(MENAFN- Khaleej Times) One might think that in the age of rapid information and communications technology growth, the industrial revolution is merely a bygone era, a time when the manufacturing sector had its most glorious days. So, why should it be wise for emerging economies such as the UAE to expand its manufacturing base? Although there is a clear imperative for the Gulf nation to venture into other forms of economic production to safeguard its economy from the volatility of oil and natural gas, is the manufacturing sector the answer to further economic growth?
Recently, the UAE Ministry of Economy announced that the country looks to increase the GDP share of the manufacturing sector from the current 11 per cent to 20 per cent by 2021 and 25 per cent by 2025. It also aims to improve its ranking in the global manufacturing industry indices. To jumpstart the plan, the UAE Cabinet approved in April the creation of the National Industrial Coordination Council which aims to boost the industrial sector's role in economic development.
With the country's highly efficient trade, transport and logistics hub and numerous free zone facilities, the potential for manufacturing is huge. But while these related industries that could support manufacturing to flourish are already in place, attracting investors and allowing them to run the business in terms of ownership remain a hurdle.
Therefore, it is good news that a new UAE investment law is soon to be enacted which will grant 100 per cent business ownership to foreign nationals to attract investment to the manufacturing sector and encourage more foreign direct investment (FDI) to be redirected.
In 2012, only 9.8 per cent of FDI went to the sector, which lagged behind finance and insurance, trade and auto repairs and real estate development, which topped FDI recipients at 26.6 per cent.
The manufacturing sector remains a critical component in any economy, whether advanced, emerging or developing. Although its role may be evolving, it still remains a significant part of an economy's growth. As for the UAE and other oil-producing countries in the region, it is becoming increasingly important to further explore what they can do to protect their respective economies during downturns.
While the global manufacturing sector is also not immune to economic fluctuations, it remains true that most of the world's biggest economies such as the US, China, Japan, Germany, France, Italy, Canada and the UK with established manufacturing sectors have remained resilient and progressive.
The manufacturing sectors of other oil-producing nations such as Mexico and Malaysia have successfully taken off to become exporters worldwide. Malaysia, an emerging economy and oil exporter as well, is rising as one of the 'mighty five' nations in the Asia Pacific for manufacturing and is poised to join the top 15 global drivers of manufacturing competitiveness, according to the latest study by consulting firm Deloitte. Its exports include electronic equipment, medical supplies, engines and machinery.
So, how can the UAE create a niche in the global market while also diversifying its economy? It is to the country's advantage that it is relatively new to the race because it can now learn from the lessons of other countries when it comes to crafting national strategies for the manufacturing sector. It can lead a new industrial revolution anchored on innovation and flexibility and succeed in becoming a global market player in producing highly valuable goods in the near future.
The writer is the managing director of Orient Planet Group. Views expressed are his own and do not reflect the newspaper's policy.
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