THE HOLY GRAIL

Abu Dhabi 2017 | INDUSTRY | REVIEW

Abu Dhabi's push to develop both heavy and light industries is paying off, as the sector now accounts for over 10% of GDP and continues to attract investment.

In late 2016, Abu Dhabi set its sights on doubling the size of the industry sector's share in GDP from 5% to 10%. With the Emirate's broader strategy of increasing non-oil contributions from 27% to 40% in 2030, it is expected that the industry sector will contribute a significant amount to diversification. Government investment in the industry sector reached upward of AED131 billion in 2016.

The local government has long supported a forward-thinking approach when it comes to industrial growth and diversification. Investment in infrastructure such as economic zones and transportation networks across the Emirate has played a vital role in feeding the market. In addition, the Emirate boasts a friendly business climate with simplified regulations and responsible governance, extensive access to developing markets, global connectivity through more than 200 airline routes, 150 shipping lanes, and 1,200km of railroads, as well as a tax-free environment and high quality of life, which attracts skilled industry sector staff. “By enhancing our presence here, we have added more timely services into our portfolio and are more effective in responding to our clients' needs. Abu Dhabi provides a good level of connectivity and access to the different markets," Dr. Ziad Awad, Senior Vice President of SNC-Lavalin, explained to TBY.

Although industrial areas with medium-quality warehousing and infrastructure posted a 9% decline in activity in 2016, Khalifa Industrial Zone Abu Dhabi (Kizad) continues to invest heavily in world-class infrastructure and terminal capacity, inspiring other zones to improve their services and signaling a favorable outlook for companies and investors in 2017. Companies interested in Abu Dhabi's industrial zones range from businesses in the general trading sector, SMEs, construction companies, and IT providers.

STEEL THE SCENE

According to local media, Abu Dhabi's heavy industries segment comprises a strong pillar of the economy. Over the past 15 years, the Emirate has invested more than AED51 billion to establish robust industrial infrastructure, especially for aluminum and steel production.

Emirates Steel Industries (ESI) has led the way for other companies in the aluminum and steel industry, with figures rapidly growing over the past few years. Currently, the Emirate produces and exports thousands of premium quality products to more than 50 countries all over the world. With special attention to quality, ESI meets 60% of local market needs for the main categories and types of steel, while exporting the remainder of its production line to markets in Latin America, Europe, East Asia, and North America.

Up to 10% of ESI products are sold to aluminum producers, such as Emirates Global Aluminum (EGA). Already one of the world's five-largest aluminum producers, EGA seeks to increase its share of that market to 51% by 2020, becoming the Gulf's top aluminum supplier. EGA produces over 2.3 million tons of aluminum annually, employs nearly 7,000 staff, and adds value to the market with 95% of its products.

Due in large part to the growing demand for both steel and aluminum, experts predict that both products will continue to carry the bulk industry sector in the coming years. Meanwhile, the raw material produced by ESI plants at the Abu Dhabi Industrial Zone and by Al Taweelah, EGA's innovative aluminum extrusion plant based in Kizad, presents numerous opportunities to international industry sector players. “We worked with EGA to help boost the aluminum and industrial sectors where plants today are among the most efficient industrial sites in the world," SNC-Lavalin Vice President Awad said. “Through our partnership with TABREED, we have engineered, procured, built, and commissioned over 45 plants in the region. This has solidified our presence in light of the growing demand for clean and efficient solutions."

IN THE ZONE

Fueling Abu Dhabi's industrial boom are its expansive free trade zones, which allow investors and operators to benefit from strategic geographic advantages and cost-effective facilities

The Industrial City of Abu Dhabi (ICAD) spans 40sqkm and connects to transportation hubs at various points—developed roads, storage, and logistic hubs that have convenient access to multiple ports and airports. Each cluster in the ICAD supports world-class infrastructure and benefits from reliable utilities and advanced communication networks, where flexible plot sizes appeal to a wide variety of investors. The site is already home to numerous steel and metals producers, as well as construction materials companies, logistics operators, FMCG manufacturers, and oil and gas players. The ICAD has been designed, constructed, and operates according to international technical and environmental standards, and features scalability that can accommodate future demand and growth.

