With its economy showing robust growth as it bounced back from the impacts of the Covid-19 pandemic, Sharjah is embarking on a new programme of investment and development. Already a major technology, health care, education and tourism centre for the UAE and the wider region, Sharjah has a unique geostrategic location – with ports and cities on both the Arabian Sea and Gulf coasts.
Without major oil and gas reserves, Sharjah has well-developed manufacturing, construction and real estate sectors. These continue to benefit from a series of free zones and industrial zones, linked by new motorways to the rest of the UAE and beyond. Aided by strong growth elsewhere in the UAE and a tradition of long-term planning, Sharjah is well positioned to benefit from a range of alliances between its sectors and those of its GCC neighbours.
Structure
As one of the UAE’s seven emirates, Sharjah is subject to both local and federal agencies and regulations. The current president of the UAE, Sheikh Mohamed bin Zayed Al Nahyan, was elected by the Federal Supreme Council (FSC) in May 2022. The FSC is the country’s highest executive and legislative authority, and is advised by the 40-member Federal National Council. The rulers of each of the seven emirates have seats on the FSC, with Sheikh Sultan bin Muhammad Al Qasimi serving as Sharjah’s ruler and its FSC representative.
The president of the UAE also heads the UAE Cabinet, which is the executive arm of the federation. Many of its 34 ministers have a key role in the UAE economy’s oversight and in formulating policy. Certain powers are kept within the purview of the individual emirates. In Sharjah, such powers are exercised via the Sharjah Executive Council, the emirate’s supreme executive authority. This assists the ruler in setting the emirate’s general economic policy, as well as other social and administrative matters. It has responsibility for supervising the implementation of federal and local laws, the proper functioning of the administration, and the drafting and proposal of new laws and regulations for submission to the relevant federal authorities.
The Sharjah Executive Council is also responsible for preparing the annual budget for the emirate, as well as is advised by the Sharjah Consultative Council. The emirate also has some devolved local authorities, with the ruler maintaining offices in Khorfakkan, Al Hamriyah and Sharjah City. In addition, the ruler’s court maintains offices in Al Hamriyah, Kalba and Dibba Al Hisn.
Oversight
There are a number of key authorities within the emirate with specific responsibilities. These include the authorities for Sharjah’s six specialised free zones and 33 industrial zones. Among these are the Hamriyah Free Zone, Sharjah Healthcare City, Sharjah Airport International Free Zone, Sharjah Media City, Sharjah Publishing City, Sharjah Research Technology and Innovation Park, and the Sharjah Human Resources Development Free Zone.
Another important body is the Sharjah Economic Development Department (SEDD) and its affiliate, the Sharjah Foundation to Support Pioneering Entrepreneurs. Other key institutions which have oversight and supervisory roles in areas of the economy where Sharjah has a specific jurisdiction include the Department of Government Relations, the Sharjah Petroleum Council, the Sharjah Finance Department (SFD), the Sharjah Media Council, Sharjah Urban Planning Council, and the Department of Statistics and Community Development (DSCD).
Another major economic entity in the emirate is Sharjah Asset Management (SAM), a holding company within the SFD that operates as the investment arm of the emirate’s government. SAM has a stake in Air Arabia, the Sharjah-based airline; Sharjah Islamic Bank; Bank of Sharjah; and Invest Bank. These banks, along with a fourth Sharjah-based lender, United Arab Bank, are listed on the Abu Dhabi Securities Exchange. Sharjah Islamic Bank is among the UAE’s top-10 largest listed banks, with Dh61.1bn ($16.6bn) in total assets as of June 2023.
Other entities with SAM’s participation include oil and gas firm Dana Gas and the Souq Al Jubail mall. SAM also has a sister entity tasked with increasing investment in Sharjah, known as the Sharjah Investment and Development Authority (Shurooq). Shurooq is behind a number of major investments in tourism, real estate, parks and recreation, arts and culture. Sharjah Foreign Direct Investment (FDI) Office (Invest in Sharjah) is a key organisation within Shurooq, acting as the emirate’s FDI office.
