Understanding the In-Country Value (ICV) Program in the UAE: A Pathway to Economic Growth

The In-Country Value (ICV) program has been a significant initiative across the Middle East, especially in countries like Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). Introduced to support national economic growth, this program has fostered the development of local industries, the expansion of employment opportunities, and the diversification of the UAE’s economy.

What is the ICV Certification in the UAE?

The In-Country Value (ICV) Certification, launched by the Abu Dhabi National Oil Company (ADNOC) in January 2018, aims to assess the contribution of companies operating in the UAE to the local economy. The initiative primarily targets businesses providing products and services within the oil and gas sector, but the scope has expanded to include other sectors in subsequent years.

The certification evaluates various factors such as the extent of local investments, the employment of Emirati nationals, use of local suppliers, and other relevant metrics that promote the UAE’s economic development. ADNOC established this program to encourage companies to invest in the local economy and to boost local businesses.

Goals of the ICV Certification Program

The key objectives of the ICV program align with the UAE’s broader economic ambitions:

1. Economic Diversification: By promoting local sourcing and production, the ICV program encourages businesses to focus on the UAE’s internal resources, fostering economic stability and diversification.
2. Job Creation and Emiratization: One of the program’s core components is the emphasis on employing Emiratis, thus contributing to reducing unemployment rates and building a skilled local workforce.
3. Technological Advancement: The program also seeks to enhance innovation within the UAE by encouraging the adoption of cutting-edge technology, ensuring that businesses remain competitive on the global stage.

Who Should Seek ICV Certification?

Any business that supplies goods or services to ADNOC or other UAE governmental bodies is required to obtain an ICV certificate. This includes industries such as construction, logistics, and engineering. Additionally, the ICV certification provides a competitive advantage for suppliers wishing to participate in government tenders. The certification is beneficial for both large companies and small and medium-sized enterprises (SMEs), ensuring that businesses of all sizes contribute to the growth of the UAE economy.

Benefits of ICV Certification

The ICV certification brings numerous advantages to companies and the country alike:

1. Economic Impact: Since the program’s implementation, over 1,500 Emiratis have secured private sector jobs, contributing over AED 44 billion to the national economy.
2. Support for Local Enterprises: Small businesses, in particular, can benefit from the ICV certification as it enables them to secure government contracts, which were previously difficult to access.
3. Enhanced Tender Opportunities: Companies with ICV certification are often given preferential treatment in the bidding process for government projects, providing a competitive edge over non-certified entities.
4. Strengthening the Local Supply Chain: By incentivizing local businesses to participate in tenders, the ICV program helps strengthen the UAE’s industrial base and reduces the dependency on imports.

How to Obtain ICV Certification?

The process for obtaining ICV certification involves several steps:

1. Submit Audited Financial Statements: Companies must provide financial statements that comply with International Financial Reporting Standards (IFRS). These documents ensure transparency and reliability.
2. Complete the ICV Template: The next step is to fill out an ICV template that gathers information on local sourcing, the employment of Emiratis, investments made within the UAE, and other relevant factors. This template is critical in determining the company’s ICV score.
3. Audit and Evaluation: The ICV template, along with supporting documents, is submitted to an accredited certifying body. An on-site audit is conducted to verify the accuracy of the submitted data.
4. Receive the ICV Certificate: Once the audit is completed and the company meets the required standards, the certifying body issues the ICV certificate.

Validity of ICV Certification

ICV certificates are valid for 14 months from the date of submission of the audited financial statements. If a company’s financial statements change, it will need to update its ICV score and reapply for certification to ensure it remains eligible for future contracts.

Key Considerations for ICV Certification

To streamline the certification process, businesses should keep in mind the following points:

1. Compliance with IFRS: It is essential that companies ensure their financial statements follow IFRS guidelines, as this is a requirement for the certification process.
2. Branch Eligibility: Companies with multiple branches in the same emirate under one ownership can apply for a single ICV certificate, simplifying the process for multi-branch organizations.
3. Owner’s Salary: The salary of business owners, if it is registered under the Wage Protection System (WPS), will count towards the ICV score, up to a certain limit.
4. Internal Costs: Costs associated with internal operations such as depreciation are not considered in the ICV score.
5. Rewards for Mainland Suppliers: Companies operating in mainland UAE can earn additional points in their ICV score, further benefiting from the program.
6. Government Payments: Payments made to government authorities contribute 100% to the company’s ICV score.

Conclusion

The ICV certification is crucial for companies operating in the UAE, not just as a requirement for participating in government tenders, but as a valuable tool for contributing to the UAE’s economic diversification. By encouraging local sourcing, Emiratization, and technological development, the program strengthens the national economy while providing businesses with access to government contracts and opportunities for growth. Companies looking to improve their ICV score can focus on investing locally, hiring Emiratis, and contributing to the national economy.

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FAQs

1. Is ICV certification restricted to SMEs?
   No, ICV certification applies to businesses of all sizes and is not limited to SMEs.
2. How long will it take to receive the certificate for the program?
   The processing time for the application can vary depending on the business’s size, the number of workers, and how promptly they provide the necessary documents. Typically, the application is processed within a month after submission of all required paperwork.
3. Can vendors who have already received an ICV certificate at the local level use it at the national level?
   Yes, businesses that have received local ICV certification can use the same certificate at the national level.
4. How much does it cost to obtain an ICV certificate?
   The cost depends on several factors, such as the company’s size (small, medium, or large), the complexity of the accounting system, and the nature of the business. The certifying bodies set the fees based on these factors.
5. Can foreign companies obtain ICV certification?
   Yes, foreign companies can obtain ICV certification in the UAE if they meet the required standards. Foreign companies must adhere to the same ICV criteria as local businesses and submit their scores for review by ADNOC.
6. What happens if a company fails to obtain ICV certification?
   If a company fails to obtain ICV certification, it may face consequences such as being ineligible to bid for ADNOC contracts, reputational damage, lost business opportunities, and potential penalties.
7. What is an ICV certificate?
   An ICV certificate measures a company’s contribution to the UAE’s economy. It is required for businesses participating in tenders with ICV-implementing companies.
8. How is ICV measured?
   ICV is calculated based on factors such as the company’s procurement from ICV-certified companies, the value of its fixed assets in the UAE, depreciation, and the costs of employing Emiratis and expatriates.
9. Is there a minimum ICV score?
   No, there is no minimum score. ICV scores vary depending on the company’s operations, and companies can improve their score by focusing on factors such as local sourcing and Emiratization.
10. Can multiple entities apply for a combined ICV?
    No, companies cannot combine their ICVs, except in cases where branches in the same emirate with identical activities and ownership can apply under one certificate.

If you’re prepared to move forward with your business in the UAE, reach out to PEAK at dursamin@peakconsultancy.com or call +971 507078555 (UAE).