The UAE’s non-oil sector is set to make big advances thanks to the government’s unrelenting encoura-gement to economic diversification and a situation in which high oil prices are fuelling large-scale public investments in utilities and infrastructure and growth in real estate and construction.

Growth in those sectors is triggering investment in other areas and this has been reflected in figures recently revealed by a government source showing that the non-oil sector grew by 18.6 per cent in 2005, some 64 per cent of the GDP.
Investors have been encouraged by the country’s open economic system, a free movement of capital and political and financial stability. Most free zones are reporting strong growth and are making a substantial contribution to the national economy.
In the general atmosphere of industrial development, the free zones, special industrial areas and public and private organisations are making hectic marketing efforts to penetrate new markets all over the world and draw in investments.
An enclave which best encapsulates the UAE’s aggressive industrialisation drive is Dubai’s Jebel Ali Free Zone (Jafz).  Jafz has emerged as one of the main drivers of the national economy having attracted foreign direct investment  (FDI) of more than $54.45 billion (a conservative estimate) over the 21 years it has been in existence. Jafz Authority (Jafza) officials say that figure is growing at a ‘phenomenal’ rate. In a recent survey conducted by the Ministry of Economy and Planning, 90 companies chosen randomly for sample surveying generated Dh3.3 billion ($898 million) of FDI.  In 2005, non-oil exports from the free zone reached Dh49.6 billion, accounting for almost half of the UAE’s total exports in that category. It also accounts for about 20 per cent of the country’s total non-oil imports. Imports within the hub were Dh63.96 billion in 2005.
Neighbouring emirate Sharjah, which houses 21 industrial parks, the latest being Emirates Industrial City, attracted $1 billion in investments in 2006. The emirate is focusing on developing small and medium-scale industries and some of the investors who set up their enterprises in the emirate did so because of lower operational costs relative to Dubai.
An ambitious initiative from Tatweer, a member of Dubai Holding, is Dubai Industrial City, which bids fair to become a flourishing manufacturing hub.  A number of production units are planned for the city which has allocated six dedicated clusters, namely food and beverage, base metals, mineral products, chemicals, transport equipment and parts and machinery and mechanical equipment.
The enclave has signed up to house one of the largest food processing facilities in the region. Iffco, a big name in the UAE’s food and beverage market, is setting up a Dh1 billion facility for producing breakfast cereals, edible oil, ice cream and processed meats.
Among Tatweer’s entities is Dubai Healthcare City, which is being developed as the region’s hub for world-class healthcare services, and Dubai Energy, designed for investments in regional and global energy opportunities.
Another prominent company, Dubai Investments, has created Glass LLC as a corporate arm for its glass ventures. The new company also happens to be the first holding company of its kind in the region. Dubai Investments has invested in a big way in the burgeoning glass industry, keeping in mind lucrative opportunities from the construction sector.  It aims to feed the regional and international markets from its subsidiary firms Emirates Glass, Emirates Float Glass, Lumiglass and Saudi American Glass.  
Over the past few months, the Dubai Flower Centre (DFC), specialising in the storage and distribution of perishable products, has been campaigning for business in India, China and South America, and indications are that these markets will look to the DFC as a conduit for onward exports to the Middle East and other markets.
The wheels of trade and commerce are moving briskly in the heady atmosphere created by UAE policies. Exports in 2006 are expected to show a 21 per cent surge to $140 billion with imports climbing three per cent to $56 billion. Oil and petroleum products continue to dominate exports but their share is expected to decline as other industries pick up steam.
Momentum will be created with the likelihood that a free trade agreement (FTA) will be signed with Japan and the possibility that the UAE might seek a similar deal with the US.
An exciting prospect for the UAE would be an FTA with China, and the UAE government is in the process of negotiating just such a deal with that powerhouse.  Dubai World, already a major investor for ports in China, is looking at real estate projects there. The company’s sights are also in India where it has investments in seaport developments. Sultan bin Sulayem, chairman of Dubai World, stated during a visit to India that investments would be augmented, and there is talk that the company has airport development in its sights.
The UAE is increasingly gaining note as the place where local investors are making big decisions. The P&O deal brought in much international attention for the way in which Dubai fought off other bidders for the buyout and also for the controversy over the inclusion of US ports in the takeover. Mubadala, the investment house from Abu Dhabi, has a growing international portfolio, the company having taken substantial stakes in the Dutch fleet management giant LeasePlan Corporation, oil exploration blocks in Libya, the Swiss aircraft and engine services provider SR Technics and Piaggio Aero Industries.  It has also taken a five per cent slice in Italian luxury car manufacturer Ferrari.
Abu Dhabi’s International Petroleum Investment Company (IPIC) has a 65 per cent stake in Borealis, the Vienna-based plastics producer, which is a joint venture partner with Adnoc in the Borouge operation in Ruwais. Borouge is tripling production capacity to 2 million tonnes per year, including, for the first time, polypropylene.  The increased output will contribute to the growth of downstream industries in Abu Dhabi and the wider region.   
But it is in the domestic terrain that the UAE has raised eyebrows. Early in 2006, the announcement came that Abu Dhabi would set up the world’s largest single-site aluminium smelter (annual capacity 1.2 billion tonnes) in a joint venture between Mubadala and Dubal, which itself is one of the world’s largest aluminium producers. Dubal, which will provide the expertise to the new plant coming up at Taweelah in Abu Dhabi, has undergone expansions in recent months that has raised its output capacity to 861,000 tonnes per year (tpy).
The Abu Dhabi smelter will star in a new industrial area marked out in Taweelah, one more sign that industrialisation is serious business in the UAE. A new port is being built in Taweelah, which will serve the business enclave.
Every now and then comes news of new ventures planned or inaugurated. Ras Al Khaimah is the site of a new Zamil Steel factory for making pre-engineered steel buildings, and Gulf Pharmaceutical Industries, based in the same emirate, will be investing $272 million in setting up 11 new factories, including seven in the UAE. One of the overseas plants will be sited in war-torn Afghanistan, with the others coming up in Sudan, Bangladesh and Morocco, all developing economies badly in need of investments.
Another leading manufacturer in Ras Al Khaimah, RAK Ceramics, has announced major expansions there and abroad. Both Julphar and RAK Ceramics denote a gathering trend among UAE investors to geographically diversify their operations beyond their homeland.
Participating in that trend is Al Islami Foods, which has set up a production facility in the Iranian free zone of Kish and is all set to export to mainland Iran.
The company views its entry into Iran as a stepping-stone for further expansion into Asia and Europe. Saleh Abdullah Lootah, CEO, Al Islami Foods, said the entry into new markets was not only critical to his company’s growth but also formed an important part of its five-year strategic plan to expand in the global market and become an international player in the processed food industry.  Al Islami’s Kish venture has wide scope in Iran whose processed food industry is valued at $600 million with annual growth of 16 per cent.
A venture soon to materialise is a facility in Dubai Silicon Oasis (DSO) for manufacturing optical media products, solar panels and tempered glass used in the photovoltaic and building industries.  Investors in the enterprise are Optical Disc Group of Europe and the Solar Technology Group.
DSO officials are happy that along with manufacturing at the venture there will be research and development, an optical media training centre and a support centre.