Sector Monitor Series

DCCI 2003 Survey: Structure & Performance of Dubai Major Economic

Sectors

Dr. Belaid Rettab

Data Management and Research Department

2006

Published by Dubai Chamber – Data Management & Business Research

Tel. 04 2028410 Fax: 04 2028478

www.dubaichamber.ae

ISBN 9948 – 430 – 14 - x

Table of contents

1. Executive Summary in Arabic 3 2. Executive Summary in English 5

3. Introduction 7

4. The macro economic perspective 8 2.1 Introduction 8 2.2 Structure and development of Gross Domestic Product 10 2.3 Number of enterprises by size and sector 13 2.4 Employment by size and sector 18

5. Characteristics of Enterprises Surveyed 22 3.1 Introduction 22 3.2 Legal Form 22 3.3 Foreign ownership 23 3.4 Exporting 24

6. Relative Economic Performance 26 4.1 The indicators 26 4.2 Value Added 27 4.3 Economic accounts 28 Accounting schemes for the four sector 29

7. Conclusions 31

Annex I Set-up of DCCI 2003 Members Survey & weighting 333

2

ملخص تنفيذي

اء القطاعات بنية هذه الدراسة تفحص ك بن ي، وذل ة في دب ر النفطي شرآات غي ات اوأداء ال ى بيان ة عل ا مباشرة أولي م تجميعه تساهم . الصناعة، البناء والتشييد، الخدمات والتجارة : بواسطة مسح ميداني غطى أربعة قطاعات اقتصادية رئيسية وهي تحديدا ت

دبي % 90 حوالي بة هذه القطاعات األربع ر النفطي ل الي غي ي اإلجم اتج المحل ة .من الن ات ثانوي ذلك ببيان ستعين الدراسة آ تدة صادرة عن وزارة االقتصاد والتخطيط تصف االقتصاد الكلي و لبناته الهيكلية ات باإلمارات العربية المتح ى بيان باإلضافة إل

ة تجارة وص ديثها غرف ي العضوية التي قامت بتجميعها وتح ر ت. ناعة دب صادية، عتب ة االقت م الخلفي ذه الدراسة خطوة إزاء فه ه . البنية االقتصادية، وأداء قطاع الشرآات غير النفطية في دبي، والذي سوف يحدد آامل المستقبل االقتصادي لإلمارة

على المستوى الكلي

طاع على مستوى اإلمارات، صنفت القطاعات إلى اعتمادا على مساهمة آل قطاع بدبي في الناتج المحلي اإلجمالي لكل ق .تصنيفين، قطاعات الواجهة وقطاعات تابعة

ى مستوى قطاعات الواجهة في دبي هي قطاعات تتميز بمساهمات مرتفعة نسبيا في الناتج المحلي اإلجمالي . 1 لكل قطاع عل

دا تتمثل هذه القطاعات . %36 عن هذه المساهمات تزيد حيثاإلمارات، ارة تحدي ذه . في قطاعات الخدمات والتج تحدد هارة دبي متخصصة في إنتاجيةالقطاعات بنية ة األم ا تحدد بني ى المدى القصير ، آم صادي عل ستقبلها االقت صادية وم . االقت

ـ ،النقل والتخزين واالتصاالت ) 1: (هذه القطاعات هي ى مستوى % 57 وتساهم ب الي للقطاع عل ي اإلجم اتج المحل من النـ ،التجارة وخدمات اإلصالح ) 3% (55 وتساهم بحوالي ،الفنادق والمطاعم ) 2(رات اإلما ساهم ب الخدمات ) 4% (47 وت

%.42الخدمات المجتمعية والشخصية التي تساهم بحوالي ) 5(وأخيرا % 46المالية وتساهم بـ

ارات من الناتج ا% 36 و%16 في دبي بما يتراوح بين القطاعات التابعة فتساهم أما. 2 . لمحلي اإلجمالي للقطاعات في اإلمق الطلب أنها حيث منوتعتبر هذه القطاعات مهمة ا و ل تقوم بدعم قطاعات الواجهة من خالل خل ا ه به ب دعمه المدخالت ش

ارات ،العقارات وخدمات األعمال ) 1: (هذه القطاعات هي .المصنعة وتساهم في الناتج المحلي اإلجمالي للقطاعات في اإلمقطاع الخدمات ) 4% (30 ويساهم بـ ،قطاع الصناعة ) 3% (30 حوالي يساهم ب ،قطاع البناء والتشييد ) 2% (32ي بحوال

%.22الكهرباء والمياه ) 5(وأخيرا % 24يساهم بـ ، والحكومية ة . 3 ورات مهم ى تط ة عل ة مقبل ات الواجه ات . إن قطاع ذه القطاع ستفيد ه ن ت اء م ة بكف ات المتاح وارد واإلمكاني ك الم ة وذل

.باالعتماد على مميزات دبي التنافسية

وفر اإلمكانيات تعتمد .4 ي سوف تت دة الت ا االقتصادية للقطاعات التابعة على الفرص الجدي ستقبل القريب له ل ، في الم ويتمثذا . ذلك في ارتفاع الطلب المتوقع في حالة وضع قوانين جديدة والدعم الحكومي لهذه القطاعات ى ه صلح إذا ا م إضافة إل

. تكامل اقتصادي محلي وإقليمي وعالمي

ة .5 ل مجموع ه آ ذي تلعب صادي ال دور االقت ي ال رق ف ابقا، يوضح الف ذي ورد س ة وال ة والتابع ين قطاعات الواجه ز ب التمييستقبال صادية حاضرا وم ي االقت اءات دب ذا . قطاعات ضمن آف ز ويعرف ه ة التميي ة انتقالي ي تمر بمرحل من القطاعات الت

ى ة إل ة مجموعة مجموعة التابع ا هي . الواجه ة قريب صبح من قطاعات الواجه ارات ) 1: (من القطاعات المرشحة لت العق .الصناعة) 3(البناء والتشييد ) 2(وخدمات األعمال

ي ،لمقارنة من أجل ا .6 ة تجارة وصناعة دب صغيرة، وهي %) 93( نجد أن غالبية واسعة من عضوية غرف شرآات ال من الشابه نجد أن . عامال 20الشرآات التي يعمل في الواحدة منها أقل من شكل م غ % 97ب ي يبل ا، والت شرآات في أوروب من ال

ال 20عددها حوالي دد من العم ذا الع ا نفس ه صغيرة . مليون شرآة، توظف الواحدة منه شرآات ال درة ال ك مدى ق ين ذل ويب .على النمو

شرآات تشكل شرآات الخدمات تقريبا ن .7 ة عدد ال صف عدد الشرآات في أوروبا، وتأتي التجارة آثاني أآبر قطاع من ناحيشييد تعمل حوالي ربع الشرآات علما بان .%28 حيث تشكل اء والت صناعة والبن ا . في مجال ال ة أم سبة ألعضاء غرف بالن

شرآات هي نجد أن التجارة فتجارة وصناعة دبي ى عدد ال النظر إل م القطاعات ب ة فيه من أه .%73 حيث بلغت ا،العاملكل فقد شرآات الصناعة والبناء والتشييد أما .من إجمالي عدد الشرآات % 15جاءت الخدمات في المرتبة الثانية بنسبة تش

