Profile:
Emirates: Abu Dhabi
Emirates: Abu Dhabi
Home to the capital city of the UAE, Abu Dhabi holds the lion share of the nation’s hydrocarbon wealth. Oil was first discovered in 1958 and since then the emirate has utilised its petroleum receipts to embark on a new diversification scheme, which will eventually yield a more balanced non-oil-centric economy. The global credit crisis that took hold in late 2008 has perhaps complicated these ambitious plans, more so for the private sector, but it certainly has not deterred the government from ploughing ahead with its large-scale infrastructure projects. Nor is development limited to Abu Dhabi city and its surroundings – the regions of Al Ain, in the east, and Al Gharbia, in the west, are also undergoing a process of deep change as the state seeks to form a solid base of tourism, industry and financial services for the future.
ISBN: 978-1-902339-98-6
ISSN (Online): 1755-280X
ISSN (Print): 1755-2796
TABLE OF CONTENTS
COUNTRY PROFILE
This section provides a quick overview of some facts about the country, its population, natural resources, geography, education system, recent history and government.
POLITICS
As the largest of the seven emirates and home to the national capital, Abu Dhabi plays a dominant role in the country. The government takes pride in maintaining a strong link between its leaders and its people, with an integrated system of local government. As per the national constitution each emirate has its own ruler, who takes care of local affairs, and also holds a seat on the national Supreme Council. The ruler of Abu Dhabi, Sheikh Khalifa bin Zayed Al Nahyan, is also the president of the UAE and is focused on maintaining tradition within his country while also providing for the needs of the 21st century. Within the emirate, the crown prince, Sheikh Mohammed bin Zayed Al Nahyan, also helps to oversee day-to-day affairs and serves as chairman of the Executive Council, Abu Dhabi’s foremost political body. The council is formed of chairmen from various government departments along with leading figures appointed by Sheikh Khalifa and is responsible for issuing legislation and leading long-term development strategies. It reviews proposals for public policy put forth by the General Secretariat of the Executive Council (ADGSEC), which also implements legislation and oversees lower levels of government. The National Consultative Council (NCC) is an assembly of influential Emiratis that examines and activates legislation and is also responsible for ensuring a strong link is maintained between leaders in Abu Dhabi and the country’s citizenry. The best example of this connection is perhaps majlis, an open meeting held regularly by the royal family to which anyone can bring requests, complaints or points of discussion. At the national level, the Federal National Council (FNC) scrutinises all federal legislation and checks in with ministers to ensure smooth inter-governmental connections. A new session of the FNC opened in November of 2008; expected topics on the table include election reform and population imbalances. In the international sphere Abu Dhabi – and the UAE – maintains a sound foreign relations policy and encounters few disputes with other nations. Regionally the UAE is a member of the Gulf Cooperation Council (GCC). While it did pull out of the planned GCC monetary union in May of 2009, regional relations remain strong.
In this chapter OBG interviews Sheikh Diab bin Zayed Al Nahyan, Member of the Abu Dhabi Executive Council and Chairman of the Abu Dhabi Water & Electricity Authority; Khaldoon Al Mubarak, Chairman, Executive Affairs Authority (EAA); Bernard Kouchner, French Minister of Foreign Affairs; Mary Coughlan, Ireland’s Deputy Prime Minister for Enterprise, Trade and Employment. There is also a viewpoint from Javier Solana, EU High Representative for the Common Foreign and Security Policy.
THE ECONOMY
Abu Dhabi could not escape the effects of the global downturn, as was initially hypothesised, but the emirate is still expected to bounce back more quickly than other economies hit by the credit crunch. Years of high oil prices have left it with a deep pool of liquidity, with which it has funded its diversification programme to prepare for a post-oil economy. These same capital reserves have also helped to aid the recovery process in 2008 and 2009. By the fourth quarter of 2008 the emirate was facing a liquidity squeeze and lending came to a near-halt after several years of readily available credit lines. Both the UAE and the Abu Dhabi government responded quickly, injecting the local financial system with $33bn and $4.4bn, respectively, to restart the engines of the economy. These efforts bore fruit by mid-2009, although some liquidity issues remain. Nevertheless, the government is pushing ahead with all of its ambitious infrastructure and development plans in the capital city and beyond. In fact, the financial crisis may have aided their expansion plans to some extent, as the downturn has all but erased the issue of inflation and cooled material prices significantly. As conditions begin to slowly improve, the Department of Economic Development can be expected to push harder to reach the goals laid out under “Abu Dhabi: Economic Vision 2030” – the long-term roadmap towards diversification. The plan targets the manufacturing and the financial services sectors in particular and also places a strong emphasis on the health and education sectors to provide a foundation for a knowledge-based economy. In the short to medium-term the emirate will face some challenges as the property market deflates and consumer spending – which accounted for about half of GDP in 2007 – falls against a backdrop of global economic anxiety. But the long-term prospects for growth are still strong as the government remains committed to the Abu Dhabi: Economic Vision 2030 plan, even during tough times.
