THE NON-OIL SECTOR

 

  • Introduction
  • Aluminum
  • UAE Free Zones
  • Shipping Related Industries
  • Paint Industry
  • Clothes Industry
  • Food Industry
  • Furniture Industry
  • The Genuine Article/Copyright & Patents
  • Conferences
  • Privatization
  • New Industrial Zones
  • Emirates Industrial Guide Book

    • INTRODUCTION

    Non-oil government earnings, including earnings from the Federal Government's overseas investments, were projected at around $1.08 billion in 1995, compared with less than $500 million in 1990. The non-oil sector of UAE's industrial base is of increasing importance and its development is a matter of high priority to the Government which has an established policy of reducing the country's dependence on hydrocarbons. The success of this policy is clearly evidenced by the steadily increasing contribution of the non-oil sector to GDP. Dubai's non-oil foreign trade is expected to reach DH 95 billion by the year 2000, up from DH 66 billion registered in 1994. Parallels have been drawn between UAE activities in hi-tech industries, financial services and tourism to the economic success of Singapore. The emirate's non-oil foreign trade has increased on average by 12.3% since 1990. Production, in the UAE, rose in the manufacturing industries from DH 23,836 million in 1992 to DH 25,720 million in 1994.

    According to the Central Bank and the Abu Dhabi Chamber of Commerce and Industry, investment in energy, industry and other sectors stands at DH 142.1 billion (38.7 billion dollars.) Almost two thirds of these investments "were pumped" by the private sector into farming, construction, trade and other non-oil industries, thus resulting in the Non-Oil Sector’s growth from DH 77.9 billion (21.2 billion dollars) in 1992 to DH 94.7 billion (23.8 billion dollars), in 1995. This increase has pushed the UAE’s GDP to DH 143.9 billion (39.2 billion dollars). A statistical study prepared by the Abu Dhabi Chamber of Commerce and Industry shows that the GDP of the Non-Oil Sector has increased by DH 8 billion in 1996, and is expected to cross
    DH 101 billion by the end of 1996. The United Arab Emirates, still produces the OPEC-decreed Quota figure of 2.16 million barrels of oil a day and accounts for a good 10 percent of the World’s total oil resources, with its crude oil reserves of 98 billion barrels.

    Given the massive growth of this sector it is worth remembering that it is only a few decades since the UAE's "industry" had an entirely traditional character, referring primarily to boat-building and manufacture of related chandlery and carpentry tools, fishing equipment, clothes making and items associated with agriculture. Whilst these sectors have developed from their traditional roots into major industries, many others have been added so that the UAE is fast becoming a major Centre for manufacture of a wide range of items.

    According to the ADCCI's annual report for 1995, livestock, vegetables, food, beverages and tobacco were the first on the list of non-oil exports, contributing 31.6 % of the total export figure of DH. 334,898,398.

    There is a great deal of logic in using the UAE as a manufacturing base for international companies since, not only is it strategically situated close to two important consumer markets in Asia and Africa, but it is also midway between the Far East and Europe. The country's modern infrastructure, with well-built multi-lane highways providing fast overland access to all industrial bases within the country, and to the rest of the AGCC, combined with its sophisticated harbors and airports, provide multiple solutions to virtually all transportation tasks, whether for the supply of raw materials, or for the export of manufactured products. If one adds to these logistical advantages the unique range of investment incentives and supporting facilities on offer then it is hardly surprising that an increasing number of major international companies are choosing to base themselves at one or other of the industrial complexes and Free Zones that have been created within the UAE.

    Aluminum

    Aluminum manufacture is one of the UAE's heavy industries whose logic is based upon its ready supply of low-cost energy and its geographic location, rendering marketing to Asian markets economically feasible. Dubai boosted its aluminum production during 1994, with production by the government-controlled DUBAL company at around 245,000 tons compared with around 242,000 tons in 1993. DUBAL is the second largest aluminum smelter in the Middle East, after Bahrain's Alba, which produces around 460,000 tons per year.

    DUBAL exports finished cast aluminum products to more than 20 countries with Japan, the main economic and oil partner of the UAE, also remaining the top importer of DUBAL's aluminum, receiving more than 30 per cent of its production. Other key importers are South Korea and Hong Kong. A 500 million dollar expansion project aimed at increasing DUBAL's annual production capacity by 52% from 245,000 tons to 372,660 tons, scheduled for completion in 1997, began during 1995.

