UAE Economy Ready for Lift-off

By J Sivan

From Issue 1, 2024 of Breakbulk Magazine.


The United Arab Emirates’ economy has experienced rapid growth due to its effective response to the Covid-19 pandemic, as well as previous reforms that have made it more business friendly. The country has set goals of doubling its economic growth within the next decade and becoming one of the top three global economic centers.

To achieve this the government has unveiled various sustainable plans worth US$8.7 trillion spanning from 2023 to Middle East 2030. Those plans aim to boost trade, attract investment and solidify the UAE’s position as a leading hub.

Moreover, the ‘UAE Net Zero by 2050’ strategy will shift focus on industrial development that could transform its economic structure and growth potential. Major sectors that are expected to undergo structural changes as a result of infrastructure and capacity expansion are discussed in this article.

Regarding oil and gas, the oil sector contributes 50 percent of GDP in Abu Dhabi. Abu Dhabi National Oil Company has announced its commitment to invest US$150 billion over five years to boost oil and gas production in support of an “accelerated growth strategy.” This movement reflects the UAE’s ambition to significantly enhance its oil and gas output. Notwithstanding its goals on mitigating climate change and aiming for “net zero” emissions, the UAE government is actively pursuing initiatives in the oil and energy industry.

For electricity and renewable energy, the UAE has set some targets for energy and sustainability initiatives in the coming years. The UAE government aims to generate more than half of its electricity from clean sources by 2050 with a focus on solar photovoltaic power. Additionally, the UAE plans to collaborate with participants of the 28th United Nations Climate Change Conference (COP28) to enhance hydrogen production and triple the capacity of energy resources by 2030. The National Energy Strategy aims to triple the capacity of energy to 14 GW by 2030 and forms part of Dubai’s Clean Energy Strategy for 2050.


Mining and Transportation

With mining and mineral extraction, the minerals and metals industry is expected to experience a growth rate of more than 3 percent and reach a value of US$10 billion by 2025. This growth can be attributed to the increasing demand from sectors such as infrastructure, construction, and building materials. As a result of this development, the mining sector’s contribution to the non-oil GDP of the country is projected to increase by 5 percent by 2030.

For transportation infrastructure, the UAE is striving to create an enduring future by focusing on innovation, infrastructure development, and renewable energy. It has initiated the Etihad Rail project, which aims to connect 11 cities across the seven emirates of the UAE. The objective of this project is to transport over 36.5 million individuals and 60 million tons of goods by 2030.

By 2030, the Abu Dhabi Transportation Mobility Management Strategy aims to enhance transportation connectivity by focusing on the development of infrastructure, regulations, and technological progress. This strategy will significantly impact transportation options like buses, metro services, and taxis. The rail network of the UAE will play a vital role in the US$100 billion GCC rail project that aims to connect Saudi Arabia, Qatar, Kuwait, Bahrain, and Oman with the UAE.

Turning to chemicals and petrochemicals, the chemical industry mainly concentrates on manufacturing petrochemicals, with the goal of achieving zero carbon dioxide emissions. The UAE aims to produce 1.4 million tonnes of hydrogen per year by 2031 and 15 million tonnes by 2050. The industry’s growth is fueled by an increase in refining capacity due to a rise in consumption.

On construction and civil engineering, due to the existence of global companies, the construction industry in the UAE has become highly competitive. It is estimated that after experiencing a 2 percent growth rate in 2022, the UAE’s construction sector will grow by 3.3 percent next year in terms of economic value. As an example, the Hatta Hydroelectric Power Plant is a US$387 million project under construction by the Dubai Electricity and Water Authority (DEWA). This growth will be driven by investments in energy initiatives to achieve the country’s net zero goal by 2050, expansion of the real estate sector, and increased integration.

With regards to defense and space, the UAE is actively investing in the defense sector focusing on developing its weapons and advanced autonomous aerial systems. It is also making progress in space science and exploration with several exciting projects lined up. After a failed first attempt in 2023, the UAE aims to achieve a milestone as the first Arab nation to land a rover on the moon. In September 2023, the UAE completed the longest ever Arab space mission when an Emirati astronaut finished a six-month mission to space. To support these endeavors, a national investment and development fund worth Dh3 billion (US$817 million) was established in 2022 for the space sector. This fund will facilitate initiatives between Emirati companies in engineering, science, and research applications.


Challenges in Meeting Project Demand

Project cargo movements require precise planning and expertise to be executed on time without any complications. Economic diversification and industrial expansion initiatives are expected to increase the demand for project logistics through to 2030. Service providers need to overcome some of the complexities associated with transporting project equipment to the sites in a timely manner. Some of the challenges associated with project cargo are noted below.

First, the cost of transportation and logistics services is increasing in the UAE due to factors like fuel prices, taxes, and labor costs. This can pose difficulties for businesses in cost-effectively moving their goods. Fluctuations in fuel prices can also make it challenging for companies to effectively plan and budget their transportation and logistics expenses.

Second, the logistics industry in the UAE often faces a scarcity of workers which can impact the handling and management of project cargo. To address this issue, companies may need to invest in training programs and initiatives that focus on developing workers’ skills.

Third, implementing logistics practices, such as reducing emissions and optimizing routes can be quite challenging when dealing with project cargo. Logistics companies might have to invest in fuel sources and advanced technologies to overcome this hurdle.

Four, finding warehousing facilities for project cargo can be a challenging task in the UAE, especially when dealing with large, heavy, or delicate items. Companies may need to explore specialized warehousing solutions for storing equipment with electronic components, which are sensitive to weather conditions.


Opportunities in Project Cargo

Service providers need to invest in advanced logistics infrastructure to effectively manage large pieces of project cargo. When choosing the mode of transportation, businesses should consider multiple factors such as size, weight, time constraints, and financial considerations. To ensure the efficient handling of project cargo, logistics service providers need to offer tailored logistics solutions with capability to handle oversized cargo items. Adoption and use of specialized trucking systems with adequate storage facilities for handling these heavy-lift and oversized cargo items.

In addition, other support services such as lashing, crating, and packaging for oversized freight items need to be integral to offerings to minimize the damages. To ensure that the project site is ready ahead of time, logistics companies should carry out monitored procedures to handle everything meticulously. This includes inspecting goods before they are transferred and after they reach their destination, personally overseeing the cargo handling process, and coordinating with the recipients of the cargo.

The rise of industries such as mining, oil and gas, and construction, which employ convergent assembly manufacturing methods, influences the need for project cargo logistics. This presents an opportunity for logistics companies to meet the requirements of these sectors and capitalize on the increasing demand for project cargo services.

As part of its Economic Vision for 2030, the UAE is actively diversifying its economy away from reliance on oil and gas with increased emphasis on the petrochemical sector. Autonomous transportation envisions transforming its transportation system into a mode by leveraging data, artificial intelligence, internet connectivity, quality standards, and innovative technologies by 2030. COP28 and commitment to reach net zero by 2050 are expected to shift the focus on the energy and environment sector.

The project logistics segment is expected to benefit from these developments and is likely to witness accelerated growth through to 2030.


The region’s soaring project sector will be the focus of a main stage panel session at Breakbulk Middle East 2024. “MENA Project Overview”, presented by the Energy Industries Council’s Ryan McPherson, is scheduled for Monday, 12 February from 10:15-11:15. Breakbulk Middle East 2024 is happening on 12-13 February at the Dubai World Trade Center.

J Sivan is a senior consultant in Frost & Sullivan’s Supply Chain and Logistics Practice.

MAIN PHOTO: ADNOC drilling rig at the giant offshore Upper Zakum oilfield. CREDIT: ADNOC