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Construction in UAE Hits New Heights as Trade Expands by 13% in Dubai and Non Oil Sector in Saudi Expects 7% Growth


Middle East : 29 March 2013

Construction in UAE Records New High Levels and Experiences 9.5% Growth in Coming Years

Fast track growth is expected in the UAE construction industry, as more investments, on-going work and government backing trigger compound growth for the next few years. According to a recent RNCOS report, the industry should experience about 9.5 percent growth between 2012 and 2016, surging from the current level of $39.4 billion or Dh 144.6bn.

A recent report from EC Harris noted that the construction industry in the UAE has recovered fully, stating that real GDP estimated figures, thriving tourism and leisure industries, investment in pipeline projects and access to debt funding, as well as pricing levels in the industry’s tendering, have contributed to the recovery.

Positive governmental policies have also brought in more FDI, as foreign investors acquire property and contribute to the expansion of construction in the UAE.

Figures from Danube Group, a leading firm in the UAE’s home interior and construction industries, show growth of 15 percent, indicative of the market conditions. This jump in business helps the firm move toward the revenue goal of Dh 1bn by 2015.

Danube Group’s chairman and founder Rizwan Sajan noted that 2012 was a “momentous year” for growth.

Sajan stated that the UAE’s construction sector often drives the national economy and that industry developments have been positive, leading to greater demands in building materials and innovation.

Both private and public entities are investing heavily in the UAE, triggering a boom in the construction industry. Notable developments include the Mohammad Bin Rashid City, with hotels, shopping malls and a theme park in the plans.

The Danube Group also plans to develop Technopark at Jebel Ali, the largest industrial complex in the region and conveniently located for all markets in the GCC.

About $1.95 trillion in construction projects are planned for the UAE this year, following a wide range of developments across the MENA region last year and including many real estate projects.

Trade Jumps by 13% in Dubai to Reach Dh 1.2 Trillion

Non-oil foreign trade rose to Dh 1.235tr in Dubai last year, up 13 percent from the 2011 level of Dh1.089tr. Exports rose by 47 percent to reach Dh 163bn, with imports surging 12 percent to hit Dh 737bn and re-exports growing by 5 percent to reach Dh 334bn.

Trade continues to be a pillar in the emirate’s economy, according to Crown Prince Shaikh Hamdan Bin Mohammed Bin Rashid Al Maktoum. He also noted that although Dubai continues to be known as the capital of Islamic finance, growth in the trade sector provides significant opportunities.

Non-oil trade rose sharply last year, according to Dubai Ports, Customs and Free Zone Corp, with direct trade accounting for 65 percent of overall non-oil foreign trade (Dh 808bn) and free zones accounting for about 34 percent (Dh 417bn). Trade in customs warehouses amounted to Dh 10bn, according to Dubai Customs Director General Ahmad Butti Ahmad.

Trade grew in every transport mode, including air cargo, sea shipping and land transportation.
China remains the leading trading partner for imports, accounting for 15 percent or Dh 111bn, while the US accounts for 9.33 percent or Dh 69bn of overall imports. India comes in at third position with 9.28 percent or Dh 68bn.

In terms of exports, Switzerland leads the pack with 34 percent or Dh 56bn in trade. India follows at 20 percent or Dh 32bn. India also leads in terms of re-exports, accounting for 15 percent or Dh 51bn, with Saudi Arabia following at 10 percent or Dh 33bn in re-export trade.

Trade between Arab nations grew by 26 percent, totalling Dh 196bn. Trade between Dubai and GCC nations equalled Dh 95bn, a rise of 28 percent over the 2011 figures.

Gold, both in raw form and semi-manufactured, led the list of imports for Dubai, accounting for 18 percent of the total.

Gold also led in Dubai exports, valued at Dh 104bn or 64 percent of overall exports. Raw aluminum came in next, at Dh 5bn. Telephones topped the list of re-exports, with 15 percent or Dh 50bn, while diamonds totalled Dh 46bn.

Saudi Non-Oil Growth Above 7 Percent This Year

Saudi’s real GDP should rise by 3 percent this year, supported by a robust non-oil sector set to counter declines in oil production. Growth in this sector should come in above 7 percent for 2013, based on a report by the NCB.

Last year, real non-oil gross domestic product grew by about 7.2 percent, a figure above the decade-long average of 4.7 percent and supported by positive performance in the non-oil private sector. Growth in the private sector was driven by retail (8.3 percent growth), manufacturing (8.3 percent growth) and construction (10.3 percent growth).

Thanks to royal decrees, higher levels of business confidence, and an enhanced financing climate, these sectors remain vibrant. Domestic demand continues to strengthen, as indicated by the increase in private-sector credit and substantial growth in merchandise imports. A credit pickup created benefits in construction and manufacturing, with each sector receiving sizeable bank advances and loans last year.

Construction is expected to grow by 10.5 percent this year, and manufacturing by 8.5 percent. Market activity and rising business confidence drive positive expectations for these economic sectors.

The report by NCB noted SR 235bn of construction projects were awarded last year, below the 2011 level of SR 270bn. Around SR 17.8bn of those 2012 contracts were within the manufacturing sector.

FDI inflows are forecasted to surpass $20 billion for 2012. Structural reforms in Saudi Arabia have enhanced the business environment and attracted a greater inflow of foreign capital.

According to the NCB, FDI will remain a key driving force for greater investment and spending within Saudi Arabia. FDI accounted for 14.9 percent of the GFCF in 2011, much higher than previous postings between 1995 and 2004, when an average of 1.5 percent was recorded. FDI inflows are also expected to increase this coming year, possibly surpassing $25 billion.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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