How Sharjah positioned itself for post-pandemic growth

As one of the most diversified emirates in the UAE, Sharjah is less reliant on hydrocarbons than many of its neighbours, and has a strong foundation in industry and manufacturing. Indeed, hydrocarbons account for around 4% of GDP, and no individual sector contributes more than 25% of the total. Given that it has shores on both the Gulf and the Gulf of Oman, as well as shared borders with the six other emirates of the UAE, Sharjah has put trade and logistics at the heart of its development strategy. As it looks to build on this through the development of more knowledge-oriented industries, the digital economy is emerging as a priority area of focus.

GDP Snapshot

Sharjah’s GDP grew by 0.9% in 2019 to Dh124.4bn ($33.9bn) in current prices, according to the most recent statistics from the Department of Statistics and Community Development. The emirate’s economy has grown steadily every year since 2010, when GDP stood at Dh78.8bn ($21.5bn). Around 95.8% of economic activity was derived from non-oil sectors in 2019, with the largest sectors being wholesale and retail trade, and the repair of motor vehicles and motorcycles (22.4%); manufacturing (16.3%); real estate (9.6%); construction (8.8%); and financial services (8.1%). Growth in 2019 was led by public administration and defence (10%), and arts, recreation and other service activities (4.6%). All other sectors either grew by less than 3% or contracted slightly. While the global economic slowdown in 2020 is sure to be reflected in Sharjah’s GDP for the year – data not yet released as of mid-2021 – there is cautious hope for a rebound in 2021 and beyond, driven by ambitious social and economic development spending, and the UAE having one of the quickest Covid-19 vaccine rollouts in the world in the first half of 2021. In its April 2021 credit ratings update for Sharjah, Standard & Poor’s (S&P) projected that the emirate’s GDP would grow by 4% that year. Meanwhile, according to the April 2021 edition of the IMF’s “World Economic Outlook” database, the UAE economy contracted by 5.9% in 2020, and was expected to rebound to growth of 3.1% in 2021 and 2.6% in 2022.

Public Finances

Government spending has continued to rise steadily, funding ambitious development goals in the emirate and the wider UAE, as well as programmes to mitigate the health and economic impacts of the pandemic. In Sharjah the general government deficit widened to 8% of GDP in 2020, according to credit ratings agency Moody’s, up from 4.9% in 2019. S&P projects this figure will reach 10% of GDP in 2021. While the UAE as a whole signalled it would trim public spending by about 5.5% to Dh58bn ($15.8bn) in the 2021 budget that was approved in November 2020, Moody’s expected overall government expenditure in Sharjah to increase by 18% or more, driven in part by the acceleration of contractor payments by the newly created Authority of Initiatives Implementation and Infrastructure Development, also known as Mubadara – a move designed to help jump-start the emirate’s economy in the post-pandemic recovery phase.

In December 2020 Sharjah approved a general budget worth Dh33.6bn ($9.1bn) for 2021, up 12% on the previous year and marking the largest-ever budget for the emirate. Of the total, 47% is earmarked for public sector salaries and wages, while 43% is allocated to developing and improving infrastructure. Notably, the capital projects budget is one-third of the total and seeks to develop tourism facilities, tunnels and other aspects of the emirate’s transport network. To help offset higher spending, Sharjah is pursuing a 15% increase in revenue for 2021, relative to preliminary 2020 figures, according to Moody’s. Given the continued impact of the Covid-19 pandemic on tax revenue, the Dh1.2bn ($326.6m) in extra revenue targeted – equal to roughly 1% of GDP – is based on a large pipeline of land sales designed to compensate for lower value-added tax (VAT) collection and contributions from government-related entities (GREs).

VAT has been an important source of revenue since its introduction in the UAE as part of a GCC-wide agreement to institute a 5% levy across the bloc. The UAE and Saudi Arabia were the only countries to implement the tax on January 1, 2018 as agreed, but unlike Saudi Arabia, which tripled its VAT from 5% to 15% in July 2020 to bolster revenue amid the pandemic, the UAE has maintained the 5% rate.

