The disruption of the Covid-19 pandemic in 2020-21 highlighted a range of inefficiencies in global supply chains, which had pronounced impacts on manufacturing and retail companies – and, ultimately, consumers. Both manufacturing and the industrial sector have also had to contend with high global inflation, which began during the pandemic but has been exacerbated by geopolitical tensions, and its detrimental effect on consumer confidence.
In the UAE as a whole, and in the emirate of Abu Dhabi specifically, the lessons learned from the pandemic are being applied to industrial strategy formulation, with a strong focus on self-sufficiency and strengthening local supply and value chains. This should also bring significant benefits to local retail and wholesale operations. Notably, before the pandemic, both sectors were adapting to the 2018 introduction of value-added tax (VAT) in the UAE. A 5% rate broadly applies, although some goods and services are exempt from the tax (see Tax chapter).
The drive to increase access to finance for startups and small and medium-sized enterprises (SMEs) is also receiving increased focus as the government works to better integrate these sections of the business community into value chains to enable the economy to benefit from their agility and innovations.
Structure & Oversight
The Abu Dhabi Department of Economic Development (ADDED) is a key government authority in both the industrial and retail sectors in the emirate. ADDED was established in 2018 with the remit to regulate Abu Dhabi’s business activities and formulate and implement strategies and initiatives to enable growth in key sectors of the economy. ADDED’s broad purview makes it the chief business licensing body in the industrial and retail sectors, while it is also tasked with implementing consumer-protection laws and policies in Abu Dhabi, under federal direction from the UAE Ministry of Economy. Other national and emirate-level government bodies, such as the UAE Ministry of Interior, the Abu Dhabi Food Control Authority, and the Department of Municipal Affairs and Transport, are also influential in the industrial and retail sectors.
The Abu Dhabi Chamber of Commerce and Industry (ADCCI) was established in 1969. It works to support, promote and protect Abu Dhabi’s private sector and its constituent operators. In February 2023 the ADCCI launched its 2023-25 strategy, through which it aims to enable accelerated private sector growth and help to stimulate greater inflows of foreign investment to the emirate (see Economy chapter).
AD Ports Group is another key industrial entity. In addition to operating the emirate’s major ports and terminals, the Khalifa Economic Zones Abu Dhabi Group (KEZAD Group), which was established in 2022 and operates under AD Ports’ umbrella, owns and oversees 12 industrial and economic zones, which cover a combined area of 550 sq km in Al Ma’mourah, Musaffah, Al Ain, Al Faya and other areas of Abu Dhabi (see Trade & Investment chapter).
KEZAD Group zones follow a clustering strategy to drive growth in targeted sectors. Key areas of focus include logistics, food and agri-tech, metals, automotive and petrochemicals. Clusters function as either free zones or domestic economic zones, with investors offered a range of attractive tax, Customs and capital repatriation incentives.
Energy
ADNOC, which is wholly owned by the Abu Dhabi government, is highly influential in both upstream and downstream industrial development. ADNOC is engaged in a joint venture with ADQ, Abu Dhabi’s third-largest sovereign wealth fund, to develop a massive integrated petrochemicals zone in Ruwais. Chemicals produced in the zone, such as methanol and ammonia, will be converted into consumable products on site. Global players such as Switzerland’s Proman have invested in the venture, with the $5bn first phase to be commissioned in 2025.
Furthermore, in February 2023 ADNOC announced that it had signed agreements worth a total of $4.6bn with local manufacturers. Those companies will be incorporated into ADNOC’s procurement value chains, with pipes, gaskets, batteries and valves among the products to be manufactured.
Industrial Strategy
The UAE Ministry of Industry and Advanced Technology (MoIAT) was founded in July 2020. It is the key implementing authority of the federal government’s industrial development strategy, Make it in the Emirates, which was launched in 2021. The 10-year plan is designed to boost the country’s manufacturing GDP from its 2020 level of Dh133bn ($36.2bn) to Dh300bn ($81.7bn) by 2031.
