Issued on November 9, Federal Decree-Law No. 25 of 2022 regarding the regulation and development of industry in the United Arab Emirates (UAE) reveals the country’s growing interest in developing policies for localizing its industries. In past years, a set of incentives have coalesced that prompted the UAE, and other countries, to develop self-sufficiency policies for various products, especially given the adverse effects of the COVID-19 pandemic and the war in Ukraine on supply chains.
The UAE has adopted a number of policies and measures aimed at localizing its industries and enhancing its capacity to be flexible and respond quickly to urgent international crises. Industry localization policies in the UAE are tied to a number of key dimensions:
1. Introducing national strategies and legislation for manufacturing: Over the past years, the UAE has been interested in launching various initiatives and strategies to boost national manufacturing. Perhaps most prominent of these is the national strategy for industry and advanced technology, known as "Operation 300 Billion," which was launched in March 2021. The strategy aims to develop and stimulate the industrial sector in the UAE, and to raise the sector’s contribution to the GDP from AED 133 billion to AED 300 billion by 2031. The strategy includes a focus on a number of industrial sectors, such as: food products, agricultural technology, medicines and pharmaceutical products, electronics and electronic equipment, chemical products, space technology, and hydrogen.
In a related context, the importance of Federal Decree-Law No. 25 of 2022 for the regulation and development of UAE industry comes from it including the provision of advantages and incentives for industrial activity in the country. This includes, for example, establishing an industrial registry at the level of the state that includes an integrated database of industrial projects.
2. Launching international forums and events for manufacturing: The UAE has been working to develop and launch international forms and events to develop local industries. For example, in June 2022, the capital Abu Dhabi hosted the forum "Make it in the Emirates: Invest, Partner, Grow," which was the first of its kind. Many local and international companies participated in the forum, which saw the signing of about 32 agreements and partnerships. Twelve UAE companies announced they obtained AED 110 billion during the forum as a result of potential purchase agreements with various companies interested in localizing a portion of their products’ supply chains.
3. Providing incentives for investors: The UAE government has sought in recent years to provide incentives for investors and to facilitate investment-related procedures in various sectors. For example, the government launched Basher, an electronic service that allows investors to establish businesses in the UAE remotely through an integrated electronic platform. The state also introduced Instant License in Dubai, which aims to speed up the procedures for establishing companies. The state also introduced an amendment to the Companies Law, allowing foreign investors full ownership of foreign companies.
4. Interest in developing industries vital to the economy: The UAE has paid clear attention to developing vital and important industries for the economy. This was clear, for example, in the launch of Abu Dhabi’s new industrial strategy this past June, which aims at the investment of around 10 billion AED in six transformational programs. The strategy’s initiatives are to focus on seven manufacturing sectors: goods, machinery, electric power, electronic equipment, transportation, food and agriculture, and pharmaceuticals. This is in order to strengthen local manufacturing in those sectors.
In parallel, major companies and important centers seek to play parallel roles to the government’s moves in the field of industry localization. The Abu Dhabi National Oil Company (ADNOC) has announced plans valued at AED 70 billion, which it intends to pump into products that can be locally manufactured, without needing to import them from abroad. The Mohammed bin Rashed Space Centre also signed a joint memorandum of understanding with Strata, a leading manufacturer of aircraft body parts from composite materials, to develop local manufacturing capabilities for the MBZ-SAT civilian satellite—the region’s most advanced in the field of high-resolution satellite imagery.
The UAE’s moves to promote national manufacturing are tied to a number of key objectives:
1. Strengthening the national economy: Expanding the localization of industries can boost the country’s economy by increasing GDP and exports. For example, the Abu Dhabi Industrial Strategy aims to double the size of the emirate’s manufacturing sector by an estimated AED 172 billion by 2031. In this context, it should be noted that the number of factories registered with the Ministry of Industry and Advanced Technology increased to 220 in 2021 from 155 in 2020.
2. Supporting the UAE’s status: It cannot be overlooked that expanding the localization of industries within the UAE helps support and enhance the country’s reputation and standing at the international level. Policies adopted by the state in recent years have helped strengthen its position in international economic indicators, such as the Competitive Industrial Performance Index issued by the United Nations Industrial Development Organization (UNIDO). The UAE ranked 31st in the 2022 report, and first in the Arab world. The report pointed out that the UAE is "the only country in the MENA region whose global ranking jumped 20 places in just seven years."
3. Underscoring the effectiveness of economic diversification strategies: The UAE has worked over the past years to achieve economic diversification and enhance all sectors’ contribution to economic growth and development. By some estimates, the UAE economy has succeeded in diversifying its sources over this period. The added value of wholesale and retail trade to the GDP at fixed prices grew by 14.1% in 2021 compared to its growth rate in 2020, while the manufacturing sector grew by about 7.5% over 2020. Real estate activity also contributed to supporting the national economy, achieving a growth of about 5.7% in 2021 over 2020.
4. Benefitting from the opportunities of global economic transformations: The UAE’s interest in developing national industries coincides with ongoing transformations in the global economy, and efforts by many countries to find alternatives to states that dominate the market in some industries. Perhaps the most prominent example of that is the microchip and semiconductor market. This market has been subjected to numerous threats from supply chain disruptions in light of the repercussions of the COVID-19 pandemic and tensions between China and the United States over Taiwan. This drove many countries to consider localizing the semiconductor industry. Therefore, the UAE—which has expressed interest in this industry—may have a role in developing it, which gives it a greater opportunity to boost its global share of this industry.
5. Dedication to an approach of resilience and adaptation to crises: Working to localize industries gives countries the capacity to adapt to crises and increase resilience in times of global uncertainty. This has become increasingly important in light of the supply chain bottleneck and the impact on global trade due to the COVID-19 pandemic and the war in Ukraine, which have put pressure on the economic capabilities of many countries. It has become necessary, therefore, for countries to develop their industrial sectors—at least in vital industries such as pharmaceuticals and food, which are a priority.
6. Achieving self-sufficiency in strategic industries: The UAE’s interest in localizing industries is linked to efforts towards self-sufficiency in a number of strategic industries for the state. Perhaps the most prominent example of that is the defense sector, as the defense manufacturing sector is witnessing significant development and comprehensive growth. The UAE’s defense industries have been able to create important opportunities to leap forward and achieve growth to enhance national goals of increasing the added national value of the industrial sector within the "Projects of the 50." The past years have seen the launch of a number of initiatives and entities related to the development of defense industries, such as the EDGE Group, NIMR Automotive, and Thales Group.
In conclusion, current transformations in the global economy are motivating the UAE to expand industry localization policies as a mechanism to strengthen the UAE economy, create jobs, and increase the country’s contribution to the global market in some vital industries. This is in addition to supporting policies of resilience and rapid response to any variables or urgent crises—such as the COVID-19 crisis—that negatively impact the supply chains of some important products and goods.