Capital's landmark plan to ease oil dependence

Abu Dhabi has set a target of boosting foreign direct investment to 23 per cent of the GDP by 2030. (EB FILE)

The emirate of Abu Dhabi is pushing ahead with a landmark development blueprint that stretches for the next 20 years and involves massive investments with the aim of easing reliance on volatile oil sales and attaining viable economic growth.

Rebuffing reports the global slowdown and the ensuing decline in crude prices would obstruct the implementation of Vision 2030, the emirate's top economic official said the strategy would move ahead in line with defined objectives, aided by Abu Dhabi's enormous financial muscle that has gained strength during the oil boom of the last seven years.

The focus of the strategy remains unchanged and is based on three main pillars – attracting investment, reducing oil sector's contribution to gross domestic product for diversification and expanding the private sector.

Huge liquidity

"We all know that the UAE, like other economies, has been affected and will be affected by external factors given its openness and interdependence with other economies," said Nassir Ahmed Al Suwaidi, Chairman of the Abu Dhabi Department of Economic Development (ADDED). "Abu Dhabi is also affected. But the emirate possesses a massive economic and financial potential that will ease the adverse impact of those factors and make it less vulnerable than other countries. This potential involves the huge liquidity amassed by Abu Dhabi during the last oil boom period. This, of course, will allow us to push ahead with the development programme and major projects according to defined plans. The recent decline in prices of building materials and the growing partnership between the public and private sector will support this trend," Suwaidi told the Beirut-based Al Iktsad Wal Amaal Arabic language magazine, which co-organised the Abu Dhabi Economic Forum in the capital last week. Suwaidi said the emirate's five-year development plans, part of the long-term Vision, still have the same priorities and goals, including lessening the hydrocarbon's sector share of GDP, diversifying sources of income by developing non-oil exports, laying more emphasis to the manufacturing sector including services and light industries, and boosting public-private partnership.

"To achieve all those goals, it is vital for us to work on attracting foreign investment, and I think we will see a sharp rise in capital flow in the next period. In this respect, we are working to improve laws governing industrial investment and at the same time we are participating in the preparation of the new federal investment law which could give full ownership to foreign investors in some projects, mainly those which will support our economy," said Suwaidi.

"Of course, we will concentrate our efforts on attracting foreign capital into the industrial sector as it is the main pillar of any diversification endeavours. We are trying to remove all obstacles facing these plans and tackling challenges such as high production costs, low labour productivity and low educational and professional level of the expatriate labour in this sector."

FDI target

Suwaidi said the emirate has set a target of boosting foreign direct investment to 23 per cent of the GDP by 2030.

Another official said while the targeted growth of seven per cent might not be attained during that period, the aim is to ensure growth is maintained in the long term regardless of the changes in the oil prices. "When we talk about our long-term economic vision we are talking about a long journey stretching for 20 years from now. It is normal that this period will see some unexpected developments, which we should handle seriously to correct the path… Now we have set a growth target in the domestic economy of six per cent to seven per cent but that does not mean this level will continue through the next 20 years," said ADDED Undersecretary Mohammed Omar Abdullah.

"This march towards 2030 could face some unexpected developments and, therefore, we have to be prepared to deal with them…I think the ultimate goal is to maintain growth in the economy and ensure that this growth remains stable, effective and sustained based on a stronger private sector and expansion in the non-oil sector's contribution to gross domestic product."

Last month, ADDED announced it had signed agreements with 14 government establishments within its strategy to cut red tape and encourage investment in its non-hydrocarbon sector. The deals covered the Telecommunications Regulatory Authority and 12 other official departments to raise to 28 the total number of agreements it had signed with government bodies to end investment barriers.

ADDED said it aims to sign 42 agreements to "develop and improve the investment environment" in the emirate as part of its Vision 2030.

Unified investment measures

"The agreements are designed to ensure all investment measures are unified and carried out by the Abu Dhabi Business Centre, which is one of the most significant initiatives taken by the Abu Dhabi Government with the aim of establishing an advanced and productive business environment," it said. "These agreements are in line with our Vision 2030 and the 2009-2013 development plan, which concentrates on expanding the non-oil sector and setting up a more productive and balanced economic base. We want to increase the efficiency of our industrial and productive sectors through stronger co-operation and co-ordination between the department and all government offices in Abu Dhabi and the whole UAE."

Abu Dhabi is the main oil and gas producer in the UAE and this has allowed it to control more than half the country's economy.

A surge in oil prices over the past decade boosted its income and enabled it to record its highest growth rates since the end of the first oil boom in late 1970s and early 1980s. Its nominal GDP more than tripled to about Dh519 billion in 2008 from Dh148bn in 2001, according to official figures.

Real GDP surged by about 13.4 per cent annually during that period to peak at around Dh297.9bn in 2008 from Dh153.1bn in 2001.

Economic diversification

Estimates by the Abu Dhabi Chamber of Commerce and Industry (ADCCI) showed total gross fixed capital formation in the emirate, covering public and private investments, exceeded Dh300bn during 2003-2008.

It expected total investments to reach Dh1.49 trillion during 2006-2014 and a large part of the funds would be pumped into the construction and infrastructure sector, which could attract Dh832bn. Investments in industry were put at Dh200 billion and those in oil and gas at about Dh174bn.

The report put the emirate's GDP in 2009 at about Dh419bn and said the decline was mainly due to lower oil prices and a cut of more than 200,000 barrels per day in Abu Dhabi's crude output in line with Opec's agreement. "Abu Dhabi's Vision 2030 will always concentrate on economic diversification. We want to make sure non-oil sectors will drive the economy," said Mohammed Hassan Al Qamzi, Chief Executive Officer of the Higher Corporation for Specialised Economic Zones.

"This certainly will require the execution of major projects by local and foreign investors despite the repercussions of the global crisis…we have instructions from the leadership to concentrate on diversifying our sources of income," he said.

Key points

The key points of Abu Dhabi strategy include:

- Formation of an economic forecasting unit

- Establishment of the Abu Dhabi Business Centre as the sole licensing authority for projects

- Creation of a government statistics department

- Launching promotion campaigns for foreign capital including the setting up of "invest in Abu Dhabi" website

- Intensifying measures to protect investors and consumers

- Setting a timetable and deadline to achieve the strategy's goals

- Handling complaints by all businessmen and traders

- Adopting international licensing procedures

- Expanding facilities and incentives for all investors and businessmen

- Promoting Abu Dhabi for international investors at the geographic and sector levels

- Monitoring prices to ensure feasibility of projects for investors

- Preparing an annual report on Abu Dhabi economic and social development

 

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.

 

Comments

Comments