Potential high for business services sector

High average growth rates in the business services industry provide great potential for investors even though the sector is not a major contributor to the UAE's GDP, said a report by the Dubai Chamber of Commerce and Industry.

The sector will be an important contributor to future economic growth, adds the study, and globally its development is a key feature of economies.

The sector's share of GDP was less than one per cent on an average between 2001 and 2005. But the industry has achieved a cumulative annual growth rate (CAGR) of 18.3 per cent since 2001. UAE data on the sector is currently available only up to 2005.

In 2006, the Dubai Chamber conducted a survey to determine the sector's structure. The study discovered the industry relied on professional knowledge or expertise relating to specific technical or operational areas.

The sector's main activities were marketing (19 per cent), professional (18 per cent), renting and leasing (17 per cent) and technical services (16 per cent). In addition it was involved in research and development, recruitment and personnel services.

The sector is dominated by small and medium-sized ventures with skilled employees and turnovers of less than Dh1 million and up to Dh10m respectively. The companies cover a wide range of markets ranging from the GCC to other Arab states, Asia and Africa.

In the standard classification of economic activities business services constitute a sub-sector of an aggregate sector, which also includes the real estate industry.

Taken separately the performance of business services, as measured by GDP share growth, exceeds that of the real estate and manufacturing sectors.

When compared with the real estate sub-sector, which accounts for 90 per cent of the entire sector to which business services belongs, the latter grew at an average rate of 18.4 per cent for the period 2001-2005, faster than the corresponding rate of 16.1 per cent for the former.

The business services subsector also grew faster than the manufacturing sector, which posted average annual growth of 15 per cent during the period.

These growth rates reveal that the UAE business service sector has grown significantly since 2001. However, the sector's share of GDP in major economies is relatively high compared with the UAE at an average of 12 per cent, said the report.

The sector is knowledge-intensive and its development and progress is extremely dependent on a high-calibre workforce.

The UAE has a small national population and its labour market predominantly relies on expatriate contractual labour, which comprises about 80 per cent of the total population.

Business services are mainly outsourced in the UAE and it seems this will continue to be the case in the short to medium term. "To position itself as an international business hub and foster robust growth, the UAE needs to be competitive in knowledge-intensive and high-tech sectors such as business services," added the report.

This could be achieved by investing across all activities in the sector through the provision of training programmes that could develop capacity to satisfy the demand for a highly qualified workforce internally.