• Home
• /
• Business

Remarkable surge for Dubai manufacturing sector

DUBAI — Dubai manufacturing sector is one of the major economic sectors, beside construction, trading and services, on which Dubai is counting for its drive of economic diversification according to a recent report by the Dubai Chamber of Commerce and industry.

The UAE Ministry of Economy and Planning (MEP) data has shown that Dubai manufacturing gross domestic product (GDP) grew by an annual average rate of 12pc during the period 2000-2004.

In addition, the share of Dubai manufacturing GDP in total GDP of Dubai has increased by an annual average of 2pc during the period 2001-2004.

Figure 1 shows the number of firms (excluding the free zones), labour and investment (measured in million AED) in Dubai manufacturing sector over the time period 2000-2004. As the figure shows, all the three variables have been rising over time.

FIRMS

The calculations have shown that the number of manufacturing firms increased by an annual average rate of 10pc during the period 2000-2004. In terms of size class distribution of the firms in 2004, 10pc of the firms are small, those with 1 to 9 employees. 56pc are medium small, those with 10 to 49 employees. 18pc are medium large, those with 50 to 99 employees. 16pc are large, those with 100 and more employees.This means that Dubai manufacturing sector is dominated by the medium sized firms, both medium small and medium large, which they represent about 74pc of the total number of manufacturing firms in Dubai.

Regarding the legal form of the manufacturing firms in 2004, 62pc of the firms were limited liability, 32pc were proprietorship, 5pc were partnership and 1pc were public sharing firms.

LABOUR

As far as labour is concerned, it has been estimated that labour increased by an annual average rate of 8pc during the period 2000-2004. In 2004, the top 5 employers of labour in the manufacturing sector are Fabricated Metal and Equipment sub-sector, which employed 30pc of the industrial labour; Non-Metallic Mineral Products sub-sector, which employed 15pc; Food, Beverage, and Tobacco sub-sector, which employed 14pc; Wood Products and Furniture sub-sector, which employed 12pc; and Chemical and Plastic Products sub-sector, which employed 10pc. Please refer to table 1.

INVESTMENT

With respect to investment, it increased by an annual average rate of 4pc during the period 2000-2004. The definition of investment here refers to the amount of paid up capital and not the gross fixed capital formation. In 2004, about 86pc of the total investment in the manufacturing sector was by UAE nationals, 6pc by other GCC nationals, and 8pc by other nationalities. The top 5 destinations of these investments were Basic Metallic Mineral Products sub-sector 43per cent; Non-Metallic Mineral Products 13per cent; Food, Beverage & Tobacco 12per cent; Fabricated Metal and Equipment 11per cent; and Chemical and Plastic Products 10per cent. Please refer to table 1.

MEP data has shown that the gross fixed capital formation (GFCF) in Dubai manufacturing sector increased by an annual average rate of 12per cent during the period 2000-2004. For 2004 it is calculated that the GFCF, which is reported by MEP, represents about 0.34 of the paid up capital, which is reported by the UAE Ministry of Finance and Industry (MFI). In economics, conventionally investment is defined as GFCF and not as paid up capital. Therefore, there is a need in UAE for an agreed definition of the concept investment; otherwise investment means different things to different people.

PRODUCTION, GDP AND TURNOVER

The most recent figures available for Dubai manufacturing sector production and GDP is that of MEP. According to MEP, Dubai manufacturing sector had a total production of AED 29,950 million and a GDP of AED 16,159 in 2004. This gives a value added rate of 0.54, which is defined as the ratio of the value added to the value of production. A high ratio reflects the existence of a production process comprising an important share of transformation of the products in the manufacturing industries.

According to Dubai Chamber of Commerce and Industry (DCCI) database, the total turnover of the manufacturing firms registered at Dubai Chamber of Commerce and Industry was about AED 25 billion in 2004.

The turnover refers to the total sales of goods carried out by the industrial enterprises during that period of time.

Although Dubai manufacturing sector is doing well, but it still faces some challenges and one of them is the rising wave of liberalisation that will be brought about by the Free Trade Agreements (FTAs) that are currently being negotiated with several countries such as the US.

To be able to stand the new tough world market competition, it needs to produce efficiently.