. قطاع الخدمات هائل ينتظرإمكانية نمو تجارييعني أن هنالك هذا . فقط من إجمالي الشرآات% 11معا نسبة

3

2003ة استبيان الغرفة لسن

ة المدرجةأوضحت النتائج المرجحة أن معظم الشرآات . 8 سئولية أو ذات ملكي تحت عضوية الغرفة إما شرآات محدودة الم .فردية

ة بالكامل ال الشرآات تشكل. 9 واطنين لمملوآ ـ لم سبة بـ شرآات %40 ن ر من مجموع ال شرآات تعتب ع ال ر من رب ، فقط أآث %.35فهي ال يعرف بالتحديد وضع ملكيتها التيالشرآات أما. ذات ملكية أجنبية) جزئيا(

عامال في المتوسط، 150 حوالي الصناعة توظف في قطاع ها نجد والتي ن الشرآات المتوسطة التي تعمل في التصدير إ. 10ي عامال30في حين أن الشرآات التي ال تعمل في مجال التصدير توظف عدد أقل آثيرا يبلغ أن التصدير ، األمر الذي يعن

.يعتبر دافعا للنمو

تضيف حين في . للقطاعمن القيمة المضافة% 91أو أآثر عامال50 توظف التيتشرآالتضيف ا :في قطاع الصناعة .11شييد في عامال 200 يعمل فيها أآثر من التي الشرآات اء والت ذا القطاع %68 قطاع البن ة المضافة له ا . من القيم في أم

من القيمة المضافة% 74 ) عامال50التي توظف أقل من (تساهم الشرآات الصغيرة و المتوسطةفقطاع التجارة

وق 20إجماال يوضح اإلجمالي السنوي للقيمة المضافة التي تحققها شرآات توظف . 12 عامال وأآثر، أن قطاع الخدمات يتف .تشييد والصناعة على التواليعلى آافة القطاعات األخرى، يأتي بعده قطاع التجارة ثم البناء وال

.مقارنة بالقطاعات الثالثة األخرى) من المبيعات% 23(سجلت شرآات البناء والتشييد والخدمات أرباحا أعلى نسبيا . 13

. المبيعاتنفقط م% 7بلغت الصناعة أرباحا ات التجارة و قطاعسجلت.14

ة . 15 الي التكلف رة من إجم واد حصة آبي ة الم شكل تكلف ارة ت ي قطاع التج ة من % 90حيث بلغت ف من % 93نقطة مئوي %. 93من % 75في قطاع الصناعة آانت %. 77نقطة من % 50في قطاع الخدمات آانت النسبة . إجمالي التكلفة

ة . 16 ك المملوآ ن تل ر م ر بكثي ا أآب واطنين أرباح ل للم ة بالكام شرآات المملوآ صناعة، سجلت ال سبة لقطاع ال ا(بالن ) جزئي .ألجانب

ر من ) جزئيا(حققت الشرآات المملوآة : في قطاع البناء والتشييد، يعتبر الوضع معكوسا تماما . 17 ر بكثي ا أآب ألجانب أرباح

.تلك المملوآة بالكامل للمواطنين

ست . 18 ى م شرآات عل ال ال ي رأس م ساهمين ف سية الم ذآر لجن أثيرا ي د ت ارة ال نج ي قطاع التج ك، ف رغم من ذل ى ال وى عل .األرباح التي تحققها

ة ، فقطاع الخدماتبالنسبة ل . 19 شرآات المملوآ ا ال ي تحققه تسجل الشرآات المملوآة لمواطنين أرباحا أعلى نسبيا من تلك الت . ألجانب) جزئيا(

4

Executive summary This paper scrutinizes the structure and the performance of Dubai non-oil enterprises sector. Scrutiny is based on sample survey data, covering the four major economic sectors i.e. Manufacturing, Construction, Services and Trade. These four sectors alone account for about 90 % of total non-oil GDP of Dubai. Furthermore, use is made of secondary macro economic data issued by the UAE Ministry of Economy and Planning in addition to membership data collected and maintained by Dubai Chamber of Commerce and Industry. This report puts a step towards understanding the economic background, the economic structure, and the performance of Dubai non-oil enterprises sector; which is deemed to determine the entire economic outlook for the whole Emirate

ith 42%.

advantages.

ation.

soon.

At macro-level Depending on Dubai sectoral contribution to UAE sectoral GDP, sectors are classified into two categories, Front-Liners and Second-Liners. 1. Dubai front-line sectors are sectors with relative high contribution to UAE sectoral GDP

of more than 36 percent. These are mainly found in Services and Trade sectors. They illustrate the production specialization of Dubai. These front-line sectors determine the economic structure for Dubai and the short-term economic outlook. These are subsequently: (1) Transport, storage and communication contributing 57% to UAE sector GDP, (2) Hotels and restaurants contributing with 55%, (3) Trade and repairing contributing with 47%, (4) Financial services contributing with 46%, and finally (5) Social and Personal Services contributing w

2. Dubai second line sectors contribute to UAE sectoral GDP 16% to 36%. These sectors

are important as well. They support the front-line sectors in terms of generating demand and delivering intermediary inputs. These are subsequently, (1) Real Estate and Business services contributing to UAE sectoral GDP with 32%, (2) Construction sector contributing 30%, (3) Manufacturing contributing 30%, (4) Government services contributing 24%, and finally (5) Electricity and water 22%.

3. The front-line sectors are heading to spectacular developments. These sectors are

efficiently utilizing existing resources and potentials relying on Dubai specific comparative

4. The economic perspectives of second-liners depend on the new opportunities to be

offered in the near future in terms of incremental demand which could be boosted by new legislation, institutional efforts in support of these sectors, local, regional and international economic integr

5. The above distinction between front-liners and second-liners delineates sharply the

economic role of both categories for the present and future economic perspectives of Dubai. It also identifies sectors in transition from second to first liners. Real Estate and Business services, (2) Construction and (3) Manufacturing are strong candidates to reach the first liners

6. Overall, the vast majority of 93% of DCCI members are small; they report to employ less

than 20 workers. Similarly, 97% of the 20 million enterprises in Europe report the same. This demonstrates further the potential of small enterprises to grow.

5

7. Service enterprises make up nearly half of all enterprises in Europe, trade is the second largest sector having 28% of all enterprises, and about one quarter of all enterprises are active in manufacturing and construction. For DCCI members, trade is by fare the most important sector in terms of number of enterprises (73%). Service is second with 15% of the enterprises. Manufacturing and construction combined make only 11% of all enterprises. This means that the services sector in Dubai still has to grow.

n.

).

DCCI 2003 survey level

8. The weighted results show that most DCCI members are either a Limited Liability or a Single Proprietorship.

9. Consequently, almost 40% of all enterprises are fully UAE owned, just over a quarter

have (partly) foreign ownership and for 35% the situation is not known.