The Abu Dhabi Industrial Strategy was launched in July 2022 to align with the national strategy. Through the programme, the government of Abu Dhabi aims to double the size of the manufacturing sector by 2031, improve access to finance and the ease of doing business, and boost foreign direct investment (FDI). Total FDI stock in the manufacturing segment contracted by an average of 16.9% per year in 2018-21.
The strategy comprises six distinct programmes. A circular economy component will be implemented to improve sustainability and promote responsible production and consumption. Indeed, solid environmental, social and governance (ESG) fundamentals are increasingly important factors for investors. For governments, improvements in this area help to attract greater private finance, in addition to enabling smoother progress towards the realisation of the UN Sustainable Development Goals.
Given the importance of advanced technology implementation in developing a circular economy, an Industry 4.0 programme is also in progress. Initiatives include a smart manufacturing funding facility, and in November 2022 ADDED launched its Smart Manufacturing Index, providing a comprehensive framework through which the manufacturing sector’s Industry 4.0 readiness can be assessed and enhanced.
Homegrown talent development is another of the aforementioned six programmes, with the capabilities of Abu Dhabi’s manufacturing workforce under assessment, and upskilling and training programmes being rolled out in response to skill gaps identified.
An ecosystem enablement component will see the streamlining of business processes, such as those related to land procurement, quality control and Customs, while reimbursement schemes for a range of operational costs are being phased in. ADDED launched its land incentives scheme in August 2022, through which long-term leases are available, with fees starting at Dh5 ($1.36) per sq metre. To qualify, applicants must demonstrate strong business plans and fundamentals that align with the strategy’s aims. Businesses in the areas identified by ADDED as having the best opportunities for value creation are invited to apply, including logistics, food, energy, health care, biopharmaceuticals, ICT and heavy industry.
Local supply chains will also be strengthened to boost resilience and self-sufficiency. The programme has prompted the expansion of the Abu Dhabi government’s so-called Golden List, which was introduced to encourage government procurement of specific locally produced materials. Additional features of the programme include a supply chain investment fund and a renewed focus on strengthening bilateral and international trade relations in order to improve access to global markets.
Lastly, a focus on strengthening the emirate’s manufacturing value chains through industrial infrastructure upgrades will be carried out throughout the strategy’s term of implementation.
Important Laws
All commercial entities operating inside the UAE must comply with the country’s regulations relating to business governance, labour rights, consumer rights, intellectual property rights, and human health and environmental safety.
Recent years have seen significant regulatory updates for businesses and investors interested in entering the market. Federal Decree-Law No. 26 of 2020 amending the provisions of Federal Law No. 2 of 2015 on Commercial Companies allowed for 100% foreign ownership of UAE-based businesses. Prior to the law’s 2021 launch an Emirati individual or entity was required to own a minimum stake of 51%. Manufacturing and retail were among the 3000 commercial and industrial activities in the emirate opened up by ADDED to full foreign ownership.
Federal Law No. 15 of 2020 on Consumer Protection repealed the 2006 consumer-protection law. The updated law includes articles outlining consumers’ right to a certain standard of goods and services at a pre-determined price; goods and service providers’ responsibility for protecting consumer health and well-being and for providing accurate information regarding goods or services sold; and consumer rights regarding privacy and data protection. The law applies to all transactions carried out between UAE residents and UAE-registered physical and digital commercial entities. It cannot, however, be applied to transactions carried out by a UAE resident with e-commerce businesses not registered in the UAE.
Size & Performance
According to Statistics Centre – Abu Dhabi (SCAD), manufacturing activities registered growth of 20.7% in 2021, following a sharp contraction of 22.5% in 2020. Growth continued into 2022, with y-o-y expansion of 20.5%, 1.8% and 4.3% for the first, second and third quarters of 2022, respectively – figures that reflect the post-pandemic normalisation of economic activity. For the full year 2022 manufacturing was up 9.7%.
