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CHAPTER V: LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT NON AGRICULTURAL: BEST PROSPECTS: RANK OF SECTOR Rank Defense Industry Equipment 1 Oil & Gasfield Machinery & Services 2 Architecture/Construction/Engineering Services 3 Telecommunications Equipment 4 Airconditioning & Refrigeration 5 Computers & Peripherals 6 Automotive Parts and Service Equipment 7 Electrical Generation Equipment 8 Water Resources Equipment 9 Construction Equipment 10 Building Products 11 Furniture 12 Sporting Goods/Recreation Equipment 13 Cosmetics/Toiletries 14 Part 1. Title Line: Best Prospects - U.A.E. Rank of sector: 1 Name of sector: Defense Industry Equipment Three-letter ITA Industry sector code: DFN Part 2. Narrative: The two principal entities in the U.A.E. engaged in the procurement of defense equipment - the General Headquarters of the U.A.E. Armed Forces (GHQ) in Abu Dhabi and the Central Military Command (CMC) in Dubai- have merged into one entity earlier this year. Now the GHQ is the sole entity in charge of procuring military equipment and supplies to the U.A.E. Armed Forces which includes the Land Forces, the Air Force & Air Defense, the Navy Forces, and Special Operations Group. In order for U.S. firms to do business with the GHQ, they should pre-register their interest with the GHQ. Only prequalified companies are invited to bid on tenders. On May 12, 1998, Abu Dhabi Crown Prince Sheikh Khalifa Bin Zayed Al-Nahyan agreed with U.S. President Clinton, in Washington on a USD 6 billion deal for the provision of eighty F-16 Lockheed Martin air fighters. The final contract will be signed later on this year. The deal still needs to gain approval of the U.S. Congress. A sale of this size to the GHQ will generate massive offset inflow to the U.A.E., thus creating investment and business opportunities for international companies. France's Dessault Aviation's Rafale fighters and the European Consortium Euro Fighter 2000 were fierce competitors for the deal. The U.A.E. Air Force is also looking at constructing two new airbases to accommodate the new air fighters and to acquire the necessary command and control systems. The U.A.E. Navy has undertaken an ambitious three-phase expansion plan named "Liwa Project" to modernize and upgrade its aging fleet. The first phase of the project includes the acquisition of six ocean capable patrol boats (OCPB). Phase two of the Liwa Project includes the acquisition of six small frigates or corvettes. Liwa III calls for the purchase of up to 200 fast intercept craft (FIC) for the Navy and the Coast Guards. A bid was announced end of last year for the supply of six 65-meter Ocean capable patrol crafts worth about USD 600 million. These new vessels will be supported by six 50-meter Baniyas Class TNC-45 fast attack patrol boats, the first of which was recently delivered by pre-offset Abu Dhabi Ship Building Company (ADSB). (N.B. Newport News (USA) owns 40% percent stake of ADSB). The U.A.E. is also considering to expand its naval base facilities to serve up to 100 fast attack craft which are programmed under the third phase of Liwa Program. Plans are underway for the construction of two new naval bases along with command and control headquarters. The proposed location for the first Naval base is between Khorfakan and Fujairah Port (Northern Emirates). Other planned procurement include maritime patrol aircraft (MPA), armored personnel carriers, heavy equipment transporters, field medical hospital equipment, and expansion of command, control and communications (C3) systems. Three major defense trade events are held every other year in the U.A.E. The Dubai Air show, the International Defense Exhibition (IDEX), and the Triple International Defense Exhibition (TRIDEX). The first two events are the largest and they are certified by the U.S. Department of Commerce. IDEX 99 will be held next year on March 14-18. Two U.S. companies were certified by the USDOC for organizing IDEX 99. They are the Association of the United States Army (AUSA), and American Aerospace & Defense Industries, Inc. (AADI). The U.A.E. Armed Forces imposes offsets obligations on international defense contractors who make sales in excess of $10 million. (N.B. Further details on offset regulations are available at the Commercial Office in Abu Dhabi). Major competitors include companies from France, U.K., Germany, Italy, Russia, Spain, and South Africa. The U.A.E. is part of the GCC unified defense program named "Hizam Al-Ta'awon" for the provision of an early warning defense system and communication network among the GCC Higher Military Commands. Offers from U.S. and other European companies are under evaluation for this project. A special forces program "ir'u Al-Jazira" (known as Peninsula Shield) was established by the GCC countries and conducts regular live munition training. In 1997, the U.S. market share of defense contracts was 30 percent. The GHQ rules for military procurement are applied. The most promising subsectors within this sector, with the estimated 1998 total market sizes of each: o Defense Electronics 250 o CCC Communications 250 o Military Telecommunications 125 Part 3 Data table: 1997 1998 1999 Total market