What’s Behind the UAE’s Manufacturing Boom

Manufacturing might not be the first thing that comes to mind when those outside the GCC are asked about the UAE.  But the industrial sector in almost all the emirates has seen significant growth in the past decade.

This has been driven by factors including the country’s location and investment environment.  Beyond this shift from trading to manufacturing is a sign of the new, dynamic GCC.  With that in mind, here is a look behind the UAE’s manufacturing boom.

According to the Government of Dubai, the industrial sector is expected to grow to more than Dh18 billion by 2030.  This boom will create roughly 25,000 jobs and more importantly will drive exports.

The move to expand the manufacturing base in the UAE will also help to diversify the emirate’s economy and this is a key part of the Government’s industrial strategy which aims to place the country on equal footing with other large economies in the region.

Doing so is no small fete as countries like Saudi Arabia, Iran, and Turkey all boast large consumer and industrial bases.  Compare this to the UAE, which has combined population of 9.23 million peoples, is a relatively small, yet wealthy, market.

In addition, the UAE is trying to stay ahead of countries, such as Oman, which is also pursuing industrialization strategies.  For example, Chinese investors have been pouring billions into a massive industrial complex in Doqm.  While this location is south of Muscat, it seven hours from Al Ain and this means that most products can be on Emirati shelves within one to two days of manufacture.

While the Doom project is still in its early days the potential challenge could be the lower cost base with Oman can provide to companies.   However, this does not mean that manufacturers in the UAE are at a disadvantage.  The lack of available labor in Oman will prove an equalizer as factories in both countries will need to rely on skilled and unskilled workers from countries such as Pakistan.

In addition, factory owners in the UAE can look at other options to be cost competitive.  This includes importing used plastic machinery from other countries or investing in process improvement initiatives to lower costs, reduce production time, and increase quality.  The latter would help the UAE to gain a reputation as a hub for world-class manufacturing.

Along those lines, the country has sought to bring in companies focusing on high tech sectors.   This includes a joint venture between Strata and Solvay to produce cutting-edge polymer parts for use in commercial airliners.

In addition, many startups have been set up to give western industrial giants a run for their money.  This includes Zarooq Motors, which was the locally owned and managed company to set up shop in the Emirates.

Beyond the rapid expansion of the manufacturing base, the Government has also been busy making investments in enabling infrastructure and services.  This includes upgrading roads and ports as well as prepping the country for the next-generation mobile services known as 5G.

This technology is believed by many to be critical for the proper functioning of the Internet of Things (IoT).  And the growth is not just in Dubai or Abu Dhabi, the once sleepy emirate of Ras Al Khaimah has been busy building up its industrial capabilities.  These include the opening of several industrial estates and free trade zones as well as an aggressive investment promotion regime.

All of this points to the tremendous upside for manufacturing in the UAE and over time this will transform the country’s economy from an overreliance on oil and gas as well as logistics and financial services.

This is a big plus for country as it seeks to make its own way in a region dominated by three economic giants.  In addition, the timing could not be better as the Emirates could either directly benefit by the explosion of Chinese investment in the region, or rely on its rich financial reserves to take advantage of the links which the Chinese are building.

The latter would ensure that the country does not have to deal with some of the more onerous terms of Chinese investment while being linked into the rebirth of the ancient trade routes which tied together the peoples of the Indian Ocean.

Through that lens, the explosion of manufacturing in the UAE is nothing more than a continuation of the long tradition of the country being a global gateway for commerce.  With this commerce will come significant opportunity for the people who call the Emirates home.