When setting up a manufacturing business, the UAE is a destination that can’t be ignored. With its strategic location at the crossroads of Europe, Asia, and Africa, a rapidly growing manufacturing sector, and strong government support, the UAE has emerged as a true manufacturing powerhouse.
In this article, we’ll explore the key factors that make the UAE such an attractive destination for manufacturers. We’ll also introduce you to free zones that cater specifically to the needs of manufacturers.
So whether you’re looking to expand your operations or start a new manufacturing business in the UAE, read on to discover 4 reasons why this country should be at the top of your list.
Reason 1. Developing Manufacturing Market
The UAE has a thriving manufacturing sector that’s growing by leaps and bounds. As the third largest contributor to the country’s GDP, manufacturing already accounts for around 10% of the total. But that’s just the beginning – experts predict that the industry will continue to expand at a breakneck pace in the coming years.
Industrialization is in full swing in many of the emirates in the UAE, with new ventures popping up in every manufacturing sub-sector, from aerospace to automotive. As a result, the market is growing at a CAGR of 8.75% nationwide, with Abu Dhabi leading the way at 9.7%.
While all manufacturing sub-sectors are expected to grow, the food and beverage vertical is set to explode, with projections suggesting a 210% increase by 2031. This surge in F&B is largely due to the UAE’s anticipated population growth and long-term goal of achieving domestic food security, both of which have received heightened attention in the wake of the COVID-19 pandemic.
Other industries poised for significant growth through 2023 include heavy machinery (164%), pharmaceuticals (150%), and electrical equipment (150%).
Driving this growth is the UAE government’s unwavering support as it seeks to increase the global competitiveness of its exports and diversify the economy away from oil. To this end, they’ve launched Operation 300bn, an initiative to transform the UAE into a manufacturing powerhouse by 2031.
Reason 2. Strong Government Support
Operation 300bn is a strategic initiative that aims to develop the country’s manufacturing sector. Announced in March 2021 by the Ministry of Industry and Advanced Technology (MoIAT), it sets a goal to increase the industrial sector’s contribution to AED 300 billion by 2031. The strategy places the greatest emphasis on the development of the food and beverage and pharmaceutical sectors to achieve this goal, although other industries will also be supported.
So how will this strategy help the manufacturing sector? It’s a multi-pronged approach, as the UAE government is investing heavily in building and expanding industrial zones, free trade zones and specialized manufacturing clusters.
Reason 3. Strategic location
As a manufacturer, the ability to ship products quickly is a significant advantage when securing orders. The UAE’s proximity to major shipping routes allows companies to fulfill orders faster than their competitors.
The country’s well-developed ports, such as Jebel Ali in Dubai and Khalifa Port in Abu Dhabi, are among the busiest and most advanced in the world. These ports offer streamlined customs procedures and excellent connectivity to global markets via sea, air, and land. This infrastructure ensures that raw materials won’t get held up in customs, reducing transportation costs and lead times.
The UAE’s central location enables manufacturers to leverage the country’s extensive network of free trade agreements (FTAs), providing preferential access to markets in the Middle East, North Africa, and beyond. The UAE’s membership in the Gulf Cooperation Council (GCC) also grants manufacturers access to a unified market of over 54 million people with high purchasing power. Situated at the crossroads of Europe, Asia, and Africa, the UAE serves as an accessible gateway to markets that collectively house over 6.7 billion people.
Reason 4. Dedicated Manufacturing Free Zones
Setting up a manufacturing business is a big investment, so all the help you can get is valuable. In the Emirates, free zones — economic zones created specifically to attract foreign business to the UAE — offer support such as access to industrial land and pre-equipped manufacturing units. They also offer import tax and VAT exemptions for companies registered there, but only for internal and intra-free zone trade.
What this means in practice is that if your company is registered in Jebel Ali Free Zone and you receive an order from Sharjah Airport International Free Zone, the transaction will be exempt from VAT. If the order comes from outside a free zone, the VAT is only 5%.
