Industrial Development Report 2018

March 2019 Dubai Exports .Export Market Development

P.O.Box 13223 Dubai www.dubaided.gov.ae Ref4 Q1 2019

2

TABLE OF CONTENTS

Manufacturing GDP _______________________________________________

Foreign Direct Investment in Manufacturing ____________________________

Manufacturing Performance Indicators ________________________________

Manufacturing Trend in Dubai in 2018 ________________________________

Impact on Trade __________________________________________________

Global Industry Trends ____________________________________________

Dubai Future Business Outlook ____________________________________

3

DUBAI MANUFACTURING GDP

Manufacturing ranks in the fourth position in contribution to GDP after Wholesale and Retail

Trade ,Transportation and Financial and Insurance Services. Its contribution to GDP recorded

9.4% of total GDP in 2017

While Manufacturing GDP achieved a growth rate of 2% in 2017 on 2016,lower than the

total GDP growth of 2.8%

26.6

11.8

10.49.4

7.1

6.3

28.3

Wholesale and retail trade; repair ofmotor vehicles and motorcycles

Transportation and storage

Financial and insurance activities

Manufacturing

Real estate activities

Construction

Others

4

FOREIGN DIRECT INVESTMENT IN MANUFACTURING

Manufacturing FDI shares 4% of all sectors FDI stock in Dubai in 2016, It ranks in the fourth

position after ,Wholesale and Retail Trade and Repair(36.5%) , Financial and

insurance(24%),Real Estate (21.6%).However the growth of FDI manufacturing stock in 2016

on 2015 was minor at 1.4%

Total Stock of Foreign Direct Investment by Economic Activity

النشاط االقتصادي

2015 2016 نسبة النمو

Growth Rate %

Economic Activity القيمة

Value

%نسبة المساھمة Percentage

Contribution %

القيمةValue

نسبة المساھمة %Percentage

Contribution %

Manufacturing 1.4 4.0 11,553.5 4.2 11,396.6 الصناعة التحويلية

Source: Dubai Statistics Center

5

MANUFACTURING PERFORMANCE INDICATORS

Manufacturing Output The manufacturing annual output is estimated currently at about 119 Billion AED

Food sector leads manufacturing activities in annual output value, sharing 14%, followed by

Petroleum Refining(12%), Metal Fabrication (11%)

Top Value Added Activities

Five activities namely: Basic Metals, Fabricated Metals, Chemicals, Food and Non-Metallic

Minerals(typical is cement and crushers industry), lead in value added generation, among

them, they share 52% of the total manufacturing value added.

Here are typical sub-activities under these major activities :

-Basic Metal constitutes mainly Aluminum Smelting.

-Steel Fabrication include, aluminum downstream industries (typical is aluminum extrusion)

and Steel re-rolling.

-Chemicals include blending and mixing of chemicals for industrial and household use;

(typical are detergents, disinfectants, and paints)

-Food Products comprise Sugar and Confectionery, processed meats / vegetables

,and edible oils

6

Typical High Value Added Manufacturing Activities in

Dubai

1. Basic Metals

7

2. Metal Fabrication

3. Food Processing

8

4. Chemicals/Paints

9

Labor Productivityi

Labor employment in the manufacturing sector in Dubai is estimated at around 264,000

persons.

Overall labor productivity in industry remained at the same level in the recent years at around

450,000 AED output/employee with minimal growth ,if any, while for example EU28

countries industrial productivity growth(including energy) during 2016 2017 is estimated at

around 1.8% according to OECD

The most labor-intensive activities in Dubai are Metal Fabrication, Non –Metallic Minerals

(cement, stone crushers) and Food. The least labor intensive activities in Dubai with highest

output per employee are Petroleum Refining, Tobacco Production, Basic Metals(Aluminum

Smelting),Chemicals, Manufacture of Computers and Electronics

Paints Manufacturing

10

Diversification

Diversif icat ion in the manufacturing sector is reflected in export diversif icat ion It is clear from the table below that the number of 4HS Codes have increased in 2017 on 2016 by 19% indicat ing that good diversif icat ion is taking place in the manufacturing sector, though the diversif icat ion index in 2017 is sti l l less than what was in 2014, a year which must have been an excellent for the industrial product diversif icat ion

                        2013 2014  2015  2016 2017

MACROECONOMIC  INDICATORS of Diversification 

   # of Markets  delivering 80% of export value    

   21 26  25  25 26

    

         # of4 HS Codes  delivering 80% of exports by value 

   22 33  25  21 25

          

0

2

4

6

8

10

12

Out

put p

er e

mpl

u]ye

e in

Mill

ion

AE

D

Top Actibvities with higewst output per employee

Petroleum Refining, Tobacco Production, Basic Metals (Aluminum Smelting), Chemicals,

Manufacture of Computers and Electronics are the least labor-intensive activities in Dubai

with highest output per employee

11

12

MANUFACTURING TREND IN DUBAI IN 2018

According to a report by Oxford Business Group on Dubai Economy 2019 ,some industries

came up in Dubai in 2018 marking a trend of evolution towards new technologies typical

examples are:

The establishment of a chemicals and building materials plant by Sika Switzerland , with a

$10.8m production facility at Dubai Industrial Park ,having a capacity of 240,000 tons per

annum .The plant takes advantage of the strategic location of Dubai to supply the growing

regional market particularly GCC,and in the Pharma sector ,Wockhardt and India-based

company, opened a $40m factory to manufacture new chemical entities used to develop

antimicrobial treatments to fight superbugs..The factory is fully automated and comprise

warehousing and testing facilities. Similarly Pharmax , a UAE based company, started a

production of generic medicine in Dubai Science Park with nan investment of around 125 Mil

AED, a joint venture with UAE distributor Al Ittihad Drug Store and two Morocco-based drug

companies. The factory capacity is set at 200 mil tablets and capsules a year ,planned to rise

to 800 mil for 2021-2023

According to Oxford Business Group, there has been a trend in digitization of services in

Dubai ,indicated by falling costs of cloud data storage and the emergence of companies that

capitalize on intellectual property assets rather than physical properties like machines .

Some of the factors which are seen to drive the future investment in the manufacturing

include the increase in oil prices , the introduction of the 100% ownership onshore and the 10

year visa scheme

A NEW CHEMICAL AND BUILDING MATERIAL

FACTORY AND TWO PHARMA FACTORIES

OPENED IN DUBAI IN 2018

13

An earlier survey of DE manufacturing members showed that 12% of participants were

highly digitized ,35% are semi digitized and 53% have low digitization, currently the

biggest use is for cloud technology (58.8%) followed by Internet of things (47.1%), and

activities with top priority for digitization are product supply chain management and

engagement with customers , while lack of digital skills and resistance to changes were

considered ,relatively, the most important challenges facing digitization

14

IMPACT ON TRADE

Export increased by 0.3% in 2017 on 2016, while manufacturing GDP increased by 2.0%

during the same period, indicating manufacturing has depended more on the domestic market

than the export market in 2017 due to recession in world trade

Export Growth 0.3%

Manufacturing GDP

Growth 2.0%

“Manufacturing GDP grew at a rate higher than exports which was affected by international recession.”

15

GLOBAL INDUSTRY TRENDS

World Manufacturing Value Added Trendii Global MVA more than doubled between 1990

and 2016 to $12,316 billion (at constant 2010 prices).1

Developing and emerging industrial economies’ share

doubled over this period, rising from 21.7 percent to

44.6 percent, reaching $5,494 billion at 2010 constant

Prices

China has the world’s largest share of MVA. It

Doubled, from 12.6 percent in 2006 to 24.4 percent in

2016. The United States, whose share declined from

20 percent to 16 percent over the period, has the second-

largest share

World Manufacturing Share in GDP In industrialized economies the MVA share of

GDP declined from 14.7 percent in 1991 to 13.9 percent

in 2014 thanks to the increasing

importance of services. In developing and emerging

industrial economies, the share climbed from 15.4 percent

to 20.3 percent, thanks largely to the relocation of

manufacturing production from industrialized economies

to the developing world.

Productivity Growth in EU (Industry)

2014 2015 2016 2017 EU 28

countries 1.9 2.7 1.7 1.9

16

“Food, Chemicals and Electronics manufacturing have the largest shares in the world Manufacturing Value Added.”

17

18

DUBIA FUTURE BUSINESS OUTLOOK

According to the latest Business Survey conducted by Dubai Economy, the manufacturing

business community have a very positive outlook for Q1 2019 performance

The number of respondents who see an increase in sales was 70% against 15% thinking that

sales will decrease ... New purchase orders have showed a very positive sentiments by the

manufacturing community for Q1 2019,as 64% believes that new purchase orders will

increase while only 3% believe that orders will decrease.

Profit is also forecasted to increase by 48% of respondents against 9% of respondents

forecasting a decrease in profits.

Forecast Business Performance (Manufacturing Exporters) – Q1, 2019

Parameter Q1, 2018 Q4, 2018 Q1, 2019

Increas

e

Decreas

e

No

Chang

e

Net

Balanc

e

Increas

e

Decreas

e

No

Chang

e

Net

Balanc

e

Increas

e

Decreas

e

No

Chang

e

Net

Balanc

e

Sales

Revenue

38% 27% 35% 11% 63% 13% 24% 50% 70% 15% 15% 55%

Selling

Prices

31% 8% 61% 23% 33% 4% 63% 29% 12% 9% 79% 3%

Volumes

Sold

31% 23% 46% 8% 50% 25% 25% 25% 61% 12% 27% 49%

No. of

Employee

s

19% 15% 66% 4% 21% 4% 75% 17% 24% 3% 73% 21%

Profits 23% 38% 39% -15% 42% 17% 41% 25% 48% 9% 43% 39%

New

Purchase

Orders

38% 19% 43% 19% 54% 17% 29% 37% 64% 3% 33% 61%

Export

Sales

42% 23% 35% 19% 67% 8% 25% 59% 55% 9% 36% 46%

i Industry survey 2016,Dubai Statistics Center ii UNIDIO INDUSTRIAL DEVELOPMENT REPORT 2018