    Aluminum manufacturing in the UAE has spawned a number of related industries of which the Dubai Cable Company, DUCAB, a joint venture between the Dubai Government and Britain's BICC Plc, is a prime example. Situated in Jebel Ali Industrial Area, the company produces a range of power cables and building wires utilizing aluminum or copper. The DUCAB range of products is accepted and approved by all major consultants and power generating and distribution authorities throughout the AGCC. The company has ISO9002 certification. On a smaller scale, a number of companies use the aluminum in the manufacture of a range of building fittings such as doors, windows, hand-rails, grills and shutters; as well as for making various forms of packaging materials, tools, utensils, machinery and equipment.

    UAE Free Zones

    The UAE, home of a free-trade-zone empire, has enjoyed a chain of economic benefits and a major industrial upswing due to its flourishing free zones. The rare opportunities and quality services which they provide have allowed the UAE to assert a pioneering role in the world of free trade.

    Financial incentives to establish manufacturing industries in the UAE are primarily focused on exemption from all taxes and duties levied on profits or production, with the exception of licensing fees. Furthermore there are no restrictions on profit transfer or capital repatriation. Customs duties may also be exempted for qualifying projects established in the special industrial zones. In addition, nationally produced products are given a 10% price advantage in government purchases, over imported goods. A key source of funding for industrial projects is the Emirates Industrial Bank, a specialized financial institution, founded in 1982, with the objective of promoting economic growth in the UAE. The bank's focus is on diversification of the country's economic base by assisting the development of its industrial infrastructure. Maximum loans are 60% of the project cost, including working capital for three months. The Bank gave loans worth 40 million dollars for six major industrial projects in 1994. These included new factories for plastics, building materials, decor, furniture, printing and publishing.

    On the eleventh of July, 1996, HH Sheikh Hazaa Bin Zayed Al-Nahyan announced the approval of plans for the establishment of a three billion dollar Abu Dhabi Free Zone to include facilities for warehousing, precious metals and food, the first of its kind in the Arab Gulf. Saadiyat, an island of about 35 square kilometers, located seven kilometers south of Abu Dhabi city, will be the Free Zone site, and will have the capacity to store sixty seven basic commodities such as oil, grain, diamonds, copper, gold etc... Plans for its completion in three to four years have already started with the issuing of a law forming the Zone’s board, which has already decided on building a six km long bridge, to link the 3,500 hectare Free Zone with the mainland. The Saadiyat Free Zone will not be in competition with the Dubai Jebel Ali Free Zone, since it is a commodities trading and storing facility, not a free trade zone specializing in container handling, like the one in Jebel Ali. The Abu Dhabi Free Zone will provide services to about 3.5 billion people. During the first official meeting of the Board, HH Sheikh Hazaa Bin Zayed Al-Nahyan, the Chairman of the Zone, went on to state that this project not only encourages investment in the region’s industrial sector, through exporting to local and external markets at competitive prices, but also places Abu Dhabi on the map of International Business with all other globally competitive enterprises. Specialist consultants retained by the zone authorities have put their expertise to use in order to develop a healthy base and framework from which to start. HH Sheikh Hazaa also added that the annual worldwide trade in the commodities to be stored exceeded 412 billion dollars (Dhs.1.5 trillion). The project’s direct positive impact on the UAE economy was mentioned by Offset Chief Amin Badr Aldin, also a zone board member. It will not only attract international investors, but will also benefit banks and insurance companies. Already, a number of major Swiss companies have shown interest in the new Free Zone, due to its strategic position , as it lies in the heart of a major trade area, exposed to the Gulf, the Middle East and East Asia. Projects such as the Free Zone, are intended to advance the policy of HH Sheikh Zayed Bin Sultan Al-Nahyan, the President of the United Arab Emirates in the effort to maximize the employment opportunities available to the Nationals of the United Arab Emirates.

