The Kingdom of Saudi Arabia has been pushing for increased localisation in line with Vision 2030.
On June 21, 2022 Saudi Arabia’s Council of Ministers approved new regulations requiring companies owned by the Saudi government (ownership greater than 50%), to comply with Local Content and Government Procurement Authority (LCGPA) regulations. Regulations now include all entities owned by a Saudi government agency or ministry, Saudi Public Investment Fund (PIF), State-owned enterprise (SOE) or investment body.
Overall, there are seven local content mandates that companies need to follow:
- Mandatory List- Companies must comply with an LCGPA-provided list of national products. Any national product on this list must be purchased locally. The mechanism is applicable to all contracts whose scope of operation includes products on the list.
- Price preference for local suppliers-
A) For SMEs: All contracts with an estimated cost of less than SAR 50 million ($13.3 million) can buy local products at a 10% premium
B)For local content: In government tenders, National products to be given a price preference of upto 10% of the price of foreign products - Local content weightage in tenders- As part of a financial bid, the weighting of a vendor’s local content score must not be less than 30%.
- Mandatory Reporting- Companies must report annually their local content score – calculated as per established formulae
- Local Content Score in Commercial Evaluation- For high-value contracts a minimum weight of 40% for local content needs to be included in commercial evaluation.
- Minimum Local Content Threshold- Minimum local content baseline that should be achieved by the contractor before the end of the contract, should be set during technical evaluation.
- Localization of Industry & Knowledge Transfer- Technology owners may enter into ‘Industry localization & knowledge transfer agreements’ with relevant government authorities in exchange for a government purchase guarantee.
For more insights and support in ensuring compliance with, and making the best of the localization regulations, please reach out to us at enquiries@transformationx.net