Abu Dhabi // An increasing flow of locally produced goods is positive news for the UAE’s energy dependent economy, but increasing the nation’s manufactured exports will require overcoming some significant obstacles.
Oil and gas, which accounts for 40 per cent of the country’s GDP, has long held the banner for the ‘made in the UAE’ label, but plunging oil prices have once again exposed the perils of having an economy driven by a single powerful industry.
“We have diversified the economy in the last 42 years, and while it will not have any immediate effect on the federal budget, it will eventually in the next two to three years,” said Sultan Al Mansouri, the Minister of Economy, earlier this year amid tumbling oil prices.
Apart from petroleum based products, the country has long had a handful champion industries contributing heavily to exports.
After 25 years of operations, RAK Ceramics is posting US$1 billion in global sales annually, and date conglomerate Al Foah ships 80,000 tonnes of their products around the world.
Companies exporting foodstuffs, metals, textiles, chemicals and other industrial goods add to the list.
As exports steadily climb, efforts from political and business leaders, along with academia, hope to continue furthering manufacturing’s contribution to the economy.
Although in its “infancy”, Dr Yehya Mohamed Al Marzouqi — an Emirati business leader with experience in the oil and gas industry, banking, and now manufacturing — sees the potential for growth in the sector.
“I am certain that with the economic diversification plan which is in place, with clear vision and commitment from the top, the future of the manufacturing sector will grow,” said Dr Al Marzouqi, who now works as and executive director with manufacturing and technology investment firm Tawazun. “The contribution to GDP will be bigger.
“The main driver for realising such a vision is the development of human capital Emirati at all levels within the sector. Additionally as part of creating a knowledge-based economy in the country, it is vital to develop a conducive environment for small and medium enterprises to flourish.”
In 2000, UAE-manufactured exports were calculated at Dh30.5 billion by the Dubai Chamber of Commerce and Industry.
Fourteen years later, the Chamber’s members reported over Dh290 billion in exports for 2014, a Dh5bn increase from 2013, and more than an 8 per cent increase from 2012.
An earlier report from the DCCI in 2013 said manufacturing accounted for 53 per cent of the UAE’s total non-oil exports in 2012, and 22 per cent of total exports including oil — with the GCC nations representing the largest export market, predominately Saudi Arabia.
Other major export partners include Japan, India, and Iran.
Increasing exports with the ‘Made in the UAE’ label means local producers will have to compete in a globalised world, said Mr Al Marzouqi.
“More and more organisations are becoming efficient and operating with best practices to penetrate different markets,” he said. “The UAE, under the wise leadership, has made much progress and advancement, but it is work in progress and we need to tirelessly continue in this path.”
Growing the sector means overcoming challenges unique to the UAE.
Leaders will also have to continue to entice younger generations to pursue an education in science, technology, engineering, and maths, all necessary skills for working in the field.
On a structural level, Mr Al Marzouqi said following through on plans for new legislation that will allow full foreign ownership of companies outside free zones could see increases in foreign direct investment, often seen as necessary for growth in the sector.
Fernando Zanella, an associate professor of economics at UAEU, said sector growth is imperative as the energy sector is not generating enough jobs.
“(The) manufacturing sector is a strategic sector to move away from oil and gas, to promote long term development, and generate high paying jobs to compete with the public sector in terms of pay,” said Mr Zanella. “But for that to happen, nationals need to have the necessary skills.”
“Human capital, along with physical and financial capital, is the basis for higher productivity and therefore for sustainable economic development.”
In an effort to develop the future executives for the sector, United Arab Emirates University, in conjunction with Tawazun, began offering an MBA in manufacturing excellence in 2012.
Mr Zanella, a professor with the programme, says it will play a role in Abu Dhabi’s Economic Vision 2030, which outlines plans to diversify the economy and support emerging areas of the economy such as manufacturing.
“The manufacturing sector is considered a strategically important sector in that vision,” he said. “A right mix of capital — the UAE has it, technology — it is acquiring it, and human skills — which are developing rapidly, will create the conditions to produce locally without future financial support from the government,” he said.
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Made in the UAE
An increasing flow of locally produced goods is positive news for the UAE’s energy dependent economy, but increasing manufactured exports will require overcoming some significant obstacles.
This five-part series profiles companies, products and goods, all made in the UAE.
■ Made in the UAE: Credibility supplied by Strata's high flyers
■ Made in the UAE: Home grown success, one cup at a time
■ Made in the UAE: Video game studio helps country reach next level
■ Made in the UAE: Al Foah puts Emirati dates on the map
■ Made in the UAE: Steel producers galvanise local market
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