How has diversification changed Sharjah’s industry and energy sectors?

Industry in Sharjah has benefitted from the emirate’s low-cost base, well-developed and connected infrastructure, and proximity to Dubai and the neighbouring northern emirates. This has resulted in Sharjah becoming a key regional industrial player. Indeed, the emirate is a significant contributor to the UAE’s total manufacturing output, accounting for around one-third of the country’s manufacturing sector. Meanwhile, in recent years the contribution of hydrocarbons production to GDP has remained comparatively small, representing around 4% of the emirate’s total GDP. This is thanks not only to a push to diversify the economy, but also higher levels of investment in and utilisation of renewable energy. This trend has enhanced the role that private service providers and independent power and water producers play in the power-generation segment.

Performance

Sharjah has been an industrial base since the 1980s, with around 35% of manufacturing facilities in the UAE located in the emirate and its nonoil economy comprising 96% of GDP in 2019. Sharjah has positioned itself as a regional centre for industrial and manufacturing activities, and the sector has supported economic diversification, providing the local market with domestically made consumables and jobs, and improving skills and technological know-how. After wholesale and retail trade – a category that includes the repair of vehicles and motorcycles – manufacturing is the second-largest sector by GDP in current prices. The sector contributed around Dh20.3bn ($5.5bn) to the economy in 2019, according to the most recent “Statistic Annual Book” published by Sharjah’s Department of Statistics and Community Development (DSCD). This equalled 16.3% of the emirate’s GDP that year and 17% of non-oil GDP. The sector’s GDP in current prices has steadily trended upwards since 2010, when it was valued at Dh13.1bn ($3.6bn).

Industrial Activities

Approximately 2500 industrial activities take place in the emirate, including the production of aluminium, building materials and pharmaceuticals. There is also a strong light manufacturing presence of textiles, paper, plastics and processed food for both domestic and international consumption. According to the Sharjah Economic Development Department (SEDD), 56,493 licences were issued in 2020, with the issuance of industrial licences increasing by 17% over the second half of the year. In the first quarter of 2021 digital investor applications through SEDD represented 17% of all transactions – compared to 9% in the first quarter of 2020 – and 1882 new companies set up in the emirate that quarter, up from 1235 firms in the January-March 2020 period. Meanwhile, the Sharjah Chamber of Commerce and Industry recorded 49,131 electronic transactions in the first four months of 2021, covering a wide range of services for the business sector, such as certificates of origin and membership ratifications.

Looking at the number of active licensed factories as of 2019, the largest industrial segment in Sharjah that year was metal products, which accounted for 326 out of a total 1732 licences, according to data from to the DSCD. This was followed by other manufacturing operations, which were granted 192 licences; non-metallic mineral products, with 189 licences; and chemical products, with 157 licences. Metal products was also the top performer in terms of investment that year, attracting around Dh1.3bn ($353.9m); followed by non-metallic mineral products, with Dh1.1bn ($299.4m); food products and beverages, at Dh597.9m ($162.7m); and chemicals, with Dh562.2m ($153m). Moreover, the greatest number of industrial workers were employed in metal production, at 15,456, followed by non-metallic minerals (10,762 workers), garments (9642 workers), rubber and plastics (8773 workers), and chemicals (8347 workers).

Investment

Sharjah attracted Dh808.6m ($220.1m) worth of foreign direct investment (FDI) across 24 projects in 2020. In the first quarter of 2021, meanwhile, Invest in Sharjah – a body also known as Sharjah FDI Office that was created in 2016 by Sharjah Investment Development Authority (Shurooq) – recorded eight projects worth $41m in capital investment. While the pandemic put downwards pressure on FDI flows worldwide, certain segments found space to thrive. These areas of business – which include health and well-being, agri-tech and green technology – have significant potential for expansion, and are posed to help the emirate as it recovers from the multiple economic challenges that were brought on by the pandemic.