10. In manufacturing the exporting average enterprise employs on average about 150 workers, whereas the non- exporting enterprise is employing a much smaller number of 30 workers which means growth is mainly export drive

11. In manufacturing, over 91% of the value added is produced in enterprises employing 50

workers or more. In construction 68% of value added is created in enterprises employing more than 200 workers. In trading, 74% of value added is contributed by small and medium enterprises (employing less than 50

12. Overall, the annual gross value added for companies employing 20 and more show that

the services sector outperforms all other sectors. The latter is followed by Trading sector, Construction and Manufacturing respectively.

13. Construction and service enterprises report relatively higher profit (23% of turn-over)

than the other three sectors.

14. Trade and manufacturing record a profit of only Seven Percent of turnover.

15. Cost of materials make up a large share of total cost, in the trade sector 90% percentage points out of 93% of the total costs. In services, this is only 50% point out of 77%. In manufacturing, this is 75% out of 93%.

16. For manufacturing, fully UAE owned enterprises report a much higher profit than (partly)

foreign owned enterprises.

17. In construction, the situation is completely reversed: (partly) foreign owned enterprises report a much higher profit than fully UAE owned enterprise.

18. However, in trade there is not much effect of the nationality of ownership on the profit

level.

19. In services, UAE owned enterprises report relatively much higher percentages of profit.

6

1. Introduction

This report scrutinises the structure and the performance of Dubai non-oil enterprises sector. Scrutiny is based on survey results directly collected from the field for four major economic sectors namely Manufacturing, Construction, Services and Trade. These four sectors alone account for about 90% of total non-oil GDP for Dubai.

Except the survey results, additional micro economic data from the Membership Database; which has been built and maintained by Dubai Chamber of Commerce and industry (DCCI) for several years has been extensively analysed, and used to generate relevant insights about the population structure of Dubai enterprises. To put the findings into macro-economic perspective, aggregate data issued by the UAE Ministry of Economy and Planning is being sought.

The report puts a step towards understanding the economic background, the economic structure, and the performance of Dubai non-oil enterprises sector; which is deemed to determine the entire economic outlook for the whole Emirate.

The report pays attention to micro and macro structures, and in a sense provides an overview of economic structure of Dubai and synthesises the findings in a most systematic manner. We highly appreciate and acknowledge the contributions made to this study by Mr. Koos van Elk (EIM), and all staff of Data Management & Business Research Department at DCCI who contributed directly or indirectly to DCCI 2003 survey. Our special thanks go to all DCCI members who participated in this survey their participation is hereby acknowledged as fundamental to business information development for Dubai.

The objectives of this report are to provide the business community and decision makers with relevant insights and explanations of the existing industrial structures of Dubai non-oil enterprises sector, assessing these structures, measuring performance levels at micro and macro levels, and spot light mechanisms underlying existing structures and performance levels.

The research aims at answering the following questions:

1. What are the major components of Dubai economic structure?

2. What is the relative importance of major economic sectors?

3. What are the relative perspectives of each of the major components?

4. Are there significant performance differentials between major sectors?

5. What are the factors underlying these performance differentials?

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2. The macro economic perspective

2.1 . Introduction This chapter reviews the macro economic structure of Dubai enterprises sector, for which aggregate data issued by the UAE Ministry of Economy & Planning has been used. However, aggregate data does not allow for detailed analysis. For that purpose, DCCI Membership Database and the DCCI 2003 survey results are used.

omic rces.

opment.

The analytical framework used in this paper relates strongly to the “structure-conduct-performance”, a well-known paradigm in industrial organisation; which emphasises market structure to be the determinant for business conduct and market performance. But at the same time, it recognises that market structure and business behaviour are determined by econfo Although “markets” structures and behaviours are core matters in industrial organisation, it remains not well defined in economics. It has been defined as a market- not a place- where prices tend to converge to a single value * 1, and later developed to allow for differences in prices due to distance between regions * 2 and to product characteristics * 3. The introduction of product differentiation to the market definition * 4 has led to more focus on distinct markets; which are usually nothing else than products being classified into distinct industries. for example, the European NACE, the UN ISIC, and the Standard Classification of Economic Activities developed by DCCI and Dubai Department of Economic Devel

1 Cournot, Augustin, Researches into the Mathematical Principles of the theory of Wealth. Macmillan Company, New Work, 1927. 2 Marshall, Alfred, Principles of economics, London, The Macmillan Press Ltd, 1920. 3 Robinson, Joan, The economics of imperfect competition, 2nd edition, London, Macmillan, 1933. 4 Chamberlin, Edward H, The Theory of Monopolistic Competition, Cambridge, Massachusetts, Harvard University Press, 1933.

8

Assessment of economic structures at industry and sub-industry levels will be sought to assess economic performance in each of the industries. The analytical framework sketched in the figure below describes hypothetical causal relationships between structure-conduct-performance. For example, the number of existing companies in a distinct industry, and the concentration degree of enterprises might explain the competition level and subsequently the economic performance in the sector.

Mark structure Business conduct Business performance

Firm population Concentration Performance level

Firm size structure

Competition Survival rates Integration

Figure 2.1: Illustrative examples of components relating to structure – conduct --behavior interactions.

This chapter aims at determining relevant characteristics of Dubai non-oil enterprises sector, and crosscheck with prevalent characteristics at European Union level. Secondly, it determines general characteristics at enterprise level, and assesses comparative cross-sectoral economic performance levels.

9

2.2 Structure and development of Gross Domestic Product

According to data provided in May 2004 by the Ministry of Economy & Planning, the Gross Domestic Product (GDP) of Dubai amounted to just over AED 76 billion in 2003, to which the corporation sector contributes about 90% of which ten percent points by the financial corporation sector and 80% points by the non-financial corporation sector. Nowadays, only seven percent of GDP originates from the crude oil and natural gas sector.

Dubai generates over one quarter of GDP of the entire UAE GDP. Table 2.1 shows Dubai sectoral contribution to UAE sectoral GDP.

Table 2.1 GDP 2003 by sector, UAE and Dubai (Current prises in million AED)

SECTOR UAE Dubai Share Dubai to UAE Non-Financial Corporation Sector 249426 63190 25%

Agriculture, Livestock & Fishing 9359 655 7% Mining & Quarrying 94134 5468 6%

Crude Oil and Natural Gas 93369 5385 6% Quarrying 765 83 11%

Manufacturing Industries 40100 12171 30% Electricity & Water 5513 1190 22% Construction 18791 5724 30% Trade and Repairing Services 25774 12202 47% Hotels & Restaurants 6345 3475 55% Transport, Storage & Communication 23629 13519 57% Real Estate and Business Services 21205 6863 32% Social and Personal Services 4576 1923 42%

The Financial Corporations Sector 18394 8498 46% Government Services Sector 29272 6905 24%

Domestic Services of Households 2068 598 29% Less: Imputed Bank Services 6039 2733 45%

TOTAL 293121 76458 26% Non-Crude Oil Sector 199752 71073 36% Source: Provisional data as being made available by the Ministry of Planning in May 2004.

