Saudi Arabia is using its purchasing power to build industry. Local content reached about 47% of government procurement in 2024, against a 45% target, and the ambition is higher still. For a supplier, that turns local content from a compliance topic into the variable that most often decides who wins.
- Local content share of government procurement in 2024, above the 45% target
- ~47%1
- Price and local content weights in the evaluation of high-value tenders
- 60 / 402
- Share of project cost SIDF can finance in promising regions (50% elsewhere)
- Up to 75%3
- LCGPA, via Argaam (2025)
- Regulations on Preference for Local Content; LCGPA
- Saudi Industrial Development Fund
How local content is measured
The Local Content and Government Procurement Authority (LCGPA) scores a company, not a product. In outline, the score is the share of a company’s spending that stays in the Kingdom across four components, verified by an accredited auditor before the certificate is issued.
| Component | What counts |
|---|---|
| Labour | Compensation paid to Saudi employees, against total compensation |
| Goods and services | Spending with local suppliers, weighted by each supplier’s own local content |
| Assets | Depreciation and amortisation of assets located in the Kingdom |
| Capacity building | Training of Saudis, supplier development and local research and development |
Two numbers matter in a tender. The baseline is your current certified score. The target is the higher score you commit to reach during the contract; it becomes a contractual obligation, with an improvement plan due shortly after award and fines of up to 10% of contract value for shortfalls.
How it changes who wins
Price preference
For listed national products, a foreign product’s price is increased by 10% for comparison. A foreign bid of SAR 950,000 is evaluated at SAR 1,045,000, so a national product offered at SAR 1,020,000 wins despite costing 7% more. Some products carry an additional preference of up to 20%, and bids from non-SMEs are treated as 10% higher against local SMEs in eligible contracts.
The weighting mechanism for high-value tenders
Above the high-value threshold (SAR 25 million at the time of writing; confirm the current figure), the financial evaluation weights price at 60% and local content at 40%. Half of the local-content score comes from your target and half from your baseline, with five points added for companies listed on the Saudi Exchange. The contract goes to the highest score, provided that bid is within 10% of the lowest price.
| Bidder A | Bidder B | |
|---|---|---|
| Price | SAR 27.5m | SAR 25.0m (lowest) |
| Target / baseline local content | 45% / 40% | 22% / 18% |
| Listed company | No | Yes (+5) |
| Price score (lowest ÷ price × 60) | 54.55 | 60.00 |
| Local content score (× 0.4) | 17.00 | 10.00 |
| Total | 71.55: wins | 70.00 |
Illustrative figures. Bidder A is exactly 10% above the lowest price, so it remains eligible.
Your bid
Competing bid
Your bid wins despite the higher price: local content outweighs the price gap.
Illustrative model of the weighting mechanism for high-value tenders: 60% price, 40% local content (half target, half baseline, plus 5 points for listed companies); the winner must be within 10% of the lowest price. Not procurement advice.
The mandatory list and what changes in 2026–2028
- Products on the mandatory list must be bought from national manufacturers; non-compliant bids are excluded.
- From 1 August 2026, a company-level minimum local content applies to 233 mandatory-list products, with more to follow in August 2027.
- From 1 April 2027, management-consulting tenders of SAR 10m or more require 30% company-level local content, falling to SAR 5m from 1 January 2028; IT services tenders of SAR 10m or more gain a local-content weighting.
- Where imported content in a contract exceeds SAR 100m, the Economic Participation Policy requires commitments worth at least 35% of that value; a 2026 draft would lower this to 25% with tiers.
State-owned buyers: iktva and its peers
Since 2022, local-content rules also apply to companies that are at least 50% state-owned. Aramco’s iktva programme is the model: a supplier’s score is its in-Kingdom spending on goods and services, Saudi salaries, training, supplier development and research, divided by its revenue from Aramco, verified each year by a certified third party. Aramco reports 70% in-Kingdom spend and targets 75% by 2030. SABIC (Nusaned) and Saudi Electricity (Bena) run comparable programmes.