SAM’s investment department also manages a portfolio of assets abroad, while its asset management division is a major investor in the local real estate sector. The entity is behind the Sharjah Entrepreneurship Centre, which runs programmes aimed at business development, from the start-up stage to sustainable growth. Elsewhere, the Sharjah Investors Services Centre is a one-stop shop for investors under the broader Invest in Sharjah umbrella. The New Business Ventures mandate, which works in support of the SAM portfolio, invests in diversification in the automotive, IT, health care, education, and oil and gas sectors. The mandate is based on six core values: integrity, human capital, environment, innovation, cooperation and institutional agility.
Private Sector Entities
The emirate is home to a number of professional organisations relevant to the economy, with the Sharjah Chamber of Commerce and Industry the leading body for private sector organisations. The chamber has sector-specific business groups under its umbrella and meets regularly with relevant authorities and other chambers throughout the UAE. The Sharjah Business Women Council, meanwhile, provides support for female entrepreneurs through a variety of workshops, programmes and initiatives.
As part of the UAE, Sharjah uses the Emirati dirham as its currency, and its monetary policy is set by the Central Bank of the UAE (CBUAE). The dirham has been pegged to the US dollar since 1997, giving it stability and meaning that interest rates follow changes in the US Federal Reserve rate.
National Strategy
Sharjah occupies an important role in the plans, programmes and strategies set out for the UAE, benefitting from the country’s ongoing economic and financial development. The country has a long-term vision, the UAE Centennial 2071 plan, which lays out four pillars around which all of the country’s other initiatives focus. The pillars are: a future-focused government, excellent education, a diversified knowledge economy, and a happy and cohesive society.
In this context, the UAE has set out a number of short- and medium-term programmes. These include the UAE Digital Government Strategy 2025, aimed at inclusive digital transformation; the UAE Strategy for Government Services, aimed at boosting federal service delivery; the UAE Fourth Industrial Revolution (4IR) Strategy, aimed at strengthening the country’s position as a global centre for 4IR development; the CBUAE’s Central Bank Digital Currency Strategy; and the UAE Strategy for Artificial Intelligence.
A further UAE programme announced in 2021 is Operation 300bn, a 10-year strategy driven by the federal Ministry of Industry and Advanced Technology. This aims to expand the contribution of the country’s industrial sector to GDP from Dh133bn ($36.2bn) in 2021 to Dh300bn ($81.7bn) by 2031.
The UAE also follows a series of nationally determined contributions (NDCs) as part of the global effort to tackle climate change. The NDCs involve a raft of policies on renewable energy, energy efficiency, the circular economy, air quality, environmental protection, as well as carbon capture and storage. The NDCs have set a target of reducing greenhouse gas emissions by 19% for 2030 – relative to 2019 – and reaching net zero by 2050. The year 2023 marked the UAE’s hosting and presidency of the international COP28 UN Conference on Climate Change, with 2023 also declared the UAE Year of Sustainability by the federal government.
Sustainable Development
In February 2023 Sharjah launched the Sustainable Financing Framework. The framework sets out the rules and regulations for financing green projects in support of the emirate’s goals in meeting its net-zero target and the UAE Centennial 2071 plan. This includes reducing greenhouse gas emissions by shifting to gas-cycle power generation, promoting cleaner transport and electric vehicles, supporting research and development, and increasing energy efficiency measures.
One project that is showcasing the emirate’s commitment to sustainability is Sharjah Sustainable City, a joint venture between Shurooq and sustainable development management company Diamond Developers. The project is set to be 100% solar powered and see 100% recycling of water and waste upon completion in 2024. Keys to the first villas in the 7.2m-sq-foot project were delivered to owners in 2022 (see Construction & Real Estate chapter).
Sharjah has also become a regional leader in sustainable waste management, with the emirate pursuing a goal of entirely eliminating waste to landfill. With the Sharjah Waste-to-Energy plant, built as a joint collaboration between BEEAH Group and clean energy organisation Masdar and launched in May 2022, the emirate has taken a major step in that direction (see Energy & Green Economy chapter).
