Mechanism for exempting companies from the regional headquarters requirement via the Etimad platform
The Saudi Arabian Local Content and Government Procurement Authority (LCCPA) has announced a new regulatory step aimed at streamlining government procedures while safeguarding national economic objectives. This step allows government entities to submit requests for exemptions from contracting regulations with foreign companies that do not have a regional headquarters within the Kingdom. This process is conducted entirely digitally through the Etimad platform, and is available in cases where contracting with these companies is necessary for the execution of a specific project or for a defined period.
Details of the new mechanism and exception controls
The Authority clarified in a recent circular that exemption requests must be submitted to the relevant "Exemption Committee" before the tender is issued or direct contracting procedures commence. The Authority emphasized the necessity of adhering to the timeframes stipulated in the regulations to ensure the request is reviewed and all regulatory requirements justifying the exemption are met, such as the absence of a suitable local alternative or the existence of precise technical specifications available only from the foreign company in question.
Economic context: Regional headquarters program
This step comes as part of the implementation of a Saudi Cabinet decision, effective January 1, 2024, which stipulates that government agencies must contract only with international companies that have a regional headquarters in the Kingdom. This strategic decision, a cornerstone of Saudi Vision 2030, aims to reduce economic leakage, enhance the efficiency of government spending, and transform Riyadh into a global regional logistics and commercial hub.
Expected economic and investment impact
This flexible regulatory framework is expected to strike a delicate balance between strict enforcement of regulations and flexibility in managing essential government operations. Domestically, this approach enhances opportunities for local content and creates a level playing field for both national and foreign companies committed to relocating their headquarters. Regionally and internationally, the existence of a clear exemption mechanism sends reassuring signals to investors and global companies that the Kingdom is committed to a pragmatic and flexible business environment, encouraging more companies to enter the Saudi market and establish their regional headquarters to capitalize on the vast investment opportunities available.
Digital transformation and spending efficiency
The authority affirmed that automating this service through the “Etimad” platform reflects the Kingdom’s commitment to digital transformation across all government transactions. The platform allows for the electronic submission and tracking of applications, thereby accelerating the decision-making process, unifying communication channels, and reducing paperwork and bureaucracy. Ultimately, this contributes to the efficiency of government spending and the rapid completion of development projects.