size 1,875 6,875 3,600 Total local production 0 0 0 Total exports* 0 0 0 Total imports 1,875 6,875 3,600 Total imports from U.S. 562 6,000 500 The above statistics are unofficial estimates. Exchange rates used US$ 3.673 *NOTE: Reexports indicated where total imports exceed market size. All figures are estimates in millions of USD. Part 1. Title Line: Best Prospects- U.A.E. Rank of sector: 2 Name of sector: Oil and Gas-Field Machinery & Services Three-letter ITA industry sector code: OGM Part 2. Narrative: Despite the volatility of oil prices the U.A.E. has continued steady on its course of increasing its petroleum and gas production capacity. Oil production, currently set at 2.1 million barrels a day (mbd),is just within the OPEC quota, so the development of the U.A.E.'s gas fields allows further increases of exports and revenues, as gas is not subject to OPEC quotas. Gas demands is expected to double within the next ten years to more than 2,000 million cf/d-mainly as a result of increased demand from the power sector and the planned expansion of downstream industries. Approximately $2.5 billion has been allocated for the expansion and modernization of existing gas field facilities which will continue over the next decade. This is an indication of the market potential for state-of-the art equipment and supplies and services. The procurement of gas equipment and services relies on three factors, the approval of new projects, the routine replacement of existing machinery and continued demand of after sales service and the supply of spare parts. Demand for gas field services and equipment is expected to increase by about 10% a year. The following projects will require oil and gas field machinery and services: -$1.3 billion Onshore Gas Development Program Phase Two (OGD) for new gas processing facilities at Habshan to produce 1,000 MMSCFD of gas, 205 tones a day of NLG, 54,000 BPSD of condensate and 2,500 tones a day of sulphur; -Onshore Gas Development - Phase Three; Although OGD Phase Two was expected to meet gas demands until 2004, this phase will address the needs after 2004. The Abu Dhabi Industrial Master plan which is still being developed will cover the scope of work. - $1 billion Khuff Gas project for the development of the U.A.E.'s largest offshore gas reservoir located under Umm Shaif and Abu Bukhoosh oil fields; - $680 million Asab Gas Gathering expansion of the onshore gas field expected to process 830 million cubic feed a day (mcf/d) of wet gas from development of the Thammama F&G gas reservoirs in the Asab field. - $140 million Zakum Gas Injection Project which involves the injection of gas into the reservoir to enhance oil recovery. The scope of the project includes the construction of a new compression platform and injection network to deliver the gas to the injection wellheads. - $205 million Jebel Ali Condensate Refinery Project for Emirates National Oil Company (ENCO) which covers engineering, procurement and construction of a 4440,000 sq. mt. plant to produce 60,000 barrels per day of jet fuel, naphtha and diesel for the U.A.E. market. - $136 million Urban Natural Gas Distribution network for domestic natural gas. Key element of the system will be to utilize natural gas to power large building and industrial air-conditioning requirements especially during peak summer power demand season. Although U.S. suppliers dominate this industry, competitors from Europe such as B.P., Technip, John Brown Engineering, and Japanese firms including Mitsui Corp., Chiyoda, and Mitsubishi is intense. In 1997 the U.S. market share was 35%. There are no regulatory/demand issues affecting the market. The most promising subsectors within this sector, with the estimated 1998 total market size of each: o Liquid Natural Gas Equipment 100 o Drilling Equipment: oil and Gas 150 o Petrochemical Equipment 90 o Services: Oil and Gas 100 Part 3. Data table: 1997 1998 1999 Total market size 670 730 803 Total local production 0 0 0 Total exports* 56 62 67 Total imports 726 792 870 Total imports from U.S. 254 277 304 The above statistics are unofficial estimates. Exchange rates used US$ 3.673 NOTE: Reexports indicated where total imports exceed market size. All figures are estimates in millions of USD. Part 1. Title Line: Best Prospects- U.A.E. Rank of sector: 3 Name of sector: Architecture/Construction/Engineering Services Three-letter ITA Industry sector code: ACE Part 2. Narrative: With a drop in oil prices to 30 percent lower than last year, Government spending in the construction sector is expected to take a dramatic down turn in the next two to three years. The domestic housing market is in decline with a number of vacant properties. Abu Dhabi Municipality and Town Planning Department's focus has moved from buildings to industry and infrastructure and recently stopped issuing permits for the construction of commercial buildings. However, this measure does not apply to the construction of residential buildings. Over the next decade, the petroleum sector still represents excellent opportunities, as on going $2.5 billion expansion includes a $600 million general utilities plant, a $600 million ethylene dichloride plant and phase two of the $1.3 billion onshore gas development. In