By Shane McGinley
Abu Dhabi has the money, space and access to cheap energy to attract medium and heavy industry to the emirate. But has it happened yet?
Abu Dhabi has the money, space and access to cheap energy to attract medium and heavy industry to the emirate. So why hasn't it happened yet? HE Mohamed Hasan Al Qemzi, CEO of the Higher Corporation for Specialised Economic Zones says it is happening as you read.
Abu dhabi is currently enjoying an ongoing love affair with the automobile. Luxury manufacturer Rolls-Royce says sales surged there by 200 percent in the first half of this year, while Port Zayed reports that the total number of vehicles arriving in the UAE capital jumped 62 percent in the same period.
Catering to this car craze, master builder Aldar Properties has jumped on the bandwagon and is developing MotorWorld near Abu Dhabi Airport, which will provide a one-stop shop for car lovers from around the region. And let's not forget the highly anticipated opening of the Ferrari World Abu Dhabi theme park in October or the now annual trek to the capital for the Formula 1 Etihad Airways Abu Dhabi Grand Prix.
This observation has not been lost on HE Mohamed Hasan Al Qemzi, CEO of the Higher Corporation for Specialised Economic Zones (ZonesCorp). Set up in 2004, Zonescorp's mandate is "to create special economic areas to foster industries and to attract investors to Abu Dhabi" and it is Al Qemzi's job to turn that into a reality and identify the latest emerging sectors to target.
Observing the high regard that the automobile industry is held in the emirate, it is no surprise that Al Qemzi's latest aim is to now bring car production to Abu Dhabi and bring the cycle full circle.
In June, engineers at King Saud University in Saudi Arabia were responsible for the first ever car designed and built in the Gulf. The university is now in talks with businesses to begin production of the Ghazal 1 vehicle and it aims to produce 20,000 of the cars over the next three years at a cost of SAR1.8bn ($479m).
Aiming to grab a slice of the fledgling Gulf automotive production sector, Zonescorp is planning to launch an automotive industry zone, which will include everything from vehicle production to services and sales.
The new zone "is expected to fuel expansion of the auto re-export market and pave the way for the automobile assembly and manufacturing sector in Abu Dhabi," according to Zonescorp.
Other services likely to be incorporated are spare parts warehousing and distribution, vehicle storage, light manufacturing and assembly, tire recycling and car crushing, as well as to retail showrooms for new and used light and heavy vehicles, motorcycles, accessories and spare parts.
The automotive cluster will be Zonescorp's fifth phase at the Industrial City of Abu Dhabi (ICAD) and is part of Zonescorp's ongoing strategy to identify manufacturing and industrial sectors that can help diversify Abu Dhabi's economy and increase the emirate's revenue from non-oil related sectors.
The slowdown in the construction sector in Abu Dhabi saw container traffic at Port Zayed fall by seven percent in the first half of this year. However, the industrial sector has held its ground and the capital's main port handled 2.98 million tonnes of general cargo, an increase of twelve percent.
"We are seeing the effects of the reduction in construction activity that led to the slight dip. However, industrialisation in Abu Dhabi is having a positive effect," says Julian Skyrem, acting chief executive of Abu Dhabi Terminals.
Abu Dhabi is investing billions of dollars in industry and infrastructure and its success has been helped in no small way by Al Qemzi's efforts at Zonescorp. However, there is still a lot of growth potential as Port Zayed is currently only utilising about 40 percent of its total potential capacity and there are plans to shift services to the even bigger new Khalifa port in Taweelah at the beginning of the fourth quarter of 2012.
The task of putting in place companies to utilise the new port falls upon Al-Qemzi and it is his job to "regulate the industrial sector in the emirate of Abu Dhabi and to provide services to investors and to collaborate with other government entities to define the industrial strategy in the Middle East."
Originally, it was Zonescorp's job to organise the infrastructure and utilities needed in the special economic zones, such as the roads, power, water and other essential supplies for the industrial sector. This has now been widened and Al Qemzi's buzzword is clusters: special industry sectors where he sees future growth and which can be developed in order to attract companies to Abu Dhabi.
"The direction has become more focused... today we are the only mandated government agency responsible for issuing industrial licenses and, at the same time, we are following the development of infrastructure and the aim is to create clusters where we will be able to have better services, infrastructure and to service the investors who are coming to our economic zones in a better way," he says.
Al Qemzi claims that while the construction sector has seen a slowdown in activity in recent years, the economic zones have not been impacted to the same extent by the global crisis and Zonescorp's plans remain on target.
ICAD 1 is a 14 sq m site located near to Mussafah Sea Port, 30km from the centre of Abu Dhabi. Infrastructure at Zonescorp's first economic zone cost AED1.2bn ($326m) to build and focuses on the textile, food, engineering, wood, chemical, plastic, construction and high tech industries. The zone is now 100 percent full and has seen investment of more than AED6bn ($1.6bn).
Al Qemzi believes "the private sector plays a big role" in nurturing the industrial development of the emirate and, as a result, ICAD II has adopted a public and private partnership model. The 11 sq km site caters to specialised industries, such as the chemical, plastics, construction materials and oil and gas related sectors.
Around AED11bn ($2.99bn) has already been invested in capital and operating costs at ICAD II and the infrastructure cost AED450m ($122.52m). Al Qemzi says about 75 to 80 percent of the sites have already been allocated in ICAD II.