Why manufacture in the Kingdom: the incentive stack
| Incentive | What it offers | Run by |
|---|---|---|
| Industrial finance | Loans of up to 50% of project cost, or up to 75% in promising regions; tenors of up to 20 years with grace periods of up to 36 months | Saudi Industrial Development Fund |
| Land and buildings | Leased serviced land at low published rates and ready-built factories across about 36 cities | MODON |
| Duty-free inputs | Exemption from customs duty on machinery, raw materials and spare parts not available locally, for industrial licence holders | ZATCA industrial exemption |
| Tariff protection | Duties raised in June 2020 on more than 2,000 tariff lines, to as much as 25%, shielding local producers | ZATCA customs tariff |
| Procurement preference | 10% price preference, mandatory lists and the 40% local-content weighting | LCGPA |
| Zone tax rates | 5% corporate tax for up to 20 years in special economic zones; 0% for up to 50 years in the logistics zone | ECZA and ZATCA |
| Export finance | Buyer credit, insurance and guarantees; more than SAR 40bn of facilities in 2025 | Saudi EXIM Bank |
| National brand | The “Saudi Made” mark and export promotion | Saudi Export Development Authority |
Regional tax deductions also exist for six less-developed regions; confirm the current terms with a tax adviser.
Market access from a Saudi factory
A product that qualifies as Saudi-origin moves duty-free across the GCC and the Greater Arab Free Trade Area, and on preferential terms to the GCC’s free-trade partners. To qualify under Saudi Arabia’s 2021 rules of origin, it needs at least 40% local value added and a workforce that is at least 25% national, with some flexibility between the two. Goods made in free zones are excluded.
Import and sell
- Pays 5–25% customs duty
- Evaluated 10% higher against national products
- Excluded from mandatory-list purchases
- Low local-content score in the 40% weighting
- No GCC or Arab preferential origin
- Little capital at risk
Manufacture in the Kingdom
- Duty-free inputs under the industrial exemption
- Benefits from the price preference
- Eligible for mandatory-list purchases
- Score rises with local labour, suppliers and assets
- Saudi origin: duty-free across the GCC and GAFTA
- Capital committed, with up to 75% financed by SIDF
A practical sequence
- 01
Prove the demand
Map which buyers purchase your product, through which route, and whether it is or will be on a mandatory list.
- 02
Model the tender maths
Test how much local content you need to beat importers and incumbent local producers at realistic prices.
- 03
Choose the route
Contract manufacturing or a joint venture with a Saudi producer can deliver origin and score faster than a greenfield plant.
- 04
Stack the incentives
Location, SIDF finance, customs exemptions and export finance are decided together, not one by one.
- 05
Certify and commit
Obtain the baseline certificate early, and commit only to targets your plan can reach.
Common questions
What is a local content certificate?
A certificate issued through LCGPA that states a company’s audited local content score. It is prepared with an accredited audit office and is used in government and state-owned company tenders.
Does local content apply to private-sector buyers?
The regulations bind government entities and companies at least 50% owned by the state. Large private buyers increasingly ask for it too, especially in supply chains serving Aramco and the giga-projects.
Can a foreign-owned factory count as local?
Yes. Local content measures where money is spent and who is employed, not who owns the company. A 100% foreign-owned factory in the Kingdom can score highly.
How much can SIDF lend?
Up to 50% of project cost in the main cities and up to 75% in promising regions, with tenors of up to 20 years and grace periods of up to 36 months, subject to its credit assessment.
Sources
- Ministry of Finance, Regulations on Preference for Local Content, Local SMEs and Listed Companies
- LCGPA, local content mechanisms
- Argaam, local content share of government procurement
- Saudi Press Agency, mandatory-list company-level minimum (February 2026)
- Saudi Press Agency, local content in consulting and IT tenders (April 2026)
- Al Tamimi & Company, doing business with Saudi Aramco: the iktva programme
- Aramco, iktva
- SIDF, financing incentives
- ZATCA, industrial exemption e-service
- US International Trade Administration, Saudi Arabia increases customs duties (2020)
- Argaam, Saudi EXIM Bank facilities in 2025
- KPMG, Saudi national rules of origin (2021)
Figures reflect the latest published data at the date shown. This briefing is general information, not legal, tax or investment advice.