Government Borrowing

To finance its expansionary fiscal policies and resulting deficits, the government of Sharjah has pursued sovereign borrowing in recent years, starting with its ultimately successful efforts to obtain credit ratings from Moody’s and S&P in 2014. Over the following two years, the emirate restructured its public and GRE debt to curb costs for interest payments. In addition to renegotiating terms with existing lenders, the government issued a series of sukuk (Islamic bonds) to repay outstanding debt – much of which was structured as more costly bank loans.

By 2016 the emirate’s debt-servicing costs had been reduced by as much as 50%. Sharjah has since established itself as a regular issuer of US dollar-denominated sukuk, beginning with a $750m instrument launched in September 2014, followed by a $500m bond in January 2016 and another sukuk for $1bn in March 2018. In February 2018 the authorities issued an RMB2bn ($293.4m) instrument on the Chinese market – a so-called Panda bond – making Sharjah the first Middle East government to do so.

Pandemic-related Financing

The emirate crafted fiscal support packages to help alleviate the economic impacts of the pandemic. The first stimulus, valued at Dh481m ($130.9m), was issued in early 2020, while a second one valued at Dh520m ($141.5m) was announced in November 2020. Furthermore, many governments in the region turned to sovereign borrowing to support public finances. In May 2020 Sharjah raised Dh2bn ($544.4m) through a privately placed one-year sukuk known as the Sharjah Liquidity Support Mechanism (SLSM) – the first rated short-term local currency tradeable instrument in the UAE. According to statements from the Sharjah Finance Department at the time of the sale, the paper could prove to be a useful liquidity-management tool for banks, and further tranches with one or more banks could see the SLSM expand to Dh4bn ($1.1bn). This was followed by a $1bn seven-year sukuk issuance in early June 2020, and in late October it was reported that the emirate had hired banks to reopen its existing $750m, 10-year sukuk from October 2019. These moves suggest that debt financing will continue to play an important role in the emirate’s recovery from the pandemic over the course of 2021, particularly given the environment of high liquidity and low interest rates globally.

With this in mind, Moody’s forecast that the emirate’s government debt burden would reach 60% of GDP by 2023, versus around 20% in 2017. By comparison, the MENA region had an average debtto-GDP ratio of 65% in 2019. However, the agency noted two important advantages for Sharjah in this regard: first, continued off-budget federal spending on behalf of the emirate frees up fiscal revenue to cover debt-servicing costs; and second, the dirham’s peg to the US dollar plays an important role in mitigating foreign exchange risk, given the large share of foreign currency-denominated borrowing in Sharjah’s debt portfolio.

The increase in government debt is a trend playing out across the wider Gulf in the wake of the pandemic. In July 2020 S&P projected the region would see a $100bn increase in government debt over the course of the year, with another $80bn drawdown on public assets to bridge central government deficits, which it expects will be a cumulative $490bn in 2020-23. However, the agency also said that it anticipates deficits will begin moderating from 2021 onwards if oil prices stabilise and production cuts are gradually rolled back. As of March 2021 Brent crude oil futures were trading at around $60 per barrel, a significant recovery from their pandemic low of less than $23 in March 2020.

Credit Ratings

Both the UAE and Sharjah have largely upheld, if not increased, their spending commitments to provide economic support during the pandemic, which – in combination with weaker revenue – has weighed on public finances and impacted credit ratings. In April 2021, for example, S&P affirmed its “BBB-“ long-term sovereign credit rating with a stable outlook for Sharjah, and also assigned a “A-3” short-term rating to the emirate. Moody’s, for its part, downgraded Sharjah’s long-term foreign and local currency issuer rating from “Baa2”to “Baa3”in February 2021, changing its outlook from stable to negative. The agency cited a sharp decline in fiscal revenue in 2020 and steadily increasing public expenditure as its primary motivations for the change in rating. It estimated that Sharjah’s revenue had fallen by as much as 30% in 2020 due to lower collection of business licence fees, a temporary reduction in government fees and levies during the Covid-19 pandemic, and lower Customs duties due to weaker global trade flows.


As the only emirate in the UAE with ports on both the Gulf and the Gulf of Oman, as well as the broader country’s geostrategic location between Europe and Asia, Sharjah is well positioned to be a central player in international trade and logistics (see Transport & Logistics chapter). In addition to building competitive underlying transport infrastructure – from Khorfakkan port on the Gulf of Oman, to Sharjah International Airport – the emirate has worked to develop a broad network of free zones and industrial zones to solidify its position as an exporter and re-exporter (see Industry & Energy chapter). More recently, the government has established free zones focused on knowledge-led sectors such as publishing, media, health and education.

