Manufacturing vs. Trading: Which Business Model Gets a Higher ICV Score?

Regarding the ‘In-Country Value’ (ICV) score, manufacturing business models tend to receive higher scores compared to the trading models. The ICV formula highlights local production, fixed assets investment, and local procurement, signifying great benefits for manufacturing, as these elements are inherent to the sector.

Introduction: Why ICV Score Matters?

In the UAE, the ICV score is crucial for measuring the contributions of a company to the local economy. Whether you operate in manufacturing or trading, your business directly impacts your ICV performance. But which model has the advantage? This blog breaks down this in simple terms with the impacts of manufacturing and trading on the ICV score, which one generates more ICV score, with reasons, and the role of ICV certification services in the UAE.

What is an ICV Score?

An ICV (In-Country Value) score is regarded as a metric of performance used to measure local economic contributions made by a company. In the UAE, the calculation of the ICV score depends on fixed asset investments, expenditures, Emiratization, and exports. 

The ICV score acts as a benchmark for a company’s contributions to the local economy of the UAE. It is presented as a percentage, which is calculated from a company’s audited financial statements for the previous financial year. 

Key Components of the ICV score:

• Manufactured Goods
• Third-Party Expenditure
• Investment in the UAE assets
• Emiritization
• Contribution of Foreign Expatriates

How Manufacturing and Trading Models Impact the ICV Score?

The manufacturing and trading business have their own impacts on the ICV (In-Country Value) score. The ICV calculation formula is evaluated based on the expenditure on goods manufactured in the UAE, third-party spend, expats’ contribution, investments, and Emiratization. 

Below is a table simplifying the impact of each (manufacturing (M) and trading(T)) model on the ICV: 

ICV Component	Manufacturing Model	Trading Model	Impact on ICV Score
Goods and Services Procurement	Large local sourcing of raw materials, packaging, and utilities.	High spend on imported finished goods (low ICV contribution)	Manufacturing > Trading
Manufacturing Cost	High impact: Direct labour, factory assets, depreciation, overheads.	Very low or none due to no local production.	Manufacturing > Trading
Third-Party Spend	Strong local subcontractor use (logistics, maintenance, and services)	More dependence on imported or external logistics.	Manufacturing > Trading
Investment in the UAE	High investment in factories, machinery, land, and technology.	Limited to office space and warehousing.	Manufacturing > Trading
Emiratization	Higher due to a larger and more diverse workforce’s needs.	Lower due to smaller workforce requirements.	Manufacturing > Trading
Expat Contribution	Higher local spending on housing, education, and services.	Lower due to fewer employees.	Manufacturing > Trading
Bonus Points	High potential (exports, advanced technology, investment growth)	Limited mainly to local sales activities.	Manufacturing > Trading

Which Business Model Gets a Higher ICV Score and Why?

The business model that receives a higher ICV (In-Country Value) score is manufacturing. In comparison to other business models, including trading, companies operating in the manufacturing sector gain a significant strategic, financial, and competitive edge in tender projects. 

Here are the advantages they secure:

1. Access to Government Contracts: Companies with an ICV Certificate in Abu Dhabi or any other Emirate, often supported by ISO consultants in UAE, get access to major tenders from government and semi-government entities such as ADNOC and Aldar.

2. Strong Positioning as a Supplier: Contractors in the UAE look for suppliers who have an ICV certification to improve their own score, resulting in competitive benefits for the suppliers.

3. Advantage in Tendering Evaluation: ICV-certified companies are highly prioritised by the large contractors or entities, making a high ICV score essential.

4. Enhanced Credibility in the Market: Companies with an ICV certificate signal commitment to the growth of local economic development. This enhances the company’s credibility among investors and stakeholders.

Here is why manufacturing models have a greater advantage in the ICV score: 

1. Local Production

As the manufacturing sector is dependent on the production of goods and services within the UAE, it gives an advantage to the companies due to localisation of spending for raw materials, labour, machinery, and facilities. 

2. Raw Materials and Subcontractors

Manufacturers in the UAE prioritise local suppliers and subcontractors for the raw materials. This increases third-party expenditures, 

In the UAE, manufacturers rely on the local suppliers and subcontractors for raw material supply and inventory. This increases their expenditures to the third-party within the nation. 

3. Long-Term Investment in Fixed Assets

The manufacturing sector involves a heavy dependence on fixed assets such as machinery, specialised equipment, facilities, and more. These fixed assets signify long-term investments in the local economy; therefore, increasing the ICV score.

4. Localised Job Creation

Manufacturing operations require a skilled workforce to handle tasks efficiently, which includes technicians, engineers, helpers, and more. By hiring Emirati staff in the facility, these companies directly impact the local economy through job creation. 

5. Local Value Addition

As companies manufacture goods in the UAE, they remove the dependence on imports. This directly signals their contribution to the local economy, resulting in a high ICV score.

What is the Role of ICV Certification Services in the UAE?

ICV certification services in the UAE assist companies in complying with regulations and meeting the requirements of the National ICV Program, which was initiated by the Ministry of Industry and Advanced Technology (MoIAT). 

In addition, many companies pursue ISO certification in Dubai or the UAE with an ICV score to strengthen both quality management and local economic contributions.

The role of the ICV certification services in the UAE: 

1. Audit and Validation: The ICV certification service in the UAE conducts audits to review a company’s financial records accurately. They identify investments, localisation of services, and Emiratization.

2. ICV Template Preparation: Their expert professionals assist in creating complex MoIAT ICV Excel templates, which outline information regarding procurement, HR, and investments.

3. Regulatory Compliance: Maintaining compliance with the International Financial Reporting Standards (IFRS) is necessary for companies. Experts review the company’s financial records to ensure regulatory compliance.

4. Liason with Certifying Bodies: These professionals have extensive work experience with authorised certifying bodies such as ADNOC or private certifiers, making the process easy and smooth.

5. Increased Tender Opportunities: By the optimisation of the ICV score, experts provide companies with tender benefits such as the first right of refusal. 

Conclusion

When it comes to the ICV score, manufacturing companies have the edge over trading. It adds more local value to the ICV score through local production, Emiratization, fixed-asset investment, and local spending. Therefore, businesses that want to maximise their ICV score must consider investing in manufacturing and also acquire ISO certification in Dubai through expert ISO consultants in UAE to enhance credibility and compliance.

Here, we explored the definition of the ICV score, the impacts of manufacturing and trading on it, which one has the greater advantage and why, and how ICV certification services in the UAE can help in building a promising ICV score.

Arabian Wingz LLC is a trusted business setup and financial advisory firm in Dubai, assisting companies in acquiring ICV certification and improving their ICV score. Our experts guide businesses through the overall process, including compliance, audits, and strategic planning, along with several other solutions like ISO certification in Dubai and the UAE, ensuring a reliable and smooth process. So, contact us and get your ICV certification in the UAE today!

including compliance, audits, and strategic planning, along with several other solutions like ISO certification in Dubai and the UAE, ensuring a reliable and smooth process

Read More: What is ICV Certificate Dubai, UAE and How to Get It? Step-by-Step Process