Meanwhile, free zone giant ZonesCorp is carrying out plans for a major new auto hub in Abu Dhabi. ZonesCorp is currently home to over 650 industrial facilities, receiving over AED29 billion worth of investment from local and international companies since its tax-free economic zones were created. As the body responsible for developing specialized economic zones in the emirate, ZonesCorp is presenting developing 12sqkm of space for automotive manufacturers, distributors, dealers, and parts providers. The first phase of the project, which will require approximately AED2 billion and focus on key infrastructure, is expected to be completed in 2017. Upon completion, the zone will offer up to 1,800 plots to be used as car showrooms, service centers, workshops, and warehouses. Additionally in 2017, ZonesCorp is working to set up 261 prefabricated, ready-to-use units covering 300,000sqm in the ICAD. In total, ZonesCorp has set aside 80% of the units for warehousing and 20% for industrial use, spending over AED90 million on the first phase. In an interview with the press, Saaed Eisa Al Khyeli, the Director General of ZonesCorp said, “This project is designed to fac­ilitate the growth of SMEs and to meet the growing demand for high-quality, flexible warehousing," adding, “The flourishing SME sector is the cornerstone of any thriving economy and the UAE is no different. The project is also firmly in line with the Abu Dhabi 2030 Vision to build a sustainable and diversified, high value-added economy." ZonesCorp reported that nearly AED160 million of externally sourced investment was injected toward these future projects by the end of 1Q2017. Companies setting up in the industrial city include Innovida Warehouses Management, Fibrex Construction Group, Petro Hub, Riviere Mineral Water Factory, and the Aertssen Group.

NOT JUST PAPER PRODUCTS

Acknowledging favorable business conditions, several key industrial players are expanding their operations in Abu Dhabi. Manufacturing in particular accounts for 86% of spending in the industry sector, and shows no signs of slowing down.

3M, the multinational manufacturing and mining conglomerate, targets double-digit growth in Abu Dhabi in 2017. One of the ways the company is working to accomplish rapid growth is through the expansion of the local workforce, specifically Emiratization, as well as through public and private partnerships.

Local industry player ADNIP is currently worth AED800 million, with a current growth trajectory of becoming an AED2 billion company over the short term. “The immediate plans for 2017 is to do mergers and acquire new business lines that will awake the interest of other companies," Mounir S. Haddad, CEO of ADNIP, told TBY. Among the company's many business segments, paper production increased from 65,000 tons to 95,000 tons over a recent 12-month period. “The new machine produces advanced NTT paper, a higher absorbance, softer, and bulkier paper with very unique qualities that is only produced in Mexico, Chile, and the UAE," Haddad said. To that end, the company fully meets local demand. ADNIP's carpet business has fared equally well, with sales figures increasing from 200 million to 270 million YoY. However, the company is not focused solely on quantity, instead emphasizing quality to stand apart from the competition and build stronger client relationships. “Mass production competitors find it more difficult to comply with timings and deliveries and that is where they lose out in comparison to ADNIP. We also cover the more protected markets, such as Saudi Arabia, where mass production companies have difficulties entering due to high taxes and strict requirements," Haddad concluded. ADNIP's brand reputation has also given it a competitive edge as an exporter. Currently, 90% of ADNIP's medical devices are shipped abroad to destinations such as Africa, Latin America, and the Middle East.
Abu Dhabi Vegetable Oil Company (ADVOC) has also found an advantage as an Abu Dhabi-based industrial exporter. Overall, approximately 40% of ADVOC's output is destined for foreign shores. Meanwhile, the company's annual growth rate has averaged at 8%, a figure boosted by general market confidence and the convenience of being located at Mina Zayed Port. In an interview with TBY, Colin Smith, CEO of ADVOC, said, “We are in the final stages of completing another building to serve the specialty fats business. We also plan to increase our capacity, hence why we made significant investments in the expansion of our facilities and distribution channels." Apart from its strong presence in the UAE, ADVOC has a strong footprint in the GCC markets.

For FMCG producers such as Agthia, sales continue to post impressive growth. “Our water segment is growing at 15% and it still represents the core business for us," Iqbal Hamzah, CEO of Agthia, told TBY. The company boasts new entries in its product portfolio for 2017, mainly freshly squeezed juices, rebranded flavored water, and new packaging for fruit-based products. Currently the number-one flour mill in Abu Dhabi, Agthia is a key supplier of the local market. “By 2020, we plan to cover the entire region with a strong footprint in each market. We also play an important role in developing the targets stipulated by Abu Dhabi's 2030 Vision and we commend all efforts to diversify its economy and bumper non-oil exports in the years ahead," Hamzah concluded.

Abu Dhabi's national investment firm Mubadala recently announced a partnership with the Dubai Future Foundation and GE to establish Abu Dhabi as a microfactory base for serving industrial firms. Combining innovation and educational ecosystems with fast, efficient, and sustainable manufacturing capabilities, micro factories offer the Emirate a range of new industrial possibilities and grant access to global best practices in manufacturing.

Colin Smith
COLIN SMITH
CEO, Abu Dhabi Vegetable Oil Company (ADVOC)
"Over the last four years we have maintained an annual growth of about 8% as we accelerated our growth rates based on the confidence we gained in the market and the longer leases we had for our offices in Mina Zayed Port."