In the UAE’s drive to diversify its economy, the emirate recently launched Operation 300 billion, an ambitious 10-year programme which aims to boost the industrial sector’s contribution to the economy. The strategy envisages the industrial sector providing AED300bn to GDP by 2031, doubling the contribution of both light and heavy industrial manufacturing sectors to the economy.

The sector also has the potential to perform well in the longer term, especially if it is able to harness some of the inherent strengths of the economy such as energy availability, strong logistics and transport links and capital deployment, Emirates NBD said in its new report on the UAE's manufacturing and industrial sector.

Manufacturing has traditionally played an important role in the UAE’s economic structure, especially in driving some of the earliest diversification initiatives that policy makers in the UAE have undertaken. Dubai and Abu Dhabi have built strong industrial ecosystem in metals and high-value downstream processing sectors through companies like Ducab and Emirates Global Aluminum (EGA). Northern emirates like Ras Al Khaimah have built successful industrial capacities in building materials, with a very strong international export base.

Other key sectors where the UAE has significant capacities include chemical and pharmaceutical manufacturing. Developments in the high-tech aerospace and defense industry manufacturing through companies such as Strata in Abu Dhabi for example, are seen as key sectors that will drive a combination of high value exports, strong and innovative industrial clusters base and high value employment opportunities that attract skilled labour to these fields.

“Developing the UAE manufacturing sector will be an important element in reducing economic vulnerabilities especially to external shocks such energy price volatility, which is a key goal of economic diversification. It also makes the economy more self-dependent and reduces reliance on imports, which is positive for the UAE’s long-term trade dynamics,” said Shady Elborno, Head of Macro Strategy at Emirates NBD.

According to him, the new industrial policy will create the roadmap for UAE manufacturing. “We believe the outlook for the sector is very strong, reinforced by the importance policymakers have placed on it, and we expect that support to hold the potential for the long-term development of this sector in good stead,” he said while giving his outlook for the sector.

Policy drives sector

The core driver of the UAE’s long term industrial and manufacturing goals Operation 300bn is a 10-year comprehensive strategy which aims to empower and expand the industrial sector to become the driving force of a sustainable economy, increasing its contribution to GDP from the current AED 133 billion to AED 300 billion by 2031. The Ministry of Industry and Advanced Technology will lead the strategy and roll out programmes and initiatives to support 13,500 industrial small and medium enterprises. The strategy is centered primarily on future industries making use of advanced technologies and the Fourth Industrial Revolution (4IR) solutions and applications.

“The strategy will focus the UAE’s core competencies as a regional logistics, energy and manufacturing hub to enhance the country’s competitiveness at a regional and global level,” Elborno noted.

 It will focus on where the UAE already has an established presence and expertise, including energy, petrochemicals, plastics, metals and manufacturing. Another focus are sectors that reduce dependence on global supply chains, such as food, agriculture, water, and healthcare.  An important focus will be on what are what are termed industries of the future, including space, biotech, medi-tech and other sectors that are enabled by 41R technologies. The regulatory framework will be key; this includes updating the existing law to allow for 100 per cent foreign ownership of individual enterprises. Additionally, the plan will focus on SME growth by providing more attractive financing options for those enterprises. The plan noted that more than 33,000 industrial enterprises operate in the UAE, comprising 95 per cent of SMEs. It has a goal of supporting at least 13,500 SMEs by 2031, given the importance of the sector to the industrial sector and sustainable economy. The plan also sets out increasing the volume of spending on research and development in the industrial sector from AED 21 billion at almost 1.3 per cent of GDP, to AED 57bn at almost 2 per cent of GDP in 2031.

Key Sectors

The report gives a snapshot of the key manufacturing hotspots in the UAE.

Metals

The UAE built significant capacities in the manufacture of primary metals and the development of high-value downstream processing as a key segment of their industrialisation strategies. Driving the competitive advantage of those sectors is access to energy and the logistics infrastructure advantages that it holds.

Aluminium: In aluminium for example, the UAE is a global player through Emirates Global Aluminium (EGA), which is owned equally by Mubadala Investment Company and the Investment Corporation of Dubai. EGA’s two smelters make the UAE the fifth-largest aluminium-producing country in the world. Furthermore, the supply of aluminium from EGA’s locations at Jebel Ali in Dubai and the other at Khalifa Industrial Zone Abu Dhabi, has contributed to the development of a downstream aluminium cluster industry in the country.

Steel: The UAE is also an important producer of steel. Emirates Steel, owned by Senaat produces rebar, wire rods and heavy sections as the only integrated steel plant in the country. The company has grown from a simple re-roller of imported steel billets to a complex integrated manufacturing plant. It has completed two expansion projects and acquired other Abu Dhabi-based steel assets in 2012, has a production capacity of 3.5 million tonnes of steel per annum. The sector has other prominent companies with Conares and Hamriyah Steel both at an annual capacity of around 1 million tonnes per annum of rebar, and other names including Al Ghurair Iron and Steel.

Copper: Ducab, a joint venture between the Investment Corporation of Dubai and Senaat, runs five manufacturing facilities for cables, a copper rod mill, and a PVC plant. It has a manufacturing capability of over 115,000 metal tonnes of high, medium, and low-voltage cables and 110,000 tonnes of copper rod and wire per annum. Union Copper Rod boasts the largest production line of copper rods in the Middle East, producing 200,000 tonnes of copper rods per year.

