Sharjah: Industrious emirate

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Sharjah is moving to strengthen the foundations needed for industrial expansion, building on existing infrastructure and working to attract further investment to its manufacturing sector, both at the direct production level and for supporting services.

Industry is one of the mainstays of the emirate's economy and that of the wider UAE, with Sharjah contributing around 48% of the country's entire industrial GDP. Its non-hydrocarbons exports are pushing towards the $1bn mark, accounting for just under 18% of the emirate's total GDP.

With more than 1600 industrial enterprises operating in Sharjah, providing jobs for more than 75,000 employees, the sector has been posting steady growth over the past decade, in line with the government's programme of diversifying the economy.

However, unlike some of the other states in the Gulf region, Sharjah has chosen not to invest in massive projects focusing on heavy industry, but instead is targeting light and medium-scale industry. The government is turning away from large-scale projects, which are often heavily reliant on oil or gas, and has taken a different approach, providing the infrastructure needed to do business and create a trade-friendly environment.

This support has seen a flourishing of small and medium-sized industries, which in turn provide employment opportunities and encourage private ownership, thereby promoting an industrial sector that is driven by the private sector.

The growing development of Sharjah as a regional industrial centre is having an effect on supporting sectors. In early July, for example, logistics giant DHL announced the opening of a new bonded facility in the Hamriyah Free ZoneHamriyah Free Zone (HFZHFZ).

The launching of operations out of the HFZHFZ was in response to increasing demand from customers for a logistics solution that will reduce costs and shipment times to and from Sharjah, Derek Tully, DHL's operations manager in the UAE, told local media on July 6.

With new investments in logistics infrastructure at the HFZHFZ, including a recently completed $100m project to deepen and expand the Hamriyah Port and additional work to improve road access, the zone's appeal for industrial firms and logistics companies has only been reinforced.

Though Sharjah has consolidated its position as the industrial heartland of the UAE, there are still a few issues that could slow the beat of manufacturing development, with the two most prominent being power and profile.

According to Marwan Al Sarkal, the CEO of the Sharjah Investment and Development Authority (Shurooq), while major industrial developments attract a high level of attention from investors and traders in growing countries, such projects can have drawbacks. These industrial zones often compete with each other, floating rival ideas and suggestions to draw investments, but can risk losing momentum.

Typical problems include a lack of planning, specialisation or focus, with many of the industrial cities becoming crowded with a mix of residential and commercial activities. "Though many industrial cities are established each year in the region, they tend to be forgotten soon afterwards," Al Sarkal told local media on July 11 during a meeting with Emirates Industrial City (EIC).

Though leading industrial sites such as the EIC and the HFZHFZ do offer a diversity of services, it is unlikely they or other manufacturing centres in Sharjah will fall into the trap Al Sarkal warns of, as they are maintaining their focus on production. However, given the larger financial resources available to some of the other states in the region, Sharjah will have to work hard to keep the emirate at the forefront of investors' minds.

Another issue that could impact Sharjah's industrial aspirations is the power shortages that have occurred over the past couple of years. Though the state utility company, the Sharjah Electricity and Water Authority, has been stepping up investments in generation capacity, the demand for power is continuing to outstrip supply, in part a result of the growing requirements of the industrial sector.

Though power cuts are expected to soon be a thing of the past, with new plants and portable generators making up the shortfall in the medium term and larger stations being planned to build in excess capacity, for the moment electricity shortages are slowing industrial production.

If Sharjah can move quickly to expand the electricity supply and raise its profile, it will be even better positioned to attract further industrial investments going forward, enabling the nimble small and medium-scale private producers that call the emirate home to keep it at the forefront of the country's industrial landscape.

© Oxford Business Group 2010