UAE re-exports rebound in 2010 after slump

The global economic downturn depressed the UAE’s non-oil re-exports for the first time in 2009 but they sharply rebounded in 2010 as demand in the region continued to recover, according to a semi official study.

“As a consequence of the global slowdown, and its ensuing impact of reduced demand in the region around UAE, the country’s re-exports fell for the first time in almost two decades in 2009,” said the study by the government-controlled Emirates Industrial Bank (EIB).

“However, 2010 saw an immediate recovery when re-exports rebounded to not only fully cover the lost ground in the previous year but post a yet another high, surpassing the record high level reached in 2008…. imports also staged a recovery but still remained below the high of 2008.”

The report showed the current share of re-exports surged to one of the highest levels of around 40 per cent of imports.

“While re-exports have recovered the decline of 2009, the fall gives a good idea of the sector wise vulnerability of reduced demand,” the report said.

The figures showed that in 2009, the country’s re-exports stood at 117.6 billion,  down by around 8.6 per cent over 2008. They shot up by about 22.4 per cent to nearly Dh144bn in 2010.

The fall in 2009 was not large or significant, but clearly a mere aberration in face of global slowdown and re-export demand already recovered in 2010 with a growth in value by 22.4 per cent, EIB said.

In terms weight, re-export had virtually shot back to the level of 2009, the report said, adding that the decline in re-export by weight was less than in value.

“The decline was fairly uniform, where intermediary and consumer goods and raw materials were all equally affected. Only three of the 21 sectors were able to register positive growth,” the report said.

The remaining 17 sectors registered a decline, it said but noted that in 2010, nine of sectors with negative growth had recovered to show positive growth.

A breakdown showed the most significant decline (in absolute terms) in 2009 was in the base metals sector, which is a leading sector. The decline was probably caused by reduced demand for construction in the region.

“However, this sector rebounded with a seven per cent growth in 2010.

Significantly, machine goods, a major re-exports sector (comprising both capital and consumer machine goods) grew by about three per cent in 2009, followed by a strong rise of 13 per cent in 2010.”

The report showed vehicles which saw a huge decline in gross imports and are a significant sector, saw only a marginal decline of four per cent.

But they sharply increased by nearly 13 per cent in 2010.

Most of the smaller sectors (arms, edible oils, footwear, art etc.) recorded the largest decline although they are not significant in absolute terms.

Concerning re-export structure, EIB said they are  predominantly of manufactured consumer goods, followed by intermediary goods and capital goods. Re-export of raw materials is relatively small while food roducts have the biggest share in re-exports, accounting for more than a quarter.

The largest individual sector is vegetable products. This is followed by the machine goods sector, comprising of both electric and non-electric machinery, and is made up of both consumer and capital goods, but more of the former. Unlike gross imports, there was no major change in re-export structure in 2009 and 2010, EIB said, adding that the top three sectors (vegetable products, base metals and machinery) remained in the lead as earlier.

Turning to destination of re-exports, the report said India, Iran and Iraq remained the dominant markets, accounting for almost 60 per cent of the total, with Iran continuing to top the list of re-export destinations.

Taken together, the GCC countries are the second largest destination for UAE exports after Iran, according to EIB, which ranked Saudi Arabia as the top GCC market, followed by Qatar, Kuwait, Oman and Bahrain.

Hong Kong and Singapore stand out as the only two significant destinations in the Far East, presumably because of their own extensive re-export activity.

“The outlook for the UAE’s re-exports remains positive despite the aberration in 2009. Growth in the destination regions will lead to increasing demand. When purchase quantities are not that large, instead of direct imports they are better procured through the re-distribution centre in UAE.”

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