Saudi rows back on HQ rule to execute strategic projects

Around two years after mandating foreign firms to establish regional headquarters in Saudi Arabia or risk losing out on lucrative government contracts, Riyadh has rowed back on its HQ rule. 

The move, launched last November, aims to strike a balance between the requirement of a local presence with the pragmatism of fulfilling strategic projects that warrant specialized expertise or financial competitiveness, Asharq Al-Awsat reported.

The Local Content and Government Procurement Authority has notified all relevant bodies of the mechanism to apply for exemptions through Etimad, the kingdom’s official financial services portal. 

Public sector entities can request for a waiver on one or more projects or for a specified time period, so long as the application is submitted prior to launching a tender or initiating direct contracting procedures.

Some exceptions to the original legislation continue to exist, such as foreign firms without regional headquarters can still compete for - and win - government tenders if the bids are technically superior and 25 per cent cheaper than the next best offer, or if there are no competing offers. Contracts with an estimated value of $266,000 or less are also exempt. 

The original legislation, which was enforced in January 2024 barring the government and state-backed institutions from signing contracts with foreign companies with regional headquarters outside the kingdom, was intended to limit economic leakage and boost job creation.  

More than 700 multinational companies had relocated their regional headquarters to Riyadh by early 2026, exceeding the initial target of attracting 500 companies by 2030. 

The move comes amid a slew of changes introduced by the kingdom, including the appointment of a senior PIF official as the new investment minister and opening up its financial markets to all foreign investors earlier this month.