Abu Dhabi Basic Industries Corporation (Adbic), a government-owned company with a private sector operating mechanism, is pumping in billions of dirhams to boost the emirate’s steel and plastic industry and set a model for cluster economies.
Dr Jim White (pictured above), Chief Operating Officer of Adbic, speaking to Emirates Business, outlined the corporation’s rapid growth in one year and its future plans, which include expansion of Emirates Steel Industries and the creation of Polymer Park, a specific industrial zone for plastic value-added products.
How much has Adbic invested so far and in which sectors?
Adbic is trying to help the country build industrial pyramids. A pyramid is a mega project at the top, typically billion dollar plus. In the middle are industries that convert raw materials – an example of that is plastic pellets made into plastic products. And then at the bottom of the pyramid are small and medium-sized enterprises and there are some industries to the side, service industries that can help us. The government has been very consistent in wanting to grow cluster economies. So this is a cluster economy.
Adbic has been around for one year. We are part of the General Holding Corporation. The three pyramids we have been working on over the year are steel, aluminum and petro-chemicals. Steel has been our primary focus. We have taken over a factory that used to be called Emirates Iron and Steel Factory in Mussafah [Abu Dhabi Industrial City] and added it to a new company called Emirates Steel Industries [also in Mussafah]. We have awarded a contract to an Italian company called Daniele to help us expand the factory. We are half way through construction with roughly $1 billion [Dh3.67bn] spent so far. It will make the emirate’s steel industries a much more integrated and durable business.
The other areas are less developed. Now we are looking at petrochemical and aluminum. In petrochemical, we have got the middle of the pyramid project running at the moment. We are going to launch what we call a Polymer Park. We use polymer resin from companies like Brogue and other suppliers further up the Gulf. It will be a business park, a very large one at about four square kilometres in Mussafah.
Investors will be encouraged to put their money there. What we would like to do over the next five years is to grow a community of businesses that just convert plastic resins into plastic goods. They can share services and co-operate with each other. It is a classic cluster business model. Adbic will act as the developer of the park. We will co-invest with people in their factories, if they want that. We think we will create something unique in this park. We can only think of one similar example in the world and that is in Taiwan where they have a very large business park. We have visited many big business parks around the world, and taken the best ideas to attract investors. We are already in negotiations with some of the early tenants, and they are hoping to get access to the land very quickly so they can start to put up factories.
How long would it take for the park to be operational?
If we are lucky, the park will be operational within five years.
What about investment in environmental protection measures? Is there a special budget for that?
Today, you must not think of a special budget. I think you have to say this is a normal part of business. There are four pressures that keep our focus on this. First, we are all professional business people and we all have professional ethical standards to do the right thing. Second thing is this country has a world-class environmental law that we [...] comply with. Third, we invest normally in partnership with people and they have their own world-class standards. The fourth thing is that we use finance from banks. Banks will not lend to projects unless they comply with certain standards.
So there are four pressures that make sure there is no compromise. There is no reason we should compromise here. This is a modern society, and we should not use old and outdated technology.
How much will Adbic invest this year and in what projects? What internal rate of returns is the company looking at from these investments?
First of all, I cannot release commercially sensitive information because I have to respect agreements I have with partners. So I am bound by confidentiality. But if I take 2007 and 2008, I would say Adbic would have spent about $1bn. A large part of that would be bank debts. But, you know, maybe a third of it would be shares and the rest would be raised from banks. Investments will be mainly in steel and plastic fabrication.
What contribution will the industries Adbic is creating make to the gross domestic product of Abu Dhabi and the UAE over the next five years?
Adbic is not working in isolation. There are other companies trying to develop the non-oil-and-gas GDP economy. It is not as big as it should be because this country is newly industrialising. If you look at other small countries like Singapore, Norway, New Zealand and Ireland, they are all worth about four million people. If you look at their economies, you can say they have achieved that level of industrialisation. I think this country is poised to get there, not in 20 years but in a reasonable period of time. It is early days, but the UAE has already set international benchmarks.
Do you see the creation of these industries as being essential to the economic growth of the emirate and the country?
The country has a very clear and consistent vision, and industrialisation is a central part of that. It creates a more diversified economy, creates different sorts of jobs and protects the economy against the ups and downs of oil and gas sector. It’s not my vision, it’s a government vision that it has had for a number of years. The government has declared it quite publicly and you will see more publications on that. You have to admire the consistency and the boldness of the vision. I think they will achieve it.
Are you satisfied with the pace of diversification of the economy to reduce dependence on oil revenues? How can this pace be accelerated?
I’m very satisfied with what I have seen here. It is very easy to spend money; it is much harder to spend money wisely. I think the country is doing a good job of balancing growth with wise investment. You can always grow faster, but you may invest in the wrong thing for the wrong reason. So, I think they are doing a good job of growing and it’s not reckless. It’s a well-thought out strategy.
Dr Jim White, COO Adbic
Dr White took over as Adbic’s chief operating officer in October 2006 when the corporation was set up. He is tasked with a large-scale expansion programme to create one of the region’s largest integrated producers of steel and steel products.
A professional chemist, Dr White has served as part of the British Cabinet as a senior executive. He has spent most of his life working in various parts of the world for British Petroleum. He has also advised Arab investors.
Adbic to stimulate steel and plastic sectors