This chapter includes interviews with Nasser Alsowaidi, Chairman, Department of Economic Development (DED) Abu Dhabi; Lord Mandelson, UK Secretary of State for Business Enterprise & Regulatory Reform; and Mahmood Ebraheem Al Mahmood, CEO, Al Qudra Holding.
BANKING
Abu Dhabi’s banking sector is part of the wider UAE banking system, which is one of the most dynamic in the region and, alongside Bahrain, has emerged as a financial centre for the Middle East. The Islamic banking segment too is starting to take a larger share in sector activities and gaining regional prominence. The National Bank of Abu Dhabi (NBAD) is the largest in the capital (and second-largest in the UAE) followed by the Abu Dhabi Commercial Bank (ADCB), both of which are majority owned by the Abu Dhabi Investment Council. Over the past few years high oil prices, low interest rates and a rapidly surging economy allowed the national banking sector to grow at a compound annual growth rate (CAGR) of over 32% between 2003 and 2008, and it was the largest in the GCC in terms of assets at the end of that period. This rapid growth faltered as the subprime crisis blew ashore, causing the profitability of banks to drop sharply in the fourth quarter. But thanks to quick and pervasive measures taken by the Central Bank and the local government, damage was kept to a minimum. In September of 2008 the Ministry of Finance set up a $13.6bn liquidity facility to aid banks, followed by a more elaborate $19bn liquidity support scheme the following month. At the start of 2009 the Abu Dhabi government complemented these measures with the announcement of a further $4.4bn injection of capital into local banks. First-quarter results for 2009 suggest that these collective efforts had paid off – while most banks reported a decline in profits, none of the major players reported a loss. Moves by the Central Bank and the Abu Dhabi government look to have successfully restarted the flow of capital needed to maintain growth and lending is growing at a rate much closer to Central Bank’s 10% target, as opposed to the excessive activity of early 2008. Abu Dhabi’s banks will certainly face a challenging year as they adjust to new market realities, but at least they can take some solace in the fact that their exposure to toxic assets is very limited compared to their counterparts in the Western world.
In this chapter OBG sits down with Khalil M S Foulathi, Chairman, UAE Central Bank; and Michael Tomlin, Chief Executive, National Bank of Abu Dhabi (NBAD).
CAPITAL MARKETS
The Abu Dhabi Securities Exchange (ADX) has grown quickly since it was first established in 2000, and despite stumbling blocks thrown up by the global financial crisis, it is gearing up for a new phase of expansion. The exchange will soon move from its downtown location in the capital to Sowwah Island, a massive project currently under way that will eventually host a concentrated and thoroughly modern business district. The central position of the ADX in Sowwah Island – a main component of Plan Abu Dhabi 2030: Urban Structure Framework – is reflective of the pivotal role it is expected play in the economic development of the emirate. Unsurprisingly, 2008 was a tough year for the ADX, as market capitalisation dropped by over 40%, in line with global markets following the liquidity crisis. The decline was less dramatic than that experienced by some of its neighbours and masked some positive yearly markers – the value of shares traded, rose significantly overall, for instance. Recent corporate law changes are expected to produce a rise in initial public offerings (IPOs), despite the rocky credit climate. The Commercial Companies Law now allows frims that wish to list to retain a 70% stake in their companies, as opposed to 45% under previous regulations. In addition to IPOs, there is also a good deal of interest in Abu Dhabi’s developing debt market. The recent freeze in external financing has renewed the government’s drive to create a viable debt market to drive the economy and so far it has shown success. In the first quarter of 2009 Abu Dhabi raised $3bn in its first sovereign bond issuance since receiving its AA credit rating from Fitch. Spring-boarding off the success of this first tranche, which was oversubscribed by two times despite rocky conditions, the government has plans to issue $10bn more worth of bonds in the short term. Elsewhere, the ADX is setting up the regulatory infrastructure needed to set up an exchange-traded fund (ETF) market, which has proved very popular in other markets. Overall the ADX is moving towards a deeper and more complex trading system, which will in turn result in more volatile markets. The Securities and Commodities Authority (SCA), chief regulator of the ADX, is working to ensure that the regulatory environment matches one of increasing risk, while the ADX itself is also spreading the reach of its investor education programme to keep well-informed traders on the floor.