Local Projects
Additionally, Sharjah is developing its local food production, with an eye to boosting food security and establishing itself as a food technology centre. Agriculture, forestry and fishing represented Dh1.6bn ($436m) of total GDP in 2021, or 1.2%, but by backing projects such as the Sobat Greenhouses Project in Al Dhaid, Sharjah hopes to boost local production. Another major project in the emirate is the Mleiha wheat farm, the second phase of which is set to cover 1500 ha. The initiative is expected to play an important role in supporting food security efforts in the emirate, as Sharjah currently imports 330,000 tonnes of wheat annually to meet local demand (see Energy & Green Economy) A range of education and health care projects are under way in the emirate. Education is already a major contributor to the economy, and in 2021 the sector contributed Dh3.5bn ($953m) to GDP – a similar amount to oil and gas. The higher education segment is concentrated at the University City of Sharjah, which is home to more than 22 higher education institutions, including the University of Sharjah and the American University of Sharjah. The district is also home to newer higher education bodies, such as Al Qasimia University; the Sharjah Academy of Astronomy, Space Sciences and Technology; and the Africa Institute. Khorfakkan is also home to a branch of the Arab Academy for Science, Technology and Maritime Transport, as well as the University of Khorfakkan, which was inaugurated in June 2022.
In health care – which together with social work contributed Dh2bn ($544m) to GDP in 2021 – a new medical district is being built by BEEAH Group, and US-based institutions Mass General Brigham Hospitals Network and Dana-Farber Cancer Institute. The Jawaher Boston Medical District is planning to cover numerous specialisations, including lifestyle and prevention medicine, oncology, women’s health, paediatrics, cardiovascular diseases, neurosciences, behavioural health and rehabilitation medicine. The government is also moving ahead with a housing programme, known as Eskan, that is expected to deliver homes to UAE nationals or provide financial grants for citizens to build their own. Connecting communities is also a key priority under the Sustainable Financing Framework, with economic regeneration projects and the Dh6bn ($1.6bn) Khorfakkan road tunnel part of this initiative.
Sector Breakdown
Unlike some other GCC economies, Sharjah is not dependent on oil and gas, with the non-oil sector responsible for around 96% of the emirate’s GDP. According to data from the DSCD, in 2021 mining and quarrying – which includes crude oil and natural gas – were responsible for Dh3.5bn ($953m) of the emirate’s Dh130.5bn ($35.5bn) GDP, or 2.7%. The non-oil sector accounted for approximately 97% of GDP from 2017 to 2020.
The largest segment of Sharjah’s economy has long been non-financial corporations, with this group responsible for Dh116bn ($31.6bn) of the total Dh131bn ($35.7bn) in 2021. Real estate contributed a further Dh11.8bn ($3.2bn), professional, scientific and technical services Dh7bn ($1.9bn), and financial and insurance activities Dh5.5bn ($1.5bn).
Public administration, defence and compulsory social security accounted for Dh9.5bn ($2.6bn). The education sector, meanwhile, contributed Dh3.5bn ($953m), while arts, recreation and other services accounted for an additional Dh2.9bn ($789m). Breaking the non-financial sector down, the largest contributor to the economy in 2021 was wholesale and retail, which accounted for Dh31bn ($8.4bn), followed by manufacturing, with Dh22.2bn ($6bn). Other sectors that contributed more than oil and gas were construction, at Dh12.2bn ($3.3bn); transport and storage, at Dh6.8bn ($1.8bn); and electricity, gas and water, at Dh4.2bn ($1.1bn).
Business Support
According to Invest in Sharjah, over 60,000 small and medium-sized enterprises (SMEs) and start-ups were based in Sharjah in September 2022, with the emirate home to more than 35% of the UAE’s manufacturing industries. According to the latest census from October 2022, SMEs provide jobs for many of Sharjah’s 1.8m residents, 61% of which were in the active workforce that year. This showed a rapid jump in population – up 22% since the previous census in 2015. Indeed, Sharjah is the third-most populous emirate after Abu Dhabi and Dubai, with around 23% of the UAE’s population.
As of 2022 the expatriate population stood at 1.6m, with 1.1m men and 500,000 women, reflecting a typical pattern in many GCC countries, where labour-intensive trades such as construction account for large numbers of predominantly male expatriate workers. The population overall is also young, with 51% between 20 and 39 years of age in 2022.