    Imports of companies based in the Jebel Ali Free Zone, JAFZ, shot up by 40% during 1995 to $ 3.1 billion (Dh 11.01 billion), as against $ 2.2 billion (Dh 8.07 billion) in 1994. The outbound trade grew by 35% to $ 3.24 billion (Dh 11.89 billion) in 1995. "Over $ 2.36 billion (Dh 8.66 billion)-worth of goods were sipped outside the UAE and about $ 889 million (Dh 3.26 billion) went through local importers into the domestic market," Sultan bin Sulayem, Chairman and Managing Director, JAFZ, and Dubai Free Ports Authorities, DPA, said in a press release on 26 May,1996. "We are pleased to see the remarkable growth of business volume through the JAFZ, which is due to the directive of General Sheikh Mohammed bin Rashid al Maktoum, Crown Prince of Dubai and the UAE Defense Minister, that we offer the maximum facilities to companies located in the zone and to DPA clients," he added. Although the free zone was centered on Jebel Ali terminal, the two terminals of the DPA operate interchangeably, he noted. "Thus, many companies in the free zone make use of the DPA's 102 deep water berths which are capable of accommodating all vessels presently trading in the Gulf." The DPA was ranked 13th for having handled 2.07 million twenty-foot-equivalent units, TEUs, of containers in 1995 by Container Management. It moved up from 14th position in 1993 and 1994 and strengthened its status as the Best Sea Port in the Middle East', as voted for the second consecutive year by readers of CargoNews Asia, said the release. In over 10 years, JAFZ has attracted a total investment of over $ 1.6 billion and hosts 930 companies from 72 countries. The Authority "is interested in attracting companies which add value to their product, through the manufacturing process or move large volumes of cargo," it added. To make room for the companies planning to expand their operations and for investors planning to put up large ventures, the JAFZ stopped renewing the licenses of companies which had been inactive since establishing their business. "The JAFZ has contributed to bring more business to Dubai due to the incentive of 100% foreign ownership, offered to investors in the free zones," said the release. "This incentive has also helped to establish large joint venture projects on an equal partnership basis."

    Incentives:

    For more information, visit the Jebel Ali Free Zone Authority home page at http://www.jafza.com/

    Sharjah Airport International Free Zone

    The Sharjah Airport International Free Zone (SAIF) was officially established on the 8th of May, 1995, following the Sharjah government’s decree #2 for that year. The Free Zone was set up following careful planning and organization by the authorities and immediately paved the way for a major industrial and economic upswing in the area.

    Strategically located nearby the Sharjah Airport, the Free Zone is only twenty five minutes away from the emirate of Dubai and a mere ten minutes away from downtown Sharjah. SAIF provides rare opportunities for business investors, these include:

    The Fujairah Free Zone

    The Fujairah Free Zone officially started to operate in November of 1987 following the issuance of the Emiri Decree no.6 of that year. The Zone covers an area of 400,000 sq. meters along with a recent one kilometer addition set up in preparation for upcoming projects. The Zone is currently engaged in an expansion phase through the construction of new buildings to provide more facilities. The plan includes a 140-office commercial complex and a new administration headquarters. Presently, there are 46 resident companies engaged in projects such as ready-made garments, textiles, perfumes, chemicals, animal fodder, color film slides, precious stones, tobacco etc... In 1995, the total amount of capital invested in the Fujairah Free Zone reached Dh. 640 million. The Free Zone Authority encourages the setting up of industrial projects which utilize high-technology machines and provides incentives such as:

    Operational licenses issued by the FFZ Authority are determined by the firms’ activities and products.

    The UAQ Free Zone

    On April 1st, 1988, the Ahmed Bin Rashid Free Zone was established. Located on the west coast of the UAE, about 30 miles north east of the emirate of Dubai, in Umm Al Qaiwain, the Ahmed Bin Rashid Free Zone was set up within the confines of the Ahmed Bin Rashid Port. The Free Zone consists of 845 meters of quay wall, 400 meters of which can handle ocean going vessels and 118,000 sq. meters of land reserved for light industrial development. The Free Zone Authority provides administrative support to the resident companies as well as incentives such as:

    The Port Authority also provides warehousing services for the resident companies. The Ahmed Bin Rashid Free Zone was established following the issuance of Decree No. 2/87, by His Highness Sheikh Rashid Bin Ahmed Al Moalla, ruler of the Emirate of Umm Al Qaiwain.

     

    Shipping Related Industries

    Given the UAE's long association with the sea it is not surprising that shipping, dry-docking, ship repairs, boat building and other marine industries are well represented within the UAE's non-oil sector. At the time of writing there are 11 boat-building yards in the UAE, together with several smaller boat workshops. More than 1,600 boats were produced in the UAE in 1994, many of which were exported. Companies such as Al Bawardy Marine Engineering Workshop, which now employs over 250 people, have grown from smaller family businesses based on fixing and repairing marine engines. Their range of activities have expanded along with their size. On a larger scale, Dubai Dry Docks, takes large ships into its facility for repair and maintenance. It employs over 2,700 people.