Promotion

Sharjah officials are working to capitalise on these opportunities. In July 2020 Invest in Sharjah hosted a webinar for US-based investors that highlighted emerging opportunities in high-tech industries that experienced rapid growth despite the challenging economic environment. “The emirate is now shifting from traditional manufacturing activities into new-age and high-tech industries such as artificial intelligence, 3D printing, robotics and drone technology, among others,” Mohamed Al Musharakh, CEO of Invest in Sharjah, said at the meeting. “The pandemic has only accelerated this move, and we are seeing a greater focus on tech-driven businesses such as vertical farming, e-learning and e-medicine.” Invest in Sharjah continued to host webinars, road shows and delegations for investors from around the world in the second half of 2020 and into 2021. In a similar vein, in December 2020 SEDD organised a virtual workshop to raise awareness for industry and manufacturing in supporting economic diversification, as well as to promote the emirate’s position as a regional centre for industry. The meeting focused on Sharjah’s strategy to achieve sustainable development centred on innovation, the support of local small and medium-sized enterprises in the industrial sector, and the empowerment of industries that facilitate invention and advanced skills.

At a federal level, the Ministry of Industry and Advanced Technology launched the “Future of Industry Dialogue” initiative in February 2021 to foster partnerships between the government and the industrial sector. The initiative targets heavy industry – which accounts for more than two-thirds of the industrial sector’s share of GDP in the UAE – and light manufacturing to facilitate knowledge and expertise exchange between the ministry and domestic and international companies to promote the sector’s growth.

Free Zones

The pandemic highlighted the importance of leveraging free zones to attract sustained levels of investment and promote economic growth through flexible conditions and incentives. Such zones have a number of advantages, including allowing 100% foreign ownership, the full repatriation of profits and tax exemptions on the condition that commercial activities are primarily export-oriented. Sharjah is home to an established network of free and industrial zones, which include six specialised free zones created to attract FDI in a diverse range of activities. These zones proved successful in the years leading up to the pandemic, with the number of factories in such areas increasing by 5% to reach 3000 in 2019. Moreover, 33 industrial zones that are not a part of the free zones further support the development of manufacturing. Sharjah has two main industry-focused free zones: the Hamriyah Free Zone (HFZ), catering for medium-to-heavy industry, and the Sharjah Airport International Free Zone (SAIF Zone), within the Sharjah International Airport (SIA) complex. The two have government-backed management and together account for a large proportion of industrial activity in the emirate. At 30m sq metres, the HFZ is the largest industrial free zone by area in the emirate and one of the largest in the UAE. The zone hosts around 6500 companies from 163 countries with a focus on industrial and manufacturing activities, though other sectors – such as oil and gas – are represented as well. Features of the zone include 100% ownership of projects and exemption from various taxes and duties, as well as access to a 14-metre deepwater port and seven-metre-deep inner harbour for the import and export of petrochemicals. Between March and mid-October 2020 the HFZ signed deals for 250,900 sq metres of investment, highlighting its attractiveness as a base in the region. The SAIF Zone, meanwhile, is one of the Gulf’s oldest free zones and the first in the UAE to be located in an international airport, enabling quick access to global markets. Established in 1995, the zone hosted more than 8000 companies from 165 countries as of 2019, up from 5000 in 2010. Most of the firms based in the SAIF Zone are active in the spheres of trade or services, and the majority of industrial activity is light manufacturing, with a focus on fast-moving consumer goods. In November 2020 the SAIF Zone and HFZ jointly signed a memorandum of understanding with Sharjah Municipality to support the further digital transformation of the zones, enhance mutual cooperation and upgrade work mechanisms, which are expected to simplify and quicken procedures in order to facilitate investment. Sharjah has developed a number of other free zones that also contribute to diversification. These are Sharjah Media City, known as Shams, which offers more than 120 licences centred around media and the creative industries; Sharjah Publishing City Free Zone, focusing on publishing, printing and distribution; Sharjah Healthcare City, standing at 4.5m sq metres and catering for hospitals, clinics, wellness centres and the light manufacturing of medical equipment; and Sharjah Research Technology and Innovation Park (SRTIP), focusing on research and development (R&D) in areas such as renewables and the Fourth Industrial Revolution. The last of these has also contributed to industrial development, especially in tech-focused segments, as evidenced by SRTIP’s additive manufacturing centre – the region’s largest.