The figures above show that Dubai services sector is doing well in terms of contribution to Dubai GDP, particularly the Transport, Storage and Telecommunication sector performed exceptionally, followed by Trade and Manufacturing. However, if we look at the sectors from a different angle, additional insights will be provided. This is done in Table 2.2. based on the figures presented in Table 2.1. The relative importance of the various sectors can be established as shown in Table 2.2. The table shows that crude oil & natural gas belongs to the lower segment of importance side to agriculture and quarrying sectors.

Dubai front-line sectors are sectors with relative high contribution to UAE sectoral GDP of more than 36 percent. These are mainly found in Services and Trade sectors. These front-line sectors determine the economic structure for Dubai and the short – term economic outlook. These are subsequently: (1) Transport, storage and communication contributing 57% to UAE sector GDP, (2) Hotels and restaurants contributing with 55%, (3) Trade and repairing contributing with 47%,

10

(4) Financial services contributing with 46%, and finally (5) Social and Personal Services con-tributing with 42%. Dubai second line sectors contribute to UAE sectoral GDP 16% to 36%. These sectors are impor-tant as well. They support the front-line sectors in terms of generating demand and delivering in-termediary inputs. These are subsequently, (1) Real Estate and Business services contributing to UAE sectoral GDP with 32%, (2) Construction sector contributing 30%, (3) Manufacturing con-tributing 30%, (4) Government services contributing 24%, and finally (5) Electricity and water 22%. The front-line sectors are heading to spectacular developments. These sectors are efficiently util-izing existing resources and potentials relying on Dubai specific comparative advantages. The economic perspectives of second-liners depend on the new opportunities to be offered in the near future in terms of incremental demand; which could be boosted by new legislation. For ex-ample, allowing foreign ownership, institutional efforts in support of these sectors such as finan-cial facilities and propriety rights, local, regional and international economic integration; whether in bilateral or multi-lateral cooperation agreements.

The above distinction between front-liners and second-liners is demonstrated to delineate sharply the economic role of both categories for the present, and future economic perspectives of Dubai. It also identifies sectors in transition from second to first liners. Real Estate and Business ser-vices, (2) Construction and (3) Manufacturing are strong candidates to reach the first liners soon.

Table 2.2 Relative importance of sectors in Dubai in terms of contribution to GDP in comparison to UAE as a whole (*), 2003 Relative Importance of sector in Dubai Share of Dubai in overall UAE GDP for the sector

High More than 36 %

Transport, storage and communication (57%) Hotels and restaurant (55%) Trade and repair (47%) Financial services (46%) Social and Personal Services (42%)

Around Average*) 16% – 36 %

Real Estate and Business Services (32%) Construction (30%) Manufacturing (30%) Government Services (24%) Electricity and Water (22%)

Low Less than 16%

Quarrying (11%) Agriculture (7%) Crude oil & Natural gas (6%)

Note *) average share of Dubai in GDP of UAE in 2003 is estimated to be 26%. Source: Ministry of Planning May 2004

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Table 2.3 shows that the total GDP contribution of the four sectors discussed in this report, i.e. manufacturing, construction, trade and services, is estimated to amount to almost AED 56 billion in 2003, almost 74% of the total as reported by the Ministry of Economy & Planning (i.e. AED 76 billion). Table 2.3 GDP in current prices, four selected sectors, estimates for 2003

Sector Million AED % Manufacturing Industries 12 171 22% Construction 5 724 10% Trade and Repairing Services 12 202 22% Services 25 780 46% Total 55 877 100%

Source: Ministry of Planning, 15 May 2004

Services, here are defined as hotels & restaurants, transport, storage & communication, real estate and business services, and social and personal services, account for almost half of the GDP con-tributed by the four selected sectors.

As these four sectors contribute some 74% of the total GDP generated by the enterprise sector in Dubai GDP, the percentages shown in Table 2.3 are corresponding to a contribution to overall GDP of Dubai of respectively 17%, 8%, 17% and 36%.

Over the last few years economic growth in Dubai has been high. Figure 2.1 shows the growth in GDP of the four selected sectors in constant prices 1995 (index numbers 2000=100). Whereas, construction grew with 11% over these three years, services have grown with 36%, implying that its share in the total has increased from 42% to 46%. Figure 2.1 Growth of GDP Dubai in four selected sectors, index (2000=100, constant prices)

90

100

110

120

130

140

2000 2001 2002 2003*

Manufacturing Industries ConstructionTrade and Repairing Services Services

Source: Source: Ministry of Planning, May 2004

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2.3 Number of enterprises by size and sector

Dubai Chamber of Commerce and Industry registers in its membership database nearly 41,000 members5. This figure includes only enterprises registered with valid membership, or member-ship expired for less than one year. The number of enterprises in the Four selected sectors is shown in table 2.4 by size of employment * 6. Table 2.4.Number of enterprises registered with DCCI by sector and size class, 2003 Size of enterprise (workers) Sector 0 - 19 20 -49 50 -199 200+ TotalManufacturing 532 259 304 80 1175Construction 2594 395 279 140 3408Trading 29198 601 231 53 30083Services 5662 372 202 77 6313Total 37986 1627 1016 350 40979Source: DCCI membership database

Table 2.4 clearly shows that over majority of enterprises is active in trade. The 29,198 small trade enterprises; which are employing less than 20 workers make up more than 70% of the stock of enterprises (41,000).

To assess the extent to which this structure is specific to the membership of DCCI, the above structure is compared with the structure of the enterprise population existing in the European Un-ion * 7. The size classes of the European data have been made identical to the classes used for the DCCI database:

0 – 19 people employed small 20 – 49 people employed medium small 50 – 99 people employed medium large

However, for the large sized enterprises a difference in the size definition remains. For DCCI membership this is defined as 200 or more workers. Whereas, European data determines this size class as 200 to 249 workers. However, this is not a significant difference as we are considering only the number of enterprises. In Europe, about 40,000 enterprises out of a total of 20 million have 250 workers or more, i.e. 0.2%. In terms of number of value added or employment, the large enterprises are obviously much more important.

Of course, one would prefer comparing the membership structure with the structure of the overall enterprise sector in Dubai. However, detailed information on the overall enterprise population is not available.

5 Meanwhile, this figure has changed to exceed 56,000 due to definition changes in late 2004.

6 The following classes in terms of the number of employed people have been distinguished: 1 –19 (small); 20 –49 (medium small); 50 – 199 (medium large) and more than 200(large).

