Prime Directives

Prime Directives

The UAE’s manufacturing industries form a significant part of the country’s GDP at current prices, running at 9% in 2012 according to preliminary data from the UAE National Bureau of Statistics, up from 8.8% in 2011. Abu Dhabi’s manufacturing accounted for 12.6% of non-oil GDP in 2013, according to the latest figures from the Statistics Centre – Abu Dhabi (SCAD). This puts it behind construction, which represented approximately 20% of non-oil GDP in the same year. Abu Dhabi is looking to boost its industrial component through the creation of the Khalifa Industrial Zone Abu Dhabi (Kizad). Spread over 52 square kilometers, and set to grow to 418 square kilometers by the end of Phase II, the zone is targeting the manufacturing and logistics sectors as part of a plan that will see activities at the zone account for as much as 15% of Abu Dhabi’s non-oil GDP by 2030, as forecast by the Abu Dhabi Ports Company (ADPC).

One of the biggest pieces of news out of the Emirate’s industrial matrix in 2013 wasthe joint venture between Dubai Aluminium (DUBAL) and Emirates Aluminium (EMAL), brought about by state investment engine Mubadala’s purchase of a share of DUBAL. The merging of activities has created the fifth largest aluminum company in the world, a sign of the ambition with which Abu Dhabi is pushing its manufacturing agenda.

AS IT STANDS

According to the latest figures from SCAD, released in June 2013, 208,481 people are at work in the industrial sector, the majority of which (167,000) are engaged in manufacturing pursuits. Mining and quarrying take up the next largest share at 26,000 employees, while utilities account for most of the remainder. In terms of establishments, manufacturing is again significant, with over 6,600 firms carrying out activities in the area. And the sector is certainly on an upward growth arc. According to the SCAD report, total production value grew from AED488.6 billion in 2010 to AED706.6 billion in 2011, growth that was accompanied by a marked increase in value added, up 49.3%. Employee wages have also been steadily increasing, growing 10% between 2010 and 2011, according to the latest data available.

KIZAD

The latest industrial free zone on the block is Kizad, a soon-to-be bustling industrial complex and port located on the northern border of Abu Dhabi. With a Phase I cost of $7.2 billion, including the development of its Khalifa Port, the project’s ambitions cannot be played down. When we spoke with Khaled S.A. Salmeen, CEO and Managing Director of Kizad, 40 investors were busy preparing to launch their activities at the site in 2014. “The minute that you are set up in Kizad as an industrial project, you are able to benefit from cost advantages,” said Salmeen. The advantages he alludes to include tax and customs exemptions, tailored for firms looking for a gateway to the GCC. “If you are within Kizad, we are able to issue a company a certificate exempting it from GCC market taxes,” he added. So far, Phase I, which includes 55% of available area (total set to be 418 square kilometers at the end of Phase II), already boasts all the necessary infrastructure for businesses to begin setting up shop. Khalifa Port is bustling already, however, having handled a whopping 108,081 TEUs in October 2013, a record for Abu Dhabi. In time, it is envisaged that Kizad will become one of the world’s largest industrial zones, representing the Emirate’s biggest ever infrastructure megaproject. Indeed, its development arc coincides with Vision 2030, with construction on the project not set to end until the same year. The zone also has world-class transport infrastructure to look forward to, with plans to connect the ambitious Etihad Rail project to the port’s terminals by 2016, while an extension of the Emirates Highway/Sheikh Zayed Road to hook it up to Kizad is also in the cards.

In addition to providing 15% of the Emirate’s non-oil GDP by 2030, it is hoped the matrix will provide up to 100,000 high-quality new jobs. While EMAL is the current flagship tenant at Zone A, project leaders foresee the development of specialized clusters related to aluminum, steel, chemicals, petrochemicals, pharmaceuticals, healthcare equipment, paper, printing and packaging, food, trade and logistics, and engineered metal products, among others. At Zone B, which is not yet under construction, the presence of high-tech and light manufacturing industries is also envisaged.

ALUMINUM & STEEL

Dominating the Emirate’s substantial aluminum industry is Emirates Aluminum (EMAL), while Emirates Steel looms large in its own field. With a 60% domestic market share, Emirates Steel is also a significant exporter, selling 30% of its products into foreign markets including the GCC, Southeast Asia, India, Pakistan, and Iraq. The company continues to grow, unofficially tasked with helping to reduce the country’s reliance on steel from Turkey, a country that has so far dominated the global rebar industry. And it doesn’t stop at rebar. “Besides our finished rebar and wire rod, we also have the capacity to produce and sell direct reduced iron and steel billets as semi-finished products. More significantly, we are now the sole producer of structural steel in the MENA region,” Saeed G. Al Romaithi, CEO of Emirates Steel, told TBY.

In aluminum, the largest development of the last 12 months was the creation of Emirates Global Aluminium. The big integration took place in June, and saw the joining of forces of DUBAL and EMAL to create the world’s fifth largest aluminum company. EMAL also recently celebrated the completion of its Phase II expansion project, in addition to achieving a cumulative production of 1.5 million tons of hot metal, a global record for a single site smelter. EMAL has also gotten down to business at Khalifa Port, exporting its first shipment through the brand-new hub in 2012. Annual production of hot metal is now expected to reach 1.4 million tons in 2014.

With the groundwork laid and the building well underway, Abu Dhabi’s industrial complex is set to make many green with envy. With many benefits on offer, investors will be hard pressed to find a better location to enter the lucrative GCC region and greater Middle East.