ECONOMIC DEVELOPMENT - UAE Interact

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100 UNITED ARAB EMIRATES YEARBOOK 2006The free zones are key elements of the diversification, industrialisation anddevelopment strategy of each emirate. They have played positive roles in promotingforeign direct investment (FDI). There are more than 3000 companies in thevarious free zones across the country, with an estimated investment of aroundDh15 billion. Multinational corporations rank UAE relatively high in the West Asianand Arab region as an FDI destination. However, the majority of the units in thefree zones are not manufacturing establishments. Although the dominating activityin the free zones is warehousing rather than manufacturing, operations takingplace in the warehouses located within free zones often add value by preparingmerchandise for its final markets. Such activities include re-packaging, re-labelling,sub-assembly, bar-coding, quality control, palletisation and unitisation.E- AND M- MARKETINGThe UAE has the largest number of per capita Internet users in the entire Gulf.The country registered 72 per cent growth in its domain registration in 2004over 2003. Indeed, its domain appendage ‘.ae’ is now increasingly popular.Meanwhile, many companies based in the UAE use the global domain nameregistrations of .com or .net.In addition to a highly active Internet usage, the UAE has one of the highestmobile phone penetrations in the AGCC region and it is still growing. In June2005 Etisalat announced that its UAE mobile network user total had crossed thefour million mark, giving it one of the highest mobile phone penetration rates inthe world. M-commerce (commerce via mobile phones) has an enormous potentialfor B2C (retail) because such wireless connectivity requires less investment and thecosts for connectivity via SMS are particularly low.Considering the significant focus the UAE Government and private enterpriseshave given to promotion of modern technology in administration and businessdevelopment, it is not surprising that the country has taken the lead in certainaspects of online marketing. The leading e-commerce, business-to-business (B2B)web-marketing and auctioning company in the Middle East is UAE-based awardwinningwebsite www.tejari.com.Tejari is a B2B marketplace that allows companies to buy and sell goods andservices online. Through Tejari, buyers can find, compare and procure productsand services from the familiarity and convenience of their desktop Internetbrowser. Suppliers can list their products and services and sell them throughonline catalogues or auctions.In 2004, Tejari reported that total value of transactions recorded through theonline marketplace since its launch has reached more than US$1 billion. Thecompany’s CEO, Sheikha Lubna Al Qasimi, who is also Minister of Economy andPlanning, has been widely recognised as one of the region’s most influentialbusiness leaders. Currently Tejari has well over 2500 trading partners from all
102UNITED ARAB EMIRATES YEARBOOK 2006ECONOMIC DEVELOPMENT103different sectors, including automotive, healthcare, construction, IT, food andbeverage, and tourism. Use of the Internet among procurement agencies is rapidlyincreasing with 17 per cent of organisations within the Gulf Cooperation Council(GCC) states engaged in online procurement. The average GCC resident purchasesUS$1068 worth of goods and services online annually, compared to per capitapurchase figures of US$1314 in the United States of America, US$1072 in the UK,and US$875 in Germany.Other active e-marketing operations are www.UAEmall.com, which is especiallypopular for buying and selling second-hand cars and works by introducing buyersand sellers rather than direct selling, and a number of share-trading providerssuch as EMAAR Financial Services, which has teamed up with Amlak FinancePJSC to deliver the UAE’s first online real-time, e-trading and mobile phone-basedtrading service.INDUSTRIAL DEVELOPMENTThe UAE’s main industrial manufacturing activities, apart from the oil and gassector which is covered elsewhere, are in construction, aluminium, chemicals andplastics, metals and heavy equipment, ceramics, clothing and textiles, and food.As already indicated, each emirate in the UAE has taken steps to nurture thedevelopment of these (and other) non-oil industries, both in terms of providingattractive structures and support mechanisms and through development ofimproved facilities such as industrial zones, business parks and vital energy andtransport networks.The UAE Government has also been working to establish major new free-tradeagreements with a number of countries. Negotiations for such an agreement withthe United States were actively under way in mid-2005. The UAE is keen that FTAsshould enhance economic competitiveness on the basis of free and fair trade.MANUFACTURINGThe UAE’s manufacturing sector contributes roughly 14 per cent to GDP and is thelargest non-oil economic sector in the country. Growth in manufacturing has beenimpressive, showing a 15 per cent increase in 2004, reaching Dh45 billion. Theimpetus for growth has come from an increase in population and demand forconsumer goods on the one hand, and expansion of the free zones and foreigndirect investment in the country on the other hand. In 2004 there were 3036manufacturing establishments registered with the Ministry of Finance and Industry,compared to 2795 in 2003. Indeed, the manufacturing sector now accounts forroughly one-fifth of the entire non-oil economy. Not only is local manufacturingcatering to increasing demand from the domestic non-oil economy, but it is alsoestablishing a foothold in international export markets.The current trend in UAE manufacturing, particularly in the free zones, is tomove up the supply chain, focusing on less labour-intensive and high valueaddedactivities in the manufacturing process – even if it means that the coremanufacturing process may be outside the country. One example is the case ofthe garment industry, which because of its labour intensity, is losing marketshare to lower cost locations in the region. However, as garment manufacturing inUAE declines, the country is using its experience, expertise and specialisationin the industry to move higher up in the garment supply chain, specialising inreplenishment trade for the European and American markets, as a large regionalwarehouse where value-addition activities take place and as a ‘showroom’ forforeign manufacturers. A similar situation has arisen in Hong Kong, whichshowcases and markets goods made in mainland China, a pattern that is nowbeing emulated in Dubai.The structure of the manufacturing sector in UAE has not changed significantlyin the last decade, with the possible exception of the decline of the garmentindustry. Total manufacturing employment grew at an average of 8.7 per centin 2004 over 2003. The wood and furniture sector labour force led the way witha 15.3 per cent expansion, followed by non-metallic mineral products with a13.8 per cent growth, whilst food and beverages increased by 10.9 per cent. Asdiscussed above, the only sector to show a decline in employment figures was thetextile industry. By far the largest sector, in terms of both value and employees, isthe metal products and machinery sector, which employed 58,334 people in2004, a growth of 10.2 per cent over 2003 figures.REORGANISATION OF ABU DHABI GOVERNMENTA new legislative framework for government organisation in Abu Dhabi was putin place in December 2004. Law No. 10 of 2004 amended the provisions of LawNo. 1 of 1974. Changes included the merger of the Departments of Purchasing andCustoms into the Department of Finance; the Departments of Public Works, Al AinMunicipality and Town Planning together with Abu Dhabi Municipality and TownPlanning and Agriculture and Animal Resources in Al Ain were all merged into asingle Department of Municipalities and Agriculture for the whole emirate; and theDepartments of Planning and Economy were joined into a single Department ofPlanning and Economy which was placed under the chairmanship of HH SheikhHamed bin Zayed Al Nahyan.ABU DHABI DEPARTMENT OF PLANNING AND ECONOMYThe Abu Dhabi Department of Planning and Economy is actively promotingpartnership between the public and private sectors in Abu Dhabi. The emirate hasadopted a balanced development strategy that involves updating legislative andlegal parameters, providing business facilities and promoting investment services,
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