According to the research, the UAE committed $248.76m in industrial developments in 2006. This was the second highest investment level among Gulf Cooperation Council (GCC) countries behind Saudi Arabia, which had investments totalling a massive $3.18bn. The UAE also had the largest number of new industrial establishments with 401 opening operations in 2006. This dwarfed the other GCC countries, demonstrating the confidence in industrial development in the emirates and the potential for rapid growth in the industrial sector.
It is clear that fabricated metals and chemicals and plastics are becoming increasingly important for the UAE with the biggest growth of establishments in this industry. However, the biggest investment remains in the non-metallic minerals sector.
Within Abu Dhabi, however, it is clear that the industrial development programme revolves around metals - in particular, aluminium and steel - and petrochemicals. The emirate naturally wants to play to its competitive advantage and is thus focusing on energy and capital-intensive industries rather than labour intensive ones. The government is thus looking to invest strategically in such areas in the hope of stimulating downstream clusters from these raw material generators.
The impetus to diversify the industrial base and move away from oil and gas dependency is reflected in the plans to build two aluminium smelters and two steel plants in Abu Dhabi. The $6bn aluminium smelter, being jointly developed by Dubai Aluminium Company (DUBAL) and Mubadala Development Company, is to be located at the proposed Khalifa Port and Industrial Zone in Taweelah. The first phase of the project, which will be operational by 2010, will see an annual capacity of 700,000 tonnes rising to 1.4m tonnes upon full completion, making it the largest single site aluminium smelter in the world. This will be complemented by a joint venture aluminium project at Ruwais between the government-owned General Holding Corporation and Rio Tinto. The project will involve an aluminium smelter producing over 550,000 tonnes in the first alumina phase with the potential to expand capacity to 2m tonnes. The project may also involve a refinery with a capacity of 2m tonnes per annum.
Many of the major developments within Abu Dhabi follow a similar formula with government owned companies providing the initial investment as a means of stimulating private sector downstream investment. Many of these major projects require capital inputs beyond that of the private sector. However, it is hoped they will provide an environment for clusters of industry. General Holding Corporation also has the mandate of building up industrial companies before selling them off to the private sector.
Some analysts suggest that there is an issue of over capacity in the development of industry within the UAE. However, a leading figure in Abu Dhabi's industrial development told OBG that this is only the case if you look at the market of the UAE. He suggested that Abu Dhabi is looking beyond its borders and the region, as many industries are now global. He further asserted that the emirate is seeking to become one of the leading exporters of aluminium in the world, for example.
The same observation has been made with regards to the petrochemical industry as the Middle East looks to become a leading producer on the world stage. Harri Bucht, CEO of Abu Dhabi Polymers Company, Borouge, told OBG that they are performing well in the competitive environment, "The polyethylene market is healthy and the price levels are good." However, Bucht is also clear that the company performs a clear role for Abu Dhabi's industrial strategy beyond the simple returns for the company. He told OBG, "I think our role is very much to be the producer of the raw material and producing opportunities for investment downstream."
The company currently produces ethylene and polyethylene but through its expansion plans for Borouge 2 it will move into the production of polypropylene. The company, which is owned by Abu Dhabi National Oil Company (ADNOC) and Borealis in a 60-40 split, is looking to triple its ethylene capacity from 600,000 tonnes per year to 2m. The projected total capacity of petrochemical production for the company by 2010 is 4.71m tonnes per year. Borouge is also currently undertaking a feasibility study into producing base chemicals.
Petrochemical expansion is therefore another key area in which the emirate is looking to stimulate private sector investment and growth with the hope of developing an associated plastics industry. Indeed, it is clear that Abu Dhabi and the UAE is pushing forward with industrial plans as it continues to decrease the hydrocarbons share of GDP.