Potential of UAE Business service sector
The business service sector is becoming an important group of industries to future economic fortunes. The growth and development of this sector is one feature of global economies. The business service sector relies on professional knowledge or expertise relating to specific technical or functional domain. It comprises among others accounting, marketing, auditing, legal services, consultancies and research and all IT related services.
In 2006, the Dubai Chamber conducted survey on Dubai business service sector to determine the structure of the sector. The results of the survey revealed that the main activities within the Dubai business service sector are; marketing services 19%, professional services 18%, renting and leasing services 17%,technical services 16% and the rest is distributed among research and development, labor, recruitment and personnel services refer to Figure 1.
Source: Dubai Chamber Survey 2006
Dubai business service sector is dominated by small and medium size companies with skilled employees, whose turnover is less than 1million and between AED 1-10 million, respectively. Companies in Dubai business service, cover wide range of markets from the GCC to other Arab, Asian and African markets.
On average the GDP share of the business service sector in the UAE economy is less than 1% for the period 2001-2005. The Sector has been growing at cumulative annual growth rate (CAGR) of 18.3% since 2001. The UAE national accounts data for business service sector are only available up to 2005.
Source: Dubai Chamber calculation based on Ministry of Economy
data
In the standard classification of economic activities, business sector is subsector of an aggregate sector which comprises both real estate and business service sector. Considered separately, the business service sector GDP share in the UAE economy is comparable to the GDP share of other subsectors, such as hotels, restaurants, electricity and insurance, as shown in Figure 3.
Source: Dubai Chamber calculation based on Ministry of Economy
data
Nevertheless, the performance of the business service sector in the UAE, as measured by GDP growth, is comparable to that of the real estate and the manufacturing sectors. When compared to the real estate subsector, which accounted for 90% of the entire sector to which business services also belongs; the latter had grown at an average rate of 18.4% for the period 2001-2005, faster than the corresponding rate of 16.1% for the former. The business services subsector had also grown faster than the entire manufacturing sector, which posted an average annual growth of 15% during the period.
Those growth rates reveal that the UAE business service sector has grown significantly since 2001. However, when comparing the percentage share of this sector to the GDP across major economies, we notice that the sector share is relatively high in these economies, representing on average of about 12% of their GDP. This is not comparable to that of the UAE, as Table 1 below shows. With the high average growth rates for UAE business service sector for the period between 2001- 2005, and still low GDP share in the UAE economy, there is a great potential in this sector for investment.
Table 1: GDP Share of Business Services
2005 (%)
Industry UK US France UAE
Business services 12.4 11.5 12.7 0.8
Source: OECD Industrial Database, UAE Ministry of Economy
Business service sector is knowledge-intensive sector, whose development and progress is extremely dependent on high caliber workforce. UAE have small national population and its labor market is predominantly dependent on expatriate contractual labor; comprising about 80% of the total population. As the business services in the UAE are mainly outsourced, it seems that in the short to medium term the UAE business service sector will continue to be reliant on outsourcing.
To position itself as an international business hub and to foster its robust economic growth, the UAE needs to be competitive in the knowledge intensive and the high-tech sectors such as business services. This can be achieved by investing across all activities in this sector. This can be done through provision of high standards of education and training programs that can develop the UAE internal capacity to satisfy demand of business service sector for highly qualified workforce.