Included in this chapter are interviews with Nazem Al Kudsi, CEO, Invest AD (Abu Dhabi Investment Company); and Tom Healy, CEO, Abu Dhabi Securities Exchange (ADX).
ISLAMIC FINANCIAL SERVICES
Growth in the IFS segment of Abu Dhabi has been vibrant over the past few years, and while the global financial crisis has tripped up momentum to some extent, the sector outlook remains optimistic. Globally, IFS has been expanding by 15 to 20% in recent years and estimates of its current size have been put at between $700bn and $1trn (up from $150bn a decade ago). Despite these impressive figures it is still a nascent industry and many products on offer in the conventional banking sector have yet to be introduced into sharia-compliant form. For this reason, combined with the fact that many countries with large Muslim populations have underpenetrated banking sectors, IFS is seen to have much room for growth before it hits its full potential. In Abu Dhabi the sector began with the establishment of Abu Dhabi Islamic Bank (ADIB) in 1997, which is now the second-largest bank in the UAE in terms of assets. In June of 2008 ADIB was joined by the 100% government-owned Al Hilal Bank as the second sharia-compliant operator in the emirate. The UAE overall is emerging as a global IFS leader and national competition is heating up as a number of conventional banks in other emirates have converted to Islamic operations, along with new arrivals to the sector. The increase in competition has spurred a greater emphasis on products and new services, including takaful (Islamic insurance) and sukuk (Islamic bonds) products. The takaful segment is expanding steadily in the emirate, driven by the Abu Dhabi National Takaful Company and Mithaq Lil-Takaful, both of whom have posted steady growth numbers over the past two years. Sukuk have also been showing success – their share of the overall bond market increased to 45% in 2008. But the sector has not been untouched by the global credit crunch. Abu Dhabi Islamic banks found an attractive market in home financing, particularly after it was opened to foreign nationals, which left them exposed to the financial crisis. Nevertheless, the sector did initially benefit in some ways from the subprime fallout as Islamic finance is generally more risk averse than conventional banking. Some of this sentiment has since dissipated but the general feeling in the Abu Dhabi sector seems to be positive, as illustrated by the new additions coming on-line. The Islamic branch of the National Bank of Abu Dhabi should become fully operational this year, while in May of 2009 the Abu Dhabi Commercial Bank announced it will establish a sharia-compliant arm, called Abu Dhabi Commercial Islamic Finance (ADCIF).
This chapter features an interview with Tirad Mahmoud, CEO, Abu Dhabi Islamic Bank (ADIB).
INSURANCE
The insurance industry in Abu Dhabi has grown in both size and complexity over the past few years, alongside the emirate’s booming economy. While the global downturn has slowed economic activity to some extent – with knock-on effects for the insurance sector – overall sentiment remains optimistic. The emirate retains a remarkably diverse provider profile in spite of its low population. The Abu Dhabi National Insurance Company (ADNIC), a public/private enterprise in operation since 1972, leads the sector. The massive National Health Insurance Company (Daman), recently established by the government, has also grown in prominence as the UAE’s first specialised health insurance company. Daman was formed to address needs created by the introduction of compulsory insurance for expatriates and their dependents in 2006. Indeed this piece of legislation has dramatically changed the profile of the industry and also served as a template for other GCC nations looking to remodel their insurance schemes. In 2008 this scheme was expanded to Emiratis as the Health Authority – Abu Dhabi (HAAD) launched its compulsory health insurance scheme for nationals, called Thiqa. Overseeing these developments is the Insurance Authority (IA), established in 2007 as part of a broader move to monitor the industry at a federal level. Looking ahead the IA will likely encounter new issues as the insurance sector adjusts to a post-credit crisis economy – policy changes in the reinsurance segment are already becoming apparent in 2009 as rates and more stringent conditions are laid out by reinsurers. As in other Middle Eastern markets, raising public awareness about both life and non-life insurance will be an important step in moving the sector forward.
