Dubai:Two Dubai-based private companies have recently commissioned two industrial units in Jebel Ali Free Zone with a combined investment to the tune of Dh350 million ($95 million), which, in their own way, will help the UAE economy in reducing its dependence on imported products.
The two facilities will help create 800 jobs at a challenging time economically.
Of this, JRD International, a leader in Rigid Plastic Packaging technology that provides solutions to a wide range of industry sectors, has invested Dh300 million ($80 million) in RMD Board — a composite polypropylene board manufacturing plant that will change, among other things, construction systems and the way people dress-up interiors — both office and residences.
The RMD Board manufacturing plant, built at a 40,000 square metres plot of land within the Jebel Ali Free Zone, has created 700 job opportunities and is going to support thousands of indirect employment.
“By next year, this plant will reach 110,000 metric tonnes per annum processing capacity of polypropylene. That will make it the largest single-site manufacturing plant of rigid extrusion of polypropylene in the world and reflects our belief and commitment to the UAE and the GCC economies,” Anupam Lunavat, Managing Director of JRD International, said. “The company plans to reach global production of half a million metric tonnes per annum by 2016.”
The second one, an industrial complex built by building materials supplier Danube Group, oversees an investment of Dh50 million, will help reduce UAE construction industry’s dependence on imported finished products as these will be custom-manufactured in the complex.
Danube Industrial Complex is spread across a total area of 450,000 square metres. The complex features four value addition units measuring 150,000 square metres. These comprise of Melamine Pressing Unit, Steel Cut and Bend Unit, Décor Unit, Development Unit, Ceiling Tiles Manufacturing Unit, and Distribution Unit in addition to a Warehouse Unit measuring 300,000 square metres.
“By positioning its key manufacturing and logistics activities at the Jebel Ali Free Zone, Danube will be able to tap the strategic location, business amenities and resources of this world-class industrial community,” Shaikha Lubna Al Qasimi, UAE Minister of Foreign Trade, said while inaugurating the facility.
Danube says, its investment will help create at least 100 direct jobs and support hundreds of indirect employment.
These were commissioned a few months after the inauguration of an upgraded Emirates Float Glass (EFG) factory, the UAE’s largest integrated float glass facility, which is wholly-owned by Dubai Investments (DI) PJSC, at the Abu Dhabi Industrial City in Mussafah.
Built at a cost of over Dh700 million and covering an area of 320,000 square metres, the factory has been partly operational since 2009. With the completion of phase-1 of the facility, it now has the capacity to produce 600 tonnes of clear moulten glass per day and over 190,000 tonnes of glass products per annum.
However, there are some stark similarities in the first two developments. Firstly, the projects have been built within a free zone in Dubai — which speaks of the logistics advantage of the free zone.
Secondly, both investments made by the respective companies’ own resources that are part of the wealth generated by these two companies’ businesses in Dubai at an economically challenging time — speaks very highly of their success.
However, the third and the most significant aspect of these developments lies in employment generation and import substitution of goods that will reduce the UAE’s dependence on imported products.
Danube, set up in 1993 by a non-resident Indian businessman, Rizwan Sajan, has benefited from the building and construction boom in the UAE. It has a solid cash flow. The company was quick to react to the financial crisis of 2008 by setting up a chain of retail outlets under Buildmart network that has widened its product inventory from 15,000 to 25,000 and incorporated home and office décor that has transformed it into a household brand.
The company has already invested Dh200 million in expanding its network during the last three years — that has paid off handsome dividend for its shareholder. It sale has multiplied, so has the cash flow and profits — making it one of the most liquid-rich companies in the country.
JRD International, owned by Lunavat — a NRI businessman, meanwhile, decided to venture in a new industry that will change the way people decorate their homes and office interiors. It’s manufacturing plant — RMD Board — is producing decorative composite polypropylene boards — which an end-user could easily cut and fix on the walls, floors, and ceilings.
Although JRD International’s investment will create a totally new product — reflecting a shift in the company’s business, Danube’s investment will complement its existing business and take it to a new level.
“With a long-term strategic plan, the new investment demonstrates our commitment to delivering a broad range of innovative logistics solutions throughout the country,” Rizwan Sajan, Chairman of Danube Group, says.
“Additionally, the facility will see an introduction to new units, thereby leveraging the growth of the industry and creating job opportunities, boosting the economy as a whole.”
The UAE’s industrial sector expanded by nearly 11 per cent in 2011 and maintained its position as second largest contributor to the UAE’s gross domestic product (GDP) after the hydrocarbon sector, according to a study by the Emirates Industrial Bank.
“According to my forecast, and if we provide for the right environment, in about 15 years we will be able to have a contribution of up to 25 per cent from the industry sector into the GDP of the UAE,” Sultan Bin Saeed Al Mansouri, UAE Minister of Economy said.
From Dh127.6 billion in 2010, the manufacturing sector’s contribution to the UAE’s overall GDP swelled to an all-time high of Dh141.7 billion in 2011. High oil price has helped the UAE’s nominal GDP to reach an all time high of Dh1.3 trillion last year.
“Growth in this sector and other non-hydrocarbon sectors in the UAE last year was a result of an increase in domestic liquidity due to a surge in the country’s oil export earnings,” EIB said in its economic bulletin.
Dubai’s economy has, for a long time, relied on trade, tourism and retail sectors with real estate and construction sectors taking a central position between 2006-08. This way, it remains vulnerable to global commodity price shocks.
“While vulnerabilities have decreased since 2008, the results of this analysis nonetheless suggest that the authorities need to remain vigilant to global shocks and continue to strengthen buffers,” the International Monetary Fund said in a statement.
The only way to strengthen the economy is to expand the manufacturing base.
Investment in industries and manufacturing is critical to economic development of a country. However, loans to manufacturing sector represent about 4.6 per cent of the overall lending by the UAE banks, a recent report showed.
“Dubai’s GDP growth is expected to be in 2012 between 4 and 4.5 per cent, led by trade, transportation and logistics, manufacturing and tourism,” Dr. Lahouel Mohammad, Chief Economist at the Department of Economic Development, earlier this year.