the private sector the hotel industry remains buoyant with several new hotels or refurbishment planned. Dubai will also remain a vibrant business center with several new projects either planned or ongoing. Current and future projects include: (In the Emirate of Abu Dhabi) - $3 billion free trade zone on Sadiyat island to develop a new port, storage facilities, an airport and commodities trading exchange, and a six kilometer bridge to link the island to the mainland. $ 2 billion will be spent on construction. - $330 million expansion of the Abu Dhabi and Al Ain Airports - a $272 million Abu Dhabi trade center development which includes a shopping mall and office complex, three cinemas, restaurants, sports and leisure complex and underground parking areas. - a new World trade center in Abu Dhabi which includes offices, conference rooms, a five star hotel, conference rooms, an exhibition center and a shopping mall. - a master plan to modernize all the existing old markets, which includes a one storey shopping mall, car parks and commercial buildings. - a $95 million container terminal at Mina Zayed. - a $70 million, 25 storey, oil company headquarters for Abu Dhabi National Oil Company; -a $27.2 million, five storey headquarters building for Emirates Telecommunications Corporation (Etisalat)in Al Ain, together with four new Etisalat towers in other Emirates. - Design and construction of a $54 million 23 storey tower block for the new Head Office for ZADCO/GASCO Development on Hoderiyat Island to accommodate a population of up to 60,000 U.A.E. nationals. -Development of a tourist center at Mirfa, comprising chalets, hotels and residences. -Development of an industrial city in Mussafah area which covers a 1,380-hectare industrial area including utility buildings, offices, a police station and a clinic. Industries to be set up there include a $100 million steel plant and a $120 million shipyard, together with several other ventures to be set up through the U.A.E. Offset Group. International Bechtel (US) has been preparing the master plan. Dubai: - a $500 magic world theme park due for completion in 2001.is under consideration as Dubai develops its role as a regional services center and tourist destination. - $300 million Dubai "Emirates Hills" residential gated community project with two 18 hole golf courses, club house and leisure center, adjacent to the existing Emirates Golf Club. Sharjah: - a $122 million 309 meter high tower block for Sharjah Chamber of Commerce and Industry. All Government major projects require international construction management firms to supervise work execution; U.S. companies enjoy an excellent reputation for such services. There are no regulatory/demand issues affecting the market. Government laws call for preregistration and prequalification. Strong competition comes from local, European, Korean and Canadian firms. US firms represented in the market include Bechtel, Brown & Root, Leo Daly, Pritchard Corp., TAMS, Stanley Corp, CRSS etc. In 1997, the U.S. market share was 19 percent. The most promising subsectors within this sector, with the estimated 1997 total market size of each in millions of U.S. dollars: o Petrochemical engineering Services 95 o Civil engineering services 50 o Port Development 12 o Hotel A/C/E/ services 10 Part 3. Data table: 1997 1998 1999 Total market sales 178 203 221 Sales by local firms 45 50 53 Sales by Foreign owned firms 133 153 168 Sales by US owned firms 35 37 39 The above statistics are unofficial estimates. Exchange rates used US$ 3.673 *NOTE: Reexports indicated where total imports exceed market size. Part One. Title Line: Best Prospects- U.A.E. Rank of Sector: 4 Name of sector: Telecommunications Equipment Three-letter ITA Industry sector code: TEL Part 2. Narrative: Over the past few years, telecommunications in the U.A.E. has been developing at a rapid pace. The U.A.E. Government has given telecommunications priority and it is one of the fastest growing areas in the economy. Emirates Telecommunications Corporation (ETISALAT), the local P.T.T. of the U.A.E. is a quasi-state company 60 percent owned by the U.A.E. Government and 40 percent by individual U.A.E. nationals, and is the second most valuable quoted company in the Middle East. Most of Etisalat's services range from advanced satellite and optic fiber based global communication systems to GSM and other up to date applications. Etisalat presently operates a 855,000 line nation wide telephone system with an expansion capacity of one million lines. This represents over 40 lines for every 100 residents. U.A.E. mobile subscriber users reached 312,734 in early 1998, up from 193,222 in 1996. Etisalat will expand its 250,000 line capacity GSM mobile network to 750,000 lines and increase the number of base stations to 2,250 by the end of 1998. Such is the optimism at the region's potential subscriber base for cellular services via satellite, that Etisalat plans to start a geostationary regional mobile satellite system in September 2000. The $1.5 billion deal was signed in September 1997 between the U.S's Hughes Space & Communications and U.A.E.'s Etisalat/Thuraya Satellite Telecommunications Company. Etisalat recently enhanced its Internet service with the