    Traditional wooden boat building can still be found in the UAE where there are many skilled craftsmen, but steel and fiberglass construction are increasingly important in hull construction.

     

    Paint Industry

    Not entirely unrelated to the marine field, paint manufacture is also an important sector of the non-oil industries, with sixteen paint factories producing 130,000 tons of paint annually. A number of major international paint manufacturers have based themselves in the UAE. Although most of the raw materials for paint manufacture have to be imported, the main added-value takes place at the manufacture stage and in this case access to a strong local or regional market is important.

    UAE Paint Industry: Exports.

    (Quantities in tons, value in Dhs million)

            Year    Qty     Value
        1989    11412   38.5
        1990    11255   41.5
        1991    17323   64.8
        1992    22134   86.1
        1993    19866   86.1

     

    Clothes Industry

    The garment industry in the UAE has become a substantial export earner since factories have mushroomed all over the seven Emirates. Over 30 apparel buying houses have established operations in the region, manufacturers are booked up to six months in advance and 90 per cent of factories are undergoing full operational expansion. About 97 per cent of garments produced are exported, and consist of shirts, dresses, skirts, trousers, jackets, sports wear, leisure wear and night clothes. Between 1974-1983, there was only one factory in the spinning, weaving and leather sector established in Sharjah. The pace of industrial growth quickened in the 1980's and between 1984 and 1988, 49 factories were established. In 1991, there were 65 factories involved in spinning, weaving and the leather industry, increasing to 69 in 1992 and 72 in 1993. Between 1990-93, 23 new factories were added, a 47 per cent increase, and the sector had a 15.3 per cent share of total industrial factories in Sharjah in 1993.

    The Abu Dhabi Garment Factory, ADGF, was opened during the period under review. Jointly owned by the French defense company Thomson CSF and the local Bin Jabr Group, ADGF is the first in a series of six offset projects resulting from a contract Thomson CSF signed in 1993. The factory, built at a cost of five million US dollars, shows the economic growth of the Emirates. It is designed to compete with foreign companies who import into the Emirates and will export to foreign markets especially in Europe. The company expected an initial annual output of two million pieces of which 30 per cent will be military uniforms and the other 70 per cent civilian clothes for export under the brand name Labiche. Based in Mussafah Industrial Complex, the factory has the latest in design and production facilities, including computer aided design, CAD, automatic spreading and automatic sewing machines. The Offset Program is intended to create value and wealth for the UAE economy through the establishment of profitable business ventures. Thomson CSF has planned about 30 offset projects around the world including the six in Abu Dhabi.

    By April 1995 the Abu Dhabi factory, only two months into production, was negotiating contracts with local oil companies for the supply of special anti-inflammable garments, and already producing uniforms for the UAE Armed Forces, the police, Emirates University and the Higher Colleges of Technology.

    Food Industry

    On the food front, almost every kind of activity now takes place in the UAE:- cold-storage; meat and poultry production, processing and packing; a wide range of dairy product manufacture, including milk, butter, cheese, yogurt and ice cream; vegetables; fruit; fish; bread; pastries; pastas; potato crisps; tea-blending and packaging; spices; salt packaging; beverages and a number of sugar projects. A major new sugar refinery recently established in Jebel Ali is partially geared for the massive market for sugar which exists in neighboring Iran. With an output capacity of 720,000 tons per year, it is the biggest sugar refinery in the Gulf, where sugar consumption of around 25 kilograms per person a year is among the highest in the world. The UAE alone consumes around 65,000 tons per year. Iran imports around 700,000 tons of sugar per year, accounting for more than half its consumption. The rest is met through local sugar production. The refinery is also likely to supply into the Iraqi market of 500,000 tons per year when Gulf War international sanctions are lifted. Other targets include Gulf Arab states, India, Pakistan and other Asian countries.

    Furniture Industry

    A rapidly growing industry throughout the Gulf area is the furniture industry, whose market is expected to reach $3 billion by the end of 1996. Of this amount, $750 million circulates in the UAE furniture market. Local production covers 20% of the figure (about $150 million) providing production of wooden products, furniture and upholstery services through a total of 97 factories, 50 of which are in Sharjah, 32 in Dubai, 9 in Ajman, 3 in Abu Dhabi, 2 in Ras Al Khaimah and one factory in Umm Al Qaiwan.

