracting with any foreign company or commercial establishment whose regional headquarters is located outside the Kingdom was suspended as of early 2024. This directive applies to all government agencies, institutions, funds, and their affiliated bodies. According to reliable sources, the Local Content and Government Procurement Authority has formally communicated the regulatory framework governing government contracts with companies that do not maintain a regional headquarters in the Kingdom, as well as with related parties. The regulations permit government entities to submit a request to the designated committee seeking an exemption for a specific project, a group of projects, or a defined period. Such requests must be filed prior to issuing a tender or initiating direct contracting procedures. The authority has issued two circulars outlining the procedures for submitting exemption requests and addressing contractual cases in accordance with the regulations. It confirmed that the electronic service for submitting such requests was launched via the “Etimad” platform in November 2025. The service is available to government entities that publish their tenders through the “Etimad” platform. Requests for exemptions concerning tenders published prior to the launch of the service, as well as tenders issued outside the platform, will continue to follow the previously established submission mechanism. The “Etimad” platform serves as the official electronic portal for financial services provided by the Ministry of Finance. It is intended to advance the digital transformation of government operations while enhancing transparency and efficiency in the management of budgets, contracts, payments, tenders, and procurement processes. In doing so, it facilitates seamless interaction between government entities and the private sector. When issuing the regulations governing government contracts with companies lacking a regional headquarters in the Kingdom, the Saudi government clarified that such rules do not preclude these companies or any related parties from participating in public tenders. However, their bids will be accepted only under two circumstances: if no more than one technically compliant bid is submitted, or if the bid, following a comprehensive technical evaluation, is deemed the most advantageous and is at least 25 percent lower than the second-best offer. The regulations further exempt projects with an estimated value not exceeding SR1 million. It is noteworthy that the number of international companies that have relocated their regional headquarters to Saudi Arabia surpassed 700 by early 2026, exceeding the original target of attracting 500 companies by 2030. This milestone underscores the Kingdom’s ambition to position itself as a leading regional business hub and a magnet for global expertise. When Saudi Arabia announced its decision to suspend contracting with companies lacking a regional headquarters within the Kingdom, it emphasized that the measure was designed to foster deeper integration of foreign companies and institutions engaged with the Saudi government, its agencies, and affiliated funds and entities. The policy seeks to generate employment opportunities, curb economic leakage, enhance spending efficiency, and ensure that essential products and services procured by government bodies are delivered domestically with appropriate local content.