addition of 45 megabit a second to the network and plans to make the U.A.E. a regional hub for Internet services. The hub will serve countries in the Middle East and Southeast and Central Asia. Projects currently under evaluation include: - a $6-$8 million pilot cable TV project (leading to an entire project of $100 million) throughout the U.A.E.. This is the initial step for a federal wide cable television company. Expected award date is January 1999. Etisalat will be utilizing its existing fiber optic and coaxial cable for the project. Etisalat will create a new subsidiary in which it will be a major shareholder, with paid in capital of $218 million. Shares of the company will be offered to U.A.E. Nationals through an initial public offering. Plans are also in hand to launch a second Arabic satellite channel in Dubai by 2000. The satellite channel will use ArabSat 11 to broadcast, using disk server technology. Subscribers will also be able to connect to the service via Internet. -The emirate of Ras Al Khaimah plans to provide 42,000 new telephone lines and 15,000 mobile telephones for 1999. In 1997 the U.S. market share was 14 percent. There are no regulatory/demand issues affecting the market. The most promising subsectors within this sector, with the estimated 1997 total market size of each: o Cable TV 100 o Mobile Communication services 120 o Fiber optic transmission equipment 25 o Packet Switching systems 30 Other end users of telecommunication equipment include Abu Dhabi National Oil Company (ADNOC), Dubai Petroleum Company, Ministry of Interior and the U.A.E. Armed Forces/GHQ. Part 3. Data Table: 1997 1998 1999 Total market size 177 204 235 Total local production 0 0 0 Total exports* 23 26 30 Total imports 200 230 265 Total imports from U.S. 28 32 37 The above statistics are unofficial estimates. Exchange rates used US$ 3.673 All figures are estimates in millions of U.S. dollars. *NOTE: Reexports indicated where total imports exceed market size. Government laws call for preregistration and prequalification. Strong competition comes from local, European and Japanese firms. Part 1. Title Line: Best Prospects - U.A.E. Rank of Sector: 5 Name of Sector: Air conditioning & Refrigeration Three-letter ITA Industry sector code: ACR Part 2. Narrative: The United Arab Emirates (U.A.E.) combines three distinctive characteristics which makes it a key market for air-conditioning equipment: high per capita income; extremely hot and humid climatic conditions; and relatively low electricity cost. In addition, the boom in the construction industry, caused by rapid economic and population growth, has created a strong and growing market demand. The nature of the U.A.E. climate made air-conditioning a necessity, rather than luxury. The trend in the 1990s has been toward more complex centrally packaged and air cooled water chillers. The growth in size sophistication of the U.A.E. market has resulted in the establishment of a major local manufacturer of central air-conditioning equipment. Use of CFC (Chloroflurocarbons) in not prohibited but there is a tendency to replace it by non-hazardous chemicals that will not affect the ozone layer in the atmosphere. Although the U.A.E. has been granted a 10-year exemption from complying with the Montreal Protocol, which requires signatory countries to implement a complete phase-out of ozone depleting substances by the end of 1996, the U.A.E. has plans to achieve that goal in five years by year 2001. Awareness among air-conditioning consulting firms is growing. CFC-free central air-conditioning systems are now specified by local consultants in major air-conditioning contracts in the U.A.E. The U.A.E. market is very receptive to U.S. central air-conditioning equipment, because of their reputation for high quality, safety, brand recognition, and low maintenance requirements. The most promising subsectors within this sector, with the estimated 1999 total market size of each in millions of U.S. dollars: o Central Air-conditioning 139 o Mini Split Air-conditioning 70 o Window Air-conditioning 66 o Cold Storage Equipment 71 Part 3. Data Table: 1997 1998 1999 A: Total Market Size 303 336 369 B: Total Local Production 24 24 26 C: Total Exports* 70 77 85 D: Total Imports 349 389 428 E: Imports From U.S.A. 111 133 159 Exchange Rate: USD 1 = Dhs. 3.673 The above statistics are unofficial estimates in millions of U.S. dollars. *NOTE: Reexports indicated where total imports exceed market size. POTENTIAL GROWTH FOR U.S. EXPORTS IS 21 % Part 1. Title Line: Best Prospects - U.A.E. Rank of Sector: 6 Name of Sector: Computers/Peripherals Three-letter ITA Industry sector code: CPT Part 2. Narrative: Computer utilization is on the rise with current computer users moving toward upgraded and higher capacity computers. Government offices and businesses are shifting from mainframes to more flexible, faster and cheaper micro computers or personal computers in networking environments. Local business sources estimate the current market for personal computers at USD 85 million. The annual market growth for computers is estimated at 20-25% over the next three years. Software piracy is a major problem facing computer software companies. Serious efforts are made by the