But with all the benefits comes some complexity. The popularity of free zones has skyrocketed, and there are now more than 44 to choose from. So how do you know which one is right for you? To answer that question, we need to understand the requirements for a manufacturing company. Perhaps two of the most important things to consider are:
Facilities: Will you be able to get a facility that will comfortably fit your production line, and will it already be equipped with machinery?
Logistics: Is there convenient access to road, sea, and air transportation to receive raw materials and ship products?
With this in mind, we’ve listed below (in no particular order) 5 free zones that meet both of these requirements.
1. Jebel Ali Free Zone (JAFZA), Dubai:
Jebel Ali Free Zone (JAFZA) in Dubai is situated right next to Jebel Ali Port, the largest seaport in the Middle East, which makes it easy to efficiently import and export goods from this zone. The manufacturing facilities here span a total of 13.6 million square meters and provide access to 1,000 light industrial units, where the infrastructure is already set up for packaging, processing, and labeling.
Well-suited for: pharmaceuticals, food and beverages, healthcare, and others.
2. Sharjah Airport International Free Zone (SAIF), Sharjah:
SAIF Free Zone occupies land adjacent to Sharjah International Airport (Air Arabia’s hangar and Sharjah Cargo Center are just on the other side of a fence), which is a huge logistical advantage — the location provides easy access to markets in the Middle East, Africa and Asia. Also consider this free zone for approachable setup prices: the cost of setting up a business here is lower compared to other emirates. Here, companies can get competitively priced industrial land, pre-built warehouses and customizable manufacturing units.
Well-suited for: food processing, pharmaceuticals, electronics, and others.
3. Hamriyah Free Zone (HFZ), Sharjah:
Hamriyah Free Zone (HFZ) is situated along the coastline of Sharjah, covering an area of 24 square kilometers. It has a 14-meter deep port and a 7-meter deep inner harbor. Consider this free zone for its strategic location: Sharjah is the only emirate with ports on both the Arabian Gulf’s west coast and east coast, providing direct access to the Indian Ocean. The Zone also offers direct access to Ajman and Ras Al Khaimah through excellent roads. It offers a variety of industrial land options, warehouses, and purpose-built factories for manufacturing.
Well-suited for: oil and gas, petrochemicals, steel fabrication, and others.
4. Khalifa Industrial Zone Abu Dhabi (KIZAD), Abu Dhabi:
Khalifa Industrial Zone sits almost smack in the middle between Abu Dhabi and Dubai, sprawling along the E11 Highway which links the two cities. Three major international airports are connected to it by a purpose-built road network: Abu Dhabi International Airport is only 35 km away, Al Maktoum International Airport is 52 km away, and Dubai International Airport lies 85 km away. The Zone also has direct access to Khalifa Port, one of the most advanced deep-water ports in the region. It offers a wide range of industrial land plots, pre-built warehouses, and customizable manufacturing units spread over 1.3 million square feet.
Well-suited for: automotive, food processing, construction materials, and others.
5. Ajman Free Zone (AFZ), Ajman:
Ajman Free Zone, established in 1988, is located in close proximity to the ports of Ajman and Sharjah and Dubai International Airport, which makes it a good choice logistically. AFZ offers affordable industrial land, warehouses, and manufacturing facilities.
Well-suited for: textiles, plastics, food processing, automotive, health and beauty, paper and packaging, and others.
Wrapping up
As we’ve seen, the UAE offers a wealth of opportunities for manufacturers looking to establish or expand their operations. With its strategic location, stable manufacturing market and robust government support, the UAE has positioned itself perfectly to attract foreign investment into its manufacturing sector.
Whether you choose to set up shop in one of the UAE’s many free zones or establish a business on the mainland, you’ll find an ecosystem designed to help manufacturers succeed.
The future of manufacturing in the UAE is bright — and with the right approach, your business can be at the forefront of this exciting new era of growth and innovation.