Industrial Zones

Of the 33 industrial zones in Sharjah, two notable locations are Al Saja’a Industrial Oasis and Emirates Industrial City, both developed by Sharjah Asset Management, the investment arm of Sharjah’s government. The latter was established in 2005 and is a 7.7m-sq-metre, multi-use zone near SIA with a focus on light and medium manufacturing. The project comprises industrial plots, warehouses, administrative buildings, showrooms, retail outlets and accommodation. Some companies located in the zone, such as Deena Furniture Factory, shifted operations during the pandemic to provide personal protective equipment. The firm dedicated a portion of its facility to the production of medical gowns in April 2020.

Hydrocarbons

According to the DSCD, the hydrocarbons sector – which includes mining and quarrying, the production of crude oil and natural gas, and supporting economic activities – contributed Dh5.2bn ($1.4bn) to GDP in 2019, or 4.2% of the emirate’s total GDP that year. The value of the sector rose from Dh3.5bn ($952.7m) in 2010 to a peak of Dh6.8bn ($1.9bn) in 2013, which was equivalent to 4.5% and 7% of GDP, respectively. However, due to fluctuating international oil prices and shrinking production volumes as Sharjah pivoted towards other industries, the oil and gas sector’s contribution both in absolute terms and as a percentage of GDP has fallen. Indeed, while the UAE is one of the world’s leading oil and gas producers – with production at almost 3.5m barrels per day (bpd) of oil, 10.5bn standard cu feet of natural gas per day (scfd) and nearly 1m bpd of natural gas liquids – economic diversification has reduced the share of the sector to around 30% of GDP. UAE crude reserves are estimated to be around 100m barrels, while gas reserves are around 215trn standard cu feet (scf) – the seventh largest in the world. In recent years the UAE has pursued a strategy of producing more natural gas to meet growing domestic demand and reduce its reliance on imports. By 2030 the UAE aims to be self-sufficient in gas.

Operators

The emirate’s government-owned oil and gas company is Sharjah National Oil Company (SNOC). Established in 2010 by a decree merging the government’s existing oil and gas operators into a single entity, SNOC is tasked with the exploration, production, engineering, construction, operation and maintenance of Sharjah’s energy assets. The company owns and operates more than 50 wells, a gas-processing complex, and two storage and export terminals.

SNOC operates the Sajaa, Moveyeid and Kahaif fields – all of which are located around 30 km inshore and produce sweet gas and condensates from fractured carbonates – as well as the company’s newest holding, the onshore Mahani gas field, which is the emirate’s biggest gas find in three decades. The largest of these, however, is Sajaa, which was developed in 1980 at a depth of 5077 metres. It produces approximately 50,000 bpd of oil condensates and 800,000 scfd of gas.

The Moveyeid field was developed in 1981 at a depth of 4403 metres, and was first converted into a gas storage facility in 2017 as part of a pilot programme. More recently, in March 2020 SNOC awarded UK oil service provider Petrofac the $40m Moveyeid Gas Storage Surface Facility Project, which aims to keep the emirate self-sufficient in gas production and consumption. “The whole idea of the gas storage project came from managing the huge seasonal variations in gas demand,” Hatem Al Mosa, CEO of SNOC, told local press at the time. “A storage facility would stabilise this. A strategic gas storage facility for Sharjah was also a key consideration to go ahead with this project.”