The emirate’s capital, Sharjah City, is home to almost all of the population, with around 1.6m people. The second-largest urban centre is Khorfakkan, on the Arabian Sea, which had a population of 53,000 at the time of the 2022 census. Economic activity also centres on Sharjah City, which now forms an almost continuous urban area with the neighbouring emirates of Dubai to the south and Ajman to the north. Khorfakkan, meanwhile, borders Fujairah and Oman. Indeed, one of Sharjah’s geostrategic advantages is that it borders – and has transport links with – all six other emirates as well as Oman, while also possessing ports on the Gulf and the Arabian Sea, and the Indian Ocean.
Post-Pandemic Recovery
For the UAE overall, GDP contracted by around 6.1% in 2020 due to the pandemic. In Sharjah, GDP at 2022 prices contracted by nearly 10.1% from Dh139bn ($37.8bn) in 2019 to Dh125bn ($34bn) in 2020. The pandemic-related slump in oil and gas prices also impacted the UAE, while non-oil was also affected by lockdowns, travel bans and supply chain disruptions. The population of the country fell by 2.3% in 2021, as many expatriate workers left. Despite this, FDI in Sharjah totalled $220m in 2020. The third and fourth quarters of that year saw a 60% growth in FDI, which created 1117 new jobs over the year as a whole.
Along with Abu Dhabi, Dubai and the broader UAE, Sharjah took advantage of favourable global financial conditions in 2021 to issue $2bn in debt on the global market. This helped ease the immediate fiscal burden, while, as 2021 progressed, oil and gas prices bounced back and wider economic activity resumed. Sharjah’s GDP grew to Dh131bn ($35.7bn) in 2021, up 4.7% on 2020. The UAE overall saw 4.4% real growth that year. Sharjah approved the largest budget in its history in 2021, coming in at Dh33.6bn ($9.1bn). This marked a roughly 12% increase from 2020 and showed the impact of pandemic relief measures on government spending.
The UAE – and Sharjah – continued to witness a strong recovery in 2022. Figures from the CBUAE show that real national GDP grew by 7.9% that year, with the oil and non-oil sectors both seeing a rapid expansion. The preliminary results from the DSCD show that Sharjah posted a GDP growth of 5.2% that year, putting total GDP at just short of Dh137bn ($37.3bn), down from the 2019 pre-pandemic total but still indicating a continued economic recovery.
Breaking that down, Sharjah’s non-oil sector grew by 5.2%, to Dh133bn ($36.2bn), with wholesale and retail up 5.9% to Dh32.9bn ($9bn) and manufacturing expanding by around 3% to Dh22.9bn ($6.2bn). The fastest growth rate, however, was in accommodation and food services, which were up 18% on the back of a major recovery in tourism. Real estate, for its part, contributed 9.7% of Sharjah’s GDP in 2022, while construction added 9%. The emirate’s target of growing the health and social services sectors was also reflected in the figures, with this sector recording a 7.9% expansion in 2022.
A further sign of a healthy return to growth was a 5% jump in the number of business licences issued in the emirate. The SEDD noted in its 2022 report that the number of commercial, professional and industrial licences issued rose by 8%, 24% and 9%, respectively. In addition, the real estate sector showed a substantial recovery, with sales transactions up 17.9% during the first nine months of 2022 compared to the same period in 2021. In 2023 real estate transactions continued to grow, reaching $5.2bn in the first nine months, resulting in a yearon-year growth rate of 14.6%.
Assisting with that recovery was the emirate’s 2022 budget. Set at Dh34.4bn ($9.4bn), this was a 2% increase on the 2021 budget. Particular segments saw larger increases. Allocations for infrastructure development, for example, were up 4%, while salaries – which accounted for 25% of the total budget – also rose by 4%. A further 4% funding increase was evident in social development, which comprised 21% of budget expenditure, while economic development received 27%. Capital projects were allocated 30%, with around 1000 new jobs for graduates created.