In 2021 manufacturing accounted for 8.2% of the emirate’s GDP, up from 7% the preceding year. This contribution was maintained in 2022. Manufacturing was the largest non-hydrocarbons contributor to GDP both years, with an overall value of Dh83bn ($22.4bn) in 2021 and Dh91bn ($24.3bn) in 2022.
The UAE’s retail and wholesale GDP grew by an average of approximately 4% in real terms for the period 2016-19. The onset of the pandemic saw a 6.5% contraction in sector GDP in 2020, which was followed by an 8.6% rebound in 2021. While Abu Dhabi’s wholesale and retail sector saw a slowdown in GDP from 2016 through to 2020, it has since witnessed a solid post-pandemic rebound.
SCAD records retail activity under wholesale and retail, a category that includes the repair of automobiles and motorcycles. In 2021 wholesale and retail recorded 8.6% growth from Dh48.3bn ($13.2bn) to Dh52.5bn ($14.3bn), following a contraction of 4.1% in 2020, with the sector contributing 5.2% to GDP, up from 4.9% in 2020. A continued rise in consumer confidence contributed to y-o-y growth of 30.3%, 17.7% and 6.4% during the first three quarters of 2022, to finish the year up 11.6% at Dh59bn ($16.1bn).
In its fourth quarter 2022 “State of the UAE Retail Economy” report, Dubai-based retail real estate holding company Majid Al Futtaim divides the UAE retail market into leisure and entertainment, fashion, hypermarkets and supermarkets, and general retail outlets, with those segments achieving 29%, 25%, 11% and 9% growth, respectively, in 2022.
Retail Developments
The total retail stock in Abu Dhabi as of the end of June 2022 was a little over 3m sq metres of gross leasable area (GLA). The emirate’s retail offering has been further enhanced by the launch of Reem Mall and the Al Qana entertainment and retail destination. The former was soft launched in February 2023, and its full launch was expected later that year. Reem Mall contains 450 retail stores and 85 restaurants across a total of 2m sq metres of GLA. Kenyan lifestyle retailer AZADEA Group announced in April 2023 that it would open 23 stores in Reem Mall across its various brands.
Projects under construction are expected to add a further 1m sq metres of GLA to Abu Dhabi’s retail market by the end of 2024. Average retail rental rates in the emirate recorded 5.6% growth during 2022, with further increases expected as footfall and demand continue to rise.
Rising household income and spending have contributed to increased final consumption expenditure, which rose from 51.5% of GDP in 2019 to 53.2% in 2020 in spite of the negative impacts of the pandemic. Meanwhile, consumer spending was up 13% year-on-year in the fourth quarter of 2022, contributing to 19% growth for the full year. Food and beverage outlets were among the primary growth drivers. Other significant contributing factors to retail growth include increased tourism inflows – Abu Dhabi tourist numbers rose to 18m by the end of 2022, representing a 13% increase (see Tourism chapter) – and the December 2021 decision by the federal government to implement a 2.5-day weekend. The latter development spurred an 11.3% increase in weekend spending in 2022, which is equivalent to an additional Dh5.5bn ($1.5bn). Furthermore, the fact that 10.1m of the UAE’s population of 10.2m use the internet is helping to stimulate significant growth in the digital retail and e-commerce space.
E-Commerce
The UAE’s online retail space is among the fastest growing in the world, with e-commerce sales in the country increasing by 20% in 2022, according to Majid Al Futtaim. In 2019-22 e-commerce sales in the UAE rose from $2.6bn to $6bn; continued expansion is forecast to see this reach $9.2bn by 2026. The federal government’s ongoing drive to digitise businesses in the country has positively contributed to that growth, as has the presence of leading financial technology firms, which are making increasingly efficient e-commerce operating systems and payment platforms more accessible.
In 2022 hypermarkets and supermarkets in the UAE recorded a 40% increase in online sales, according to the Majid Al Futtaim report, marking a significant increase compared to the 7% expansion in sales seen in their physical stores. Buy now-pay later platforms and offerings were used by 45% of UAE consumers during 2022, representing a 114% increase over 2021.