Building Materials

The UAE has developed significant capacities around the building materials, with the Northern Emirates and Ras Al Khaimah becoming key players in the field.

Cement: The UAE has 14 integrated cement plants with a production capacity of 31.4, m tonnes per annum (mtpa) and eight grinding plants with a capacity of 10.4mtpa. The Union Cement Company, established in 1972, was the first cement producer in the UAE and is still the country’s largest, producing 4.8 mtpa, with other producers including Gulf Cement and Star Cement in the emirate. Arkan Building Material is another player producing cement, concrete blocks and bags.

Ceramics: RAK Ceramics is largest ceramics producer in the UAE with 16 plants in the UAE and around the region, through which it produces 110mn sq m of tiles per year, 24 million pieces of porcelain tableware and 5 million pieces of sanitaryware. The company is a global exporter with almost $1bn of global sales.

Glass: Guardian Glass, a subsidiary of Guardian Industries (owned by Koch Industries), is one of the world’s largest glass manufacturers operating a float glass plant in Ras Al Khaimah since September 2007. Guardian’s plant in Ras Al Khaimah had a capacity of 700 tonnes of glass per day used in construction and automotive sectors. Its glass has been used on the Burj Khalifa, among other important buildings in the UAE. Another important player is Glass LLC owned by Dubai Investments and comprising five subsidiaries: Emirates Float Glass, Emirates Glass, Saudi American Glass, Lumiglass Industries, and Emirates Insolaire.

Petrochemicals

The UAE has built a strong industrial complex around petrochemicals, with Abu Dhabi holding the lead role in building industrial facilities that have access to the feedstock needed to develop this important downstream sector, an important part of its diversification strategy. The UAE is estimated to have around 14.5 million tonnes of petrochemical capacity.

Polyfins: The petrochemical production plant in Ruwais, about 250km west of Abu Dhabi, and following the start-up of the Borouge 3 project in 2015, is now the world’s largest integrated polyolefins complex, with a production capacity of 4.5 million tonnes.

Ammonia and Urea: Ruwais Fertilizer Industries (Fertil) is a joint venture between Adnoc and French Total, the combined complex production of ammonia is 3,300 and granulated urea 5,800 mtpd.

Organic and Inorganic Chemicals: The UAE has several companies engaged in manufacturing other organic chemicals, such as Emirates National Oil Company (Enoc) operates a lubricants and grease manufacturing plant in Fujairah Port. While in inorganic chemicals, such as chlorine and its byproducts. Al Ghaith Industries has a chlor-alkali plant in Abu Dhabi that produces 140 mtpd of caustic soda lye, 160 mtpd of hydrochloric acid, and 70 mtpd of sodium hypochlorite.

Pharmaceuticals

The UAE has developed a large domestic pharmaceutical manufacturing industry, particularly for generic drugs. This is led by Gulf Pharmaceutical Industries PSC (Julphar) established in Ras Al Khaima, one of the largest pharmaceutical manufacturers in the Middle East and Africa. The company has 16 manufacturing facilities globally and a product portfolio of nearly 3000 different medicines and solutions. Other key manufacturers in the UAE include, Globalpharma, LifePharma in Dubai and NeoPharma in Abu Dhabi.

Food and Beverages

Meat and Poultry: BRF, a Brazilian poultry exporter that is one of the biggest food companies in the world, has one of its largest facilities outside Americas, producing 70,000 tonnes of meat products and bread-based foods. Other important players include Al Islami Foods, Al Kabeer Group, Emirates Rawabi, the International Foodstuffs Company (Iffco), and the International Fish Farming and Holding Company (Asmak).

Advanced Manufacturing

This is an area that holds a very important potential specifically on building high value industries that will likely have an important impact on the long-term dynamics of industrial development in the UAE based on a number of key factors.

Aerospace: The UAE is seeking to meet its aerospace and defense needs by investing heavily in domestic capabilities and building strategic partnerships with key international players. Mubadala is a major player in the civil aviation segment, with subsidiaries including Strata Manufacturing, a developer of airframe parts, and Sanad Aerotech, a provider of aircraft MRO services. Strata, which was created in 2009 as a wholly owned subsidiary of Mubadala, manufactures a wide variety of components for Airbus, Boeing, and ATR aircraft. It is considered a key driver of the sector and has built an aerospace supply chain in Abu Dhabi, with over half of its suppliers being locally based.

Satellites and space: The UAE has launched numerous satellites, including KhalifaSat.

In summary, the industrial and manufacturing sectors in the UAE are being seen a key pillar in the UAE’s long-term diversification objectives. Policymakers’ commitment to the sector has been made clear through the announcement this year of Operation 300bn, the ambitious drive to boost the contribution of the manufacturing sector to the economy by almost three time its current contribution. The plan focuses on all key sectors within manufacturing, from core strength sectors where the UAE has presence, to advanced technologies manufacturing. “This force of policy support will be a key driver to the building a thriving industrial and manufacturing sectors in the UAE. We are optimistic that the UAE has strong potential to realise those goals, and kicks-off the development path from a very well-developed manufacturing and industrial base,” the report concluded.