7 Information on the European Union is based on the ENSR Enterprise Survey 2003, implemented by EIM Business & Policy Research for Directorate General Enterprise in the framework of the Observatory of European SMEs. The data provided here refer to the fifteen Member States that existed in 2003: Austria; Belgium; Denmark; Finland; France; Germany; Greece; Ireland; Italia; Luxembourg; the Netherlands; Portugal; Spain; Sweden and the United Kingdom, see: http://europa.eu.int/comm/enterprise/enterprise_policy/analysis/observatory.htm

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Tables 2.5 and 2.6 Show the distribution and structure of enterprises in Europe. Furthermore, Ta-bles 2.7 and 2.8 present the same for the DCCI membership. Table 2.5 EU distribution of enterprises by sector and size class ( in percentages) Sector of industry in four classes Size Manufacturing Construction Trade Services Total 0 – 19 90% 96% 98% 98% 97% 20 – 49 7% 3% 2% 1% 2% 50 – 199 2% 1% 0% 1% 1%200 – 249 1% 0% 0% 0% 0%Total 100% 100% 100% 100% 100%Source: Data on EU-15, ENSR Survey 2003

Table 2.5 Shows the European structure of enterprises:

• The vast majority of the 20 million enterprises * 8 in Europe are rather small, 97% of the

enterprises report less than 20 workers; • This pattern is true for all Four sectors, although in manufacturing the percentage of

small enterprises with less than 20 workers is somewhat lower at 90%; • A noticeable share of enterprises employing more than 50 workers is only found in manu-

facturing; still it is only Three Percent. Table 2.6 EU distribution of enterprises by size and sector (in percentages) Size of enterprise (workers) Sector 0 - 19 20 - 49 50 - 199 200 - 249 TotalManufacturing 10% 32% 30% 75% 11%Construction 13% 19% 14% 7% 14%Trade 28% 22% 15% 5% 28%Services 48% 28% 42% 13% 48%Total 100% 100% 100% 100% 100%Source: Data on EU-15, ENSR Survey 2003

8 The data used here refer only to enterprises up to 249 workers. However, this nearly coincides with the entire enterprise

population, in terms of number of enterprises. Whereas, there are some 20 million enterprises in Europe, only 40,000 (0.2%) employ more than 250 workers.

14

In addition: Table 2.6 shows that:

• Overall, service enterprises make up nearly half of all enterprises in Europe. Trade is

the second largest sector having 28% of all enterprises. Still, about one quarter of the enterprises are active in manufacturing and construction;

• Among the small enterprises only 10% are active in manufacturing. Whereas, this figure rises to 75% for enterprises employing between 200 – 249 workers * 9.

• Trade and services on the other hand, make up a sizeable portion of the smaller en-terprises i.e. those with 0 – 19 and 20 – 50 workers. Whereas, these sectors are much less important among the largest enterprises distinguished here (200-500 workers).

Table 2.7 Distribution of DCCI member enterprises, by sector and size (in percentages) Sector Size Manufacturing Construction Trade Services Total0 < 20 45% 76% 97% 90% 93%20 < 50 22% 12% 2% 6% 4%50 < 200 26% 8% 1% 3% 2%200 + 7% 4% 0% 1% 1%Total 100% 100% 100% 100% 100%Source: DCCI membership database Table 2.8 Distribution of DCCI member enterprises, by size and sector (in percentages) Size of enterprise (workers) Sector 0 < 20 20 < 50 50 < 200 200 + TotalManufacturing 1% 16% 30% 23% 3%Construction 7% 24% 27% 40% 8%Trade 77% 37% 23% 15% 73%Services 15% 23% 20% 22% 15%Total 100% 100% 100% 100% 100%Source: DCCI membership database

Table 2.7 Based on observations with regard to structure of DCCI membership10, using Europe as a benchmark,:

• The vast majority of the DCCI members are small. However, their share is lower than in Europe: 93% versus 97% of the enterprises report less than 20 workers;

• For the DCCI membership, this pattern is only true for the two sectors, in which most en-terprises are registered. Trade and Services (Trade 97% - Services 90%). In Construction 76% of the enterprises employ less than 20 workers, and in manufacturing this percentage of small enterprises is only 45 %;

9 As a result the average enterprise size in manufacturing is as high as 75 workers, whereas in trade it is only 7 workers. 10 As mentioned, only detailed information with regard to the members of DCCI is available. There are also non-registered

enterprises in Dubai which could result in a difference for Dubai depending on how many are they.

15

• For Europe, we observed that only in manufacturing a noticeable significant share of en-terprises (3 %) employ more than 50 workers. For the DCCI membership also, the high-est share is found in manufacturing but here it is as high as 33%.

• In Europe, only a negligible share of enterprises in construction employs more than 50

workers. For DCCI membership, it is 12% of the enterprises.

Table 2.8 considers the following:

• For DCCI members, Trade is by far the most important sector in terms of the number of

member enterprises (73%). Service is second with 15% of the enterprises. Manufacturing and construction combined encompass only 11% of all enterprises;

• In DCCI membership, only one percent of the small enterprises are active in manufactur-ing. Whereas, this figure is ten percent for Europe;

• Whereas in Europe trade and services already dominate the small enterprises with a share of 76%, in DCCI membership these sectors make up as much as 93% of the small enter-prises.

• Whereas, Trade and Services are rather unimportant among the largest enterprises in Europe (together 18% as shown in Table 2.6), these sectors represent together 37% of the largest enterprises in DCCI membership; as shown in Table 2.8. Also for DCCI members, Trade and Services consist mainly of smaller enterprises, as shown in Table 2.7. How-ever, due to the large overall number of enterprises in this sector, the larger enterprises in these sectors still form a considerable part of all large enterprises as shown in Table 2.4).

The detailed figures presented in Tables 2.5 to 2.8 are summarized in Figure 2.2; which compares the size class structure of DCCI members with the enterprise sector in Europe by sector, and in Figure 2.3 which compares the sector structure by size class. Figure 2.2 shows that in Manufac-turing, Construction and consist of relatively large enterprises.

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Figure 2.2. Structure of DCCI members compared to enterprise sector in Europe, size class

structure within each sector, number of enterprises 2003

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Manufacturing

DCCI

Eur

Construction

DCCI

Eur

Trade

DCCI

Eur

Services

DCCI

Eur

0 - 19 20 - 49 50 - 199 200 - 249

Source: DCCI membership database, and data on EU-15, ENSR Survey 2003, EIM

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Figure 2.3. Structure of DCCI members compared to enterprise sector in Europe, sector

structure within each size class, number of enterprises 2003

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 - 19

Eur

DCCI

20 - 49

Eur

DCCI

50 - 199

Eur

DCCI

200 - 249

Eur

DCCI

Manufacturing Construction Trade Services

Source: DCCI membership database, and data on EU-15, ENSR Survey 2003, EIM

Major observations from Figure 2.3:

• DCCI membership in small enterprises is dominated by traders; • Also in medium small and medium large enterprises, trade is relatively important; • Among the large enterprises in DCCI membership construction is very important.

Whereas in Europe, the larger enterprises (200 to 249 workers) are mainly active in manufacturing.

2.4 Employment by size and sector

In the enterprise sector in Dubai more than 600,000 people earn a living. Figures by the Ministry of Economy for 2003 indicate about 594,000 jobs in the non-financial enterprises and an addi-tional 14,000 jobs in the financial sector, or in total 608,000.

For purposes of representative-ness, DCCI survey results have been (re)weighted to the enter-prises population of DCCI membership. The employment magnitude as shown by the weighted resulted of DCCI 2003 survey 11 is comparable to the above figures. Weighing the results of the DCCI survey for employment resulted in estimates of around 607,000, as distributed by sector Table 2.9. 11 In 2003 data has been collected from a sample of enterprises. The sample survey is described in more detail in Annex1 of this re-

port, of which survey data on 563 enterprises is being processed and analysed. All results as presented in this chapter have been (re-) weighted in order to make sure that the sample represents the structure of the nearly 41000 enterprises registered with DCCI..