U.A.E. Ministry of Economy through their Patent Office to combat software piracy. Computer companies/dealers continuously offer special promotional bargains to gain or keep their market share. With the drop in prices for reputable brand names, computers of U.S. origin have become more affordable, thereby making it more attractive to persons who wish to buy quality products. U.S. computer manufacturers are looked upon as market leaders and will maintain their edge to the extent that they continue to be able to introduce state-of-the-art technology and products at competitive prices. With the introduction of Internet services into the U.A.E. the market for personal computers has increased and it is expected to increase even further. Major U.S. computer hardware and software brands available in the U.A.E. are Microsoft, Silicon Graphics, Oracle, CompuLink Research CLR, Western Digital, Gateway 2000, AST, Apple, Compaq, Dell, digital, Hewlett-Packard, IBM, and NCR. Computer assembly plants operating in the Free Zone manufacture Acer, Toshiba, Hyundai, Samsung, Mitac, Lexmark, Commodore, and Supra brands. Products brought into the U.A.E. from the Jebel Ali Free Zone are considered as imports. Major competitors are Japan, U.K., Netherlands, Taiwan and Singapore. There are no import restrictions for the computer industry in the U.A.E. However, U.S. companies exporting sophisticated and advanced computer technology to the U.A.E. are subject to the U.S. Export Licensing regulations. The U.A.E. imposes 4 percent across-the-board customs duty on all imports including computer hardware and software. The most promising subsectors within this sector, with the estimated 1999 total market size of each in millions of US dollars: o Personal Computers 63.0 o Computer Monitors 49.0 o Printers, computer 49.0 o LAN equipment 49.0 o Modems 28.0 o Multimedia upgrades 28.0 o OCS/Scanners 28.0 o CD-ROM Drives 24.5 0 Network Adapters 15.5 o File Servers 14.0 Part 3. Data table: 1997 1989 1999 A. Total Market Size 265 304 350 B. Total Local Production 0 0 0 C. Total Exports* 142 164 188 D. Total Imports 407 468 538 E. Imports from the U.S. 122 140 161 Exchange Rate: USD 1 = Dhs. 3.673 The above statistics are unofficial estimates in millions of U.S. dollars. *NOTE: Reexports indicated where total imports exceed market size. Potential growth for U.S. exports = 16% Part 1. Title Line: Best Prospects - U.A.E. Rank of Sector: 7 Name of Sector: Automotive Parts and Service Equipment Three-letter ITA Industry sector code: APS Part 2. Narrative: With per capita income among the highest in the world, the automotive sector has traditionally fared well in this small but lucrative market. U.S. cars are increasing market share due to more favorable exchange rates vis-a-vis Japan and Germany. Most well known brand names are already represented in this highly competitive market. Local companies are increasingly interested in joint ventures/licensing agreements to manufacture in the U.A.E. items such as spark plugs, shock absorbers, air/oil/fuel filters etc. for the regional market. There is minimal manufacturing of auto spare parts in the U.A.E. Local industry sources commented that the U.S. retained its market share of approximately 21 percent. There are no regulatory/demand issues impacting the market. Customs duty is 4 percent. The most promising subsectors within this sector, with the estimated 1998 total market size of each in millions of US dollars: o Automotive Engine Parts 125 o Automotive Repair Maintenance Equipment 39 o Automotive Accessories 25 o Motor Vehicles H/V/A/C Equipment 19 o Automotive Electronic Parts 13 Part 3. Data Table: 1996 1997 1998 A. Total Market Size 224 247 271 B. Total Local Production 0 0 0 C. Total Exports* 208 220 233 D. Total Imports 432 467 504 E. Imports from the U.S. 46 51 56 Exchange Rate: USD 1 = Dhs. 3.673 The above statistics are unofficial estimates in millions of US$ *NOTE: Reexports indicated where total imports exceed market size. Potential growth for US exports = 11% Part 1. Title Line: Best Prospects- U.A.E. Rank of sector: 8 Name of sector: Electric Power Systems Three-letter ITA Industry sector code: ELP Part 2. Narrative: U.A.E.'s current power production is estimated at 6000 Mega Watt with a projected annual demand growth of 10 percent. Gas is heavily used for electrical generation in the U.A.E. due to its availability and low price. Gas turbines and gas operated steam turbines are widely used in power generation plants. This year Abu Dhabi government has launched the power privatization scheme as a model to be followed by other emirates. Privatization of the power sector is believed to be economically feasible. It will reduce government's capital expenditures incurred for the expansion and maintenance of power projects, as well as reduce federal subsidies. The cost of generating one kilowatt hour is 7 cents while the selling price is 4 cents to non-U.A.E. nationals and commercial offices, and two cents to U.A.E. nationals. The annual figure for Government subsidies for this sector is estimated at USD 271.7 million. The Abu Dhabi Water and Electricity Authority (ADWEA),established earlier this year, is in charge of handling all Independent Power Projects (IPP) in Abu Dhabi. The Taweelah A2 (IPP) expansion project is the first in line on a B.O.O. basis. The project involves increasing the current power plant's capacity by 480 MW. ADWEA is evaluating the bids for the project and the project is expected to be awarded mid June. In 1997, U.S. market share for power generation equipment in the U.A.E. was reported at 28 percent. Lots of attractive opportunities are available for U.S. power equipment manufacturers and power plant management companies to participate in forthcoming B.O.O. projects. In Abu Dhabi alone, there are more than six major power projects coming up, while at least four major ones are foreseen in Dubai and the northern emirates. The U.A.E. is involved in a GCC plan to construct a unified power grid. The first phase of the project connects Saudi Arabia, Kuwait, Bahrain, and Qatar, while the second phase incorporates Oman and the U.A.E. in the overall grid. Execution of this plan is dependent on the construction of a unified power grid in each country. The U.A.E. has started the construction of its four-phase unified grid connecting all emirates. Actually, the completion of the first phase of the project is expected end of this year, thus interconnecting all power stations in the western coast with the central region stations. There are no constraints on the import of power generation equipment in the U.A.E.. A 4 percent tax applies to power generation equipment imported for sale in the country. Major power subsectors Estimated Market Size in 1999 (in Million USD) 0 Gas and Steam Turbines and parts 600 0 Power Transmission/Distribution Equipment 100 0 Switchgear motors/engines 55 Part 3. Data Table: 1997 1998 1999 Total market size 522 650 715 Total local production 0 0 0 Total exports* 66 75 83 Total imports 588 725 798 Total imports from U.S. 165 203 223 The above statistics are unofficial estimates. Exchange rate used is One USD equals 3.673 dirhams. *Note: Re-exports indicated where total imports exceed market size. All figures are estimates in millions of USD. Part 1. Title Line: Best Prospects - U.A.E. Rank of sector: 9 Name of sector: Water Resources Equipment Three-letter ITA industry sector code: WRE Part 2: Narrative: The privatization of the water sector goes hand in hand with that of the power sector especially that power and water generation in the U.A.E. are co-linked at the same plant. Last year, a US$2 billion budget was allocated for the development of power and water desalination capacity for 1997-1998. With privatization plans ahead, the U.A.E. government is expected to reduce its budget allocations for the power and water desalination projects, thus giving a bigger role for the private sector. Total demand for water in the U.A.E. is estimated at 400 MGPD. The Ministry of Water and Electricity estimates an annual growth of 12 percent in demand for water in the next couple of years. Current water desalination capacity in Abu Dhabi alone is reported at 196 MGPD. The Taweelah A2 power and water desalination project was launched earlier this year in Abu Dhabi under the newly adopted privatization scheme. The project will increase the current Taweelah A2 water desalination capacity by 50 MGPD. The final phase Taweelah C Power/Water Desalination plant will add 40 MGPD of desalinated water by year. Almost 20% of all water consumed is used for agricultural purposes especially that the U.A.E. is focusing more on developing its agricultural sector. By year 2015, water consumption forecast exceeds 600 million GPD of which Abu Dhabi's share could reach 250 million GPD. Overall, capacity to produce water will double in the U.A.E. during the next 5 years, including new opportunities for Independent International Power Producers to invest in B-O-O (build-own-operate) projects worth billions of dollars. The application of Reverse Osmosis technology have encountered several problems in the U.A.E. due to the high temperature and salination rates in summer, which causes the closure of the membranes, thus suspends desalination operation. Multi-Stage Flash and Multi-Electric desalination technologies are becoming widely used in the U.A.E.. U.S. companies with RO technology should exert an effort to update U.A.E. officials at the Ministry of Water and Electricity on technological developments made to overcome those problems. Wastewater treatment systems are in great demand now but because of religious considerations, waste water cannot be used either for human consumption or agricultural crop production. It's principal use is in municipal decorative and ornamental agriculture and golf courses. U.S. companies face tough competition from French, Italian, British, German and Japanese companies. In 1997 the U.S. market share was 25 percent. There are no regulatory/demand issues affecting the market. The most promising subsectors within this sector, with the estimated 1998 total market size of each: o Desalination equipment 350 o Irrigation Equipment 100 o Water supply/Dist. Systems 220 Part 3. Data table: 1997 1998 1999 Total market size 627 750 840 Total local production 0 0 0 Total exports* 60 67 67 Total imports 689 817 907 Total imports from U.S. 175 210 252 The above statistics are unofficial estimates. Exchange