UAE Aims to Become International Manufacturing Hub
Ian Wright posted on June 02, 2016 | 4001 views
Dubai construction workers on lunch break with the tallest building in the world, the Burj Khalifa, in the background. (Image courtesy of Piotr Zarobkiewciz.)
Dubai construction workers on lunch break with the tallest building in the world, the Burj Khalifa, in the background. (Image courtesy of Piotr Zarobkiewciz.)
When thinking of the United Arab Emirates (UAE), you might picture Dubai’s stunning Burj Khalifa, the country’s appalling human rights record or its massive oil reserves (the seventh largest in the world). One thing that probably doesn’t come to mind is manufacturing.

But in the wake of falling oil prices, the country’s government is hoping to change that.


Middle East Manufacturing

The Oil and Gas industry currently accounts for 40 percent of the UAE’s GDP, but is faced with shrinking prospects for investment as alternative energies become more popular. In response, the government has recently undertaken a number of steps to shift the focus of its economic growth to other sectors, and manufacturing is chief among them.

Incentivised by the country’s government, Dubai has developed one of the largest industrial hubs in the region in an effort to attract manufacturers looking to set up new plants.

According to the UAE’s Department of Economic Development (DED), the manufacturing sector already accounts for 80 percent of Dubai’s non-oil trade, making it the second largest contributor to the UAE’s economy.

In total, the UAE’s manufacturing sector accounts for 53 percent of the country’s total non-oil exports, with the DED predicting it to contribute one quarter of the country’s GDP by 2025. Major manufacturing sub-sectors include: 

  • Processed food and beverages
  • Plastics and rubber
  • Electrical machinery and equipment
  • Chemicals and chemical products
  • Minerals and mineral products
  • Base metals
  • Publishing and printing
  • Pearls, precious stones and metals

The country’s capital, Abu Dhabi, has been emphasizing heavy industry due to the availability of low-cost energy, while the Emirates of Dubai and Sharjah focus on services and light industries.

Currently, there are approximately 5,200 industrial establishments in the UAE with a total employment of nearly 400,000 workers.


New Factories in the United Arab Emirates

Several large manufacturers have opened or are planning to open facilities in the UAE.

Nestlé Waters plans to open a AED 100-million (USD 27 million) bottling factory in Abu Dhabi and Leminar Air Conditioning Industries recently opened the Gulf Cooperation Council’s (GCC) largest air duct manufacturing facility for the same amount in Dubai.

Processed food and beverages are a growing manufacturing sub-sector in the UAE.
Processed food and beverages are a growing manufacturing sub-sector in the UAE.
Al-Nakheel, part of the Fine Hygienic Holding company, is investing AED335 million (USD 91 million) to build a 144,000-square-meter (1,550,000-square-foot) paper factory producing hygienic household tissues in Abu Dhabi.

Ashok Leyland, a commercial vehicles maker, announced the expansion of its Ras Al Khaimah plant in the UAE with a fresh investment of USD 10 million.

Unilever has initiated the groundbreaking work for its personal care manufacturing site in Dubai Industrial City. This new facility carries a large investment by Unilever and its suppliers, exceeding AED1 billion (USD 272 million).

Emirates Aluminium Rolling (Emiroll) has also confirmed that it will be building a new aluminium coil plant in Abu Dhabi at an investment of USD 120 million.


Will The UAE Become the Manufacturing Center of the Middle East?

It’s difficult to say whether all these touted investments in manufacturing will be sufficient to wean the country off of its heavy dependency on the Oil and Gas industry. However, compared to many other Middle Eastern states, the UAE is well-positioned to reduce its economic focus on fossil fuels.

Map of the Middle East. Note the UAE's strategic position in the southeast of the Persian Gulf.
Map of the Middle East. Note the UAE's strategic position in the southeast of the Persian Gulf.
In addition to its strategic position in the Persian Gulf, the country has made significant infrastructure investments in recent years.

Most recently, the UAE moved from 12th in 2012 to 5th in 2016 on the Nabarro infrastructure index, which rates 25 countries in terms of their investment attractiveness. That puts it just behind Australia at 4th and well ahead of Saudi Arabia at 13th and Qatar at 15th, with Egypt currently holding last place.

However, let’s not forget the state of human rights in the UAE, particularly those of migrant workers, who make up the vast majority of the UAE’s manufacturing labor force. Although the country has been making recent efforts to reduce incidences of forced labor, whether or not those efforts will be effective is still an open question.

Could the UAE become a global manufacturing hub? Will a change in how labor forces are treated make the difference? Comment below.

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