Wednesday, May 11, 2011
Gulf News
Dubai Going by history, small-scale manufacturing ventures in the Middle East always had to confront long odds. The burden of low expectations was just one of them.
The disparaging sentiment would be that such ventures would be hard put to consistently meet quality parameters on their production. And where quality lags, can failure be far behind?
One UAE based manufacturer has now decided to take on the weight of history. “It’s not true that industrial ventures in the SME space cannot survive in the local or Gulf markets,” said Faisal Kottikollon, chairman of KEF Holdings and which operates one of the largest foundries in the region through Emirates Techno Casting located in Hamiryah Free Zone.
“Given that the Middle East hosts such a vibrant oil and gas industry, it’s possible to create an ancillary industrial cluster that would support it with many of the components needed by it. That’s exactly what a hub-and-spoke model would do.”
Kottikollon is not just saying it, he is going ahead and doing something about it. This will see it actively support small-scale industrial ventures in Dubai and Sharjah that would, in turn, produce components for use by Emirates Techno Casting in making valves for the oil and gas industry. Currently, it is just a handful of entities that are thus supported, but the KEF Holdings chief sees prospects for many more to come on board. These ventures would entail investments anywhere between $1 million (Dh3.6 million) to $10 million.
While KEF Holdings will not offer direct funding for the ventures, what it will do by way of support is provide technology know-how and buyback guarantees on future outputs from them.
According to Kottikollon, with buyback agreements in place, the project promoters would have easier access to seed capital funding.
“In Dubai and Abu Dhabi, there are many initiatives from government agencies that support initiatives by small and medium enterprises,” Kottikollon said. “Access to capital is not as hard to come by as it may have been in the past, and industrial projects are certainly being given more attention.
“Given the new production capacities that will be added by us, we see a situation where our production could easily support anywhere between 30 to 40 ancillary companies. Our role would be strategic in their evolution and in the creation of an industrial cluster.”
The foundry capacity at Emirates Techno Casting (ETC) and its sister entity, JCF Valves, currently has an output of 36,000 tonnes a year. Clients include Adnoc, Enoc, Qatar Petroleum and Takreer, among others. The size of the regional market for valves used in the oil and gas industry is estimated at $3.5 billion plus.
ETC itself came to life as a small-scale industrial unit in 1997 with an investment of Dh10 million. Apart from having one of the largest capacities in its line within the region, the company now has a turn-over of $140 million. It is now aiming to touch $1 billion in five years.
“At the time, no one wanted to make an attempt in this line and the reasons given were that neither the technology nor the infrastructure was available,” Kottikollon said. “As we have proved, that simply is not true.
By Manoj Nair?Associate Editor
Gulf News 2011. All rights reserved.
