Industry

On The Pace

Industry

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On The Pace

Prude economic management has seen the industrial sector become a rising star in the Emirate's economic mix.

According to statistics from Dubai’s Department of Economic Development (DED), manufacturing is the fourth largest sector in Dubai’s economy, recording a share of 15.4% of total GDP in 2012, up from 11.3% in 2008. If growth trends hold, the sector will have contributed more than that level for FY2013, for which the agency has not yet released figures. It’s a vibrant market.

The DED reported that 1Q2014 industrial permits represented 1% of all commercial licenses, with the number of permits, 64, up 3% from the same period the previous year. In the top 10 industrial activities, the seven licenses issued for office furniture manufacturing led the list, followed by home furniture with six licenses, each representing 4% of total permits. The DED tracks a total of 158 industrial activities.

Imports accounted for 59% of Dubai’s total manufacturing trade in 2013, while exports and re-exports made up 41%, according to the Emirates NBD report. The DED reported that bank lending to the sector surged 11.3% YoY in December 2013, with base metals and products credit comprising 24.1% of manufacturing loans.

AUTOMOTIVE: A SALESMAN’S DREAM

Low petrol prices make Dubai a driver’s dream, and it’s a dream for car salesmen as well. An HSBC Global Connections report forecast growth in UAE passenger car registrations to average 10.2% annually between 2013 and 2017. The report noted that government restrictions on car financing, which limit the amount of a car loan to 20 times a borrower’s monthly salary with a maximum two-year repayment period, could crimp sales, but Dubai dealers seem unfazed.

Neil Slade, General Manager of AMMENA Aston Martin, told TBY that, “The high-end luxury vehicle segment, the HLS sector, is well represented in Dubai and in the Middle East. The sector is growing by between 30% and 40% per year.”

FOOD & BEVERAGES & HALAL STANDARDS

Dubai has become a center of halal standards and regulatory frameworks. At its most basic level, halal certification means that food or any consumer item has been produced in accordance with Islamic practice as outlined in the Quran and by custom.

Abdulla BelHoul is CEO of Dubai Industrial City, which has launched a dedicated Halal Cluster as a part of Dubai’s plan to become the global capital of the Islamic economy. “We identified that the halal market for personal consumption products is huge,” BelHoul told TBY. “According to recent reports, Muslim consumers spend over $1 trillion on food and over $26 billion on cosmetics and personal care. This is expected to increase by 50% in the coming five years, to $1.6 trillion and $39 billion, respectively.”

The GCC Standardization Organization (GSO), in collaboration with the Emirates Authority For Standardization & Metrology (ESMA), held a halal regulatory and standards workshop in Dubai in April 2014 for state officials and industry players. Sponsored by Coca-Cola, Mars, MDLZ, PepsiCo, and Unilever, the workshop was also attended by delegates from the region as well as certification bodies from the EU, Canada, and the USDA representative office. The GSO delegation concluded that there was a need to create an additional conformity program for non-meat products. Industry players addressed the harmonization of halal regulations among all Islamic countries.

Henry Liesche, CEO of Gulf Meat Products, told TBY that his 6,000-ton capacity meat factory in the UAE, like any business, needs a growing market, “and that is precisely what has happened in the halal industry. We are not on the verge of an economic downturn, or faced with a declining population. Rather, the entire Islamic world is growing, and the food industry is growing along in step.”

The GCC food market alone is worth $85 billion, and is worth another $237 billion in the other MENA regions. Dubai and the other emirates comprise the 14th largest halal food market in the world, worth $20 billion.

Saleh Abdulla Lootah, Managing Director of halal poultry producer Al Islami Food, told TBY that, “There have been many discussions, and many people are asking what’s next for halal foods and the halal economy? And my comments now are that we are just starting… The challenge now is to figure out what impression, or what experiences, we are leaving on our consumers. The future for me lies in selling ‘happiness.’ We, the sellers of halal products, need to sell an experience.”

A young population with rising incomes in Dubai and the surrounding region make the food and beverages sector attractive. The National in February 2014 reported that Dubai-based investment group Al Mal Capital launched the Emirate’s first private equity fund dedicated to food and beverages. The report said that the sector’s stable demand was part of the attraction for the creators of the new fund.

Tarek El Sakka, General Manager of Dubai Refreshments Company, sees the soft drinks market growing in the mid single-digit range in 2014. The company has been a PepsiCo bottler and distributor for half a century and is nearing completion on a new factory. “The factory will increase our overall capacity by about 50%; however, it is not only about size,” El Sakka told TBY. “It is important to have flexible capacity. The new factory will have much more flexibility in the types of products and packages that it can produce. That is important in our industry where packaging plays a big role in driving the business.”

DOWN TO EARTH

The Financial Times, in June 2014, reported on Dubai’s newest free zone, Dubai Design District, a fashion center set to open at the beginning of 2015. The article said that Dubai’s 22 sector-specific free zones “have become hubs attracting 19,000 companies, from multinational banks to global media, creating some 200,000 jobs.” However, Dubai Industrial City is a non-free zone that benefits from being next to the new Al Maktoum International Airport (Dubai World Central) and close to the Jebel Ali Free Zone. The huge industrial project spread across 55 square kilometers touts itself as the prime beneficiary of world-class infrastructure. For example, the UAE’s national railway operator, Etihad Rail, is developing a main rail terminal within the city. Andrew Shaw, Managing Director of Dubai Cable Company (Ducab), told TBY that, “I think the excellence of the infrastructure, the quality, the power supply—all of these things we take for granted in the UAE, and, as a manufacturing business that is running 24/7, yes, it is part of our advantage.”