Describes how major projects are secured and financed. Explains activities of the multilateral development banks in and other aid-funded projects.
Selling to the Government
The UAE has a two-tier government with federal and emirate levels. Each emirate has specific provisions regulating government procurement activities. Public sector work is generally awarded on the basis of Federal Regulation of Conditions of Purchases, Tenders and Contracts, Financial Order No. 16 of 1975 (the “Public Tenders Law”), which prescribes minimum standards in relation to government procurement across the UAE. Public defense contracts have their own set of industry-specific rules.
For any types of government procurement project, companies must have a legal presence in the UAE and ensure that their goods and services are prequalified for procurement tenders. It is possible for bids to be sole sourced or to be awarded to select, pre-qualified contractors rather than to be competed via public tender at the discretion of the relevant governmental party, generally in the case of urgent need. Federal purchases are administered through the respective federal offices located in Abu Dhabi and/or Dubai. At an emirate level, purchases for goods and services are done directly by the institution depending on its needs.
For most civilian purchases, government entities prefer to deal with firms registered in the UAE, and will favor local products over imports. Federal Law No. 2 of 2014 gives preference to Emirati entrepreneurs and is designed to help Emirati small-and-medium-sized businesses secure more business.
Only when goods or services of desired quality are not available locally will the procurement authority seek outside sources. The government continues to limit direct procurements and require companies to make the arrangements for a local presence. Invitations to participate in government procurement tenders are usually sent only to the pre-qualified companies, and some are advertised in newspapers.
In-Country Value (ICV)
As part of its efforts to grow and diversify its economy through nurturing local and international partnerships and opportunities, improving knowledge transfer and creating job opportunities for UAE nationals in the private sector, the UAE has implemented an In-Country Value (ICV) system when evaluating commercial bids and inviting companies to participate in government-issued tenders. The Abu Dhabi National Oil Company (ADNOC) launched its own ICV program in 2018, mandating all suppliers to declare their ICV scores for consideration on tenders (ICV Certificate). ADNOC requires an annual third-party verification of the numbers of the ICV Certificate to be conducted. Senior-level officials have signaled ADNOC’s ICV pilot program could be expanded across additional sectors, after purportedly retaining $4.9 billion in Abu Dhabi’s coffers in 2018. It is also important to mention that many of the emirates now ask for in-Emirate value (IEV), which sets more challenges for foreign companies.
Competition in the public sector is very strong. Aside from large military procurement projects, governments in the UAE invest heavily in infrastructure projects, such as roads, power generation and distribution systems, desalination facilities, sewage systems, public housing, recreational facilities, hospitals and other medical facilities and services, schools, national security projects, athletic facilities, refineries and other hydrocarbon facilities, airports, and government buildings.
The UAE partner of the U.S. company is usually responsible for registering the U.S. product or service with the UAE government. The following documents are usually required for the registration:
- Ministry of Economy Certificate
- Reference List
- Last 3 years audited bank statement
- ISO, or other relevant, certifications
- Quality and HSE manuals
- Questionnaire that will be provided by the U.S. company
Though the English language is widely used in the UAE, the ability to communicate in Arabic is mandatory when communicating with the government.
Participation in Tenders
UAE Government entities follow a transparent system for tendering and awarding contracts. All invitations to bid are made public and are accompanied by a clear set of guidelines that bidders must follow. To be able to bid for government contracts, all bidders must register on the respective eProcurement system. For Federal Entities, the Ministry of Finance has an advanced procurement system for all federal entities through which it announces purchases. Through this system, it also invites tenders and announces contracts.
To bid for contracts of local entities in Abu Dhabi, the Abu Dhabi Government requires that contractors and suppliers must have an established presence in Abu Dhabi and must possess the licenses needed to carry on business activities in Abu Dhabi.
To bid for contacts of local entities in Dubai, the Dubai Government utilizes the online eSupply portal operated by Dubai eGovernment and Tejari. The eSupply portal has created an official eSupply procurement portal for Dubai Government and the online destination for all suppliers interested in dealing with Dubai government entities.
To bid for contracts of local entities in Sharjah, the Sharjah Government follows a similar procedure to register contractors and issue contracts. The government bodies will verify the company that applied for registration and on successful verification, the company will appear in its ‘list of approved suppliers’. This will entitle contractors to bid for tenders.
Financing of Projects
The UAE is a vibrant financial hub in the region. The development of projects requiring financing is broadening. Major international and local banks are behind these projects advising and arranging for the major part of the financing using a variety of sophisticated instruments: bonds, sukuks (Islamic bonds), loans, syndicated loans, murabaha (Islamic loans), initial public offerings, etc. The proportion of financing and the transactional leadership is steadily shifting towards local and regional banks, including in some cases, Islamic banks.
Securities and Commodities Markets
Emirates Securities and Commodities Authority (SCA) is the governing body for all the stock exchanges, securities and commodities listed in the UAE except for the ones that are in the financial free zones.
The Dubai International Financial Centre (DIFC) is a financial free zone that opened in 2004 under the regulatory authority of an independent body, the Dubai Financial Services Authority (DFSA).
Similar to DIFC, the emirate of Abu Dhabi launched the operations of the Abu Dhabi Global Market (ADGM) in October 2015. This financial center is also regulated by its own independent body, the Financial Services Regulatory Authority (FSRA).
The Dubai Financial Market (DFM) and the Abu Dhabi Securities Exchange (ADX) that opened in 2000 are regulated by the SCA. The SCA electronically links both bourses in what it calls the Emirates Securities Market (ESM). They are the most prominent stock exchanges in the country. More than 200 stocks and a dozen of sukuks and bonds are listed in the DFM and ADX combined.
The Dubai Gold and Commodities Exchange (DGCX), founded in 2005 in the Dubai Multi Commodities Centre (DMCC) as the region’s first commodity derivatives exchange, is also regulated by the SCA.
In 2005, Nasdaq Dubai stock exchange opened in DIFC under DFSA’s regulatory authority. After years of low trading volumes, all clearing, trading, settlement, and custody functions for Nasdaq Dubai equities have migrated and are being outsourced to the DFM’s systems. To date, only 8 stocks are listed in Nasdaq Dubai, and most other securities traded are sukuks and bonds.