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The Future of Localization in UAE

Some important changes have taken place since 2018 when Adnoc (Abu Dhabi Oil Company) implemented its ICV, In-Country Value program. In June 2020, the 3rd form of the ICV 3.0 was created, while the 1st round of changes was made in 2018, November (ICV 2.0). Within the past year, the In-Country Value program has shifted across different sectors like; gas, oil, logistics, and energy. In September this year, Mubadala and Emirates Nuclear Energy Corporation also joined ICV Certification program.

Grasping the Guidelines

The implementation of the program rests on the main body; this means that the rules of ICV are different for its relevant party.

For example; Adnoc uses the ICV formula in the form of a combination in order to rank bidding parties with the best ICV scores. This combination of scores is produced by weighing the mean of the marks specified through the ICV Improvement Plan and ICV Certification. The Improvement Plan indicates how a bidder’s score can be improved in the future, while the ICV Certificate is grounded on audited financials.  An important thing to keep in mind is that Adnoc only grants the top bidder the right of 1st refusal with the intention of matching the top commercial offer.

The Department of Economic Growth in Abu Dhabi has combined the ICV formula in the Abu Dhabi Local Content Program (ADLC). In the ADLC, the Certification accounts for forty percent of the total financial assessment. This department, unlike Adnoc, doesn’t require bidding parties to hand in an Improvement Plan.

Megaprojects Facilitating Localization

Adnoc has specified that its large scale projects can be presented by using ICV scores. Thus, the regulation is stating that the ICV Certificate is not compulsory for proposals. In this aspect, it can be said that Adnoc is following the footsteps of Saudi Aramco, it’s Saudi Arabian Counterpart. In-Kingdom Total Value Add (IKTVA), the program under Saudi Aramco, makes the IKTVA Certificate mandatory for those taking part in bids.

When the target scores are set by the Adnoc, then the procurement, construction and engineering contractors might feel pressured to look for ways to optimize their scores. It is then anticipated that contractors might pass this pressure onto their suppliers. This can be done through contracting repeatedly, hence passing down ICV Improvement Plan related responsibilities to the supply chain.

Covid-19; a Facilitator to Local Measures

The pandemic has increased the need and awareness of how important it is to localize some important sectors of the supply chain. This concept is not only applicable to the gas and oil industry, it includes the medical and food industry as well. Since procurement mostly relies on public reserves, it is expected that In-Country Value will be utilized to accommodate such investments. Combining the certification process and the formula under Adnoc’s management turned out to be a fine step towards making it easier for businesses to operate in the Emirates, without the need for multiple certifications.

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