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Driving economic diversification

posted on 02/12/2006: 1554 views

The industrial sector is becoming a key contributor to the UAE economy. From a small trading outpost, an area that was once the Trucial States has, over the last three and a half decades, become the most vibrant economy in the region due to the UAE's dynamic leadership that provided the right impetus to the growth.

Small and medium-scale manufacturing has already played an important role in the economic diversification efforts of Dubai and Sharjah.

Abu Dhabi is now paying greater attention to building its industrial sector. It is using its abundant oil wealth to pursue an economic development strategy that does not depend on the upstream energy sector alone.

Industrial zones

Like Dubai and Sharjah, Abu Dhabi is developing specialised industrial zones to attract investment. The emirate is particularly keen on setting up heavy industries and offers to help investors in areas such as financing, production and marketing.

Sharjah began its industrialisation drive years ago, while Dubai focused more on establishing itself as a trade and logistics hub.

According to Sharjah Economic Development Department Chairman Sheikh Tariq Bin Faisal Al Qasimi, the manufacturing sector in the emirate has received more than $1 billion in investments this year.

"The industrial sector is one of the major areas we want to develop in Sharjah. We have 21 industrial parks, the latest being Emirates Industrial City. We are focusing on small and medium industries," says Sheikh Tariq.

About 1,400 companies are operating within Hamriya Free Zone, which is going through a major expansion phase to accommodate bigger industries.

Dubai Industrial City

Dubai's industrialisation efforts have been boosted by the Dubai Industrial City (DIC) project unveiled in 2004. Dubai will spend Dh5 billion, in each of two phases, on laying out the DIC infrastructure. DIC is focusing on key sectors including machinery, steel, mineral products, food and beverages and chemicals. "There is a need for goods produced within the region to support the growing economies of the Gulf. The construction sector will continue to develop, and manufacturing is here to stay," says Khalid Al Malek, senior vice-president for industry and knowledge at DIC developer Tatweer, a division of Dubai Holding.

DIC has attracted 100 companies and sold 120 land plots to real estate developers. The industrial city will house a logistics park, an academic cluster and residential areas.

Dubai can also capitalise on its position as an entrepot, supported by the region's biggest logistics hub, Jebel Ali Free Zone. The free zone is home to more than 5,000 companies.

Being close to sources of raw materials such as Iran and India, the UAE hopes it can develop into a manufacturing centre.

In Ras Al Khaimah, the government has introduced industry as a major element of its economic planning. "The emirate is developing a new free trade zone covering an area of 27 square kilometres," says Ras Al Khaimah Free Trade Zone chief executive officer Osama Al Omari.

The new zone will cater mainly to heavy industries that require a large amount of space. Ras Al Khaimah has adopted a "multi-location" strategy in developing special economic areas catering to various sectors.

The existing free trade zone attracted 2,150 companies, a large number of them from India and Iran. Fifteen per cent of the companies are in the industrial sector. The six-year-old trade zone is registering between 100 and 150 companies per month.

"Potential investors are attracted to the UAE's efficient sea transport network and availability of energy resources. These are two key factors in setting up industries," says Raju Menon, partner with Morison Menon Chartered Accountants.

A lack of ancillary industries is seen as hampering the growth of high-tech units and heavy industries in the country, but Menon believes big manufacturing units have to be set up first in order to create supporting industries.

Factors that favour investment are good telecom infrastructure, an absence of income-tax, flexibility in capital and cash transfers, easy clearance of projects, low crime rate, political stability and links with other lucrative regional markets. (Gulf News)


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