Opportunities and Challenges in the UAE Manufacturing Sector

The manufacturing industry has gradually spiked at the global level, affecting many segments within its umbrella. Manufacturing is one of the essential elements that confirm the existence of a product in the targeted market. One of the most capable business areas for the establishment of companies has been the United Arab Emirates. Business investors consider the region to be an excellent place to invest in, whether it's a small or large-sized business. The UAE has relentlessly worked to develop the area as one of the booming manufacturing destinations, recognising the nature of the manufacturing industry and the benefit it holds.

There are several investment opportunities for business investors to invest in the manufacturing sector. In an increasingly competitive business world, the universal extension of development and trade has become colonial. The UAE is no exception to this rule and has already accepted the benefits of improving its production industry.

The manufacturing sector's contribution to GDP currently stands at 14% and plans have been drawn up by the UAE to increase this to 25% over the next 15 years, with significant investments being made in petrochemicals, fertilisers and metal processing in particular.

While the Emirate will remain dependent on the oil sector for several years to come, its dependence level is gradually decreasing. The proportion of oil in the UAE's GDP is slowly dwindling. Although the oil industry remained an essential individual region in terms of its GDP share at 31 per cent in 2016, the shared share of the non-oil sectors, 69 per cent, reflects the UAE economy’s growing diversity.

Challenges in the UAE Manufacturing Sector

The burgeoning manufacturing sector of the U.A.E. provides a broad range of opportunities for U.S. businesses and investors. First, U.S. businesses could decide to set up U.A.E. manufacturing operations and make the country a regional production and export hub for products. Second, U.S. companies could pursue contractual partnerships with U.A.E. producers, either as potential suppliers of their products to these producers or purchasers. Third, U.S. investors may choose to explore investments in a large number of U.A.E. producers rising rapidly in the nation and beyond.

While U.A.E.-based manufacturers enjoy the advantages, they also face some barriers, particularly to the nation and others more generally to the industry.

1. Lower Oil Prices

The fall in international oil prices has led the U.A.E. to embark on financial restructuring and rationalisation over the past few years. For instance, it has improved its energy subsidies system that has brought local energy prices closer to global benchmarks. It has squeezed margins, especially in energy-intensive industries like cement. Government spending has declined in the meantime, tempering economic growth and impacting domestic demand for goods.

2. Regional Rivalry

"U.A.E. manufacturers are facing increasing competition from countries engaged in similar strategies of industrialisation as the U.A.E. The 2030 Vision of Saudi Arabia calls for "stimulating a new phase of the Kingdom's position, strategic alliances, energy sources, logistics, industrialisation, and exports and re-exports to catalyse. The 2030 Vision regularly points for the transformation of the state oil giant Aramco from an oil company to a "global industrial industry" This vision also calls for the creation of half the Kingdom's military needs inside the Kingdom by 2030 and the localisation of the Kingdom's sectors of renewable energy and manufacturing equipment.

3. Dumping Foreign Affairs'

The U.A.E. is also contending with the dumping of manufactured products into local markets. The U.A.E.'s Federal National Council passed a new anti-dumping law in January 2017 to protect domestic goods from import sales for less than what is called fair market value, recognising this as a problem. The law would add a customs duty on an imported item equal to the difference between its reasonable market price and the flooding price. Dumping is a particular concern for U.A.E. steel producers.

4. Global Protectionism

At the same time, a global protectionist wave is facing U.A.E. manufactures. Trade policies (and subsequent decisions to withdraw from the Trans-Pacific Partnership and renegotiate the North Atlantic Free Trade Agreement) have contributed to widespread concerns of a global increase in security measures. Great Britain's decision to leave the European Union is exacerbating this terror. The U.A.E. industry may be particularly vulnerable to a protectionist surge, given its limited domestic market and consequent dependency on exports.

