Cautious capital, closer factories: UAE set for supply-chain shift

• Minister: volatility moves investor priorities
• Resilience and proximity outweigh cost
• Closeness to India and Turkey in focus

Manufacturers are reworking how and where they produce goods as geopolitical tensions force a rethink of global supply chains, with resilience and regional proximity taking precedence over cost, the UAE’s investment minister told AGBI.

Businesses are moving away from single-source, lowest-cost production models toward more diversified and regionalised supply networks. Closeness to countries such as India and Turkey is emerging as a crucial consideration. 

A white paper launched by the investment ministry on Wednesday during the Make it in the Emirates initiative revealed that foreign direct investment has been central to the UAE’s industrial push, accounting for nearly $33 billion in capital commitments and an estimated near 39,000 jobs over the past decade. 

The US, UK and India ranked as the leading sources of projects.

Conflict-driven uncertainty has resulted in “greater deliberation in decision-making” among investors, said the minister, Mohamed Hassan Alsuwaidi.

But caution doesn’t mean withdrawal.

“Volatility has sharpened investor priorities,” the minister said. “The question is no longer solely where returns are highest, but which markets can offer certainty of execution, continuity of operations and long-term stability.”

That recalibration is reinforcing the UAE’s ambition to more than double manufacturing’s contribution to GDP under its Operation 300bn strategy. The government recently approved an AED1 billion ($270 million) industrial resilience fund and is pursuing the localisation of more than 5,000 critical products to reduce reliance on imports.

“We are not trying to manufacture everything,” Alsuwaidi said. “Our advantage lies in higher-value, more complex industries, where our infrastructure, connectivity and regulatory environment more than offset higher input costs.”

In petrochemicals, a $6.2 billion expansion of the Borouge 4 complex by the Abu Dhabi National Oil Company and Borealis is set to turn Al Ruwais into the world’s largest single-site polyolefin plant – making materials for packaging, car parts, medical devices and construction – with capacity of 6.4 million tonnes a year.

In aerospace, Rolls-Royce’s $6.5 billion Trent 700 engine deal running through 2027 is set to deepen local manufacturing capabilities beyond maintenance, repair and overhaul. Meanwhile, India’s Ashok Leyland is expanding its Ras Al Khaimah plant into electric-vehicle production aimed at European markets.

“Becoming a credible exporting economy means moving beyond assembly into advanced manufacturing and high-value exports,” Alsuwaidi said, adding that the “Made in the UAE” label is gaining international traction.

India is emerging as a near-term priority, given the proximity, population and size of the economy. 

 “It is a market of 1.4 billion consumers with rising demand for chemicals, food products, building materials and machinery,” he said.

Indonesia, Turkey and the wider Greater Arab Free Trade Area are also emerging as significant strategic corridors.

Regional anchor

As companies adopt dual-sourcing and nearshoring strategies, the UAE is positioning itself as a regional production and distribution anchor, Alsuwaidi said.  

Its 12 commercial ports offer combined capacity exceeding 25 million twenty-foot equivalent units annually, complemented by air cargo throughput of more than 3 million tonnes and a growing Etihad rail-linked logistics network.

Dubai’s re-export market, which handles more than $200 billion in trade each year, reinforces that role.

“The UAE operates as both a manufacturing base and a global distribution hub – a combination difficult to replicate,” he added. 

Further reading:

• UAE announces $49bn industrial localisation drive
• Conflict accelerates shift to local production in UAE
• UAE investors shift to ‘old economy’ assets