Sharjah is the third largest economy in the UAE, after Dubai and Abu Dhabi
Ruler Sheikh Sultan bin Mohammed al-Qasimi
Per capita GDP $17,554
Key economic sectors Manufacturing and industry, real estate, trading and retail, construction, mining and quarrying, financial services
Main towns Al-Dhaid, Kalba, Khorfakkan, Dibba
The emirate covers 2,600 square kilometres and includes three enclaves on the Gulf of Oman – Khorfakkan, Dibba Hisn and Kalba – as well as two islands – Abu Musa and Sir Abu Nuair.
The emirate was the headquarters of the British military during the Trucial era. The Royal Air Force built an airstrip in Sharjah, the first in the country, during the Second World War. This contributed to Sharjah’s rapid development during the 1960s and 70s, when it was the most advanced emirate in the territory. Oil was discovered in 1972 near the island of Abu Musa and production began in 1974. Today, industry is the mainstay of the economy.
Sheikh Sultan bin Mohammed al-Qasimi became ruler of Sharjah in January 1972, succeeding his brother. His cousin Sheikh Sultan bin Mohammed bin Sultan al-Qasimi is crown prince. All administrative powers in Sharjah are held by the ruler. He is supported by an Executive Council and a Consultative Council. The Executive Council is the most senior and has a range of high-level responsibilities, including defining and implementing the policy of the local government departments under the supervision of the ruler; setting the objectives for the economic and social development of the emirate; and preparing the annual budget of the emirate and submitting it to the ruler for approval. The Consultative Council was established in 1999 to represent the people and support government departments, of which there are about 20. It acts in the same way as the Federal National Council.
Sharjah focused on industrialisation in the mid-1980s in an effort to open its economy beyond oil and gas revenues, which it recognised as unsustainable over the long term. The emirate has the third largest share of the UAE’s 97.8 billion barrels of proven oil reserves, with an estimated 1.5 billion barrels. However, its share is just 1.5 per cent, placing it a long way behind Abu Dhabi, which has 92.2 billion barrels, and even Dubai, with 4 billion barrels. Sharjah’s gas reserves are similarly meagre with 300 billion cubic metres, which account for just 5 per cent of the UAE total.
|Sharjah gross domestic product|
|Source: National Bureau of Statistics|
Over the past three decades, the ruler has sought to make the emirate the centre for non-oil industrial manufacturing in the UAE, complementing the focus on real estate and business in neighbouring Dubai. Much of this has been achieved through its 19 industrial areas, which account for more than 40 per cent of all industrial activity in the UAE and 48 per cent of the country’s industrial gross domestic product (GDP).
More than 1,500 companies have begun trading with Hamriyah Free Zone Authority since 2008. The Sharjah Economic Development Department says that new and renewed business licence renewals increased 7.1 per cent between 2009 and 2010.
Sharjah’s economy has expanded at an unprecedented rate in recent years. GDP growth has increased by about 15 per cent a year since 2002. But the emirate was badly affected by the property downturn in neighbouring Dubai. Traditionally Sharjah has been a source of low-cost accommodation for people working in Dubai as the rush hour traffic jams between the two emirates testify. But with real estate prices having dropped by more than 50 per cent in Dubai in recent years, many have now given up their base in Sharjah.
|GDP by sector, 2009|
|Real estate and business services||2,879||17.3|
|Wholesale retail trade and repair services||2,274||13.7|
|Mining and quarrying||1,802||10.8|
|Transport, storage and communication||1,105||6.6|
|GDP=Gross domestic product. Source: National Statistics Bureau|
In a bid to soften the impact of falling real estate activity, Sharjah is targeting small- and medium-sized enterprises (SMEs). To attract them, it has set up seven special zones within the Hamriyah Free Zone that are collectively referred to as the Hamriyah SME zone. The areas are: Steel City; Petrochemicals Zone; Maritime City; Oil and Gas Zone; Timber Land; Construction World; and Perfume World.
The regulatory environment and incentives offered to investors at Sharjah’s industrial zones are similar to those on offer in neighbouring emirates: flexible licensing procedures; tax and customs exemptions; free repatriation of invested capital and profits; and warehousing.
However, the emirate has three additional advantages. First, it has Khorfakkan Container Terminal on the Gulf of Oman, as well as ports at Khalid and Hamriyah, which allow for the easy import and export of goods.