ENERGY
Abu Dhabi’s economy has traditionally been synonymous with its energy sector and, despite persistent diversification efforts, this remains the case in 2009. The emirate is home to the vast majority of the UAE’s hydrocarbons reserves, which measure up to 97.8bn barrels of oil (the sixth-largest in the world) and up to 5% of the world’s gas reserves. The oil sector continues to form the backbone of Abu Dhabi’s economy, accounting for 80% of government revenues and providing the necessary capital to fund the emirate’s industrial and financial services sector – both crucial components of the diversification programme. The year 2008 was a bittersweet one for the emirate – and all other oil-exporting nations – seeing record prices as well as the end of the five-year bull run on oil. The fall in prices has led to some delays and contractual renegotiations of planned energy projects, but most developments are still going forward. Signs of recovery are emerging – in January 2009 drilling activity was up by nearly 30%, showing that it was business as usual for the National Drilling Company (NDC), a subsidiary of Abu Dhabi National Oil Company (ANDOC), the national oil producer. With major increases in industrial production planned and a rapidly expanding population, rising electricity and water demand is putting a strain on power infrastructure and natural gas supplies, the main feedstock for electricity production. This is a common problem throughout the Middle East and despite rolling investment, gas supply infrastructure in the UAE can hardly keep up with demand. In order to address power supply issues the government is focusing on the installation of independent water and power projects (IWPPs) under the umbrella of the Abu Dhabi Water and Electricity Authority (ADWEA). Financing for the Shuweihat 2 project, a joint venture with a total value of $3.2bn, is currently being sought. Despite the challenges ahead, Abu Dhabi has shown relative strength thus far in 2009 and should continue to move confidently ahead, sure that the global economy will eventually rebound and oil demand will rise again.
This chapter includes a viewpoint from Abdualla Saif Al Nuaimi, Abu Dhabi Water and Electricity Authority (ADWEA); as well as interviews with Yousef Omair bin Yousef, CEO, Abu Dhabi National Oil Company (ADNOC); Lady Barbara Judge, Chairman, UK Atomic Energy Authority; and Abdul Rahman Al Dhaheri, Deputy Managing Director, Abu Dhabi Distribution Company (ADDC).
TRANSPORT
The transport sector in Abu Dhabi is undergoing improvements and expansions across all segments to ensure infrastructure keeps pace with strong growth elsewhere. April 2009 saw the Department of Transport’s unveiling of the Surface Transport Master Plan (STMP), which looks forward to the year 2030. Given the rapid population growth – which averaged 6-7% between 2005 and 2008 – the emirate is eager to support the next wave of urban development. Road congestion extracts a heavy toll on Abu Dhabi’s economy in both urban and rural areas and, as a result, the government is prioritising projects like the widening of the Mafraq-Ghweifat highway, the corridor from Abu Dhabi to the western border with Saudi Arabia. Within the capital, the Department of Transport hopes that the introduction of the urban public transit system will take a significant number of vehicles off the road. In a style typical of the emirate, the STMP calls for environmentally friendly public transport. As air traffic steadily increases, so has the capacity of the Abu Dhabi International Airport and other airports overseen by the Abu Dhabi Airports Company (ADAC). The emirate’s main airport, unlike other major international hubs, has not seen a decrease in passenger traffic over the past few years and the government is investing accordingly: about half of the planned $6.8bn worth of expansions have already been completed. Major changes are afoot at the emirate’s ports as well. Under the auspices of the Abu Dhabi Ports Company (ADPC) and the Department of Transport, the emirate is preparing to shift operations at the main port at Mina Zayed to the massive Khalifa Port in the new industrial area at Taweelah currently under development. Finally, in a first for the UAE, the federal government created an inter-emirate transport network in March 2009, setting in motion a long-discussed plan to connect all seven emirates via rail. The $3bn railway project will eventually connect with the larger 1940-km rail development that aims to connect all six countries of the GCC. As of mid-2009 Abu Dhabi seemed undeterred by the global credit crisis and was pushing ahead with its wide-scope development plan, ensuring that the emirate will be able to more efficiently handle future growth and a larger population.
