Jebel Ali Free Zone plays major role in attracting industries

During the last two decades, with the government's increasing emphasis on diversification of the economy, the manufacturing sector has made significant progress in Dubai.

Jebel Ali Free Zone has played an influential role in attracting manufacturing industries and, today, hundreds of factories cover a wide range of manufacturing fields.

Dubai Municipality's Statistical Year Book 2000 shows that the manufacturing industry sector has grown tremendously, with the number of establishments rising from 1,386 enterprises in 1980 to 3,687 in 2000 - an increase of over 160 per cent at an average annual growth rate of 5 per cent.

Between 1980 and 1985, these establishments increased by 48 per cent, from 1,386 to 2,053 and between 1985 and 1995 the number increased 65.3 per cent from 2,053 to 3,394.

The number of employees in these establishments grew from 21,971 in 1980 to 81,272 in 2000 at an average annual growth rate of 6.7 per cent. Also, between 1985 and 1995, it increased 169 per cent from 22,577 to 60,724 employees.

Between 1995 and 2000, it increased by 33.8, from 60,724 to 81,272 employees.

When the five-year intervals from 1980-1985 and 1995-2000 are compared, they show that the scope for employment within the manufacturing sector has expanded significantly.

That is, while the number of employees increased 2.8 per cent between 1980-1985, it rose 33.8 per cent between 1995-2000.

The five-year interval between 1980-1985 showed an increase in the number of establishments at a rate of 48.1 per cent while the number of employees increased at a rate of 2.8 per cent.

This revealed the introductory phase of the manufacturing sector, when investors were attracted to the region because of its economic growth so as to set a hub for global and regional markets.

While the introductory phase of an industry usually attracts new players, those who start with a small scale of production and, as such, establish units with lower levels of employment and production.

On the contrary, while the number of establishments increased 8.6 per cent between 1995 and 2000, the number of employees rose 33.8 per cent during the same period, showing an expansion of operation and a larger scope for production as the manufacturing sector moved ahead towards the growth stage.

In 1995, total input into the manufacturing sector was over Dh4 billion while total output was more than Dh8 billion. Of this, Dh3.5 billion formed the net value added which is distributed at 81.5 per cent net profit and 18.5 per cent salaries.

Annual capital formation comprised about Dh221.6 million while total invested capital was about Dh2.9 billion.

According to the 2000 statistics, small-size establishments formed the major category in the manufacturing industry. The number of establishments hiring 1-4 employees and 5-9 employees comprised the largest two groups, with 13,86 and 1,278 establishments respectively.

The second largest group is the one that hires 10-19 employees, and comprised 387 establishments. The third largest section hired 50-plus employees, and comprised 330 establishments.

Medium-size enterprises hiring 20-29 employees and 30-49 employees were 158 and 148 establishments respectively.

It is important to note that throughout the fifteen years, from 1985 to 2000, large size establishments of 50-plus employees has grown from 62 enterprises in 1985 to 330 in 2000 at an average annual growth rate of 11.8 per cent - the highest rate compared to the other sections.

Establishments that hire 10-19 and 20-29 employees make the next level of growth, with the number increasing at an average annual growth rate of about 9.5 per cent, from 98 and 41 enterprises in 1985, to 387 and 158 enterprises in 2000 respectively.

Jebel Ali Free Zone has contributed to the development of the manufacturing sector, as it attracted foreign direct investment that was seeking a hub in the regional market.

Thus, the number of establishments operating in the free zone has grown from 234 in 1996 to 329 in 2000 by 40.6 per cent.

It is important to note that of these 329 establishments, foreign enterprises appear to be the largest section with 212 set up there. The second largest group is the 69 enterprises registered in UAE.

The 30 Arab establishments occupied third position and there were 18 establishments registered in the Gulf comprising the final group.

Similarly, in 1999, the 199 foreign companies occupied first place, 64 UAE establishments placed second, 32 Arab enterprises were third and 16 Gulf enterprises fourth.

During 1999, while 49.8 per cent of the 311 establishments in Jebel Ali operated in tobacco, packaging, optical industries and other fields, the remaining classified fields are fabricated metal products (16.4 per cent); chemicals, petroleum and plastic products (10.9 per cent), food and beverages (9 per cent), textile and wearing apparel (8.4 per cent); paper products and printing material (3.2 per cent), wood products (1.9 per cent); and non-metallic mineral products except petroleum (0.3 per cent).

Although trade dominated the economic activity in Jebel Ali during 2000 with 1,494 establishments of the total 1,897 establishments operating in such activity, industry comprised the second largest sector with 17 per cent of economic activity while services comprised 4 per cent.