Strengthen Your Local Content. Improve Your Business Opportunities.
Local Content has become an important part of doing business in Saudi Arabia,
particularly for companies participating in government projects, major contracts,
and supply opportunities.
The Local Content and Government Procurement Authority (LCGPA) promotes the
development of Saudi Arabia’s local economy by encouraging businesses to increase
their spending on local employees, products, services, capabilities, and assets.
We support businesses in understanding, calculating, preparing, and improving their
Local Content position and in completing the requirements for obtaining a Local Content Certificate.
What is Local Content?
Local Content represents the contribution made by a business to the Saudi economy
through its operations and expenditure within the Kingdom.
In simple terms, it measures how much of the company’s business activities support
the local economy through areas such as:
- Saudi employee compensation
- Local goods and services
- Training and development of Saudi employees
- Supplier development
- Research and development
- Local assets and depreciation
to the Saudi economy.
What is a Local Content Certificate?
A Local Content Certificate confirms the approved Local Content percentage of an
establishment for the relevant financial period.
The certificate is issued by the Local Content and Government Procurement Authority
(LCGPA) after the company’s Local Content calculation and supporting information
are reviewed through the prescribed process.
The certification process generally involves preparing the Local Content measurement,
appointing a qualified audit firm, completing the required agreed-upon procedures,
and submitting the resulting report to the Authority for its review and issuance of
the certificate.
Why is the Local Content Certificate Important?
A Local Content Certificate can help businesses:
- Participate in government and major corporate tenders.
- Demonstrate their contribution to the Saudi economy.
- Meet Local Content requirements included in certain tenders and contracts.
- Improve competitiveness in procurement opportunities.
- Identify areas where Local Content can be increased.
- Support long-term localization and Saudi Vision 2030 objectives.
- Strengthen relationships with government entities, major companies, and local supply chains.
Some tenders may prescribe minimum Local Content requirements, and businesses
should carefully review the particular tender conditions before submitting their bids.
Main Components of Local Content
1. Employee Compensation
This component considers eligible expenditure relating to employees and the extent
to which employment expenditure contributes to the local economy.
Maintaining proper payroll records, employee information, and supporting
documentation is therefore important.
2. Goods and Services
Purchases of goods and services are an important component of the Local Content calculation.
The assessment considers the nature and origin of purchases and their contribution
to the Saudi economy.
Companies should maintain proper supporting documents such as:
- Supplier invoices
- Purchase records
- Supplier information
- Contracts and purchase orders
- Country-of-origin information, where applicable
- Supporting Local Content information from suppliers, where relevant
Simply purchasing from a Saudi supplier does not necessarily mean that the
entire expenditure will qualify as Local Content. The underlying Local Content
classification should be determined according to the applicable methodology.
3. Training and Development
Investment made by companies in developing Saudi employees may contribute to
Local Content. This can include eligible training programs and professional
development expenditure, subject to the applicable requirements.
4. Supplier Development
Businesses investing in the development of local suppliers may also be able to
recognize qualifying expenditure within the Local Content methodology.
Supplier development can support stronger local supply chains and reduce dependency
on imported goods and services.
5. Research and Development
Eligible spending on research, innovation, technology, and development activities
may contribute to Local Content where it meets the applicable requirements.
6. Asset Depreciation
Eligible depreciation relating to the company’s assets is also considered as part
of the Local Content measurement.
A proper fixed-asset register and supporting purchase documents are therefore
important during the calculation and verification process.
Local Content Baseline Certificate
The Baseline represents the company’s Local Content percentage based on its
historical financial information.
Certain government tenders may require bidders to submit an approved Local Content
Certificate showing their baseline percentage.
The certificate helps contracting entities understand the existing Local Content
contribution of the bidder before evaluating future commitments.
Targeted Local Content
For certain contracts, particularly high-value projects, companies may be required
to commit to achieving a specified Targeted Local Content Percentage during the
contract period.
This may require the contractor to:
- Establish its existing Local Content baseline.
- Commit to a target Local Content percentage.
- Prepare a Local Content plan.
- Monitor actual performance.
- Maintain supporting documentation.
- Submit periodic or final Local Content reports as required.
Businesses should therefore consider Local Content during the planning and pricing
stage of a project rather than addressing it only after winning a tender.
How to Obtain a Local Content Certificate
The certification process generally includes the following steps:
1 Collect Financial Information
Gather financial statements, trial balance, payroll information, purchase details,
fixed-asset records, training expenses, supplier information, and other relevant documents.
2 Prepare the Local Content Measurement
Classify the company’s expenditure according to the applicable Local Content
methodology and prepare the required calculation.
3 Review Supporting Documents
Ensure that the amounts reported in the Local Content calculation can be supported
by accounting records and documentation.
4 Appoint a Qualified Audit Firm
The entity selects and contracts with an audit firm qualified for the Local Content
verification process.
5 Complete Agreed-Upon Procedures
The qualified audit firm reviews the measurement and supporting documentation
and issues the required report.
6 Submit to LCGPA
The required measurement and verification report are submitted to the Local
Content and Government Procurement Authority.
7 Authority Review
LCGPA reviews the application and may request clarifications or additional information.
8 Certificate Issuance
After completion of the review and approval process, LCGPA issues the Local Content Certificate.
Documents Generally Required
Depending on the company and certification requirements, documents may include:
- Audited financial statements
- Trial balance and general ledger
- Payroll records
- Employee information
- GOSI-related supporting information
- Purchase ledger
- Supplier details
- Supplier invoices
- Contracts and purchase orders
- Fixed asset register
- Asset purchase invoices
- Depreciation schedules
- Training expenditure records
- Research and development expenses
- Supplier development expenses
- Supporting information relating to the origin/localization of goods and services
- Previous Local Content Certificate, if applicable
Additional documents may be required depending on the nature of the business and the
applicable LCGPA requirements.
Improve Your Local Content Before the Tender
Local Content should not be considered only when a company needs a certificate.
Businesses can improve their Local Content position through proper planning, including:
- Increasing Saudi employment where commercially appropriate.
- Investing in Saudi employee training and development.
- Developing local suppliers.
- Increasing procurement from qualifying local sources.
- Reviewing imported goods and identifying appropriate local alternatives.
- Investing in eligible local assets.
- Supporting research, innovation, and development in Saudi Arabia.
- Maintaining accurate documentation to support Local Content classifications.
A well-planned Local Content strategy can support both regulatory compliance
and long-term business growth.
Supporting Saudi Vision 2030
Local Content is an important part of Saudi Arabia’s economic development strategy.
By strengthening local supply chains, developing Saudi capabilities, increasing
local employment, and encouraging investment inside the Kingdom, Local Content
helps businesses contribute to the objectives of Saudi Vision 2030 while improving
their ability to participate in new business opportunities.
