Abu Dhabi: Strong backbone for manufacturing

Abu Dhabi is looking to increase the role industry plays in its burgeoning economy, stepping up investments in leading manufacturing sectors with an eye to building export markets in the medium term and laying the foundation for a more advanced industrial base in the longer run.

Under its long-term development plan, Economic Vision 2030, it is hoped that industry will account for 25% of GDP by 2030, more than double the 12% of last year., As Vision 2030 foresees a quadrupling of GDP – from $100bn in 2008 to $400bn by the end of the plan’s term – this will entail a rise in the sector’s share of the overall economy from just over $10bn to $100bn by 2030.

The increased investment is already having an effect, with the scope of industry’s contribution to the local economy underscored in late July by the release of the “Statistical Yearbook of the Emirate of Abu Dhabi – 2011”. Prepared by the Statistics Centre – Abu Dhabi (SCAD), the yearbook served as proof that the economy had shaken off the last effects of the global recession, with GDP rising by 15.9% to $168bn in 2010.

Particularly significant was the fact that growth in the non-hydrocarbons sector of the economy has been a main driver of this expansion, with oil production now accounting for just under half of GDP. One of the strong performers listed by SCAD was the manufacturing sector, which posted growth of 10.8% in 2010.

According to Mohidin bin Hendi, president of retail and services group Bin Hendi Enterprises, there have been a number of factors that have boosted the development of the non-oil sector, including large-scale investments in infrastructure and the availability of low-cost energy. “This helps to produce and manufacture goods at cheaper and competitive prices,” he said in an interview with Gulf News on July 27.

Emirates Aluminium (EMAL) and Emirates Steel Industries (ESI), two of Abu Dhabi’s industrial powerhouses, are in the process of building on those advantages. Both are looking to ramp up production as part of the broader plan to enhance manufacturing’s contribution to GDP.

On July 23 EMAL, a joint venture between aluminium producer Dubai Aluminium Company and Mubadala Development Company, announced plans for a $4.5bn expansion programme that will increase aluminium production capacity from 750,000 metric tonnes per annum (mtpa) to 1.3m mtpa by the end of 2014. In addition to constructing a new pot line within the industrial complex at Al Taweelah, EMAL will also install new technology at its existing production lines, increasing output by 50,000 tonnes by 2012. The full expansion project will make EMAL one of the largest single-site aluminium producers in the world.

Government-owned ESI is also in the process of expanding its production. It recently purchased a new 1.6m-mtpa direction reduction plant and a steel melt plant with an annual output of 1.4m mtpa. ESI has also acquired a heavy sections rolling mill with a 1m-mtpa capacity, which is due to start operations early next year.

Though both ESI and EMAL experienced decreases in sales during the recent worldwide economic downturn as the local, regional and international construction sectors slumped, their fundamentals remained strong and their investment programmes stayed on track. As such, both are well positioned to take advantage of the economic rebound.

Vision 2030, Abu Dhabi’s blueprint for the future, calls for the development of more advanced manufacturing industries, with the aviation, high-tech and shipping sectors among those targeted. Indigenous steel and aluminium production capacity can form a strong backbone for such ventures, thereby underpinning efforts to expand the domestic non-oil economy.