This chapter features an interview with Abdulla Rashed Al Otaiba, Chairman, Department of Transport (DOT).
CONSTRUCTION & REAL ESTATE
The global economic slowdown can be detected within Abu Dhabi’s construction sector, but overall, the emirate remains well protected from the recession thanks to strong internal dynamics and ambitious public infrastructure plans. The effects of the slowdown have made project financing more difficult and competition between contractors for existing projects fiercer. On the bright side, the global crisis, coupled with volatile oil prices and dropping inflation, has caused materials prices to fall significantly, a boon for well-capitalised builders. The softening of construction costs this year has altered the course of the market to some extent; during the height of oil and materials prices, developers were largely constrained to luxury developments to keep healthy profit margins. Lower costs translate to developments with a lower price tag, clearing the way for much-needed activity in the middle- and low-income segments. Overall the real estate market is undersupplied and affordable housing developments such as Al Reef Villas, the first in the segment to come on-line in 2009, could make major strides in closing the supply gap. The government too is keeping contractors busy with a raft of infrastructure projects planned in line with its broader goals and backed by stable reserves. While 2009 will likely post some challenges for the sector as uncertainty in the global market remains, it also presents some opportunities in Abu Dhabi, where fundamentals remain strong.
Since Abu Dhabi’s real estate market never became as overheated as others in the region, it has held up well against the global downturn. Moreover, its reputation for a more sustainable style of development has hindered the drainage of sector confidence occurring worldwide. Much of this confidence is derived from strong market fundamentals. It is in a state of undersupply – and is likely to remain so until at least 2012 – and long-term demand is derived from a rapidly growing population, much of which is working in the oil and gas industry. A rising status in the arts and culture world – based on ambitious collaborations with the Louvre, Guggenheim and other global leaders – is also helping to make the emirate more attractive to foreigners and increasing the livability of the city. With more than half of the population under the age of 30 in 2006, demand from the youth market should help to keep the commercial real estate segment strong over the coming years. The government has clearly had a strong hand in shaping the current and future trajectory of Abu Dhabi and remains committed to its expansive development plans, funded by five years of budget surpluses. Short-term prospects for growth in the real estate sector have been affected by diminishing end-user and investor confidence, but the medium- to long-term outlook appears sound.
INDUSTRY
Abu Dhabi may be most well-known for its petroleum resources, but industrial production is moving into the spotlight as a central part of the government’s diversification programme. Non-oil activities accounted for just under 40% of GDP in 2007, and manufacturing in particular has made a significant contribution to economic growth, increasing at 16.5% per year on average during 2002-07. The food, tobacco and beverage segment accounted for the majority of investment in manufacturing, but looking ahead, the importance of petrochemicals and plastic production is expected to grow as the government pours more resources into heavy industry. The focus on this segment, which is heavily reliant on hydrocarbons, is naturally derived from Abu Dhabi’s comparative advantage in the energy sector. Currently, heavy industry ventures are focused on the town of Ruwais – home to the Borouge polyolefin factory and the Ruwais Refinary (a subsidiary of Abu Dhabi National Oil Company) – and the industrial port of Mussafah, site of the Abu Dhabi Industrial City and the planned Abu Dhabi Polymers Park. The Khalifa Port and Industrial Zone (KPIZ), currently under construction, will also feature what is likely to be the world’s largest petrochemicals complex upon completion. Abu Dhabi is set to take another superlative, this time in the metals manufacturing sector, as the $5.7bn Emirates Aluminium smelter, also under construction in Taweelah, is expected to become the world’s largest greenfield aluminum plant. By using its petroleum resources as a springboard, the industrial sector will play an increasingly prominent role in the economy in the coming years, and is a crucial part of the emirate’s diversification scheme.
This chapter includes an interview with Jaber Hareb Al Khaili, CEO, ZonesCorp.