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Table 2.9 Total employment by sector and size class Size of enterprise (workers) Sector 0-19 20-49 50-199 200 plus TotalManufacturing 5,006 9,122 28,802 45,058 87,988Construction 18,080 14,299 27,056 123,363 182,798Trade 125,898 18,908 25,097 27,594 197,497Services 63,445 12,212 19,895 43,089 138,642Group Total 212,429 54,541 100,850 239,105 606,925Source: 2003 DCCI Survey,

Trade and construction employ most workers each close to 200,000 workers, respectively 33% and 30% of the total. The fast growing service sector now employs 23% of the workers. Whereas, manufacturing is the smallest employer with 14% of the total.

Considered by size class of enterprise, the employment structure shows a "bi-modal" pattern. Large concentration of employment in both the small and the large enterprises.

Figure 2.4 constructed to examine further these structures. The figure shows that the distribution of total employment of the DCCI membership by size class of enterprise is indeed very different for the Four selected sectors.

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Figure 2.4 Employment structure by size class for each of the 4 sectors

0% 20% 40% 60% 80% 100%

Manufacturing

Construction

Trade

Services

0-19 20-49 50-199 200 plus

Source: 2003 DCCI Survey,

There are two patterns being detected: ‘large employers’ in manufacturing, and construction and ‘small employers’ in trade and services.

Large employers : In manufacturing, total employment gradually increases by size of enterprise, the large

enterprises provide more than half of total employment; In construction, the largest enterprises provide even two-third of all jobs;

Smal l employers : In trade, the situation is completely reversed the small enterprises provide nearly two-

thirds of all jobs; In services sectors, the distribution is less clear. Although the smallest enterprises provide

more than 45 % of all jobs, a large share of employment is also concentrated in large en-terprises (about 30%). This may be related to the fact that services as defined here to con-sist of subgroups (hotels & restaurants, transport, storage & communication, real estate and business services, and social and personal services) which be different from one an-other.

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Combining employment and size class by sector * 12 shows that manufacturing is indeed relatively a large-scale sector, an enterprise employs on average 75 workers. Whereas in services only 22; and in Trade only Seven. Within the large enterprises however, the service firms employ ap-proximately as many workers as manufacturing ones (560 workers). However, construction firms are relatively large, employing about 880 workers on average. Table2.10 Average number of jobs per enterprise, by size class and sector, DCCI members 2003 Size of enterprise (workers) Sector 0-19 20-49 50-199 200 plus TotalManufacturing 9 35 95 563 75 Construction 7 36 97 881 54 Trade 4 31 109 521 7 Services 11 33 98 560 22 Total 6 34 99 683 15 Source: 2003 DCCI Survey.

12 In other words the average enterprise size in terms of employment.

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3 Characteristics of Enterprises Surveyed

3.1 Introduction Two of the major characteristics of the enterprises have been discussed already in the previous Chapter, i.e. the sector and the size of the enterprises in terms of the number of people employed. However, before the performance of the enterprises in the Four sectors is being analysed in sec-tion 4, some additional characteristics are presented in this section:

Legal form (Section 3.2) Foreign Ownership (Section 3.3) Exporting (Section 3.4).

3.2 Legal Form For all enterprises surveyed, the legal form has been assessed. Among the seven types distin-guished in the questionnaires, table 3.1 shows the weighted results. Most DCCI members are ei-ther a Limited Liability or a Single Proprietorship. Table 3.1 Enterprises by legal form Legal form PercentSingle proprietorship 23%General Partnership Company 5%Limited Liability 52%Branch of Foreign Company 7%Others and unknown 12%Total 100%Source: 2003 DCCI Survey Table 3.2 shows that there is quite a distinctive pattern by sector. In manufacturing and especially in services, the single proprietorship is very important. In construction and trade, the limited li-ability is more frequently used.

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Table 3.2 Legal form by sector (percentage of enterprises) Table 3.3 shows that the Single Proprie-torship is Source: 2003 DCCI Survey

Legal form Manufactur-

ing Construction Trade Services Total Single proprietorship 44 10 16 64 23 General Partnership Company 1 19 5 1 5 Limited Liability 42 69 56 25 52 Branch of Foreign Company 4 0 9 2 7 Others and unknown 9 2 14 8 12 Total 100 100 100 100 100 Source: 2003 DCCI Survey Table 3.3: Shows that the single Proprietorship is equally important for medium sized enterprises as for small enterprises. Table 3.3 Legal form by size of enterprise in terms of number of workers (% of enterprises) Size of enterprise (workers) Total Legal form 0-19 20-49 50-199 200 plus Single proprietorship 24 22 22 10 23 General Partnership Company 5 6 5 9 5 Limited Liability 51 61 58 61 52 Branch of Foreign Company 8 7 3 3 7 Others and unknown 13 4 12 17 12 Total 100 100 100 100 100 Source: 2003 DCCI Survey

3.3 Foreign ownership Almost 40% of the enterprises are fully UAE owned, just over a quarter have (partly) foreign ownership and for 35% the situation is not known. There is not much variation by size class of enterprise as Table 3.4 shows. Foreign participation is only more limited in the smallest enter-prises. About 35% of all enterprises employing 20 workers or more have (partly) foreign owner-ship. Table 3.4 Nationality of ownership by size of enterprise in terms of number of workers (Percentage of enterprises) Size of enterprise (workers) Total Nationality of ownership 0-19 20-49 50-199 200 plus Only UAE 38% 40% 42% 42% 39% Not known 36% 24% 24% 22% 35% Also foreign 26% 36% 34% 36% 26% Total 100% 100% 100% 100% 100% Source: 2003 DCCI Survey By sector more variation is found (Table 3.5). The highest share of enterprises with (partly) for-eign ownership is reported in manufacturing (35%) and construction (40%). However, figures

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have to be interpreted with care as also the percentage of ‘not known’ varies by sector and size class. Table 3.5 Nationality of ownership by sector (percentage of enterprises) Sector Total Nationality of ownership Manufacturing Construction Trade Services Only UAE 50% 48% 31% 68% 39% Not known 15% 12% 43% 12% 35% Also foreign 35% 40% 26% 20% 26% Total 100% 100% 100% 100% 100% Source: 2003 DCCI Survey

3.4 Exporting In the survey only enterprises in manufacturing have been asked about their export turnover, i.e. directly exporting to foreign customers. As much as 98 out of 154 respondents reported about their export turnover. After a weighing exercise, this represents 38% of all DCCI members in manufacturing. The dis-tribution of exporters by size class is presented below:

small enterprises (0 – 19 workers) 8 % exporting

medium small (20 – 49 worker) 59 % exporting

medium Large (50 – 99 worker) 59 % exporting

large (more than 200 workers) 85 % exporting Looked at from a different perspective we can conclude that for manufacturing the exporting en-terprise employs on average about 150 workers. Whereas, the non-exporting enterprise is much smaller at 30 workers. In Table 3.6 the share of exports in total revenue is presented for the enterprises in manufacturing. Over 10% of the manufacturers export more than 50% of their turnover. Table 3.6 Share of export in total revenue, 2002

Share of export in total revenue Percentage of enterprises No export 62% 0 < 25% 15% 25 < 50% 12% 50 <100% 11%

Total 100% Source: 2003 DCCI Survey It is interesting as well to consider similar comparison by size of enterprise even though the num-ber of small exporters that responded to the survey is too small to allow this detailed analysis. By combining small and medium small enterprises we have sufficient cases to make this comparison.