rates used US$ 3.673 *NOTE: Reexports indicated where total imports exceed market size. All figures are estimates in millions of U.S. Dollars. Part 1. Title Line: Best Prospects - UAE Rank of Sector: 10 Name of Sector: Construction Equipment Three-letter ITA Industry sector code: CON Part 2. Narrative: The construction sector of the U.A.E. is one of the most active sectors of the economy. The current boom in construction and renovation activity, fueled by rapid economic and population growth, will create a strong growing market demand for construction equipment. The U.A.E. will spend well over USD ten billion for civil work projects over the next five years. Projects include construction of new high-rise commercial/residential buildings, houses, hotels, beach resorts, hospitals, schools, roads, public parks, shopping malls, two major airport expansions, and theme parks. Industry sources are confident that the upward trend in the construction industry will continue during the next three years. Thus, additional construction equipment will be in demand to support this high level of construction activity. All construction equipment demand is met through imports. U.S. market share is expected to increase during the next three years. U.S. manufacturers and exporters enjoy an excellent reputation for product quality and durability. There are no significant trade barriers to the importation and sale of construction equipment in the UAE. Custom duties are four percent. The most promising subsectors within this sector, with the estimated 1999 total market size of each in millions of U.S. dollars: O Heavy Construction Machinery 160 O Road Construction Machinery 146 O Earth Moving Machinery 125 Part 3. Data Table: 1997 1998 1999 A: Total Market Size 414 462 521 B: Total Local Production 0 0 0 C: Total Exports* 131 145 160 D: Total Imports 545 607 681 E: Imports From U.S.A. 223 249 278 Exchange Rate: USD 1 = Dhs. 3.673 The above statistics are unofficial estimates in millions of U.S. dollars. *NOTE: Reexports indicated where total imports exceed market size. POTENTIAL GROWTH FOR U.S. EXPORTS IS 12 % Part 1. Title Line: Best Prospects - UAE Rank of Sector: 11 Name of Sector: Building Products Three-letter ITA Industry sector code: BLD Part 2. Narrative: The U.A.E. import market of building products is influenced largely by the level of construction activity in the country. Local market demand for building products is growing rapidly as public and private sectors are floating tenders for the construction of diversified commercial, residential, and institutional buildings. Major current civil construction projects include: Abu Dhabi Grand Mosque, Abu Dhabi Airport Expansion, Adnoc Headquarters, Ruwais Housing Program, Abu Dhabi Pediatric Hospital, Dubai Airport Expansion, Chicago Beach Resort Development, Emirates Towers, Sharjah Tower and Exhibition Complex, two new Etisalat Towers, and Magic World Theme Park. Local importers and distributors of building products indicated that U.S. manufacturers/suppliers have an excellent reputation for supplying quality-engineered products and foresee an increase in the U.S. market share. The primary reason for this expected growth is due to the satisfaction among end-users with the quality of U.S. building products. There are no significant trade barriers to the importation and sale of building products in the UAE. Custom duties are four percent. The most promising subsectors within this sector, with the estimated 1999 total market size of each in millions of U.S. dollars: o Wood & Wood Products 296 o Architectural Glass 256 o Electrical Products 220 o Ceramic Products 217 o Plumbing Products 138 Part 3. Data Table: 1997 1998 1999 A: Total Market Size 1,459 1,691 1,974 B: Total Local Production 210 231 258 C: Total Exports* 312 364 420 D: Total Imports 1,561 1,824 2,136 E: Imports From U.S.A. 186 218 255 Exchange Rate: USD 1 = Dhs. 3.673 The above statistics are unofficial estimates in millions of U.S. dollars. *NOTE: Reexports indicated where total imports exceed market size. POTENTIAL GROWTH FOR U.S. EXPORTS IS 17 % Part 1. Title Line: Best Prospects - U.A.E. Rank of Sector: 12 Name of Sector: Furniture Three-letter ITA Industry sector code: FUR Part 2. Narrative: A growing population means increasing requirements of both office and residential space, implying a higher demand for furniture. Improving standards of living and high disposable incomes lead to larger living spaces and frequent replacement of furniture. In addition, the fast growth in tourism is boosting construction of hotels and leisure facilities. Dubai attracted well over two million visitors in 1997. There are currently 233 hotels rated 3 stars and above with over 12,000 rooms. The total number of hotel rooms is expected to increase to 20,000 during the next five years. There are six new hotel projects currently under construction including the world tallest hotel tower currently being built on a man-made island. Several other hotels are in the process of expanding/renovating their existing facilities. The most promising subsectors within this sector, with the estimated 1999 total market size of each in millions of US dollars: o Household furniture 126 o Office furniture 