Saudi Arabia Softens Stance on Regional Headquarters, Opening Doors for Foreign Firms
Saudi Arabia is adjusting its policy requiring foreign companies to establish regional headquarters (RHQs) within the Kingdom to secure government contracts. While the original directive, implemented in early 2024, aimed to deepen the integration of foreign businesses, a revised procurement framework now allows for structured exemptions, signaling a more flexible approach.
The Original Directive and Its Impact
From January 1, 2024, Saudi government entities were prohibited from contracting with foreign companies lacking a regional headquarters in Saudi Arabia. This applied to all government agencies, institutions, funds, and their affiliated entities. The goal was to boost employment, reduce economic leakage, and ensure domestic delivery of key products and services with local content. The policy was designed to incentivize companies to invest further in the Saudi economy.
New Exemptions: A Pathway for Specialized Expertise
The recent changes introduce a pathway for exemptions in specific circumstances. Government entities can now request exemptions for a specific project, a group of projects, or a defined time period. These requests must be submitted to a designated committee before issuing a tender or initiating direct contracting. The process is facilitated through the “Etimad” digital platform, launched in November 2025.
Bids from companies without a regional headquarters will be accepted under two key conditions: when only one technically compliant bid is received, or when the bid is at least 25% lower than the next best offer after a thorough technical evaluation. Projects valued under SR1 million are exempt from these restrictions.
The “Etimad” Platform: Streamlining Procurement
The “Etimad” platform, the Ministry of Finance’s official electronic portal, is central to this revised framework. It supports the digital transformation of government operations, enhancing transparency and efficiency in budgets, contracts, tenders, payments, and procurement. It also aims to strengthen collaboration between government and the private sector.
Headquarters Relocation Progress Exceeds Expectations
Despite the softening of the mandatory requirement, the relocation of regional headquarters to Saudi Arabia has been remarkably successful. By early 2026, over 700 international companies had already relocated, surpassing the original target of 500 by 2030. This demonstrates the continued appeal of the Kingdom as a strategic business hub.
Looking Ahead: Potential Future Trends
This shift suggests a nuanced approach to attracting foreign investment. Saudi Arabia appears to be balancing its desire for deeper economic integration with the need to remain competitive and access specialized expertise. Several trends are likely to emerge:
- Increased Focus on Value-Added Services: Exemptions will likely be granted more readily for projects requiring highly specialized skills or technologies not readily available within the Kingdom.
- Competitive Bidding Pressure: The 25% price differential requirement will likely intensify competition among bidders, potentially driving down costs for government projects.
- Digitalization of Government Processes: The continued development and adoption of platforms like “Etimad” will be crucial for streamlining procurement and enhancing transparency.
- Targeted Incentives: We may see the introduction of more targeted incentives to attract companies in specific strategic sectors, even without full RHQ relocation.
FAQ
Q: Does this mean the regional headquarters requirement is cancelled?
No, the requirement remains in place, but the new rules allow for structured exemptions under specific conditions.
Q: How do companies apply for an exemption?
Government entities must submit a request to a designated committee before issuing a tender, using the “Etimad” digital platform.
Q: What is the “Etimad” platform?
It’s the Ministry of Finance’s official electronic portal for financial services, designed to streamline government procurement processes.
Q: Are all projects eligible for exemptions?
No, exemptions are granted based on specific criteria, such as the need for specialized expertise or significant cost savings.
Q: What is the threshold for projects exempt from the RHQ requirement?
Projects with an estimated value not exceeding SR1 million are exempt.
Pro Tip: Foreign companies considering bidding on Saudi government contracts should carefully review the new exemption criteria and ensure they understand the requirements of the “Etimad” platform.
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