Diverse participants: Companies of all sizes play key roles in the industrial sector

According to the Dubai Chamber, manufacturing is among the greatest contributors to the UAE’s non-oil GDP, accounting for roughly 14% of non-oil GDP over the last decade. This figure grew to 16% in 2012 and was expected to rise as high as 19% in 2013. At the national level, the bulk of manufacturing investments are concentrated in heavy industry, including petrochemicals, aluminium, steel, cabling and marine industry products (ship construction).

Investment

The UAE has a significant competitive advantage in these markets, given the availability of low cost energy in Abu Dhabi, where 58.8% of sector investment is concentrated. However, with its relatively modest hydrocarbons reserves, Dubai’s manufacturing sector is less focused on heavy industry.

Though Dubai’s industrial sector is best known for some of its major players, such as Ducab (cabling) and aluminium producer Dubai Aluminium (soon to be known as Emirates Global Aluminium following a planned merger), only 3% of the emirate’s industrial companies have investments that exceed Dh50m ($13.6m).

Some 95% of Dubai’s businesses are classified as small or medium-sized enterprises, having 100 employees or less. These firms are largely focused on light industry and services, helping explain how the emirate can be home to a disproportionately large number of the country’s manufacturing firms, estimated at 40% of the country’s total in 2011, despite accounting for only 22% of nationwide industrial investment.

Production

 Key outputs for the manufacturing sector include refined petrochemical products, aluminium motor vehicles parts and accessories, precious metals and food processing. These products can be broadly classified into two categories: import/re-export intensive products, for example jewellery and sugar, and export products where Dubai has a competitive advantage, for example aluminium and plastics, thanks to available raw materials and/or low-cost energy supplies.

According to the Dubai Statistics Centre, the emirate’s manufacturing sector expanded by 13.3% year-on-year (y-o-y) in the second half of 2013, helping the emirate to achieve its fastest rate of GDP expansion in six years, at 4.9% over the same period. Growth in the manufacturing sector is also helping improve the sustainability of economic expansion, as pre-2008 GDP growth was largely driven by construction and real estate.

Major Economic Players

 Diversified conglomerates play a pivotal role, supporting the growth of subholding entities across a variety of different industries as a means of balancing risk exposure. Dubai Investments (DI), the largest of the investment companies listed on the Dubai Financial Market, has a range of subholding entities in sectors such as manufacturing, real estate and finance, among others. Manufacturing companies include Glass, Dubai Investments Industries and Masharie. For the first nine months of 2013, DI posted consolidated revenues of Dh1.9bn ($517.2m), helping it achieve profits of Dh531m ($144.5m) for the same period, a 110% y-o-y increase.

Glass, created by DI as the first-of-its-kind glass holding company in the region, attracted substantial demand from emerging markets in 2012, reaching sales in excess of $163.35m. Dubai Investment Industries operates in a range of sectors including pharmaceuticals, dairy and juice production, construction, oil, extruded polystyrene, cranes and technical services. Masharie is likewise diversified, covering aluminium extrusion, furniture, polymers, auto-claved concrete blocks, lighting and architectural services, and aluminium design.

Another of Dubai’s major industrial conglomerates is Al-Futtaim, a privately held company that was first established in the 1930s. Having since expanded internationally, the group now operates through 65 companies and employs over 20,000 people. The group is active in a range of sectors including automotive sales, retailing and services, electronics and engineering, insurance, real estate, and leisure and entertainment. Specific industrial companies include Arab Heavy Industries, involved in ship repair and manufacturing, and AFTRON, Al-Futtaim’s electronics and appliances brand.