IAR export does not set PROJ_DIR option

When I export an Mbed project to IAR from the Mbed online compiler (using the right click and Export), looks like the PROJ_DIR option is not set in the exported IAR project. This is what the C\C++ compiler options looks like for the exported Mbed project:

This lacks the PROJ_DIR option.

In my original Mbed project, if I deleted mbed-os library and imported a fork of mbed-os on GitHub, and then exported the project, this problem doesn’t exist.

What must be causing this difference? I am using IAR 8.32.4.