Copper, aluminium products and electrical appliances are among the most expensive items on Dubai's import bill and represent opportunities for the emirate to become a self-sufficient producer of locally manufactured goods, says a new report from Dubai Exports.
The report identified 10 "substitution opportunities" where imports have surged by more than 25 per cent between 2005 and 2009, accounting for more than Dh360 million (US$98.01m) of yearly spending.
"The Dubai Government realises the importance of diversifying sources of income and increasing the participation of the industrial and the export sectors in increasing the country's GDP," said Saed Al Awadi, the chief executive of Dubai Exports.
Biscuit production offered Dubai the best chance for food-import substitution, followed by meat and poultry, the report said.
It pointed to a lack of foreign investment in manufacturing in Dubai. Foreign capital accounted for 16 per cent of investment in the emirate's manufacturing sector last year, and half of that money came from other Gulf states.
The rising demand for aluminium and copper products between 2005 and 2009 probably reflected the UAE's property boom, a period when demand for building materials sent import bills skyrocketing, said Jarmo Kotilaine, the chief economist at NCB Capital in Saudi Arabia.
"Clearly, during the past decade, Dubai went through an extraordinary construction boom. This is going to continue to an extent, but it's not at all obvious that Dubai should remain on its trajectory for the coming 10 years," he said. "There's a general consensus that there's more than enough housing now in Dubai to keep them going for a number of years."
However, in an economy focused on transport and logistics, local production may not be the most effective method of cutting the size of the bill for manufactured items, Mr Kotilaine said.
"Even though the demand for commodities is growing, it doesn't mean you're better off producing it at home," he said.
"Dubai shouldn't automatically try to do something because it's in demand," he said, citing constraints such as the region's harsh climate.
Dubai has already made strides in addressing some of the import substitution opportunities identified by Dubai Exports, most notably aluminium, with the emirate now home to one of the largest aluminium smelters in the world.
Manufacturing accounted for 13 per cent of the emirate's economy last year, with items made of gold accounting for almost two thirds of direct exports, the report said. The price of gold has soared in recent months, reaching an all-time high of $1,603.85 an ounce on Tuesday.
"This manufacturing report's findings show a growing export market with significant opportunities for Dubai manufacturers," Mr Al Awadi said.
The production of fabricated metal and equipment accounted for the largest proportion of the emirate's manufacturing workforce - 43,771 workers in 2009.
More than half of the emirate's manufacturing companies are based in the Jebel Ali Free Zone, followed by Al Quoz and Al Qusais.