The second benefit is its policy of developing industrial zones in clusters. The system produces greater efficiency by establishing complementary industrial activities close to one another. Petrochemicals clusters make up the central component of the free zone programme and are surrounded by clusters of other industries such as metals and logistics.
The third and perhaps most important benefit Sharjah offers is a significantly lower cost base than certain other emirates. According to Crown Prince Sheikh Sultan, chairman of the Sharjah Commerce & Tourism Development Authority, the cost of industrial production in the emirate is 35 per cent lower than in the other emirates, with the government shouldering 70 per cent of the costs of energy and water production. Foreign investors are also attracted by the low cost of land, which remains far cheaper than in neighbouring Dubai, despite the recent drop in real estate values.
Foreign investment in the emirate is not the only goal. Sharjah also actively supports local industry. The government gives priority to local products when purchasing, with a price advantage of up to 10 per cent of the value of orders.
Until now, much of the focus for government business incentives in the UAE has been on the financial and construction sectors – for example, through the creation of the Dubai International Financial Centre in 2005. But 8 per cent of the UAE’s GDP comes from the manufacturing sector, in particular industry based in Sharjah.
SMEs comprise about 80 per cent of the emirate’s economy, according to the Sharjah Chamber of Commerce & Industry, and employ approximately 750,000 Emiratis and expatriates.
Like the other northern emirates, Sharjah has long struggled with a lack of electricity during the summer months. Blackouts have become increasingly common in recent years. The utility receives sufficient gas to meet the emirate’s off-peak demand, but during the hottest months when electricity consumption soars due to the use of air-conditioning, it has to buy in liquid fuels to enable it to increase production. This represents a huge financial burden and it is unable to recoup the additional cost through sales to customers because electricity prices in the emirate are kept so low.
Sharjah is, however, set to get a power boost thanks to the announcement of a $1.5bn federal investment plan to improve power and water in the northern emirates. As part of this, the emirate will be provided with a further 700MW. Sharjah’s GDP totalled $16.6bn in 2009 and accounted for 5.6 per cent of the UAE economy.
Free Trade Zones
Hamriyah Free Zone
Much of Sharjah’s industrial expansion can be attributed to the creation of the 10 sq km Hamriyah Free Zone. Like other zones, it permits 100 per cent foreign ownership of businesses as well as import and export tax exemptions. It can issue three types of licences: industrial; commercial; and service.
The free zone began operations in 1995 and has grown to house more than 6,000 companies. Between January and November 2012, 1,450 companies registered with the zone. According to the authority, most businesses establishing in the zone are trading companies keen to benefit from the so-called ‘Sharjah link’, namely the ports, Sharjah International airport and road links to the other emirates.
Sharjah set up its first petrochemicals plant – the Hamriyah ammonia and urea plant – in the free zone in 2007. The 1,180-tonne-a-day plant is part of a $200m investment by Oman Chemicals & Pharmaceuticals Company. Gas feedstock is supplied by the local Crescent Petroleum Company.
Hamriyah Free Zone Authority
Tel: (+971) 6 526 3333
Sharjah Airport Free Zone
The Sharjah Airport Free Zone opened in 1995 with just 55 companies. To date, it has licensed more than 5,000 companies. As with the Hamriyah zone, trading dominates the sectors represented in the area, which consists of warehousing, office space, bunkers and parking areas.
Tel: (+971) 6 557 0000
Sharjah is investing in port infrastructure and building a series of inland ‘logistics cities’ to help it achieve its aim of becoming the distribution hub for the northern emirates. Already a centre for ship-to-ship transfers of containers, it is upgrading its land-side operations to support its port activities with logistics cities – bases providing storage and transport facilities and, in later phases, sophisticated supply chain services.
Local port management company Gulftainer operates container terminals on behalf of Sharjah Ports Authority at Khorfakkan Container Terminal on the east coast and Sharjah Container Terminal at Port Khalid on the west coast. It also manages container movements for the Hamriyah Free Zone.
In 2008, Gulftainer grouped together its logistics activities into one business unit – branded Momentum Logistics – made up of freight and transport divisions. Momentum offers Gulftainer clients an integrated logistics service that includes warehousing, freight forwarding, container repair and maintenance, and transportation.