TOURISM
Abu Dhabi is often pigeonholed as a business destination, but it is set to revamp its reputation as a new stream of cultural and eco-tourism projects come on-line. Like the rest of the Gulf, the emirate is focusing on the high-end, low-volume segment through luxury developments and cultural offerings. The Louvre and the Guggenheim – perhaps the most esteemed institutions in the museum world – are developing Abu Dhabi branches on Saadiyat Island, the $27bn cultural district project. The Tourism Development & Investment Company (TDIC) is also going after the burgeoning eco-tourism segment by carefully developing some of its most naturally beautiful places on offer. Sir Bani Yas Island, situated 170 km west of the capital, stands out as a prime example. TDIC is integrating sustainable development practices within the luxury resort planned on the island, complete with an animal sanctuary and a promise to plant a mangrove seedling for every visitor to the island. The sector strategy is overseen by the Abu Dhabi Tourism Authority (ADTA) and under its five-year plan for 2008-12 the emirate is looking to attract 2.3m visitors by 2012, up from about 1.5m guests in 2008. Various hotel developments are under way to meet current demand as well as an expected future increase. At present, Abu Dhabi still faces an undersupply of hotel rooms. In the short term, the emirate is expected to be well insulated against a global drop in leisure tourism thanks to its established base in business-related tourism.
In this chapter OBG interviews Sheikh Sultan bin Tahnoon Al Nahyan, Chairman, Abu Dhabi Tourism Authority (ADTA); Richard Cregan, CEO, Abu Dhabi Motorsports Management (ADMM); and Ahmed Tamim Hisham Al Kuttab, CEO, Byblos Properties.
AL AIN
Located in the eastern region of Abu Dhabi and blessed with lush greenery amid desertous surroundings, Al Ain has attracted Emiratis looking to escape the coastal heat for centuries. The government is now seeking to capitalise on the area’s natural beauty to develop a formal tourism infrastructure, as well as a financial and business services sector. The necessary components to bring these plans to fruition are currently being unrolled. Road network expansions, for example, are crucial since the airport is under development and there is no direct sea link. The municipality has $626m worth of road investments in the pipeline, on top of the $654m worth of projects either completed or under way by the end of 2007. As in most areas of the Gulf, the high-end tourism market is being targeted, with luxury hotels, golf courses and even an indoor ski slope on the flank of the Jebel Hafeet mountain planned. Al Ain is also emerging as a centre for a new strain of economic diversification in the emirate: the aerospace industry. In June 2009 the Abu Dhabi Airports Company (ADAC) and the Mubadala Development Company, one of the government’s investment firms, formed a partnership to develop the Al Ain Aerospace Cluster on a 25-sq-km plot adjacent to the Al Ain airport. Despite these ambitious projects, the Al Ain Municipality is guiding the process of development at a steady pace and is intent on keeping the original, low-key character of the eastern region intact.
AL GHARBIA
Containing the vast majority of onshore hydrocarbons reserves, the Western Region of Abu Dhabi – Al Gharbia – has long played a pivotal role in the emirate’s economy. Now, like the rest of the country, it is seeking to diversify its economic activities and the region is becoming increasingly important in the overall development scheme of Abu Dhabi. In 2006 the government set up the Western Region Municipality (WRM) and the Western Region Development Council (WRDC), an international-standard development agency that helps to oversee the WRM. These bodies – along with the appointment of Sheikh Hamdan bin Zayed Al Nahyan, brother of the UAE president, as regional representative – have brought both a greater autonomy to the region and a greater interconnectivity with the capital. The WDRC is working in coordination with the Urban Planning Council (UPC) to craft Plan Al Gharbia 2030, which will map out the future development of the region. Targeted areas include small and medium-sized enterprises (SMEs), industry and infrastructure, as well as health care and education. Major strides have already been made in creating a high standard of living for local residents – the WRM has delivered close to $2.5bn worth of capital projects including roads, infrastructure, and community centres. With 350 km of unspoiled coastline, tourism developers are aiming for eco-tourism niche projects and targeting the high-end, low-volume segment. Sir Bani Yas Island, for example, is being developed as a nature reserve and luxury resort with sustainable development principles. Meanwhile, the WDRC and WRM are working to strengthen the logistics sector, mainly through plans for a pan-GCC rail network, which will include a depot at Sila, in Al Gharbia.
