UAE’s industrial plan to localise value chains set to attract investment and create jobs
The UAE government’s plan to raise the economic contribution of the industrial sector over the next 10 years will help create new jobs and attract fresh investment, according to experts.
The country’s leadership announced a new industrial strategy named Operation 300bn on Monday to more than double the contribution of the industrial sector to the country’s overall economic output from Dh133 billion to Dh300bn by 2031.
The new strategy will lead “to an economic add-on effect – call it a domino effect or a multiplier effect – from which you can expect to see a few things”, said Abhay Bhargava, senior director of the Middle East and South Asia industrial practice at consultancy Frost & Sullivan.
“One is, of course, employment. There is ... going to be a lot of employment that gets generated from this.”
Another is a strengthening of the UAE’s logistics sector and the supply chain of companies serving manufacturers, he said.
“Whenever you bring in manufacturing, it results in requirements for more financing services, more testing and inspection services, quality inspection on quality certification, as well as supporting areas such as painting, coating and fabrication.”
A key part of the strategy will be to attract foreign investment after recent legislative changes allowed 100 per cent foreign ownership of companies and projects. Dedicated financing is also being made available while an in-country value programme will direct spending towards local products and suppliers. The adoption of advanced technology will also be encouraged.
Overall, Operation 300bn aims to support 13,500 small and medium enterprises over the next decade.
Research and development spending on the industrial sector will also increase to Dh57bn by 2031, more than doubling from Dh21bn.
This will increase the industrial R&D contribution to gross domestic product from 1.3 per cent to 2 per cent.
“Manufacturing has been a catalyst of the UAE’s growth and diversification for decades, creating thousands of jobs and investment opportunities,” said Saud Al-Shawareb, managing director of Dubai Industrial City.
“By boosting R&D and building on our achievements, Operation 300bn will boost our knowledge and innovation-based economy and strengthen the emirate’s attractiveness as a global business destination,” he said.
The UAE already has a number of companies that are playing an important role in the manufacturing sector, including Emirates Global Aluminium, Borealis, Emirates Steel, Agthia and Ducab.
Edge, a defence conglomerate with more than 25 companies under its umbrella, also aims to boost its manufacturing capabilities and grow its revenue.
“For a region that has a high disposable income and one of the highest high-value consumer markets, it is naturally the next step to look at localising more value chains in the region,” said Anshu Vats, senior partner and global public sector and policy practice lead at Oliver Wyman.
The Fourth Industrial Revolution challenge “would be instrumental in addressing these new value chains, from advanced manufacturing to mobility to high-tech agriculture. They can all create significant global impact, based and made in the Emirates”.
A holistic approach to regulation is also needed to bring in sufficient investment and talent.
“Attracting the right companies, for the right reasons, would be critical to the success of the initiative,” said Mr Vats.
Douglas Pickles, partner at Kearney Middle East, said the biggest challenge would be making UAE goods competitive globally.
“It is probably the most important factor,” he said.
Improved access to neighbouring markets is another.
“You will need access to markets such as India, Pakistan and Africa to tap into the kind of demand that is going to bring companies here.”
Bharat Bhatia, the chief executive of Dubai steel maker Conares, welcomed the new initiative and said industrial development “is the only way forward for the long-term sustainable growth of any economy in the world”.
“Industries create innumerable employment opportunities in line with the business evolution, infrastructure investment, increased consumption and individual purchase power resulting in greater economic growth. It is great to know that the UAE is gradually shifting the focus of its economy towards the industrial sector as its backbone for growth,” he said.
Industries related to food and beverages, oilfield equipment, building materials, aerospace and defence and packaging are expected to attract more investment because of the new strategy, according to Mr Bhargava.
Attracting the right companies, for the right reasons, would be critical to the success of the Operation 300bn initiative ANSHU VATS
Senior partner at Oliver Wyman