INDUSTRIAL DEVELOPMENT

The rationale for industrialization in the UAE is the diversification of an economy that is heavily reliant on oil.

Industrialisation is a main aim of the state for the correction of the structure of production in which the crude oil sector accounts for about two thirds of the GDP. The industrial sector, according to economic criteria, is the sector on which economic efforts should be concentrated.

The fact that the non-oil sector now accounts for around three-quarters of GDP is a testament to the success of the Government's strategy in this regard.

The UAE's drive for industrial development focused, in the initial stages at least, on the construction, food and clothing sectors. Later, new industries were added, of which the most significant is that related to the production of aluminium and related products. Of course few of these developments are entirely inextricable from the wealth-creating and energy-supplying oil and gas industries. It is equally true that each area of non-oil industrial development has apawned other loosely related industries. The construction boom, for example, increased demand for cement, cement blocks, PVC pipes, aluminium windows, furniture and a host of other items whilst the large increase in population created the need for greater food production.

The UAE's first cement factory opened in Ras al-Khaimah in 1975 with an annual capacity of 550,000 tons. Today there are eleven cement factories in the UAE with an annual capacity exceeding eight million tons. Most of the raw materials for cement manufacture (except for gypsum and some additives) are locally available. Downstream developments include the building materials industry which manufactures items such as asbestos-cement pipes and sheets, concrete building blocks and tiles. Following awareness of the environmental problems connected with asbestos (which is facing a ban throughout the GCC) a large number of GRP, PE and PVC pipe factories have been developed.

Most of the concrete block, intelock and tile factories are on a relatively small scale, supplying local building industry needs and exporting a substantial portion of their production.

There are currently five factories for making reinforcement steel bars from scrap iron in the UAE and between them these produce a total of 100,000 tons annually, amounting to less than one tenth of local demand. A large factory for this purpose is scheduled for development in Abu Dhabi and once this is in operation it will substantially reduce imports.

There are more than 20 paint factories in the country, producing over 100,000 tons annually, and exporting about a quarter of thier paint products. Although most of the basic materials for manufacturing paints are imported, the high water content in most paints used in building makes it economical to manufacture the paints locally in order to reduce transport costs. Many carpentry shops have been established to supply the construction industry with doors, windows, partitions, pre-fabricated buildings, etc.

There are currently more than 180 food processing and beverage factories in the UAE, including a large sugar factory and a number of flour mills. The bulk of the manufacturers are involved in smaller units for meat or fish processing, milk and dairy products, vegetable oil and animal fat processing, canning of fruits, vegetables and legumes, soft drink factories, mineral water bottling factories and three factories for animal feed.

Most of the 143 ready-made garment factories in the UAE are located in Sharjah and Ajman with some in Jebel Ali Free Zone. With the exception of four larger clothing manufacturers, the vast majority and relatively small enterprises with a capital investment of less than half a million dirhams for each factory. The bulk of production is shipped to the USA and the EU. It is considered the second largest manufacturing industry in the UAE after aluminium and constitutes about 15 per cent of the non-oil industrial exports.

By the end of 1999 there were 65 publishing establishments operating in the UAE together with 60 units for manufacturing paper or paper products. A few of these are paper mills using recycled paper as raw material with one factory in Jebel Ali using pulp to make tissue paper.

At the time of writing there are over 300 metal products factories, making items such as aluminium windows, metal furniture, and cooking utensils; and over 40 factories connected with machinery and equipment such as air-conditioners and electric distribution panels. The large number of mechanical workshops in the UAE includes an extensive workshop in Dubai Drydock, one of the largest drydocks in the world and capable of handling tankers of a capacity of up to one million tons.

The jewel in the crown of UAE's non-oil industries is undoubtedly DUBAL, the Dubai Aluminium Smelter which began production in 1979. DUBAL is an integrated smelter, power plant and water desalination complex. The smelter, which produces ingot, billet and high purity aluminium, is noted for the very high purity of its products and for its excellent business systems. In 1993, DUBAL became the first aluminium smelter in the Middle East to be awarded the ISO 9002 standard and this was followed in 1999 by DUBAL receiving ISO 14000 accreditation - the second aluminium smelter to do so worldwide.

DUBAL produces aluminium foundry ingots (mostly used to manufacture automotive car wheels), homognised aluminium extrusion billets (used for general-purpose extrusions) and high-purity primary aluminium for specialised uses such as magnetic storage media. Its high-purity aluminium is the preferred raw material for further refining to ultra-pure 99.94 per cent and 99.96 per cent pure metal; 99.97 per cent pure metal is also offered.

DUBAL's current production levels are running at more than half a million tons per year making it one of the world's largest and highest specification aluminium smelters. The sophisticated industry has played an important role in the training of UAE nationals in technology.

One of the single most important factors in the UAE's successful diversification and industrialization is its imaginative use of free zones as a means to attract inward investment and major industries. The first and most significant of these special areas is Jebel Ali Free Zone which today has over 1600 companies of which about 22 per cent are industrial. The industries involved are mainly light and medium. Jebel Ali's success was due to the fact that it was built around the largest man-made port in the world with 70 berths. It has a developed infrastructure with a modern management and with strictly implemented environmental and health and safety regulations. Recently several free zones, mostly from the Arab world, have signed management consultancy agreements with Jebel Ali Free Zones Authority to benefit from the experience of Jebel Ali.

MANUFACTURING INDUSTRIES

The discovery of oil ushered the UAE into the industrial age. This process of industrialisation gathered momentum following the formation of the Federation. During the last two decades, with the Government's increasing emphasis on diversification and basic components such as capital and energy readily available, the manufacturing sector has made significant progress in the UAE.

Free zones have played an instrumental role in attracting manufacturing industries (see section on Business Environment) and today, hundreds of factories covering a wide range of manufacturing are distributed throughout the country. Cement, building materials, aluminium, chemical fertilisers and foodstuffs industries top the list, followed by garments, furniture, paper and carton, plastics, fibre glass and processed metals.

Sectoral Distribution

In 1999 1,695 factories employing more than 145,000 people and with investments estimated at more than Dh 14 billion were operating in the UAE.

Sharjah has the largest number of firms followed by Dubai, Abu Dhabi and Ras al-Khaimah. Nearly 140 units were established in 1998 - roughly the pace at which new manufacturing units were formed in 1997 - and employment saw a 20 per cent increase. The strongest growth was in chemicals (see section on Oil and Gas). The chemicals and non-metallic industries had the greatest number of establishments and employed the most people. Food and beverages -- in the consumer goods sector - were most successful at substituting imports. Industry in the Northern Emirates focused on small factories especially textiles, most of them in Ajman.
 

UAE INDUSTRIAL STATISTICS (1999)

Number of Establishments, Labor, and Investment in  Abu Dhabi