Diversification and FDI Driving Sharjah’s Economy
The 2018 Oxford Business Group (OBG) report for Sharjah has shown that the emirate’s policy of diversification and its success in attracting foreign direct investment (FDI) is driving the economy towards new heights.
The document, ‘The Report Sharjah 2018’, provides an in-depth analysis of the most prevalent sectors and industries, highlighting the move away from hydrocarbons and towards a diverse and innovation-led economy, stating: ‘Sahrjah authorities have been undertaking a range of measures to boost foreign investment flows, supported by competitive advantages such as strong connectivity… and a culture of entrepreneurship.’ The Report: Sharjah 2018 marks the culmination of more than 12 months of field research by a team of analysts from OBG.
The report goes on to reinforce Sharjah’s attractiveness to foreign investors in terms of facilities and services, saying the emirate is ‘home to a growing network of free zones – the emirate punches above its weight in terms of commerce and is highly diversified by regional standards, with oil and gas contributing less than 6% to GDP and no individual sector accounting for more than 20%.’
Continuing its theme of overseas businesses either beginning or expanding their operations in Sharjah, the report said that the emirate attracted Dh 912m ($248.2m) worth of foreign direct investment in 2016 – a record amount, according to the Sharjah FDI Office, also known as Invest in Sharjah (IIS). In April 2018, IIS announced that the emirate had registered Dh 5.97bn of FDI in 2017, representing a significant increase on the previous year.
Among the main contributors to Sharjah’s GDP were manufacturing; real estate; wholesale and retail trade; financial services; construction; mining and quarrying; professional, scientific and technical activities; and transportation and storage.
In keeping with its history of being the industrial heart of the UAE, the largest component of Sharjah’s GDP according to the 2017 data was manufacturing, worth Dh15.7bn ($4.3bn), or 16.9% of its total gross domestic product. OBG reports that the emirate has maintained its success in developing its industrial and manufacturing sector through a network of two free zones and 19 industrial zones, which continues to grow.
Manufacturing may become even more important in the years ahead, with the government estimating that it will account for around 25% of GDP by 2025.
Innovation and Education
The report draws attention to Sharjah’s ‘particular emphasis on innovation and quality as it positions itself as a centre for education within the UAE and the wider region’, underscoring it as home to two of the Middle East’s highest-ranking universities. It also highlighted the emirate’s efforts in ‘developing a culture of entrepreneurship, strengthened by support from the authorities, its well-developed education sector and its lower cost base,’ singling out the Sharjah Entrepreneurship Centre, Sheraa, as a prime bolster for start-ups.
The financial and insurance sector’s contribution to the emirate’s GDP was Dh9.5bn ($2.6bn) in 2017, equivalent to 10.3% of the total and 11% of non-oil GDP, according to preliminary data from the Federal Competitiveness and Statistics Authority. This figure was up from Dh8.66bn ($2.4bn) in 2016 at current prices, or 10.1% of GDP and 11% of non-oil GDP. According to credit ratings agency Moody’s, the banking sector grew at an annual rate of 12.7% from 2012 to 2017.
Commenting after the launch, Oliver Cornock, OBG’s editor-in-chief and managing editor for the Middle East, said that moves to develop key growth sectors within the economy and cultivate entrepreneurial activity were already beginning to deliver results.
“Our report shows that Sharjah has taken steps to capitalize on its prime regional position and central location in the UAE, with ports on both the Gulf and the Gulf of Oman, while also strengthening the appeal of its commercial, educational and cultural institutions,” he said. “With rising international oil prices likely to provide an added economic boost, all indications point to a bright outlook.”