Sharjah recorded Dh34.9bn ($8.5bn) in imports in 2019, up 3.4% on the 2018 total, according to the most recent full-year statistics for the emirate from Bayanat. Non-oil exports were up 3.5% at Dh13.8bn ($3.8bn) while re-exports grew by 32.9% to Dh37.9bn ($10.3bn). Re-exports are a strategic area of growth for the UAE, accounting for more than one-quarter of exports. National non-oil re-exports were valued at Dh451bn ($122.8bn) in 2019, per the latest annual data from the Federal Competitiveness and Statistics Authority, up 5.9% on 2018. Non-oil exports rose by 12.1% to Dh231bn ($62.9bn), while imports grew by 1.8% to Dh915bn ($249.1bn). Saudi Arabia was the top destination for the UAE’s non-oil exports in 2019, purchasing Dh88.1bn ($24bn) of the total, followed by India, at Dh53.9bn ($14.7bn). China was the UAE’s primary source of imports, supplying Dh149.8bn ($40.8bn) worth, with India again in second, at Dh98.2bn ($26.7bn).

Although full-year figures for 2020 had yet to be published as of February 2021, the effect of the Covid-19 pandemic is likely to be reflected in weaker trade volumes for Sharjah and the broader UAE. In the first half of 2020, when restrictions to curb the spread of the virus were most severe, the UAE recorded a 16.2% year-on-year decline in trade to Dh786bn ($213.9bn). However, over the course of the first nine months of the year, non-oil foreign traded rebounded to Dh1.03trn ($281.2bn) – equal to nearly two-thirds of the 2019 total – in a signal that the UAE’s trading activity may have been more resilient to the pandemic than other commercial hubs. Imports comprised Dh572.9bn ($155.9bn) of the total, while exports stood at Dh191.3bn ($52.1bn) and re-exports Dh269.1bn ($73.2bn).

Foreign Direct Investment

The Covid-19 pandemic triggered an estimated 42% decline in global foreign direct investment (FDI) in 2020, according to the UN Conference on Trade and Development ( UNCTAD). While the UAE was not immune to this bearish investment climate, Sharjah recorded increases in commitments to key industries late in the year. The emirate attracted a combined Dh808.6m ($220.1m) in FDI across 24 projects in 2020, according to the Sharjah FDI Office, better known as Invest in Sharjah, with a 60% quarter-on-quarter increase posted in the last three months of the year. Foreign investors tapped opportunities in fields that largely benefitted from the pandemic, among them e-commerce, medical research and personal protective equipment.

While the 2020 total was down considerably from the emirate’s record of nearly Dh6bn ($1.6bn) in 2017, rebounds are expected in 2021. According to 2021 projections by investment intelligence firm Wavteq, Sharjah is forecast to see FDI increases of 74% in life sciences, 55.6% in ICT, 49.7% in food and agriculture, and 46.2% in logistics and distribution.

The UAE as a whole attracted Dh73bn ($19.9bn) in FDI in 2020 – making it the world’s 15th-largest recipient of FDI that year – as per the most recent data from UNCTAD. This figure was up 44% from 2019, when the UAE attracted $13.8bn in FDI. The upwards trend is expected to be supported by reforms to foreign investment regulations introduced in November 2020. According to Federal Decree Law No. 26 of 2020, foreign nationals can now own up to 100% of onshore commercial companies in the UAE; prior to the change, most companies needed a UAE shareholder to hold at least 51% of issued share capital. Some exceptions exist for industries with strategic national interest, which were included in previous negative investment lists. The legislation builds on countrywide strategies to develop technologies such as artificial intelligence (AI), support advance sciences, foster innovation and lay the groundwork for the Fourth Industrial Revolution.

