UAE growth capitalises on expanding manufacturing sector

Worldwide, manufactures were worth $9,962bn in 2011, growing by 2% between 2005 and 2010. More recently in the region, estimates have put non-oil industrial growth at 9% from 2012-2013 - which will largely be driven by manufacturing. In particular, significant investments will be made in petrochemical, fertilisers and metal production in Qatar and Saudi Arabia, as well as construction investments more generally.

Currently, Dubai's industrial production alone is valued at $54.4bn, contributing 13% of the Emirate's GDP with the sector averaging growth of 8% a year since 2007. GVA from the manufacturing sector grew by Dhs18bn from 2006 to 2011 - a 24% increase overall - while 7.7% of the UAE's employed population was also found in the manufacturing sector in 2011.

Manufacturing in the UAE centres around eight main segments: food, beverages and tobacco; textiles, clothing and leather; wood products including furniture; paper products, printing and publishing; chemical and plastic products; non-metallic mineral products; and fabricated metal and equipment. Exports (FOB) of basic manufactures in 2011 amounted to $33.6m (Dhs123.4m); non-metallic manufactures stood at $25.4m (Dhs93.4m); while miscellaneous manufactured goods were valued at $11m (Dhs40.7m).

Cable manufacturing company Ducab, with factories in both Abu Dhabi and Dubai, manufactures more than 110,000 tonnes of copper for various voltage levels of cables a year. In Dubai's Jebel Ali, Dubal (Dubai Aluminium) holds casting operations with the capability of more than 1.3 million metric tonnes per annum. Earlier this year its profits jumped 65% to a total of Dhs3.5bn.

Challenges faced by the manufacturing sector around the world revolve around lending shortages, the volatility of currencies, sustainability concerns and the impact on supply chains, as well as the downward pressure on prices.

The Eurozone's manufacturing sector has contracted for the past year, while the USA's sector also found itself contracting in July and August this year. However, in the UAE overall this year (2012) the manufacturing sector was predicted to post growth of 6% - double that of 2011.

So why has this growth been predicted? According to the Oxford Business Group, the manufacturing industry in Dubai specifically has increased in importance over the past few years. This is mainly due to other sectors taking more of a back seat, such as real estate and construction - which were both his particularly hard by the global financial crisis in 2008.

Another factor adding to this growth in the UAE is the general move in the sector from West to East. An increased focus on India and Asian countries as the West remains in economic turmoil, has allowed the UAE to benefit from the knock-on effect of regional manufacturing trade boosts.

Looking to the future, manufacturing will provide a way for the Middle East and other economies to move away from their dependence on oil and gas. Manufacturing - including fertilisers and metal production) are predicted to drive real GDP growth in the non-oil sector. Growth is forecasted at 7.3% over the next year, which will lead to real GDP growth in the GCC of 4.6%.