ENVIRONMENT
Abu Dhabi is positioning itself as a future world leader in renewable energy and green technology, led by the efforts of the Abu Dhabi Future Energy Company (ADFEC), better known as the Masdar Initiative. The most widely received green energy project is likely to be the zero-carbon, zero-waste Masdar City – a $22bn mixed-use development that will eventually house 40,000 people, create 70,000 new jobs and bolster the emirate’s GDP by more than 2%. The Masdar project is more than an experiment in green urban architecture, and stands as the starting point for a future renewable energy sector in Abu Dhabi. Solar energy, wind power and the like are seen as crucial in divesting the emirate’s economy from the oil sector and towards a sustainable mix of industry that will provide prosperity long after oil reserves run dry. Renewable energy is also being targeted as a viable way to meet a growing demand for power and water supplies – in addition to the Masdar City plant a 100-MW solar plant known as Shams-1 is also under construction. The government has already laid out lofty goals for the sector – aiming to have renewable resources account for 7% of power production capacity by 2020. While much of the impetus behind these green initiatives has come from the government, the private sector is also expected to play an important role. This sentiment will likely be increased by the global financial crisis as government funds are spread across virtually all sectors of the economy. Nevertheless, Abu Dhabi remains firm in its commitment to green its economy for the long haul.
This chapter features an interview with Majid Al Mansouri, Secretary-General, Environment Agency – Abu Dhabi (EAD).
EDUCATION
Seen as fundamental to the emirate’s future, the education system is one of the main focuses of governmental efforts. The strategy revolves around substantial investments – the UAE federal government allocated $2bn for the sector in 2009 – and a programme of reform that is harnessing private expertise and international models. The establishment of campus branches of internationally renowned institutions such as the Paris-Sorbonne University and New York University in Abu Dhabi has garnered much media attention in local press. Local institutions, such as the Al Ain-based UAE University and Zayed University, have also continued to evolve and are of great importance to the country’s plan of reducing the number of foreign skilled workers and preparing Emiratis for competition in the international labour force.
In this chapter OBG sits down with Mugheer Khamis Al Khaili, Director-General, Abu Dhabi Education Council (ADEC).
HEALTH
Abu Dhabi’s health sector is currently undergoing a transformation as recent structural changes have seen private involvement and competition flourish, driving up standards and bringing in greater investment. The emirate faces issues common to the Middle East, namely rising rates of non-communicable diseases – in Abu Dhabi 19% of the population is afflicted with diabetes – and high rates of obesity. A shortage of skilled medical staff also remains an issue. The government is addressing these problems through a series of reforms. For one, the General Authority for Health Services was recently reformed into two separate entities to increase efficiency. The Abu Dhabi Health Services Company (SEHA) is responsible for public health center management, while both the public and private sectors are regulated by the Health Authority – Abu Dhabi (HAAD). There is a definite focus on encouraging the participation of the private sector and SEHA has already engaged a few noteworthy international firms such as John Hopkins and Cleveland clinic to manage various public facilities. Meanwhile, mandatory insurance coverage has provided access to services for expatriates, many of whom had been previously uninsured. The National Health Insurance Company (DAMAN) was established to provide the base of universal coverage and covered about 30% of the UAE’s population by mid-2009. The UAE has also made notable advances in the field of medical IT. Electronic claims management had already been implemented in several hospitals by the beginning of 2009 and is being rolled out over the course of the next three years. The need for large-scale medical infrastructure is largely covered by projects already in the pipeline, but there still remains a scope for consolidation and expanding homecare services, according to insiders.
Included in this chapter are interviews with Zaid Al Siksek, CEO, Health Authority – Abu Dhabi (HAAD); and Saif Al Qubaisi, Chairman, Abu Dhabi Health Services Company.