Gulftainer is developing logistics cities on the outskirts of urban Sharjah. The Sharjah Inland Container Depot, 120km inland from Khorfakkan, opened in 2004 and is being expanded to serve as a hub for Momentum, which bases its transport division’s fleet of 122 trucks and 240 trailers at the depot.
The customer base at the Sharjah depot ranges from electronics firms to shipping agencies and other service providers. It does not include manufacturing or assembly firms, as such activities are concentrated at the Hamriyah Free Zone.
The company is building its second logistics city on a 700,000 sq m site at Al-Sajaa, 110km inland from Khorfakkan.
TRANSPORT & INFRASTRUCTURE
The 21-berth Port of Khalid is considered a pioneer seaport of the region, hosting the first container terminal, roll-on/roll-off cargo terminal and free trade terminal.
Tel: (+971) 6 528 1666
Khorfakkan is a hub for ship-to-ship transfers of containers on to smaller feeder vessels offering connections to and from ports in the Arabian Peninsula, Iraq, Iran, India, Pakistan, East Africa and Asia. Its location on the east coast enables ships to avoid the Strait of Hormuz.
Hamriyah Free Zone port
The harbour construction at Hamriyah commenced in 1984 and was completed in 1986, followed by the construction of the liquefied petroleum gas loading berth. The port is able to accommodate very large and deep-drafted vessels and handle all kinds of cargoes. Its location in the free zone is critical to traders in the emirate.
Tel: (+971) 6 526 3388
Sharjah International Airport
Sharjah International airport’s history goes back to 1932, when the emirate was used as a stopover point by Imperial Airways – a forerunner of British Airways. Imperial Airways constructed an airfield at Sharjah as a stopover en-route to India and Australia. Today, Sharjah International is a key cargo hub thanks to its strategic location.
In October 2003, the government of Sharjah launched its own budget airline, Air Arabia. The airline has grown to be a regional carrier serving destinations across the Gulf, North Africa, the former Soviet Union and the sub-continent. The resultant increase in passenger throughput via Sharjah airport has been dramatic. The airline also operates hubs in Morocco and Egypt. In 2011, Air Arabia carried 4.7 million passengers, up 7 per cent on 2010, and posted a profit of AED274m from a turnover of AED2.4bn.
Tel: (+971) 6 558 1111
Demand for office space in Sharjah has traditionally focused on the main business hub near the port, but over time this has changed as businesses have grown frustrated with the lack of parking and poor quality space. They have now gravitated towards newer premises in the Buheira Corniche area. “There is office space readily available in Sharjah at competitive prices in a range of sizes, from shell and core to fitted-out
|Office rents 2012|
|(Per square foot a year*)|
|*=Prices are approximate and do not include incentives. Source: Cluttons|
Preston warns new entrants to be wary of agents of landlords offering space in a building without the power connection included. “There are still delays [in] getting buildings connected,” she says. She also mentions that taking office space in residential towers, although legal, can cause problems for tenants. “The buildings are not designed for the purpose,” she says. “The lifts cannot cope with high volumes of passenger traffic at peak times.”
|Lease rates 2012|
|(AED thousand a year)|
|Area (3-bed villa)||Rent|
Hotels in sharjah
Expatriates must pay for their own healthcare, although emergencies will be treated at Ministry of Health hospitals.
Government departments and offices
Sharjah Economic Development Department
This department issues business licences for onshore firms in Sharjah that are not in the industrial areas or free trade zones. In 2010, it issued or renewed 25,979 licences, with 60.6 per cent of these being for trading companies and 37.5 per cent for professional licences.
Tel: (+971) 6 512 2222
Sharjah Directorate for Naturalisation and Residency
Companies setting up business onshore must apply for their employment visas through the Naturalisation and Residency Directorate. Companies in free zones or industrial zones can apply through their free zone authority.
Tel: (+971) 6 572 6777
Labour Office, Sharjah
Work permits are issued through the local office of the Ministry of Labour. Proof of trade licence and commercial premises are required for permits to be awarded. The permit can then be taken to the residency department to obtain an employee visa.
Tel: (+971) 6 566 9777
Sharjah Chamber of Commerce and Industry
Established in 1970, the Sharjah chamber is the third oldest in the UAE. Every new business must register with the chamber once the trading licence has been granted by the economic department. There are four main branches and offices at the free trade zones and the economic department. It provides many services including giving technical advice to investors.
A MEED Subscription...
Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.