Growing inflationary pressures prompt industries to innovate

Dubai: Dubai Industrial City (DIC) is being developed by Dubai Holding's unit Tatweer to create a strong manufacturing sector in the emirate. It expects a total investment of $15 billion in its infrastructure and factories.

When complete, the zone will have 450 industrial and manufacturing units. Spread over 560 million square feet, DIC features six industrial clusters for food and beverage, base metals, mineral products, chemicals, transport equipment and parts, and machinery and mechanical equipment.

Rashid Al Ansari, CEO of DIC, talks about how the industrial park will work. Al Ansari was previously the principal executive and coordinator for commercial affairs of companies at Dubai Holding. In May 2005, he was appointed a board member of Dubai Mercantile Exchange.

Al Ansari holds a bachelor's degree in engineering from the University of Bradford, UK. He also has a Masters in Business Administration degree from the Leeds University Business School.

Gulf News: You have completed some infrastructure work and finished leasing land. Could you provide updates on the ongoing work?

Rashid Al Ansari: We have had tremendous success from a leasing perspective. We have managed to lease out the six industrial zones that we have. There is a huge growth in the market for industrial land and we have positioned ourselves to cater to the local market's needs.

There are two aspects of running an industrial park. One is its location, and being close to the world's largest airport [still under development] has definitely impacted us positively, as well as being close to the sea port and highways. The other aspect is the services that we provide.

In terms of infrastructure, we have contracted Wade Adams for Dh774 million to build the phase one infrastructure. Since we had great success in leasing out phase two, we have brought forward the infrastructure schedule. We had planned to start infrastructure work for phase two in 2009. However, we will be able to commence the work by the middle of this year. This is in addition to the infrastructure we are building in commercial areas.

Are you on schedule in terms of construction? Is the handover of plots on time?

It is generally on time. However, there are lots of challenges, [like] the labour shortages contractors are facing, and these do affect construction whether you like it or not. Internally, we have put enough buffers to accommodate these things. There are two things about engineering projects that I have learned through my experience. One, a project is never on time, and secondly, it is never on budget. That is why it is planning, planning and planning from the beginning. We have planned very well for DIC and we have put enough cushions as a policy to accommodate these things. Yes, we are affected, but the effect is not vast.

Are these companies going to produce for the local market or for exports?

We are well-balanced between the local and regional markets. We are not a free zone area. The reason we have kept it as a non-free zone area is to benefit from the Greater Arab Free Trade Agreement (Gafta). There are two free trade agreements. One is at the GCC level and the other is at the Middle East and North Africa level. Gafta includes 17 countries within the Mena region. So we are talking about a huge geographical area and a huge market. If you are located in a free zone, you automatically get disqualified from benefitting from the tariff-free access to the 17 countries. This is the main reason why we have kept the area as non-free zone.

There is a cost factor as well. Companies based in Dubai are faced with higher operating costs because of inflation. Is that affecting DIC?

It is a must for companies to build capacity these days. You cannot use the excuse of rising inflation any more because there is a huge demand for products in the local market as well as in the regional market.

Look at it from a positive perspective. It [high operating cost] pushes manufacturing plants to make their processes more efficient. For example, Dewa says there is a slab system for tariffs. So, if you use more energy you will be charged extra. Do not use more energy, come up with some systems [to save energy], solar panels on roofs, for example. It pushes companies to be more responsible, more efficient.

For example, we have a food and beverage company that realised how expensive land is in Dubai. They realised how expensive energy is going to become. They came up with an innovative solution of a vertical system, which uses gravity to mix dough. The system uses less energy and space. If it was not for these pressures, you will not come up with these innovative solutions.

But the bottomline is that companies producing in Dubai may become less competitive in foreign markets?

There is a global [inflationary] trend. I think Dubai is in line with it.

How are you taking care of your electricity and water needs?

Dewa is providing power to DIC. We have secured three sub-stations; each one is 132 kva capacity and it is going to be sufficient for phase one in order to provide power to the factories that are coming up. So that puts us in a comfortable position. We are looking at how we can reduce the carbon footprint, how we can increase the amount of green energy. We have 12 million square feet of warehousing rooftops. All these rooftops can accommodate solar panels. We are thinking along those lines.

In terms of quality standards, do you have an ongoing supervision of companies?

It starts from the application stage. Before we even consider a plot of land, there is an application screening process that is governed by an independent department called Maqayees under the authority of DIC. The department uses the Dubai Quality Mark to benchmark whether a company meets the minimum requirements or not.

The Dubai Quality Mark is a bundle of industrial standards and management standards. If a company falls short, it automatically gets disqualified even before being considered for land. The screening starts from point zero rather than after we engage with the client. This sets DIC apart from other industrial parks. We rejected 30 per cent of applications in 2006 and we rejected 35 per cent in 2007 because they did not comply with the requirements of the Dubai Quality Mark.

What role do you see for your industrial zone in Dubai's economic development?

Once complete, DIC with its 450 factories, will contribute positively to Dubai's economy. It is an arm for diversification for the government. We are the third largest non-real estate based project in Dubai. So we have a significant role to play in contributing to the emirate's GDP.