Updated Version of Saudi Economic Participation Policy Issued for Public Consultation

Key Takeaways

• On 5 April, the Saudi Local Content and Government Procurement Authority (LCGPA) published an updated draft of its Economic Participation Policy (EPP) for public consultation. The consultation window is open until 22 April. The public consultation provides an important indication for what to expect, as well as an opportunity for companies that are likely to have EPP obligations under the revised version of the policy to contribute comments.
• The current version of the EPP, originally issued in 2022, requires bidders on contracts with an import value above SAR 100 million to commit to re-investing 35% of that import value in the local economy.
• Companies must propose projects that fall within one of the eligible categories of economic participation. LCGPA then assigns these projects multipliers based on their perceived value to the local economy, with higher multipliers for activities such as export promotion and research and development than for activities such as subcontracting.
• The EPP, which drew inspiration from the offset policies applied for many years in the defense sector, reflects the long-term policy direction in the Kingdom to use government procurement to drive localization by foreign companies. It was first applied in the pharmaceutical sector, before being rolled out more broadly across government procurement.
• The updated draft issued for consultation contains several significant changes to the current policy — most notably, a reduction in the topline economic participation (EP) obligation from 35% to 25%, the introduction of tiered obligations based on total tender size or cumulative tender value, an expanded multiplier range, and a formal appeals process.
• These changes suggest a meaningful effort to reflect private sector feedback and give companies greater flexibility in meeting EP requirements. At the same time, the LCGPA has introduced stricter reporting requirements and other changes that suggest it intends to apply the new policy more rigorously moving forward.
• The new version of the policy is unlikely to enter effect until late 2026 or early 2027, following policy finalization and a 120-day grace period. In the meantime, companies may be required to commit to obligations under the current, less flexible version of the policy, necessitating a carefully calibrated approach to policy engagement and compliance.