ADNOC's in-country value program is not only creating opportunities for Emiratis to join the oil and gas sector but inspiring other local firms as well.
It is a common challenge among nations with large pools of natural resources and foreign workers to effectively utilize them for the long-term sustainability of the local economy. It is a far more difficult task than it may at first seem. Academics and policymakers alike have long warned of a “natural resource curse,” in which oil or mining assets end up being squandered or siphoned abroad. Higher proportions of migrant and expatriate workers, too, often create a risk of squeezing the number of jobs available for the local labor force and keeping local skill levels low. The UAE and other Gulf states, however, have come to address this challenge head-on in a way that few others have.
The spearhead of this effort lies in the UAE’s largest economic sector—oil and gas—particularly in the work of ADNOC, the national oil company in Abu Dhabi. Specifically, ADNOC’s in-country value (ICV) program has, over the last several years, played a significant role in growing and diversifying Abu Dhabi’s economy while creating opportunities for Emirati nationals, especially in the private sector, where the proportion of Emirati workers has historically been low.
At the heart of ICV is the requirement that ADNOC’s suppliers declare their lasting contributions to the UAE economy as part of the tendering process. This includes injections of financial and infrastructural capital into the country as well as the hiring of UAE citizens. These contributions are verified on an annual basis by third-party auditors. Deals with Emirati manufacturers and other native private-sector giants are also key to boosting ICV scores.
The program has thus far proved to be an enormous success. Throughout 2019, the ICV program generated some AED26 billion for the domestic economy. The total contribution since the program began in 2018 stands at over AED44 billion. That includes spending from foreign partners on local products, manufacturing and facilities, services, and other infrastructure. Perhaps most intriguing is ADNOC’s decision in 2019 to assign more resources to expanding the ICV program to target SMEs. The UAE’s SME sector is growing and is a major focus for the national government within its long-term economic diversification strategies. Furthermore, there is a concerted effort to integrate SMEs into the oil and gas supply chain.
ICV is also inspiring other major companies outside of oil and gas, too. Aldar, an Emirati real estate giant, has announced a partnership with ADNOC to develop its own ICV program, in which the company’s suppliers will be urged to develop their own local supply chains. The end result, it is expected, will be major investments in domestic assets and raw materials, and procurement of local contractors along with employment opportunities for hundreds of Emirati citizens.
The Abu Dhabi Department of Economic Development (ADDED) and ADNOC have also signed an MoU to enhance cooperation and drive ICV for Abu Dhabi following the success of ADNOC’s ICV program. Under the terms of the MoU, ADDED will integrate and standardize ADNOC’s ICV certification program across the Abu Dhabi Government’s procurement process. This extends the impact and reach of the ICV initiative, which ADNOC developed to strengthen the spillover economic impact across the UAE.
Following this agreement, businesses can make a one-time application for a unified ICV certificate that will now be applicable for the Abu Dhabi government’s commercial evaluation process of goods and services procurement. It is not often that national efforts to intervene in the procurement strategies and employment methodologies of private sector firms produce positive results.
In the UAE, however, the effort is proving to be the key to the country’s ability to sustain foreign partnerships in the long term, as local citizens come to strengthen their faith in international collaboration and gain the skills necessary to fully take the reins of the economy themselves.