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*UAE moves to protect domestic iron factories

Duty imposed on Screen metal exports,but experts sceptical

The UAE has moved to curb exports of scrap metal to India and other markets to save its cash-strapped factories.
The Ministry of Finance and Industry (Mofi) has decided to start levying a Dh250 ($68.20) duty on each tonne of scrap metal exports.

This will enable domestic iron plants to get enough scrap metal for their production and this will allow them to meet growing local demand and boost earnings.
But experts doubt the decision, which takes effect tomorrow, will be fully implemented on the grounds the UAE has numerous ports and other export terminals and outlets.
"I suspect the decision will be fully enforced; I am sure the move will benefit local metal scrap factories, but it will be difficult to fully enforce the duty as there are too many export outlets in the country," said Dr Mohammad Al Asoomi, a Gulf Arab economist.

"This issue has been on the cards for more than six years and the decision to enforce such a duty will surely be welcome news among industrialists here. There have been lots of complaints about traders exporting their scrap to other markets, mainly India and Pakistan, at higher prices; this has created a shortage for local factories and, consequently, prevented them from raising output and making higher profits."

The Mofi hopes traders would abide by the new decision which it said is intended to give a shot in the arm to the iron industry and the whole non-oil manufacturing sector.

"We had to act to support our national industries and stop such practices," said Naser Al Suwaidi, director of the Industrial Development Department at Mofi.

"I think this decision will largely benefit our industrial sector, but it needs time as many traders are surely tied to contracts, which they can not cancel now."
Dealers said the move could hit the iron market in India and Pakistan as they get their metal scrap needs from the UAE at very competitive prices.

"Major industrialists in the subcontinent also have representatives or agents in the UAE. The new situation will certainly harm the interests of these agents," one dealer said.

The UAE has at least five major metal plants and exports of such products exceeded 400,000 tonnes last year. The shortage in the market because of excessive scrap exports has given rise to imports of such products, which surged from Dh1.26 billion ($343 million) in 2002 to around Dh1.46 billion ($397 million) in 2003.

Like other Gulf Arab states, the UAE has given priority to the manufacturing sector in its long-term economic diversification programmes aimed at lessening reliance on volatile oil exports.

As a result, investments in this sector have largely exceeded capital pumped in other sectors. From Dh30 billion ($8.17 billion) at the end of 2002, total industrial investment in the UAE jumped to around Dh43.6 billion ($11.8 billion) at the end of 2003 and is expected to top Dh47 billion ($12.8 billion) at the end of this year.

The bulk of the new investments last year were channelled into projects involving metals, refined petroleum products, textiles, food and chemicals.
Such investments have sharply expanded the manufacturing sector to become the second largest component of the gross domestic product after oil. In 2003, the sector's share of the GDP stood at nearly 13.6 per cent, with a value of Dh40.1 billion ($10.9 billion).

Industrial output totalled about Dh66.5 billion ($18.2 billion) while manufacturing units exceeded 2,500, employing nearly 262,812 people, mostly expatriates.