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Table 3.7 clearly shows that the percentage of enterprises exporting more than 50% of their turn-over increases by size of enterprise. Those exporting up to 25% of turn-over are showing similar trend. Table 3.7 Share of export in total revenue, 2002, by size of enterprise Size of enterprise (workers) Export share in revenue 0-49 50-199 200 plus Total No export 75% 41% 15% 62% 0 < 25% 10% 26% 34% 15% 25 < 50% 10% 17% 11% 12% 50 <100% 5% 16% 41% 11% Total 100% 100% 100% 100% Source: 2003 DCCI Survey

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4 Relative Economic Performance

4.1 The indicators

Turnover is defined as the total revenue enterprises receive by selling their products and Services * 13. The average turnover for a DCCI member in Manufacturing is nearly AED 22 Million; which is a bit more than in Trade where it is 18 million on average. But in comparing these figures across sectors one should realise that the character of the production process between sectors is completely different.

In manufacturing an enterprise might start with a relatively low value of raw material,

and put in a lot of efforts (processing by labour and machines) to arrive at its turnover; In trade sector, relatively little value might be required in terms of handling. The differ-

ence between turnover and purchase value of merchandise is merely a gross margin to cover costs and profit.

Therefore, an indicator that makes more sense – certainly when comparisons between sectors are made – is value added. Value added is defined as the difference between the turnover and costs of all inputs except Labour and Capital. It therefore consists of three main components: labour earn-ings, compensation for Capital and Profits. Value added is a much better indicator for the eco-nomic production that actually takes place in an economic unit, whether this is an enterprise, a sector or a geographical unit. Next, two performance indicators discussed namely value and Profit added as a resulting from the economic accounts.

13 Generally speaking, turnover is similar to total sales, however to arrive at sales corrections are made for changes in the

stock of goods and – in manufacturing – for goods that manufacturers are selling but that they did not produce (just trad-ing or merchandising).

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Value Added Tables below present the annual average gross added value per company by sector and size class. Note that for accuracy purposes, analysis in this section is limited to enterprises employing 20 employees and more. Performance is being reported about in terms of gross added value, and Profit. The latter will be dealt with as relative figure to other costs and turn-over. Comparative analysis is being done at sector level and at cross-sector level. Table 4.1 (a) demonstrates that the annual gross added value per company for the services sector outperforms all other sectors. The latter is followed by trading sector, construction and manufac-turing respectively. Especially the large companies employing 200 and more in the services sector are making difference. Medium firms in the trading sector are exceptionally performing as com-pared to the same category in all other sectors. Table 4.1(a). Annual average gross value added per company, by sector and size, in AED Mln. Size Manufacturing Construction Trade Services Total20-49 2.3 1.9 5.9 3 3.750-199 9 6 23.5 7 11200 plus 35 47 60 95 56Total 10 11 14 14.3 12Source: 2003 DCCI Survey,

In Table 4.1(b) we present the distribution of gross value added over the different size-classes for each of the Four selected industries. Table 4.1 (b) Distribution of total gross value added by size class and sectors Size Manufacturing Construction Trade Services Total20-49 9% 8% 28% 11% 16%50-199 50% 23% 46% 14% 33%200 plus 41% 68% 26% 75% 51%Total 100% 100% 100% 100% 100%Source: 2003 DCCI Survey, In manufacturing, over 91% of the value added is produced in enterprises that employ 50 workers or more* 14. In construction 68% of value added is created in enterprises employing more than 200 workers. In trade sector 74% of value added is contributed by small and medium enterprises.

14 The distribution of net value added (i.e. gross value added corrected for depreciation) over sectors, and size classes is very

similar to that of gross value added.

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4.2 Economic accounts

Introduct ion This section summarises the information on revenues and costs obtained in the survey among DCCI members in simple economic accounting schemes. Table 4.2 below illustrates through an example. Table 4.2 Example accounting scheme Total revenue or turnover 100 %Total Costs 90 % - of which materials 60 %- of which labour costs 25 %- of which other costs 5 %Profit 10 %Source: 2003 DCCI Survey As explained in section 4.1, value added is equal to profit plus labour costs, in this example (25 % + 10 % = 35 %). In this chapter the accounting schemes for the various sectors and size classes are presented and analysed. The indicators are presented relative to the total revenues or turnover.

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Account ing Schemes for the four sec tors The average accounting schemes reported by DCCI members in the four sectors has been calcu-lated and is reported in Table 4.4. Table 4.4: Accounting schemes for the four sectors. Manufacturing Construction Trade Services Total revenue or turnover 100% 100% 100% 100%Total Costs 93% 77% 93% 77% - of which materials 75% 56% 90% 50%- of which labour costs 10% 16% 2% 18%- of which other costs 8% 5% 1% 8%Profit 7% 23% 7% 23%Source: 2003 DCCI Survey Table 4.4 shows that the construction and service enterprises report relatively higher profit (23%) than the other three sectors. Whereas, trade and manufacturing record a profit of only seven per-cent of turnover. Obviously, cost of materials make up a large share of total cost, in the trade sec-tor 90% points out of 93% of total costs. In services, this is only 50% point out of 77%. In manu-facturing this is 75% out of 93%. Labour costs make up about 18% point of total cost in services and 16% point of total costs in construction, but only 2% point in trade.

Account ing Schemes by nat ional i ty o f ownership Finally, accounting schemes are presented for enterprises that are fully UAE owned and enter-prises, which are (partly) foreign owned. As we want to focus on the effect of foreign ownership, we have made such analysis within each of the four sectors (differences found are not distorted by sector effects). It has been realised however, that the original number of observations on which this analysis is based is rather small. For enterprises with only UAE ownership this varies from 39 to 69 cases per sector, whereas for (partly) foreign owned enterprises the number of respon-dents varies from 27 to 78 by sector. Results presented are based on weighted figures.

Table 4.5 shows that in manufacturing, fully UAE owned enterprises report a much higher profit than (partly) foreign owned enterprises;

Table 4.6 however shows that in construction, the situation is completely reversed: (partly) foreign owned enterprises report a much higher profit than fully UAE owned en-terprises;

Table 4.7 shows that in trade, there is not much effect of the nationality of ownership on the profit level

Table 4.8 however shows that in services, national enterprises report relatively much higher percentages of profit.