Investment Promotion

Several government bodies are responsible for investment promotion in the emirate. Until September 2016, when Invest in Sharjah was launched, investment promotion was carried out by the Sharjah Investment and Development Authority (Shurooq), of which Invest in Sharjah is a semi-autonomous arm. Shurooq is also an active investor, developer and operator of businesses, notably within tourism and real estate (see Construction & Real Estate chapter). Invest in Sharjah’s roadshows and forums have been an important investment-promotion strategy, with a historical focus on India, Russia, China, GCC countries, the US, and European nations such as Italy and France. The investment body participated in 14 local and international events – six of which were held virtually – and organised 12 over the course of 2020, highlighting real estate, technology, industrial manufacturing, agriculture and other fields of strategic interest to the emirate. Amid pandemic-related travel restrictions and limitations on physical gatherings from March onwards, 16 of these discussions took place online. The body also holds the annual Sharjah FDI Forum, which hosts discussions on investment trends.

In late 2019 Invest in Sharjah launched the Sharjah Investors Services Centre (SAEED), a one-stop shop service centre that helps investors complete the legal and administrative requirements needed to establish a business in the emirate. SAEED provides services from a number of local and federal government entities, allowing investors to register their businesses in under an hour. “SAEED offers robust consultative and advisory services to guide investment in high-growth industries,” Marwan Saleh Alichla, general manager of SAEED, told OBG. “It also plays a key role in raising awareness about emerging opportunities for the private sector.”

While it was difficult to ramp up in the first half of 2020 due to the pandemic, the centre promoted itself by taking on activity usually done by other public offices and provided clients special services at no extra cost, including picking up their application at home and mailing it back to them. As of early 2021 the centre offered 120 services from more than 15 public entities for new investors and existing businesses, as well as for families and individuals.

Digital Economy

The launch of SAEED is part of the emirate’s ongoing push to develop smart government and smart city initiatives, in line with ambitious growth plans for the digital economy in Sharjah and the wider UAE. The digital economy contributed an estimated 4.3% to national GDP in 2019, which the country aims to double under the leadership of Omar Al Olama, who was appointed as the federal minister of state for AI, digital economy and remote working applications in July 2020. Financial cooperation, the development of the freelance economy, and the creation of digital markets and content will be part of the new ministerial portfolio.

Speaking to OBG in an interview in mid-2020, Al Olama explained, “We are developing the right policy framework for this ecosystem. Within it we will focus on research so that the advancement of innovation is happening right here in the UAE. The goal is for us to be the country that people associate with AI. As such, a federal initiative called Regulations Lab has been implemented to test technologies in a sandbox and develop future legislation.”


Sharjah has a thriving start-up scene, and was recognised in policy advisory firm Startup Genome’s “The Global Start-up Ecosystem Report 2020” as the top high-growth activation phase ecosystem out of 250 studied. At the emirate level, a number of start-ups are driving the development of the digital economy. Sahab Smart Solutions, for example, has been working with the government of Sharjah to build a digital platform for business and public services, and is also creating the emirate’s first e-commerce platform for Souq Al Jubail, one of the largest fresh produce markets in Sharjah.

Building the entrepreneurial ecosystem and supporting entrepreneurs as they grow innovative startups is the mandate of the Sharjah Entrepreneurship Centre (Sheraa), established in 2016. Sheraa is home to the UAE’s first government-supported start-up studio, Sharjah Start-up Studio (S3), which works alongside founders to validate their idea and determine whether to take it to market. S3 offers both technical and financial resources, and is the first start-up studio in the region to use a revenue-sharing model, with founders retaining full ownership of their businesses. “S3 is the culmination of our venture-building experience over the past five years, offering founders the engagement they need to build sustainable, successful and profitable businesses,” Najla Al Midfa, CEO of Sheraa, told OBG. “Instead of replicating what works in Silicon Valley, S3 offers a studio model adapted to the needs of local startups.” From 2016 through to 2020 Sheraa supported 114 start-ups that have gone on to raise $87m in capital, generate $130m in revenue and create over 1300 jobs. During the pandemic, Sheraa launched the $1m Solidarity Fund to support impact-focused start-ups experiencing financial difficulties through equity-free grants and commissioned projects.


While the economies around the world confronted unprecedented disruptions in 2020, the key role of technology in preserving continuity – whether in business, education or health care – has underscored the strategic importance of Sharjah and the UAE’s ongoing drive to develop their digital economies and e-government services. Although trade and logistics will continue to be the foundation upon which the emirate’s diversified economy is built, growing international and local interest in knowledge-led and digitally native fields is likely to steer innovation and investment in the post-pandemic era, facilitated by the creation of SAEED and the liberalisation of foreign investment regulations.

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