107 o Medical/hospital furniture 73 Part 3. Data Table: 1997 1998 1999 A. Total Market Size 253 300 362 B. Total Local Production 54 62 70 C. Total Exports* 35 42 49 D. Total Imports 234 280 341 E. Imports from the U.S. 23 30 36 Exchange Rate: USD 1 = Dhs. 3.673 The above statistics are unofficial estimates in millions of U.S. dollars. *NOTE: Reexports indicated where total imports exceed market size. Potential Growth for U.S. = 25% Part 1. Title Line: Best Prospects - U.A.E. Rank of Sector: 13 Name of Sector: Sporting Goods/Recreation Equipment Three-letter ITA Industry sector code: SPT Part 2. Narrative The U.A.E. follows Saudi Arabia as the second most important consumer market among GCC countries. With a high per capita income ($17,500) and competitive worldwide salaries it presents a very attractive market for the leisure/recreational industry. The large resident expatriate population (80% of total population) has a significant influence on the demand for sporting goods. In recent years, both the public and private sector have begun to build and operate large scale recreational facilities/theme parks in the U.A.E. Three water/theme parks are in the planning stage. Opportunities for further development and expansion exist especially for theme park equipment. All the centers/parks will be supplied with imported equipment. Actual value figures for recreational equipment is not reflected below as it usually gets noted under construction activities by the local statistics office. Innovative new products and increased promotional activity characterize this highly competitive market. Major competitors are Germany, China, Japan and the U.K. Customs duty is 4 percent. The most promising subsectors within this sector, with the estimated 1999 total market size of each in millions of US dollars: o Video games 17.1 o Amusement park/Outdoor playground equipment 9.0 o Racquet Sports and Accessories 7.5 o Fitness Equipment 6.2 o Golf Equipment 4.1 o Playing cards 2.2 o Soft playgrounds 1.8 o Fishing Equipment 1.4 o Hunting/Shooting Equipment 1.0 Part 3. Data Table: 1997 1998 1999 A. Total Market Size 82 87 90 B. Total Local Production 0 0 0 C. Total Exports* 46 48 51 D. Total Imports 128 135 141 E. Imports from the U.S. 19 20 21 Exchange Rate: USD 1 = Dhs. 3.673 The above statistics are unofficial estimates in millions of U.S. dollars. *NOTE: Reexports indicated where total imports exceed market size. Potential growth for U.S. exports = 5% Part 1. Title Line: Best Prospects - U.A.E. Rank of Sector: 14 Name of Sector: Cosmetics/Toiletries Three-letter ITA Industry sector code: COS Part 2. Narrative Innovative new product formulations and increased promotional activity characterize this highly competitive market. Opportunities for further development and expansion exist especially for hypo-allergenic and therapeutic skin care products. Demographic trends indicate an ageing population which offers potential further growth for anti-ageing products. U.S. market share for the U.A.E. in 1996 was 11 percent. Companies offering natural cosmetic/toiletry products comparable to the Body Shop, U.K. have excellent potential in the U.A.E. Major competitors are France, U.K., Germany, Italy and Spain. Customs duty is 4 percent. Cosmetic creams which offer recuperative or restorative skin care must be approved by the Ministry of Health before market entry into the U.A.E. The most promising subsectors within this sector, with the estimated 1999 total market size of each in millions of US dollars: o Cosmetics 72 o Perfumes 60 o Skin Care Products 43 o Hair care Products 36 o Cosmetics & Toiletries - Men 30 Part 3. Data Table: 1997 1998 1999 A. Total Market Size 229 247 266 B. Total Local Production 20 22 24 C. Total Exports* 70 82 96 D. Total Imports 279 307 338 E. Imports from the U.S. 28 31 34 Exchange Rate: USD 1 = Dhs. 3.673 The above statistics are unofficial estimates in millions of U.S. dollars. *NOTE: Reexports indicated where total imports exceed market size. Potential growth for U.S. exports = 11% BEST AGRICULTURAL PROSPECTS: Name of Sector: Horticultural and Tropical Products PS&D Commodity Heading: Apples, Fresh Comments: Because of their high quality, demand for U.S. red apples is very strong, particularly among institutional end-users. In fact, the UAE is one of the top 10 markets in the world for U.S. apple exports. Iran is currently the principal apple supplier to the UAE, providing mostly golden varieties. Chile and France are other major suppliers. Data Table 1996 1997 1998 (1,000 MT) A. Total Market Size 45 47 49 B. Total Local Production 0 0 0 C. Total Exports 38 38 39 D. Total Imports 83 85 88 E. Total Imports from U.S. 16 18 20 Name of Sector: Oilseeds and Products PS&D Commodity Heading: Corn Oil Comments: The U.S. is currently the principal corn oil supplier to the UAE. Most oil is shipped in bulk for further processing and packaging in local plants. There is also growing demand for sunflower seed and to a lesser extent, canola oil. Data Table 1996 1997 1998 (1,000 MT) A. Total Market Size 20 22 23 B. Total Local Production 0 0 0 C. Total Exports 5 8 10 D. Total Imports 25 30 33 E. Total Imports from U.S. 20 25 27
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