Interest Rates
In 2023, with the Targeted Economic Support Scheme wound down and pandemic-related economic support largely withdrawn, the UAE and Sharjah were working to chart a course for continuing growth amid global supply chain uncertainties, and sustained higher interest rates and inflation. Indeed, as the US Federal Reserve has hiked its rates, the dollar peg has meant the CBUAE has also had to increase rates, putting them up by a total of 425 basis points (bps) in 2022, with a further 50-bps rise in the first half of 2023. In September of that year, however, the US Federal Reserve decided to hold rates steady, with the CBUAE following suit. As of December 2023 the CBUAE base rate applicable to the overnight deposit facility was fixed at 5.4%.
Consumer Price Index
Inflation in the UAE averaged 4.8% in 2022, according to the IMF, fuelled by price hikes in imported goods, real estate, food and fuel. The fund projects inflation will moderate in 2023 to around 3%, as growth underpins economic recovery and fuel prices stabilise.
Preliminary data for 2023 suggests that growth has continued to remain positive, if at a more subdued pace than before the pandemic. The slowdown is due to sluggish global economic activity, continued high borrowing rates and a cut in the UAE’s oil production quota from the Organisation of the Petroleum Exporting Countries (OPEC) and other allied oil-producing nations, collectively known as OPEC+. In September 2023 the CBUAE forecast 3.3% real GDP growth for the UAE in 2023 and 4.3% in 2024, as the OPEC+ quota increases. The IMF forecasts 3.4% real GDP growth in 2023 and 4% in 2024. For Sharjah, growth is less connected to oil and gas, and is therefore likely to be dominated by the manufacturing, services and finance sectors.
Resurgent growth could help alleviate financing pressures being felt by the emirate. According to Gulf Economics Consulting, Sharjah started 2023 with a $2.3bn budget deficit and $2.4bn in maturing bank loans, delivering a financing requirement of $4.7bn for the year. With this in mind, the budget for 2023 was smaller than the 2022 budget, as remaining financially prudent and improving the emirate’s competitiveness became the main goals.
Sheikh Mohammed bin Saud Al Qasimi, chairman of the SFD, told local media in December 2022 that the 2023 budget had two dimensions: first, economic, social and infrastructure development; and second, developing and strengthening the financial sustainability of the government. Totalling Dh32.2bn ($8.8bn) – 12% less than the year before – 2023 budget expenditure broke down into 14% on capital projects and infrastructure; 28% on salaries and wages; 30% on operating expenses, 4 percentage points less than the previous year; 13% on support and aid; and 13% on loan repayments and interest.
As for revenue, oil and gas receipts were expected to jump 96% on the 2022 budget, with this accounting for about 6% of total government revenue. Tax revenue was budgeted for an increase of around 48% on 2022, to account for roughly 10% of public revenue. Customs revenue, at 4% of total government receipts, is budgeted to rise by 4%.
At the same time, Sharjah has deployed its Sustainable Finance Framework to positive effect. In February 2023 the government issued a $1bn, 6.5% sustainable note – due in 2032 – with law firm Clifford Chance acting as adviser, and HSBC and Abu Dhabi National Bank among the lead managers and bookrunners. This marked the first sustainable sovereign bond for the GCC region. Further recourse to the debt market seems likely to continue in 2024 (see Financial Services chapter).
Outlook
The emirate’s budget gives Sharjah strong government backing for infrastructure development, with the period ahead likely to see progress on a range of projects connected with the emirate’s sustainable development framework. At the same time, as global economic activity continues to recover, Sharjah’s many non-oil enterprises are expected to see their business grow. Retail and real estate in particular are positioned to recover as the UAE’s economy continues to expand. One of Sharjah’s distinct advantages is that it represents a lower-cost location than neighbouring emirates, with its high-quality infrastructure and transport networks. Economic growth throughout the UAE, therefore, is likely to benefit Sharjah as well.
Meanwhile, the emirate’s focus on education, arts and culture should see rewards as major projects in higher education, such as the University City of Sharjah, continue to roll out. Likewise, private health investment is set to bring in medical tourism, as well as provide higher-quality services to Sharjah residents. Tourism is another clear area for future expansion, particularly as the global travel industry continues to recover after the pandemic.
There are, of course, uncertainties in the region and beyond, and Sharjah is operating in a highly competitive neighbourhood. Nonetheless, the emirate has created a clear niche for itself – and is now seeking to leverage its distinct identity in order to generate future growth and business opportunities.
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