    Between 1975 and 1995 in the UAE, the furniture and wooden products’ manufacturing business figures were as follows:

    Local consumption accounts for over 80% of the production, the rest of which is distributed in the Gulf furniture markets and Europe. The continuous and rapid development of the country has opened the way for increased construction of residential buildings and new hotels which has increased the demand for furniture production, leading to a boom in the UAE’s furniture industry.

     

    The Genuine Article

    Introduction and enforcement of copyright and trademark laws in the UAE has boosted a number of industrial sectors. It has helped to underpin major developments in printing and publishing as well as providing a basis for growth in the jewelry, electronics and software fields. The Hallmarking Law is designed to ensure that gold jewelry sold in the local market, and items destined for export, are of genuine cartage. The law states that all pieces of gold, platinum and silver jewelry must carry stamps showing their carat number and purity. The symbol adopted for gold is a falcon, that for silver a fort and platinum bears a palm-tree.

    Computer hardware imports into the UAE alone are estimated at $150 million for 1994 according to industry figures, a significant increase on the $125 million for 1993. As copyright laws for software packages are enforced, the software industry expects significant growth. Industry sources believe that if piracy is reduced by even 20 per cent, software sales in the region will quadruple. With the UAE and Saudi Arabia introducing stricter copyright laws, the Gulf is set to become a boom market. Local companies now have the chance to increase their share of this lucrative market for a wide range of equipment, technology and services including processors, peripherals and terminals, components, graphics and English and Arabic software.

    Conferences

    The UAE is now a major international center for trade conferences and exhibitions. The list of major events held during the 1994-1995 period, attests to the great range of interests that are catered for, both for companies based within the UAE and for international institutions. The hotel sector has already benefited greatly from this activity and it is expected to grow rapidly during the next few years, as the federation emerges as a major tourism center. 1996/97/98 are expected to be boom years with many conferences and world exhibitions attracting thousands of participants. This will, in turn, create a boom in domestic trade, specially in the fields of service, hotels and restaurants. The expected growth will be supported by developments in the aviation field, with Emirates airline adding new aircraft to its fleet and airports undergoing expansion of facilities, as well as the completion of a number of large hotels currently under construction.

    Privatization

    The Abu Dhabi Government is planning a major privatization program that will transfer management of a range of state-run enterprises and public utilities in a phased manner. The program will cover public utilities like water, sewage disposal, electricity as well as areas like shipbuilding, aviation, airport, harbor management, insurance, petrochemical projects and possibly health care. Public utilities will be first let out to private management and later the Government will sell part of its holdings before the final transfer at a later stage. Efforts are being made to evaluate Government assets, restructure losing state owned units with the help of private expertise, and create regulatory mechanisms to ensure against transfer of Government monopolies. The process will focus on technology intensive projects in order to reduce the country's present over-dependence on foreign workers.

    Privatization is expected to provide a wider choice for consumers. The private sector at present contributes around 30 to 40 per cent of the GDP of the GCC countries. As part of this move towards privatization the General Industry Corporation, GIC, announced plans to sell off five of its profitable factories to the private sector. The first phase of privatization plan will cover Al Ain Cement Factory, Abu Dhabi Flour and Animal Feed, Abu Dhabi National Pipes and Bags, Cement Brick Factory and Al Ain Mineral Water Bottling Factory. The GIC feels that privatization will boost efforts to shift to a new phase in upgrading the activities of the corporation. The move was in line with GIC's plans to adopt a philosophy of industrial investment in the Emirate to create opportunities and encourage nationals to invest in this sector and contribute towards diversification of national economy.

     

    New Industrial Zones

    Apart from privatization, GIC is planning to set up three major industrial zones and has earmarked around Dh 100 million ($27.2 million) in soft loans to potential investors in those zones. It was expected that such projects would push up the GDP in Abu Dhabi's non-oil industrial sector from Dh 5.58 billion ($1.52 billion) in 1993 to Dh 11.1 billion ($3.02 billion) in 1998 and Dh 20.9 billion (5.69 billion) by 2008

     

     

    Emirates Industrial Guidebook

    Further information on the UAE's 2,500 or so factories and their products can be obtained from a new guidebook, published in August 1995. The book, entitled The Emirates Industrial Guidebook 1995-1996, has been issued by the UAE Chambers of Commerce and Industry in co-operation with the Ministry of Economy and Commerce. Additional publications on investment opportunities and a trademarks directory were also in the pipeline.

     

     

     

     

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