The emirates’ diversification drive is ongoing
The UAE’s gross domestic product (GDP) will grow between 3-3.5 per cent in 2011, driven by a diversifying economy moving away from hydrocarbons and towards downstream industries, trade and tourism, the federation’s Economy Minister said on 22 May.
A recovering economy will be strongly aided by the industrial sector, which is expected to grow by half over the next 12 years.
The 2011 growth predictions indicate that the UAE is profiting from a resurgence of the world economy, led by important trade partners in emerging markets. The economy grew by 2.6 per cent in 2010, after having contracted by 2.7 per cent a year earlier.
“We have pursued a policy of diversification that has proved a successful model, even in difficult times. The government has identified industry, trade and tourism as the pillars of growth over the next five years,” said Sultan bin Saeed al-Mansoori, UAE Minister of Economy.
Over 70 per cent of GDP stems from economic activity unrelated to the hydrocarbon sector, he added.
At present, the industrial sector contributes about 10 per cent to GDP, according to the minister, and the government aims to raise this proportion to 15 per cent by 2023.
“We expect growth in this sector, especially in downstream, chemical industry, shipbuilding, pharmaceutical and auto parts,” said Al-Mansoori.
Abu Dhabi, the wealthiest of the emirates, has already invested heavily in downstream industries. The vast Borouge petrochemical complex, a joint venture of Abu Dhabi National Oil Company (Adnoc) and Austrian Borealis, already produces 2.1 million tonnes a year (t/y) of ethylene, 1.1 million t/y of polyethylene and 860,000 t/y of polypropylene.
The Borouge 3 expansion will increase capacity of petrochemicals to 4.5 million t/y by the end of 2013.
Engineering, procurement and construction (EPC) tenders for the Tacaamol chemicals complex in the western region of Abu Dhabi have been mooted for the final quarter of 2011.
The UAE is trailing Saudi Arabia in the development of downstream industry, however. The kingdom’s petrochemicals industry has recently begun accelerating its move downstream with several projects that will provide feedstock products for a planned automotive industry.
The most high-profile project is Saudi Basics Industry Corporation’s (Sabic) joint venture with the US’ ExxonMobil Elastomer, which will be built at Al-Jubail Petrochemical Company (Kemya) in the Eastern Province.
The UAE is planning to increase the number of tourists visiting the country from the current 9 million visitors a year to 12 million yearly visitors by 2020.
Trade is to be increased with the help of infrastructure plans designed to capitalise on the UAE’s strategic geographic location. The UAE had benefited from GDP growth of 5-7 per cent in some of its neighbouring countries, even during the difficult years of 2009 and 2010, said the minister, dampening the impact of the global economic slump.
“It is an advantage to be well located for fast convenient access to emerging markets in the Middle East, North Africa, South Asia [Menasa],” said Al-Mansoori. “We want to build strong links with the world, improve flow of capital and goods to become a global hub for Menasa.”
The minister called on banks to make use of growing deposits by increasing lending. “Without banks providing liquidity, we will not be able to move on with this economy with the speed we would like it to be,” said Al-Manoori.
Inflation, which decreased for a fifth successive month to 1.1 per cent in April, will be ranged between 1-1.5 per cent during 2011 and pose no threat to economic growth, he added.