5. Skilled Labor

For many manufacturers, employment is cited as a critical issue. The biggest challenge is not having professional employees per se, but getting skilled local staff. Abu Dhabi's government is keen to put more Emiratis into the workforce. However, there is a shortage of professional team in many instances, which causes businesses to leave a place open or employ an expatriate worker.

6. Energy Prices

While input costs may not be the central issue, efficiency may not be jeopardised by the selected expenses for a few input items. Increases in electricity prices can have severe consequences for sectors, especially those that use electricity as a critical input factor in production.

Opportunities in the UAE Manufacturing Sector

1. Manufacture Intelligence

Intelligence in manufacturing must become a top priority — it must be designed, implemented, handled and invested in. Typically, a completely new viewpoint and perspective on what is historically known as purely a mechanical or procedural problem is required. It will include advanced sensor and actuator data collection; immediate awareness of inventory, properties, production status; and improved operation, efficiency and granularity of costs.

2. Manufacturing Predictive Analytics

Manufacturers need to take their manufacturing intelligence and use it in ways that forecast the future so that before concerns arise before risk events occur and before opportunities are squandered, decisions and actions are taken. It involves embedded analytics; supporting predictive technologies; and capabilities for rapid response.

3. Quality Control of Output

It is how producers accomplish almost zero waste, zero accidents and zero pollution. The new quality improvements would stem from visibility, communication, and analytics of information.

4. Integrated Scheduling and Operations Execution

To entirely alter how production scheduling will make plants and factories more flexible, produce more, and support more product designs, new techniques are being created. Again, this is driven by advanced uses of data, including elaborate preparation and scheduling of execution; capabilities of meaning and response; and advanced modelling.

5. Manufacturing Visibility and Visualization

Knowledge is worthless unless it helps you to understand and work. Imagine being able to have a holistic, dynamic real-time view of the operations, as they move through a complicated supply chain, being able to imagine people, processes, properties, and inventories. New equipment, networks, and control rooms allow manufacturers to see multiple factories in a single view, use advanced production dashboards, and optimise their assets across the entire organisation.

6. Manufacturing Network Monitoring

The ability to see and act on the entire network helps you predict issues, enforce corrective steps (such as repairs) rapidly and keep the whole network humming. It leads to improved organisational choices; increased remote visibility; and the lowest possible production cost.

A new perception of knowledge as a vital asset is needed for each of these opportunities. It requires a different view of the production process and, in most cases, a completely new competency. The U.A.E. provides myriad opportunities for United States companies to establish manufacturing operations, build relationships with U.A.E. manufacturers, or invest in the local industry.

The thriving manufacturing sector of the U.A.E. provides a broad range of opportunities for U.S. businesses and investors. First, U.S. businesses could decide to set up production operations in the U.A.E. and make the nation a regional centre for manufactured and exported products. Second, U.S. companies could pursue contractual partnerships with U.A.E. producers, either as potential suppliers of their products to these producers or purchasers.

Provided that manufacturing is still a long-term strategy for investors worldwide and that opportunities continue to evolve, the UAE today offers an excellent arbitration opportunity. We assume that investors can now invest in the UAE’s Emirates, where capital and economic development will be comparatively higher in the next few years. Moreover, there is no saturation point for the manufacturing sector, and it can only grow in the future.

The UAE manufacturing market has its own set of challenges, including understanding the legal requirements and laws of enforcement of the region. What the future of the manufacturing industry in the Emirates holds depends on the government's initiatives.

How Can Commitbiz Help?

Commitbiz has supported numerous customers across the UAE to provide the best and streamlined integration procedure, helping them initiate their business roots. We have been leading multiple company owners since the beginning to turn their business ideas into reality. Our experts have expertise in the industry and are well versed in the legal rules and procedures related to company incorporation. To understand the business requirements and have realistic and customised business setup solutions, they take the initiative. Do have a word with our advisors to proceed ahead with your production company. Contact us today-we’d be glad to assist.