40 years of UAE: Making the tools for the future

It's been a long journey from pearl-diving to aluminium extrusion, but manufacturing in the UAE is still trumped by the dominance of the hydrocarbons industry and is unlikely to catch up in the next few years.

Thirty years down the line, the manufacturing sector is still in its developing stages and the UAE has yet to become a truly industrialised economy: it is held back by investments in hydrocarbon projects at the expense of other industrial sectors, the absence of advanced technology to increase production, and a lack of local raw materials.

Yet manufacturing is poised to become the most important sector in the next decade and it is crucial to invest in advanced technology, technical training and more funding for small and medium enterprises that make up the bulk of the industrial establishments in the country, analysts say.

Over the last 30 years, the UAE invested $6.8 billion (Dh25 billion) in industrial development that spurred the creation of 1,000 factories with more than $20 billion in direct investment, according to a recent estimate by the Economist.

Historically, the development of the industry fell into three main stages that corresponded to the changes in UAE society from its early beginnings as the Trucial States, to the discovery of oil, to the drive for economic diversification.

Effective strategy

The first phase of the manufacturing industry began in the late 1960s to meet basic needs for food and infrastructure. Small industrial establishments were into beverages, food processing and construction requirements.

The second phase in the 1970s recognised the need to move away from complete dependence on oil revenues, led to a gradual investment in non-oil sectors. The industry advanced to meet the development of the country and changes in lifestyle. In 1975, the first cement factory and paint factory began production. Laying the foundation for industrial development, the Federal law No 1 of 1979 organising industrial affairs was passed.

Heavyweight industry giants Dubal and Ducab were also established in the 1970s. In the 1990s, the third phase saw the manufacturing industry looking abroad to export markets for expansion.

The major development of industry over the last 30 years was fuelled by technology.

"Technology transformed the industry to a more advanced stage. It used to be an import-substitution industry for the local market and then changed from local to export-based," said Dr Faisal Mohammad Al Amir, senior industrial consultant at Dubai Export Development Corporation (DEDC). Manufacturing currently contributes 16 per cent to the UAE's gross domestic product.

Recently, Sultan Bin Saeed Al Mansouri, the Minister of Economy, said the ministry has adopted an effective strategy to boost the performance of the industrial sector in order to increase its contribution to GDP to 25 per cent in the coming years.

At present, large-scale downstream hydrocarbon projects continue to dominate manufacturing in the UAE, but other sub-sectors have grown.

Major industries such as aluminium, steel, chemicals, spare parts, pharmaceuticals, shipbuilding, cement, ceramics, glass, textiles, paper products and food processing are growing — a radical transformation from the early dependence on animal breeding, pearl trade, seafaring and fishing in pre-oil days.

Dubai's top 10 manufactured exports include gold and jewellery, sugar, plastics, petroleum products, scrap and waste, chocolate and processed food, and aluminium, with top export destinations including India, Switzerland, Saudi Arabia and Iran, according to the DEDC.

Dubal, one of the UAE's industrial landmarks, alone contributes 45 per cent of Dubai's exports. About 90 per cent of its aluminium production is exported.

High demand

"A number of downstream industries in Dubai and the UAE depend on Dubal products, not to mention that it absorbs young nationals in the field of engineering," said Khalid Bu Humaid, Dubal spokesperson.

"The industry will continue to grow in the coming five years and more, as the demand is still high and there are excellent facilities around Dubai and the UAE." Ducab, the cables company, opened 32 years ago alongside Dubal.

"There was barely a handful of manufacturing companies in the UAE. Ducab was the first cable manufacturing company to be opened in the UAE which started operations in collaboration with the UK's BICC," said Andrew Shaw, managing director of Ducab. Beginning with an area of 10,000 square metres in a small Jebel Ali factory, Ducab now occupies 920,000 square metres spread over four manufacturing sites that export cables and copper rods to more than 40 countries. Cable exports have reached 143,000 tonnes.

Up to 2010, Ducab has sold about 717,000 copper tonnes equivalent of products. It started with 18 employees in 1979 and now has over 1,000 people and investments worth Dh2 billion over the past five years.

Continuing policies that make the UAE a cost-effective place to do business is the way forward, said Shaw.

"Further consolidation by offering competitive energy costs, excellent infrastructure and encouraging the development of the supplier base would definitely provide an impetus to the manufacturing sector as a whole."

Government efforts continue to drive the manufacturing industry.

"Innovation and investment are the key drivers of growth in the manufacturing sector owing to a high level of government support and funding," said Abdullah Bel Houl, managing director of Dubai Industrial City, a member of Tecom investments dedicated to attracting and supporting the growth of light to medium manufacturing and logistics ventures.

Low-interest loans to local and foreign investors, government investment in infrastructure, focus on high-technology, establishment of free zones and a government commitment to developing the industrial sector, have pushed the "Made in UAE" label to global fronts, Bel Houl added.

Dubai Industrial City has recorded a rise in demand for industrial space from logistics, food and beverages and chemical sectors with leases signed for more than 1.5 million square feet of warehouse facilities since 2010, he said. This year, 40 per cent of warehouse Phase 2 was booked.