Meanwhile, major Middle Eastern e-commerce company Noon announced in November 2022 that it would, through partnership with the Abu Dhabi Investment Office, open a 252-sq-metre fulfilment centre in the emirate. The facility is expected to open in 2024 and will create an estimated 6000 jobs.
The Abu Dhabi government is keen to grow its e-commerce space. In September 2023 one of the 11 new laws adopted by the UAE to further strengthen the federal legislative system covered the e-commerce segment. The law is seen as an effort to boost the competitiveness of e-commerce in the UAE and provide clearer guidelines to businesses operating in this field. Licences for e-commerce entities can be applied for under ADDED’s Tajer Abu Dhabi scheme, which was established in 2017 to stimulate growth in the emirate’s start-up and SME ecosystem. At its launch, the scheme applied to around 100 economic activities that did not require physical commercial premises; by the close of 2021 the list of qualifying activities had been expanded to around 1200, representing 29.5% of all economic activities open for participation in the emirate. Applications can be submitted on TAMM, the Abu Dhabi government’s centralised portal for online information and services.
Start-Ups & SME
In addition to the Tajer Abu Dhabi scheme, there are multiple initiatives in operation at both the national and emirate level designed to enable growth of start-ups and SMEs, such as the UAE Ministry of Economy’s Entrepreneurial Nation programme, whose second phase was announced in October 2022 (see Economy chapter).
A number of initiatives are focused on the wholesale and retail and manufacturing segments. Indeed, an estimated 73% of the UAE’s start-ups and SMEs – which account for 94% of all businesses registered in the country – belong to the wholesale and retail segment. Meanwhile, in Abu Dhabi, 90% of all companies are start-ups and SMEs, and they account for around 39% of the emirate’s workforce.
Through the Make it in the Emirates strategy, also referred to as Operation 300bn, the federal government has pledged to support 13,500 start-ups and SMEs by 2031 in recognition of the important role they play in strengthening manufacturing value chains and their capacity for innovation and agility.
At the emirate level, the Abu Dhabi SME Champion initiative was launched in February 2023 to extend training and mentorship opportunities to start-ups and SMEs in the emirate in order to enable them to compete in procurement pitches to supply large public and private enterprises. At the time of the project’s launch, ADDED announced that four major Abu Dhabi companies – Etihad Aviation Group, Aldar Properties, Emirates Steel Arkan and Ittihad Paper Mill – had already opened up procurement opportunities worth Dh7.5m ($2m) each. ADDED also stated its intention to continue to promote start-ups and SMEs in order to raise awareness of the benefits large companies might receive by integrating those companies into their existing supply and value chains.
Metals
Emirates Global Aluminium (EGA) and Emirates Steel Arkan, both based in Abu Dhabi, are among the region’s largest metals producers. Strong value chains relating to both industries exist throughout both the country and the emirate.
The UAE is the fifth-largest producer of aluminium, behind China, Russia, India and Canada. EGA is the country’s largest aluminium company, with smelters in Abu Dhabi and Dubai. Its Al Taweela alumina refinery is situated next to its Abu Dhabi smelter. It also has assets in Guinea. Globally, EGA exported 14m wet tonnes of bauxite, produced 2.4m tonnes of alumina and 2.65m tonnes of hot metal, and sold 2.7m tonnes of cast metal in 2022. EGA’s Abu Dhabi smelter and refinery are located in Khalifa Industrial Zone Abu Dhabi (KIZAD), with the former carrying a nameplate capacity of 1.5m tonnes per year.
Emirates Steel Arkan and a number of other key steel players, such as Al Ghurair and Al Khaleej, operate out of the Industrial City of Abu Dhabi. Prior to the fourth quarter of 2021 Emirates Steel Arkan was known as Emirates Steel. The current company structure is the result of a merger between ADQ portfolio companies Emirates Steel and Abu Dhabi-based steel and building materials producer Arkan Group.