MEDIA
The creative climate of Abu Dhabi is growing more vibrant by the day, with both government-sponsored initiatives and a steady flow of foreign investors pushing the media sector towards new heights. Certainly, advertising sales have not escaped the grip of the global recession, but the sector – aided by the relative stability of the emirate’s economy – is steadily emerging as a new regional centre of media and culture. Like other national markets in the Arab region, the print sector still dominates the UAE advertising market, accounting for double the amount spent on television. Promising new additions – such as The National, an English-language daily launched by Abu Dhabi Media Company (ADMC) in 2008 – and expansions planned by Reuters should help ensure the industry stays on its toes. While the travails of the credit crunch will serve up some challenges, the print medium is faring much better in the Gulf than in other regions, where it is being steadily superseded by online news outlets. In the realm of television, locally based channels are aiming to take on more established pan-Arab stations, like Middle East Broadcasting Company (MBC) and Saudi TV. ADMC’s Abu Dhabi TV revamped and rebranded in October 2008 to prime itself for regional competition against a backdrop of some consolidation amongst Middle East and North Africa operators. ADMC is viewed as a point of stability within the region thanks to generous government funding. Indeed, the government is throwing more weight behind creative ventures throughout the sector with the 2008 launch of twofour54, an umbrella organisation expected to provide support for the media sphere across the Arab world, and Imagenation, the government’s film production firm, which is reportedly seeking to spend more than $1bn over the next five years.
This chapter includes an interview with Tony Orsten, CEO, twofour54.
TELECOMS & IT
Telecoms has recorded some of the fastest growth of any sector in the UAE over the past five years. Despite the global recession, the sector is still looking at a smooth ride in the short to medium term, as Abu Dhabi boasts one of the highest GDP per-capita rates in the world and Emiratis have proven very receptive to new products and services. Since Emirates Integrated Telecommunications Company (du) broke the monopoly of Emirates Telecommunication Corporation (Etisalat) in 2006, prices have dropped and market competition has helped to spur much growth. In 2002 mobile penetration rates stood at about 70%; by the end of 2008 this number had jumped to approximately 200%. In the fixed-line segment, coverage is largely delineated geographically, with du dominating in Dubai and Etisalat holding the advantage in the rest of the country. In order to close the gap, du is investing heavily in infrastructure expansions into 2009. Looking ahead, future subscriber growth in the mobile segment is likely to flatten out, but significant opportunities remain for the operators to bolster their domestic revenue sheets. The spring 2009 launch of the iPhone, for example, should help to spur demand for new services and fixed-mobile convergence, while the growing vigour for personal technology in Abu Dhabi and the wider Arab world, should allow the sector to continually reinvent itself in the medium to long term.
The IT sector has established itself as one of the most strongest in the region, thanks to strong demand and generous spending by the government. In 2007, IT spending increased by 41% year-on-year to more than $790m, about 27% of which was accounted for by the government. The sector is an integral part of the Abu Dhabi: Economic Vision 2030 and the state is setting its aim high, seeking to raise internet penetration to 60% by 2030, up from 11% in 2007. With this in mind, the main focus will be on increasing the speed and penetration of broadband connections, and the government is rolling out measures to increase usage, such as free internet parks throughout the city. Both Etisalat and du are working to improve broadband infrastructure and are in the process of installing a fibre-optic network that will increase speeds from their current maximum of 12 MBps to 16 MBps. Once the network is fully installed, it will be the first city in the Middle East to be fully connected via fibre-optic technology. It will also provide the foundation for the development of new value-added services and products. In the short term these may see limited growth as a consequence of the global economic slowdown denting consumer confidence. But with the government taking a leading role in pushing IT to the forefront of the national agenda, and the market heading towards a state of maturity, the prospects for the industry continue to look strong.
This chapter also features an interview with Mohamed Nasser Al Ghanim, Director-General, UAE Telecommunications Regulatory Authority (TRA).
THE BUSINESS GUIDE
In conjunction with Baker Tilly MKM Chartered Accountants, OBG explores the taxation system, examining the UAE and in particular Abu Dhabi's pragmatic approach to taxation. With the help of Reed Smith, OBG also introduces the reader to the different aspects of the legal system in Abu Dhabi, looking especially at the UAE's many investor-friendly regulations. This chapter also includes viewpoints from Abdul Munim Al Rubaie, Group Managing Partner, Baker Tilly MKM Chartered Accountants; and Peter Michelmore, Senior Partner, Middle East, Reed Smith and Chairman of the British Business Group (BBG).
THE GUIDE
OBG’s local correspondent takes a closer look at the luminous Sheikh Zayed Mosque, which stands as a suitable homage to the culturally tolerant and open spirit of its benefactor, the first president of the UAE. Also included in this chapter is a guide to the range of hotel offerings in the emirate, an informative section on cultural etiquette for first-time visitors and useful phone listings.
