How is the ICV score calculated ?
The UAE government’s In-Country Value (ICV) program is a crucial initiative for boosting the local economy by encouraging enterprises to contribute to Emiratisation, local procurement, and economic diversification. The ICV score, which quantifies a company’s contribution to the UAE economy, is a critical component of this program.
Understanding how the ICV score is computed is critical for businesses seeking government and semi-government contracts. This article explains the calculation procedure, the components involved, and how to increase your ICV score.
What Is The ICV Score?
The ICV score is a percentage-based rating given to businesses based on their audited financial accounts. It measures how much value a company creates in the UAE through local spending, employment, investment, and exports.
This score is critical for enterprises competing on contracts with UAE government entities and major corporations like ADNOC, Etisalat, and Mubadala. Higher scores increase a company’s chances of getting contracts, providing a significant competitive advantage.
Factors Affecting ICV Score Calculation
The ICV score is derived using certain criteria established by the Ministry of Industry and Advanced Technology (MoIAT). The criteria include:
1. Local Procurement: Purchasing goods and services from UAE providers.
Impact: A larger percentage of local procurement boosts the ICV score. Businesses are encouraged to prioritise local suppliers over overseas ones.
2. Emiratisation: The percentage of UAE nationals employed by the company.
Impact: Hiring and retaining Emirati employees, particularly in skilled positions, considerably improves the ICV score. Emirati training programs and professional development initiatives are also under consideration.
3. Asset Investment: Capital spent on local infrastructure, equipment, and operational facilities in the UAE.
Impact: Companies that invest in assets such as manufacturing plants, warehouses, and office buildings improve their overall score.
4. Exports: Revenue from non-oil exports originating in the UAE.
Impact: Export activities contribute to the UAE’s economic diversification, and enterprises that export receive a higher ICV score.
5. Definition of Operating Costs in the UAE: The fraction of a company’s operational expenditure assigned to UAE-based resources such as utilities, rent, and local services.
Impact: Increased operational spending within the UAE leads to a higher score.
6. Subcontracting: Hiring UAE-based subcontractors for projects and services.
Impact: Subcontracting with local firms displays a commitment to the UAE economy, which improves the score.
ICV Score Calculation Formula
The ICV score is derived as a proportion of the company’s overall contribution to the UAE economy divided by its total income.
The formula is:
ICV Score (%) = (Total Local Contribution ÷ Total Revenue) × 100
Local procurement, Emiratisation, local investments, and exports are all examples of “local contributions.”
Steps for Calculating the ICV Score
Prepare the Audited Financial Statements
Companies must produce audited financial accounts from the most recent fiscal year. These materials form the basis for calculating the ICV score.
Evaluate Local Contributions
Analyse your financial data to determine contributions in the following categories:
- Spending with UAE-based suppliers
- Salaries and benefits are paid to Emirati employees
- Investing in local infrastructure and assets
- Revenue from exports
- Adjust for Non-Qualifying Expenses
- Exclude costs that do not benefit the UAE economy, such as imports and overseas operating expenses
Apply The Formula
Use the ICV calculation to determine your score as a proportion of total revenue
Submit to an Approved Certifying Body
Send your financial information to a MoIAT-approved certifying organisation for validation. The certifying body examines your documentation, validates your calculations, and issues the ICV certificate.
How Can Companies Improve Their ICV Scores?
Achieving a competitive ICV score necessitates strategic and operational changes. Here are some actionable methods to enhance your score:
1. Increase local procurement
Prioritise UAE-based suppliers of goods and services. Develop long-term relationships with local vendors to maintain consistent local spending.
2. Emphasis on Emiratisation
Hire more UAE nationals and support their professional development. Offering competitive salary packages and opportunities for advancement might help increase retention rates.
3. Invest in Local Assets
Develop operating facilities in the UAE, including factories, warehouses, and offices. These investments not only boost your score but also display your support for the local economy.
4. Increase Export Activities
Expand your company’s export operations to help the UAE’s non-oil economy. Diversifying your revenue streams through exports will dramatically boost your score.
5. Work with ICV consultants
Work with professionals that can audit your financial data, find areas for improvement, and recommend custom tactics to increase your ICV score.
Common Challenges in ICV Score Calculation
While calculating the ICV score is straightforward, businesses frequently confront problems such as:
Complex Financial Data: Parsing financial statements into ICV-relevant components can be time-consuming.
Limited Local Procurement Options: Some businesses rely significantly on imported items, reducing options for local expenditure.
Low Emiratization Rates: Recruiting and maintaining Emirati employees can be difficult, particularly in specialised areas.
Lack of Awareness: Many firms are unaware of the ICV program’s benefits or how to align their processes to improve their score.
Benefits of a High ICV Score:
Achieving a high ICV score has various benefits, including:
Improved access to government contracts
Companies with higher scores are given preference for bidding from government and semi-government institutions such as ADNOC and Etisalat.
Enhanced reputation
A high ICV score demonstrates your dedication to assisting the UAE economy, which increases your reputation with clients and partners.
Alignment with UAE Vision 2030
A high score indicates your contribution to the UAE’s long-term economic goals, which include diversification and sustainability.
Achieve Competitive Edge
In industries with fierce rivalry, a high ICV score can set your company apart and increase your chances of landing big deals.
The Function of Certifying Bodies in ICV Score Calculation
Approved certifying bodies are critical to assuring the accuracy and reliability of ICV results.
The Certifying bodies will:
- Review and validate audited financial accounts.
- Comply with MoIAT requirements.
- Issue the ICV certificate, which is valid for 14 months.
Conclusion
The ICV score is an important indicator for businesses operating in the UAE because it shows their contribution to the country’s economic progress. Companies can attain a competitive score and unlock major opportunities in government procurement by understanding the factors that influence its calculation and applying performance-enhancing initiatives.
Whether you want to enhance your score or navigate the certification process, working with a seasoned ICV consultant like AbstractICV can make all the difference.
Do you need help with your ICV score? Contact AbstractICV today for expert advice and personalised solutions.
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