The road to Al Ain International Airport just may be one of the most picturesque approaches to any international gateway: unbroken sand dunes whose rich ochre hues are dotted with meandering camels.
That picture of serenity is set to change, however, to one of industry and action. A 25 square kilometre block of desert adjacent to the airport is to be transformed into an industrial cluster for the aerospace industry for local and international companies.
The plans are ambitious but also far-sighted, entailing nine stages of development, to be spaced out from now until as late as 2090. By the first few decades, the zone is expected to generate 10,000 direct and indirect jobs for the local community and contribute 1 per cent of the emirate's GDP.
The efforts are part of Abu Dhabi's desire to diversify the economy and build up industries of high value that play to the emirate's strengths - plentiful energy and capital. A few businesses are already up and running, notably Strata, which produces composite parts for Airbus aircraft and plans to take on more complex work through the decade. Other anchor tenants are involved in aircraft maintenance and flight training.
To date, aerospace has been a notable holdout in the spread of globalisation. In 2008, 85 per cent of electronics manufacturing took place in emerging markets. In the automotive industry, that figure was 33 per cent. But in aerospace, only 3 per cent of the work was done in developing markets, according to a report from the consultancy McKinsey & Company.
It said the reasons include high regulatory, quality control and safety requirements, the importance of protecting intellectual property, and the sometimes blurry line between civilian technology and sensitive military applications. In addition, manufacturing volumes are lower than in other industries, and the level of design and customisation is higher, McKinsey said.
Today, most aircraft are made in Europe, North America and Brazil, while some countries, including Japan, have become major suppliers to the main manufacturers such as Boeing and Airbus.
Nonetheless, the UAE should take heart that the list of nations with significant aerospace capabilities is growing, even beyond the BRIC nations of Brazil, Russia, India and China. Mexico is the success story, receiving more foreign investment in aerospace manufacturing than any other country, according to AeroStrategy, a UK consultancy.
The country now has more than 20,000 workers employed in the industry, with annual aeronautical exports of more than US$3 billion (Dh11.01bn). Mexico's keys to success include a low-cost, dependable and skilled labour force; proximity to US and Canadian aerospace supply chains; completion of an aviation safety agreement with the US, which lets manufacturers certify and ship components directly from Mexican factories; confidence in Mexico's willingness to protect intellectual property; and Mexico's elimination of duties for aeronautic components, AeroStrategy said.
Similarly, Morocco's proximity to Europe and cultural affinity with France have helped to create a $250 million industry employing 7,000 people from firms such as Boeing, EADS and Safran, AeroStrategy noted.
A number of emerging players are based in Asia. Malaysia launched its National Aerospace Blueprint in 1997 and has outlined a plan to become a major player by 2015. It has a national-level steering committee chaired by the prime minister and was the seventh-largest destination for manufacturing investments between 1990 and 2009.
Through partnerships with US firms, and heavily investing in its own research programmes, South Korea has produced indigenous aircraft including the T-50 trainer jet, considered a contender in a $1.2bn contest in the UAE. What is more, South Korea's space industry had an estimated turnover of $1.1bn in 2006 and has exported satellites to Dubai and Malaysia. Finally, Vietnam will soon receive a factory outside Hanoi to produce wing flaps for the Boeing 737, while EADS plans to build an industrial park for aeronautics and space in Da Nang.
Ross Bradley, the chief executive of Strata, said countries such as Vietnam wanted to get into the aerospace industry because of the technology transfer it would enable. "They can take that technology and put it into other sectors, such as automotives," he said.
In Abu Dhabi, cluster plans are being developed by Mubadala, a strategic investment company owned by the Abu Dhabi Government, and Abu Dhabi Airports Company (ADAC). Mubadala will work with foreign companies on industrial co-operation and partnerships at the cluster, while ADAC will be in charge of the logistics, infrastructure and the management of facilities, said Homaid al Shemmari, the executive director of Mubadala Aerospace. The two firms are working on finding the best balance and synergies, he said.
To build a successful cluster, a number of ingredients are necessary, according to McKinsey. First, governments need to make aerospace development a significant national priority. And it helps to structure the industry around a single integrated player to bring scale to development and manufacturing. In the case of Abu Dhabi, that could come from Mubadala's ambitions to produce a business jet locally.
In addition, McKinsey said any resulting product must be globally competitive in performance and cost. Other ingredients include a large pool of capital and "the ability to develop aircraft, manage the supply chain, co-ordinate manufacturing and assemble a plane's structure - or at least to access such capabilities through partnerships," it said.
All of this must be facilitated by a bright and motivated talent pool. The Korea Aerospace Research Institute and Singapore's Agency for Science, Technology and Research played crucial roles in the development of these nations. In the same way, Abu Dhabi is positioning the Higher Colleges of Technology and the Khalifa University of Science, Technology and Research to train engineers and technicians.
Clusters also require large numbers of small and medium-size suppliers to support anchor tenants and build up a critical mass. Some European firms could become interested in Al Ain, according to Alessandro Borgogna, a principal at the management consultancy Booz & Company. To minimise currency risks, they may look to move some production to US dollar-denominated countries such as the UAE. They may also move facilities offshore to establish strategic partnerships in key regions to access local opportunities, he said.
In addition, investing overseas may also help firms to meet offset agreements, which are rules that require companies that receive defence contracts to contribute to the local economy in return. These rules are sometimes met by manufacturing parts or assembling aircraft in the purchasing country.
With a view to identifying partnership opportunities, representatives of French, US and British aerospace companies recently toured Abu Dhabi, including Al Ain, with positive results.
"Everybody in Europe is looking for the same thing - to keep quality the same but lower the cost," said Charbel Ghanem, the general manager of Gate Ground Support Equipment in Poitiers, France. "They did a perfect job at Strata. We could never see the same quality, even in Toulouse."