As work moves ahead on the remaining zones, Al Qemzi is confident demand is there to meet supply. ICAD III is currently about 55 percent allocated and by 2012 he hopes that all the plots will be filled.
The development of ICAD IV is currently underway and "the study will be completed by the second quarter of next year and then we will be much clearer on the direction," he adds. Looking to the future, he sees growth in the metals sector and growing demand for a specialised aluminium cluster.
He is also implementing plans for a dedicated industrial area in the western area of Abu Dhabi that will specialise in the oil and gas sector. "We will be developing an industrial area there specialising for serving the upstream area of oil and gas. We are discussing with our work colleagues in the western region municipality and have already found the land. That is our top priority and down the road the masterplan will be soon approved and we will be working together," he said.
Around the world, Abu Dhabi has many competitors and, while it may have the oil wealth to back it up, it faces strong competition. For example, Egypt's model is based on the promotion of its cheap labour market.
"Each country has its own advantages and disadvantages. We cannot compete with some countries," admits Al Qemzi. "When we talk about Abu Dhabi we talk about the Abu Dhabi packages, it is not just Zonescorp. The infrastructure is the highest standard of services. We can differentiate ourselves, we are different. We are financially very strong, the private sector is strong and the policies are very transparent."
Many countries use incentives to try and attract businesses to their shores, especially in the current economic climate, but this is one area that has not been developed yet and which Al Qemzi believes is on the cards.
"We are using the law that exists. We don't have specialised incentive packages, but the government of Abu Dhabi is looking at this... and where the enhancement can be implemented."
Another issue where he believes there is a lot of potential, and also a necessity, is in the ownership laws and in the development of full free zones with 100 percent ownership for foreign companies, similar to those in Dubai.
"Today in Abu Dhabi there isn't any free zones... we are waiting for the federal law of the free zones to be endorsed and from it definitely we will capture this opportunity and create free zones."
Currently, the ownership structure in Zonescorp's ICAD parks is 51 local and 49 percent foreign. However, if 100 percent ownership is introduced for foreign companies, then he believes "Zonescorp will take advantage of this and will create a special cluster."
It is Zonescorp's job to manage the registering of industrial licences in Abu Dhabi. So far, Zonescorp has handed out 1,193 permanent and preliminary industrial licences within its industrial parks, worth a total of around AED49bn ($13.34bn).
The self-financed government body is also responsible for the managing of living conditions for labours in Abu Dhabi. In July, Al Qemzi announced that as many as 300,000 workers would be moved to new homes by the end of the year, in what was classed as the largest relocation of labour in UAE history. The decision came about after Zonescorp executives travelled to other countries, such as Singapore, to see the conditions their workers were living in.
"We learnt how they have done it," he says. "When you bring construction labour in, you have to make sure how and where they are going to sleep, so that the next morning, when they wake up, they can contribute. These things impact their performance."
For the past three years, Al Qemzi's team has been gathering information to implement the plan and already more than 100,000 workers have moved from Mohammed Bin Zayed City to new housing off Abu Dhabi island. "We are still learning... We haven't perfected it all yet, but we are moving in the right direction. The whole idea came out in late 2007," Al Qemzi says, adding that he was shocked at some of the conditions he originally found when he inspected some of the conditions in place during the boom years. "There was a boom, especially in construction. At that time, how the workers lived was no longer acceptable."
The workers will be moved from labour camps to multi-storey housing developments complete with malls, hospitals and playgrounds. By the end of this year, three new developments, including Al Hamim, between Abu Dhabi and Dubai, and Al Mafraq, outside Mussafah, will house workers. The operators of the new camps charge AED390 ($106) per worker, a fee that includes security, housekeeping and essentials such as furniture.
The plan was implemented by the Urban Planning Council of the Abu Dhabi Municipality and Zonescorp began working on the project in 2007. However, it was not been without any hitches. The move was originally slated to begin in July of last year, but companies complained to the Abu Dhabi Chamber of Commerce and Industry that they could not afford to pay higher expenses to house their labourers. The Abu Dhabi Municipality has since told contractors to shift their workers to the newly built complexes by September 17.
Some of the workers also complained that the distance from their work stations to the new camps was too far and they would incur travel charges. Al Qemzi says contractors are obligated to pay for transportation and make sure their workers get to and from work.
"You have brought them here - if you don't care of them, that is wrong," he says of contractors reluctant to pay the transport charges. Those who do not comply, he says, will face penalties, such as denial of licenses for new recruits.
This summer, Al Qemzi took part in a seminar looking at the prospects for Abu Dhabi's industrial sector. Opening the seminar was Mona Al Suwaidi, head of the economic studies section at the Department of Economic Development in Abu Dhabi.
Al Qemzi reports that Al Suwaidi noted that the ‘Abu Dhabi Economic Vision 2030' gives priority to the development of a number of industries in the industrial and manufacturing sectors. He says effort to achieve the goals of the 2030 plan has seen the manufacturing sector grow from AED17bn ($4.6bn) in 2001 to more than AED40bn ($10.89bn) in 2009.
However, the contribution of manufacturing in Abu Dhabi's GDP is still limited, reaching approximately 7.4 percent last year. Therefore, Al Qemzi believes that there is still a lot of growth potential in the market.
Additionally, non-oil and gas exports only account for around 1.5 percent of Abu Dhabi's GDP and the government aims to get that up to eleven percent as soon as possible.
With goals like these and the new port waiting to be filled, Al Qemzi is going to be a busy man.