The Tawazun Economic Programme: UAE Defence Offset Obligations Explained
Last updated: June 2026
The Tawazun Economic Programme requires defence contractors winning UAE contracts above AED 10 million to discharge offset obligations of 60 percent or more of contract value through qualifying investments in UAE defence industrial capability. Unlike standard ICV, offset obligations require active investment — not merely local spending.
How Tawazun Offset Differs from Standard ICV
Standard ICV measures where a company's economic activity occurs. Tawazun offset obligations require primes to actively create new UAE defence industrial capability — technology transfer, joint ventures, local manufacturing capacity, or Emirati workforce development in defence sectors. Non-compliance risks contract penalties and disqualification from future tenders.
Who Has Offset Obligations
- All defence contracts above AED 10 million awarded through Tawazun Council
- Foreign OEMs and prime contractors are the primary obligors
- Obligations are discharged over the contract period per an agreed schedule
Discharge Mechanisms
- Establishing UAE-based manufacturing or MRO facilities
- Joint ventures with UAE defence companies
- Technology transfer agreements
- Procurement from UAE defence suppliers (weighted by their ICV scores)
- Training and employment of UAE nationals in defence roles
Al Selmiyyah Defence Industrial Free Zone
Launched in May 2026 by Tawazun Council and AD Ports Group, Al Selmiyyah is the UAE's dedicated defence industrial free zone. All OEM and tier-1 tenants operate under 100% ICV-embedded procurement requirements, making it a primary discharge venue for offset obligations.
Finding Qualifying UAE Suppliers
A prime with an offset obligation needs qualifying UAE suppliers and partners. Supplier selection directly affects discharge credit. Search UAE defence sector suppliers →
Frequently Asked Questions
What is the Tawazun offset requirement?
Defence contracts above AED 10 million awarded through Tawazun Council carry offset obligations of 60 percent or more of contract value, discharged through qualifying investments in UAE defence industrial capability.
How is Tawazun offset different from ICV?
ICV measures where economic activity occurs; Tawazun offset requires actively creating new UAE defence capability through investment, joint ventures, or technology transfer. Offset is an investment obligation, not a spending measurement.
What happens if a contractor misses offset obligations?
Non-compliance risks contract penalties and disqualification from future UAE defence tenders.
What is Al Selmiyyah?
Al Selmiyyah is the UAE's defence industrial free zone, launched in May 2026 by Tawazun Council and AD Ports Group, with 100% ICV-embedded procurement requirements for all tenants.
Can offset obligations be discharged through procurement?
Partially. Procurement from UAE defence suppliers contributes weighted by their ICV scores, but most obligations require deeper investment such as technology transfer, joint ventures, or local capacity building.
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