How local content policies are driving economic resilience and transforming global industries

By Zachary Kaplan and Dorival Bettencourt

Localisation has emerged as a pivotal trend in economic policy worldwide, particularly in the Gulf Cooperation Council (GCC) countries, where governments are prioritizing local content (LC) and in-country value (ICV) initiatives. These policies aim to build local industries, reduce dependency on imports, create employment opportunities, and support sustainability efforts. This report summarises key findings from a detailed study that assesses various policy formulas for calculating LC and ICV across the GCC—specifically Saudi Arabia (KSA), the United Arab Emirates (UAE), and Qatar—and compares them with those used in the United Kingdom and Mexico.

The return of protectionism

In recent years, localization and protectionist industrial policies have made a strong comeback as countries strive for economic independence. Governments are increasingly adopting LC/ICV regulations to create competitive local products, improve sustainability, and secure economic development. These regulations are seen as a critical measure in protecting local economies against the dominance of hyper-industrialized countries.

The GCC , with a combined GDP of USD 2.2 trillion, is a significant player in implementing these localization measures. Countries like KSA, UAE, and Qatar have implemented comprehensive LC/ICV policies, making the region a prime case study for localization analysis.

Local content and in-country value: country-specific insights

Kingdom of Saudi Arabia (KSA)
KSA's LC policy is regulated by the Local Content Government Procurement Authority (LCGPA) and applies to all sectors. It is unique in offering bonuses for research and development (R&D). The policy uses a "two-dimensional" approach that factors in both past performance and future plans, making it a comprehensive framework for local economic development.

United Arab Emirates (UAE)
The UAE's ICV policy is regulated by the Ministry of Industry and Advanced Technology (MoIAT) and incentivizes advanced technology and sustainability. Unlike other GCC countries, the UAE's system distinguishes between goods manufacturers and service providers. It focuses on historical performance and uses automated standard scores to assess local subcontractors.

Qatar
Qatar's ICV requirements are managed by the Ministry of Finance, with a "two-dimensional" approach involving the ICV Scorecard (past performance) and the ICV Plan (future projections). Unique to Qatar, businesses can earn ICV points for supplier development and training costs. A combined score from the ICV Scorecard and the ICV Plan is used for high-value tenders.

United Kingdom (UK)
The UK's local content formula is used for specific energy projects, such as offshore wind, and incorporates historical and future UK content. Managed by the Department for Energy Security and Net Zero, the UK formula plays a relatively smaller role in competition for government support, with limited use of preset coefficients.

Mexico
Mexico uses a National Content formula for the energy sector, focusing on project-specific metrics overseen by the Ministry of Economy. Penalties are applied for non-compliance, making it a stricter approach than other countries in the study.

Key recommendations for policymakers

Based on the analysis of LC/ICV policies across these countries, several insights and recommendations have been developed for policymakers:

• Adjust LC/ICV Formulae for Policy Alignment: policymakers are encouraged to enhance LC/ICV formulas by including additional metrics and weightings to better align with specific localization policies. Metrics that are independently verifiable, such as those based on generally accepted accounting principles (GAAP), should be balanced with policy-driven metrics that can drive local economic development.
• Optimise Tender Evaluation Criteria: For public procurement, it is critical to balance LC/ICV with price and quality. Depending on the localization and economic development goals, higher weightings for LC/ICV should be applied thoughtfully.
• Extend LC/ICV Use to Private Procurement: To maximize impact, it is recommended that the LC/ICV formula requirements be extended to private sector procurement. This can be achieved through industry-wide voluntary targets and mandatory reporting, as seen in the UK's wind power sector.
• Monitor LC/ICV Outcomes: close monitoring of tenders and LC/ICV weightings will help ensure the formula remains balanced and effective in promoting localization without causing high costs or unintended negative

Conclusion: where do we go from here?

The LC/ICV policies across the GCC, UK, and Mexico showcase sophisticated approaches to fostering economic independence and localization. We expect a greater alignment between LC/ICV formulas and national economic goals as these policies evolve. Governments should engage with the market to optimize these policies, ensuring they contribute effectively to local economic development and sustainability goals.

For more in-depth insights, read the full report on LC/ICV policy assessments and the future direction of these critical economic tools.

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