Export-orientation policy drives economic transformation: DEC

Dubai / WAM

Export-orientation has been credited as a successful development strategy leading to economic transformation while sustained export-oriented policies have been associated with significant export diversification, according to a working paper on productivity of exporting firms in Dubai in two economic zones, Dubai main and free zones.
The paper also described how countries, which initially remained confined to exploiting the natural resources they were endowed with, sought to avoid abrupt sector-specific shocks by shifting towards manufacturing. The export of manufactured products was seen as non-traditional export.
In fact, non-traditional exports are characterized by higher income elasticity, less volatile terms of trade, and higher prospects of dynamic productivity gains, said the paper prepared by the Economic Policy & Research Center (EPRC), the operational arm of Dubai Economic
Council (DEC).
Dubai has recently launched a far-reaching development plan (the Dubai 2021 Development Plan). Among other things, this plan is aimed at enhancing high productivity through the promotion of the ‘light manufacturing sector’. The received wisdom about the role of manufacturing, especially manufacturing exports, in economic development should augur well for this strategic objective of the Dubai development plan.
A more prominent role for manufacturing, therefore, should entail higher productivity growth and, hence, more stable and sustainable growth. This has rightly been the main policy concern for Dubai in view of the increasingly volatile global economy, which has substantially impacted the highly open and largely service-oriented economy of the Emirate. Moreover, though the massive factor accumulation and superb business environment have been enough to allow Dubai to achieve one of the most phenomenal economic transformations in recent history, there is a wide consensus that this growth model might have now reached the point of diminishing returns. While the economy has multiplied by 11 times in real terms in the period 1975-2008, labour productivity, as measured by output per working-age person, has remained stagnant for a long period of time (1987-2004) following a substantial decline in the early 1980s. This contrasts sharply with the other city economies, most notably those of Hong Kong and Singapore, where labour productivity has grown steadily over the same period.

Of the 953 firms surveyed, 795 were located in Dubai Main, while 158 were located in Free zones (including Dubai International Financial Center DIFC). A total of 66 percent of firms in the sample were small firms with 5-19 employees, 28 percent were medium firms with 20-99 employees, while 6 percent of firms had more than 100 employees.