Emirates Steel Arkan – which holds a 60% share of the UAE’s steel market, and has the capacity to produce 3.5m tonnes of steel and 4.6m tonnes of cement annually – plays a key role in strengthening Abu Dhabi’s manufacturing value chains. Its portfolio companies include Al Ain Cement Factory, Emirates Blocks Factories, major industrial services provider ANABEEB and Arkan Dry Mortar. In total, the group contributes around 12% of Abu Dhabi’s manufacturing output, and in 2022 reported net profit of Dh508m ($138.3m), a significant turnaround from the Dh637m ($173.4m) pre-merger loss reported in 2022. The group’s revenue increased from Dh8.6bn ($2.3bn) in 2021 to Dh9.5bn ($2.6bn) in 2022.
Harnessing Capacity
In December 2022 ground was broken on a new integrated metals park in KIZAD, part of KEZAD Group’s efforts to bolster existing value chains and develop new ones. The 450,000-sq-metre park will offer storage, handling, processing and fabrication facilities, as well as access to finance and human resources for UAE-based metals vendors and processors. It presents significant opportunities for investors considering entry into the UAE market. The development is expected to stimulate growth in the construction, appliance, toolmaking and automotive industries.
KEZAD Group aims to make Abu Dhabi a centre for electric vehicles (EVs), and in September 2022 announced an agreement with global EV manufacturer NWTN for a 25,000-sq-metre production, research and development, testing and logistics complex in KIZAD. With an eventual capacity of 50,000 vehicles a year, the facility began trials in early 2023.
FMCG & Pharmaceuticals
Foods and fast-moving consumer goods (FMCGs) are key areas of the manufacturing and wholesale and retail segments. As part of the post-pandemic drive to boost self-sufficiency, reinforcing local value chains is receiving considerable focus from the emirate’s key manufacturers and industrial authorities.
In February 2022 AD Ports partnered with UAEbased conglomerate Ghassan Aboud Group to establish a 3.3-sq-km global foods wholesale centre in KIZAD. Plans for the facility include trading pavilions, logistics services, and infrastructure and temperature-controlled storage facilities. Notably in terms of ESG, it plans to operate a zero-waste policy.
In addition, AD Ports announced in August 2022 that it intends to establish an 80,000-sq-metre food, FMCG and speciality chemicals storage facility, known as KLP21, next to the aforementioned food wholesale centre in KIZAD. Its 100,000-pallet capacity is set to make it one of the region’s largest temperature-controlled storage facilities, and it will also offer speciality packaging and labelling services.
In other food developments, in the first quarter of 2023 KEZAD Group, operating under the AD Ports banner, announced that it had signed $272m worth of deals with Dubai-based Al Ghurair Foods for the construction of three food-processing plants in KEZAD zones, part of federal government efforts to reduce the country’s reliance on imported foods.
Multinational pharmaceuticals company AstraZeneca announced in December 2022 that it would establish a major manufacturing and R&D facility in Abu Dhabi. In October of the same year the MoIAT signed agreements worth some Dh260m ($70.8m) to establish several new medical supplies and equipment production lines in the country.
Outlook
The drive to enhance governance structures, services and investment regulations should help reverse the downward trend in FDI stock in manufacturing. Meanwhile, the return of footfall to malls and commercial centres in Abu Dhabi will likely see retailers revisit pre-pandemic expansion plans.
As major conglomerates adapt their strategies to industrial trends, there are opportunities to grow SMEs’ role in national value chains. This would benefit not only the manufacturing segment and prospective investors, but also continued efforts to develop the SME ecosystem. The emirate’s rapidly expanding e-commerce segment offers solid growth potential to entrepreneurs, and the Tajer Abu Dhabi scheme should continue attracting new entrants.
Leading industrial players view the transition to renewable energy as closely tied to current development strategies, which will aid the federal government’s efforts to reach net zero by 2050, and appeal to an international business community that is demanding more robust ESG policies (see Energy chapter). At the same time, the strengthening of important trade relations, such as those with China and Japan, should add to the shared growth potential of Abu Dhabi’s manufacturing and retail sectors.
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