What is an ICV Certificate?
The National In-Country Value Program (ICV)
The National In-Country Value (ICV) Program is a government program that redirects more public spending into the UAE economy in order to boost economic performance and support local industries. It will be implemented under the supervision of the Ministry of Industry & Advanced Technology as part of “Projects of the 50”. In addition to increasing demand for local goods and services, the program promotes local capabilities, and attracts foreign direct investment to the local industrial sector. After being launched in Abu Dhabi in 2018, the ICV program has been a great success.
A new procurement-led In-Country Value (ICV) program was launched by the Abu Dhabi National Oil Company (Adnoc) in 2018 to encourage Emiratisation and GDP diversification. Following the success of the program, the Abu Dhabi Department of Economic Development (ADDED) and Adnoc joined forces earlier this year to launch a unified ICV certification process for UAE suppliers in line with the economic goals of the government accelerator program, Ghadan 21.
Last year, Aldar Properties, Abu Dhabi Ports, ADDED, Adnoc, and ADDED joined the unified ICV certification process. They are now referred to as Participating Entities. Mubadala Investment Company and Emirates Nuclear Energy Corporation (ENEC) have also signed agreements to collaborate on the programme with Adnoc. ICV certification platform is expected to attract more entities in the near future. Suppliers who are part of the procurement process of the Participating Entities, whether as primary or secondary suppliers, can use the unified ICV certification process to consolidate the ICV certification process into a single ICV certificate.
ICV Certificates aim to diversify Gross Domestic Product (GDP), increase private sector participation, and localize critical supply chain components. Peeyush Joardar, Partner – ICV & Audit at MBG Corporate Services, one of the approved certifying bodies in the UAE, explained that supplier spend that remains in the UAE or contributes to it is calculated and considered as in-country value. Approximately 1,500 Emiratis have been employed in the private sector through Adnoc’s ICV program as of December 2019. More than 3,000 companies in the UAE are ICV certified.
ICV certification covers a wide range of areas, including manufacturing, investment, Emiratisation, expatriate contributions, and investment growth. Due to this evolution, ICV has developed into a new business line and must be provided by UAE-based companies. ICV certificates also help companies and grant them the right to first refusal in tendering processes. In Adnoc Group tenders, companies without the ICV certificate are still permitted to participate, but their ICV score will be considered zero, putting them at a disadvantage compared to those with higher ICV scores.
As a result of implementing the ICV Program, the following strategic impacts will be achieved.
- Localization & Development: New industries and services are being developed locally as a result of the strategic localization of supply chains.
- Foreign Investments: Increasing foreign investment and diversifying the economy by stimulating and attracting foreign capital.
- National GDP Growth: Assisting in the growth of the national GDP.
- Research & Development: Intensify research and development and technology spending.
- Private sector: Contribute more to the national economy from the private sector.
- Job Opportunities: Involving the private sector in creating valuable jobs.
The National In-Country Value Program
Investments, hiring, and training of Emiratis are also taken into consideration in the program. By redirecting expenditures on procurement into the national economy, it supports the national industry.
In collaboration with the Ministry of Industry and Advanced Technology (MoIAT), Deloitte is one of the Certifying Bodies that are implementing the National In-Country Value Program (ICV). As part of the Program’s strategic partners, a number of government agencies and leading national companies are involved, including its implementers, Abu Dhabi Department of Economic Development (ADDED), Abu Dhabi National Oil Company (ADNOC) and Aldar Properties.
As part of the Program, supply chains will be strategically localized and new local industries and services will be developed, foreign investment will be stimulated and attracted, the economy will be diversified, and exports will increase, creating valuable job opportunities for the private sector, increasing the value of national GDP, enhancing R&D and advanced technology expenditures, and increasing private sector contributions.
In order to be eligible to participate in the National ICV Program, suppliers must declare their ICV achievement (“ICV Certificate”) with respect to the previous financial year. Partners of the Program participate in the ICV assessment as part of the tender evaluation and award process.
A Certifying Body must certify the ICV Certificate every year.
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A template or formula is followed in the ICV Certification process.
The following are the elements of ICV Aligned Certification:
- Production and Third Party Costs (50%) – These are the manufacturing and third-party costs incurred in the United Arab Emirates as a percentage of the total cost.
- Supplier’s investment (25%) – This is for determining the volume and direction of the supplier’s net book value
- In this case, Emiratization refers to the costs of training, salaries, benefits, and donations made to Emiratis’ development.
- A supplier’s expatriate contribution (10%) is based on how many expatriates they employ
- An additional bonus of 5% is awarded for investment growth, revenue generated by the supplier outside the UAE, and Emirati headcount
- Additionally, the ICV Certification process has been enhanced with the following changes:
- A financial statement prepared according to International Financial Reporting Standards (IFRS)
- The Ministry of Economy requires that all financials be based on IFRS and audited by a licensed auditor prior to issuing an ICV certificate.
One certificate per branch
The supplier is eligible for one combined ICV certificate if more than one branch operates in the same Emirate and lists the same ownership details.
The payment of taxes to the government
All payments made to regulators of government-licensed free zones and government-licensed entities are treated as 100% ICV.
Mainland suppliers receive credit
Mainland UAE suppliers will be automatically assigned a 10% ICV score (for ICV calculation purposes).
Headcount of employees
The number of employees a supplier has in a year is averaged.
Credit of owner salary
Wage Protection System members who are Emirati owners can be included in the salary calculation. Owners will be limited to AED120,000 per month.
The calculations exclude all internal costs of the supplier, except depreciation.
Upon the issuance of audited financial documents by the supplier, or after the vendor issues new financial statements, the ICV certificate is valid for 14 months.
There are several things a supplier should keep in mind regarding an ICV Certificate, such as the cost and the duration.
The cost of obtaining an ICV Certificate is not fixed. A supplier’s choice of an authorized Certifying Body will determine the ICV Certification process. A supplier or contractor usually receives their ICV Certificate within three to 15 business days. A supplier’s size could affect how long it takes to evaluate. The ICV certificate will be valid for 14 months from the date of submission of the required documentation for certification. Government procurements in Abu Dhabi can be made easier with an In-Country Value Certificate.