The Kahaif field, for its part, was developed in 1992, with production starting in 1994. The field had an estimated 553bn scf and 19.3m barrels of gas condensate as of 2019. Lastly, in partnership with Italian multinational Eni, SNOC began extraction and production from the Mahani field in January 2021. Production began one year after the gas was discovered, and marked the first onshore gas field discovery in the emirate in almost 40 years. The Mahani project comprises a high-pressure compressor facility and pipeline, and flow lines to four existing wells in the Moveyeid field. Tests reveal gas flows of up to 50m scfd.

Two other notable players are privately owned Crescent Petroleum and Dana Gas. Crescent is the largest and oldest private upstream hydrocarbons firm in the region, having been founded in 1971. In Sharjah, where the company is headquartered, its focus has been on the offshore Mubarek oil and gas field. Dana Gas, meanwhile, was established in Sharjah in 2005 and was the first in the region to be publicly traded on a stock exchange, listing on the Abu Dhabi Securities Exchange. It operated the Zora field between 2016 and 2019, when production stopped due to low yields.

Utilities

Sharjah’s power requirements amount to approximately 200m cu feet of energy in the winter and 500m cu feet in the summer. The value of the emirate’s utility sector – which comprises electricity, gas, water and waste management – totalled around Dh2.4bn ($653.3m) in 2019, equivalent to 1.9% of GDP for the year, up from Dh1.2bn ($326.6m) and 1.5% of GDP in 2010, according to data from the DSCD.

The government-owned Sharjah Electricity, Water and Gas Authority (SEWA) is responsible for the production, distribution and sale of electricity and water in the emirate. As of the first quarter of 2020 SEWA had an installed electricity generation capacity of 2808 MW, of which 2076 MW was available at the time. Approximately 2361 MW, or 84.3%, of the installed capacity is provided by gas turbines, 432 MW (15.4%) by steam turbines and 9 MW (0.3%) by diesel units.

The emirate is adding generation units and transmission substations as part of a wider effort to strengthen transmission and distribution capacities, and boost the electricity grid. In 2020 SEWA began a three-year, 1026-MW expansion of the Al Layyah power plant at a cost of Dh2.1bn ($571.6m). The first phase will see 345 MW generated by October 2021, with an additional 345 MW set to come on-line six months later. The final phase will see remaining 336 MW come on-line by July 2022. The project includes a new power plant that uses natural gas, consisting of two gas turbines, two thermal energy recovery boilers and a steam turbine that will be used to produce desalinated water.

SEWA produced 34.1bn gallons of desalinated water and 2.6bn gallons of groundwater in 2019, down from 33.2bn and 3.9bn gallons, respectively, in 2018. Similarly to electricity, most is sourced from within the emirate: in 2019 the Al Layyah plant produced 47m gallons of desalinated water a day – accounting for 46% of the emirate’s capacity – while a new plant in Hamriyah produced 12.6m gallons a day.

Sustainability

Sharjah has prioritised waste management and environmental sustainability, with Shurooq highlighting investment opportunities in solar energy, in particular. In March 2019 Shurooq and Diamond Developers from Dubai announced the creation of Sharjah Sustainable City, a Dh2bn ($544.4m) solar-powered and water-efficient residential community built over 669,00 sq km. The project was 35% complete as of November 2020, and the finishing date is set for 2024. Meanwhile, environment and waste management firm Bee’ah is also working on sustainability projects. In July 2020 it announced it was building a 40-MW solar plant on a landfill site, while in 2021 it will construct the UAE’s first multi-fuel, waste-toenergy facility in Sharjah in partnership with Masdar. The facility will turn over 300,000 tonnes of non-recyclable waste into 30 MW of electricity per year and contribute to zero landfill waste in the emirate. The emphasis on sustainability is expected to be reflected in other sectors moving forwards. OUTLOOK: In addition to strengthening its manufacturing base, a sustained focus on emerging opportunities in technology, digital tools and renewables will help Sharjah achieve its economic diversification goals postCovid-19. While global oil prices rose to around $60-65 per barrel by early 2021, reliable, sustainable energy sources will be essential to power these new industries and help the emirate reach energy self-sufficiency.