Manufacturing plays a crucial role in reducing a country’s vulnerability to external shocks and attaining economic independence. The industry creates a strong foundation for self-reliance, reduces dependence on imported goods and increases export earnings.
The pandemic has exposed the vulnerability of the country’s economy, which has encouraged the government to come up with a new strategy to future-proof the UAE economy. Investment in primary manufacturing could create an industrial revolution in the UAE, develop home-grown products that could meet domestic demand, create jobs, diversify export earnings and make the economy self-reliant and less immune to external shocks.
For a long time, the UAE economy was reliant on the export of crude oil. Dubai, on the other hand, diversified its economy and expanded the service sector, especially through trade, retail and tourism. This way, the country has become a consumer economy that relies mostly on imported goods, retail and wholesale, and tourism.
But this could drastically change - how?
The UAE holds 97.8 billion barrels – the world’s seventh largest proven crude oil reserves, with 3.77 million barrels production per day. It has a plan to develop mid-stream and downstream petrochemical industries that could provide feedstock raw materials to a number of local manufacturing industries - be it electrical, electronics, household appliances and toys – that use petrochemicals as feedstock to manufacture components. If utilised properly, part of UAE’s crude oil production could fuel the domestic industrial revolution in the coming years.
A comprehensive action plan
In March, the government announced a 10-year national industrial strategy that seeks to expand the UAE’s industrial sector and increase its GDP contribution from the current Dh133 billion to Dh300 billion by 2031. The strategy envisions the industrial sector as the driving force of a sustainable national economy.
Additionally, the Dubai Industrial Strategy 2030 aims to make Dubai a global base for knowledge-based, innovation-driven and sustainable industries. The strategy comprises 67 initiatives that are expected to lay the foundation for industry in Dubai and add Dh160 billion to the emirate’s gross domestic product (GDP) through to 2030. These are the two best economic strategies announced this year – and covers both the federal and Dubai economy.
In Dubai, the announcement was followed up with another piece of news – the restructuring of Dubai Exports, part of the Department of Economic Development DED), to Dubai Industries and Exports – that will not only focus on exports, but also industrial development. Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Dubai Crown Prince and Chairman of The Executive Council of Dubai, said Dubai Industries and Exports will develop the industrial sector and coordinate efforts to make the emirate a hub for industries of the future.
Industrial headway
According to Dubai Statistics Centre, the average GDP contribution of the industrial sector in the 2015-19 period (at constant prices) was 9.3 per cent. Industrial exports saw an average growth of 7 per cent in this period. The total value of industrial exports in 2020 amounted to Dh167 billion, a growth of 8 per cent from the previous year, according to Dubai Customs.
A report by the Business Registration and Licensing (BRL) section of Dubai Economy states that 6,728 companies have been operating in the industrial sector in Dubai from 1963 to 2021. The number of investors in the industrial sector reached 33,548 in 2021.
To encourage and accelerate investment in manufacturing, the government could consider offering incentives to export-oriented industries, like many other countries, including offering free or subsidized land, easy bank loans backed by government guarantees, export credits and export incentives. These steps could accelerate investments into manufacturing.