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Table 4.5 Accounting scheme by nationality of ownership in manufacturing Nationality of ownership Only UAE Also foreign Turnover 100% 100% Total Cost 87% 97% - of which materials 70% 81% - of which labour 10% 9% - of which other costs 7% 7% Profit 13% 3% Source: 2003 DCCI Survey

Table 4.6 Accounting scheme by nationality of ownership in construction Nationality of ownership Only UAE Also foreign Turnover 100% 100% Total Cost 90% 72% - of which materials 72% 48% - of which labour 16% 15% - of which other costs 3% 9% Profit 10% 28% Source: 2003 DCCI Survey

Table 4.7 Accounting scheme by nationality of ownership in trade Nationality of ownership Only UAE Also foreign Turnover 100% 100% Total Cost 92% 95% - of which materials 85% 93% - of which labour 4% 1% - of which other costs 3% 0% Profit 8% 5% Source: 2003 DCCI Survey

Table 4.8 Accounting scheme by nationality of ownership in services Nationality of ownership Only UAE Also foreign Turnover 100% 100% Total Cost 66% 94% - of which materials 41% 73% - of which labour 17% 19% - of which other costs 9% 2% Profit 34% 6% Source: 2003 DCCI Survey

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5. Conclusions The paper provides relevant insights about the structure and the performance of Dubai non-oil enterprises sector. Major findings show that: Dubai has got a group of front-line sectors contributing to UAE sectoral GDP with more than 36%. These are mainly found in Services and Trade sectors. They illustrate the production struc-ture and specialization of Dubai. These front-line sectors determine the economic structure for Dubai, and the short – term economic outlook. Dubai second line sectors contribute to UAE sectoral GDP 16% to 36%. These sectors are impor-tant as well. They support the front-line sectors in terms of generating demand and delivering in-termediary inputs. The economic perspectives of second-liners depend on the new opportunities to be generated.

The extent to which the two groups of sectors contribute to the UAE sectoral GDP demonstrates the actual economic potential and comparative advantages of Dubai as compared to other Emir-ates. It also identifies sectors in transition from second to first liners; which are (1) Real Estate and Business services, (2) Construction and (3) Manufacturing. Further assessment identified the policies required to open new opportunities to these sectors. Relevant policies to speed-up abovementioned transition are to alleviate existing entry barriers to foreign ownership in the Real Estate, improve access to financial facilities and development cus-tomer friendly mortgage arrangements, open financial market to new players, improve institu-tional facilities to protect investors and consumers, and develop measures to improve transpar-ency in the real estate sector through improved and sustainable regulations. Furthermore, the second-liners should be given new opportunities. Consistent and comprehensive open door policy might result in incremental demand for the sectors, and support sustaining re-gional and international economic integration. Although Services sectors, in Dubai, is amongst the front –liners, it has been demonstrated that it has still long way to go. It still has sufficient potential growth to achieve the services sector’s structural shape of most saturated economies such as that of the European Union. In manufacturing the exporting average enterprise employs about 150 workers. Whereas, the non- exporting enterprise is employing a much smaller number of 30 workers. The annual gross value added per company for the services sector outperforms all other sectors. The latter followed by trading sector, construction and manufacturing respectively; especially the large companies employing 200 and more in the services sector are making difference. Medium firms in the trading sector are exceptionally performing as compared to the same category in all other sectors.

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In manufacturing, over 80% of the value added produced in enterprises employing 50 workers or more. In construction, two third of value added is created in enterprises employing more than 200 workers. The trade sector is the other extreme: 75% of value added contributed by small enter-prises. For larger manufacturers, the total value added created by exporting enterprises is much larger than the value added of non-exporting manufacturers. While for the smaller ones this finding does not hold. At profitability level, construction and service enterprises report relatively higher profit (23% of turn-over) than the other three sectors. Trade and manufacturing record a profit of only seven per-cent of turnover. Obviously, cost of materials make up a large share of total cost. In trade sector, 90 percent points out of 93% of the total costs. In services, this is only 50% point out of 77%. In manufacturing, this is 75% out of 93%. Finally, all indicators assessed show that indeed structure determines performance at company level as well as at sector level and subsequently at sectoral level. One should attempt a further in-depth analysis to check and determine the extent of such dependencies and thereby detect possi-ble causal relationships. These are highly relevant for policy making at micro as well as macro levels. This will be part of DCCI future research agenda.

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Annex I: Set-up of DCCI 2003 Members Survey & weighting

1. Introduction

The DCCI Membership Database contains about 41 thousand active members holding valid licenses as of the end of the third quarter of 2003. The information in this database refers mainly to the time the members registered or renewed their registration. Thus, no reliable in-formation with regard to economic performance.

The shift in the structure of Dubai’s economy from highly oil-based to a diversified structure

has been very rapid. However, there is lack of reliable detailed economic information on

market structures, conduct and performance that would enable analysis of the changes in

these structures and the effects thereof. Economic information that may provide guidance for

sound economic decisions at business as well as at policy levels is limited. Therefore the

2003 DCCI survey has been initiated and conducted by the Data Management and Research

Department at DCCI to explore this research field furthermore.

2. Sampling design

A stratified sample has been used covering four major economic sectors to allow meaningful

analysis * 15 . Each of the four major economic sectors is treated as separate domain to ensure

sufficient coverage of each independent sector* 16.

3. Details on Stratification

The first dimension in the stratification process refers to the number of workers employed. A

distinction was made between members employing 20 or more workers and the smaller en-

terprises in terms of employment.

15 A disproportional stratified sample aims at surveying different strata in the population of enterprises with different sam-

ple fractions. Smaller companies are relatively abundant and homogeneous, so it is not feasible to survey a major pro-portion of them. Larger companies on the other hand are limited in number and are more likely to be rather specific in their characteristics; it is therefore desirable to sample in a way to reflect the reality of the economic structure.

16 A fully random sample would result in a very large proportion of small trade enterprises as they constitute nearly three quarters of all DCCI members. This would result in an insufficient number of respondents from the other sectors to ar-rive at conclusions for those sectors.

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The second dimension refers to the main economic activity. To aim at a reasonable minimum

number of respondents from each sub sector, relatively higher sample fractions were used in

sub sectors where small number of DCCI members is found.

Table IV.1 Respondents by sector and size class (number of enterprises)

Size of enterprise (workers)

0 - 19 20 - 49 50 - 199 200 - 249 Group Total Manufacturing 7 42 70 35 154 Construction 11 22 42 39 114 Trade 42 52 34 18 146 Services 28 42 45 34 149 Total 88 158 191 126 563

Source: 2003 DCCI Survey, processing: EIM

Given the fact that enterprises in the population did not have an equal chance of being in-

cluded in the sample (as the stratification was dis-proportional) it will not be possible to ar-

rive at valid conclusions across different strata without weighing the results.

Table IV.2 shows the distribution of sample after reweighing to represent the structure of the

population by sector and size class.

Table IV.2 Reweighed sample by sector and size class (number of enterprises)

Size of enterprise (workers) Group Total

0 - 19 20 - 49 50 - 199 200 - 249 Manufacturing 7 4 4 1 16 Construction 36 5 4 2 47 Trade 401 8 3 1 413 Services 78 5 3 1 87 Total 522 22 14 5 563

34