REVIEW

Encouraging entrepreneurialism and economic growth

THE ECONOMIC

Autumn 2009

Pulling ahead:
The role of sport in Abu Dhabis future

Going west:
Modernising date farming ADXs stellar performance

The economic birth of Al Gharbia

Stelios Haji-Ioannou Employing Emiratis Hosting IRENA Nanotechnology

CONTENTS

welcome
ll eyes will be on Abu Dhabi over the next few days when the prestigious Formula 1 Grand Prix motor race comes to town. An estimated 600 million people are expected to watch the event on television, presenting Abu Dhabi with an unprecedented opportunity to share our successful growth story with the world (page 14). But sport is not the only thing that is elevating Abu Dhabi to the global stage. This summer, the newly established International Renewable Energy Agency (IRENA) chose Abu Dhabi as its new home (page 9). This is significant for the emirate it is the first time that an international body has chosen an emerging economy as its headquarters. These are two good early wins now we must deliver a worldclass event and headquarters to cement our global reputation. But reputations also depend on strong institutions and strong systems of governance for support, the very things that will attract global investors to the emirate in the first place. Abu Dhabi is working hard to ensure those institutions and systems are in place across all sectors. In particular, the new Abu Dhabi Centre for Corporate Governance will help all companies strengthen their governance system (page 10). The UAE Central Bank has also taken advantage of the opportunity afforded by the global financial crisis to introduce measures to strengthen the banking system and implement a governance framework for the banks to enhance their independence and accountability (page 5). Were also improving and modernising our traditional industries. Date farming is a case in point. It will soon be exporting brand Abu Dhabi across the world, further enhancing our reputation (page 22). And major investment in Al Gharbia will open up this region, rich in economic potential, to the world (page 18). In so many ways, Abu Dhabi is spreading its wings and building momentum to achieve its 2030 vision. I hope you enjoy this issue of The Economic Review. We always welcome your feedback. Please email us at feedback@ theeconomicreview.ae.

NewS ANAlYSIS & commeNt

Financial services

Why the global financial crisis has not been all bad news for Abu Dhabi

Real estate

The government reins in the real estate sector; and how the global slowdown has hit the industry

8 9

Nanotechnology Renewable energy

Nanotechnology is on the verge of big things

The International Renewable Energy Agency heads for Masdar City

10 Corporate governance
Abu Dhabi strengthens efforts to help businesses improve their corporate governance practices

11 Employment
Why nationals need to overcome their aversion to working in the private sector

13 An economic driving force

The world may be in financial turmoil, but the ADX stock market is holding strong

14

feAtureS

14 A game of patience
Abu Dhabi has stepped up its presence on the international sporting calendar this year, as investments start to pay off

18

18 Going west
With the government acting to reverse the migration trend in Al Gharbia, the western region is undergoing an exciting transformation

22 The fruits of new labour processes

Dates have always been important to Abu Dhabis heritage and, following a major overhaul, the date farming industry is ready to take on the world

26

ANd fINAllY...

24 Databank
Abu Dhabis economic indicators

Waleed Al Mokarrab Al Muhairi Director General Abu Dhabi Council for Economic Development

26 In conversation
Stelios Haji-Ioannou on entrepreneurialism, easyGroup and Abu Dhabi
Cover illustration by McFaul Studio

THE ECONOMIC REVIEW AUTUMN 2009 3

AGENDA Financial services

In this section:
Financial crisis (p5) Real estate (p6-7) The role of nanotechnology (p8) Hosting IRENA (p9) Corporate governance (p10) Employing Emiratis (p11)

What the crIsIs dId for us

By Abeer Al Jassim
n the past year, words like turmoil and downturn have dominated the papers as they reported on job losses, bankruptcy, a plunge in investment opportunities and historic lows in consumer confidence all triggered by the global financial crisis. Though not immune, Abu Dhabi has had a softer landing than most, thanks in part to the initiatives adopted by policymakers to shield the economy from future crises. The financial services and the property sectors, which have borne the brunt of the crisis, have been the targets of the policy measures. In particular, the UAE and Abu Dhabi governments have taken several measures to stabilise the banking system and stimulate the economy. More recently, the state passed legislation extending a federal government guarantee to bonds issued by local banks to support their borrowing in international capital markets. The government has also pledged to guarantee all bank deposits including ones with foreign banks with core operations in the Gulf area for the next three years. Al-Mashreq Bank CEO Abdul Azeez Al Ghurair said the UAE economy was strong. The decision by the government to guarantee all bank deposits of all kinds, including bankto-bank deposits, is a wise decision that aims to assure the public that our financial institutions are in good shape, he added. It is hoped this will also provide investors with a sense of security. In the property market, a positive outcome of the financial crisis was the Abu Dhabi mortgage company. Abu Dhabi Finance was launched in November 2008 by five of the emirates major investment, real estate and finance companies

Mubadala Development, Abu Dhabi Commercial Bank, Aldar Properties, Sorouh Real Estate and the Tourism Development and Investment Company. The bank has been aggressively targeting consumer demand for mortgage financing, which had dried up during the crisis. Ali Eid Al Mehairi, chairman of Abu Dhabi Finance, said: Abu Dhabi Finance will provide liquidity to a market where demand remains high for property. A dramatic plunge in the UAEs inflation rate from 12.3% in 2008 to 4.9% during the first four months of 2009 is another positive outcome of the crisis. It reflects a cooling of the property market, which had become overheated. The financial crisis has also prompted the Abu Dhabi government to seek more cost-effective ways of delivering its own services. It recently announced a five-year priority financing plan designed to find efficient ways of financing

government projects and to develop a common financial framework. These initiatives are aimed at enhancing the financial performance of government bodies through strategic planning and allocation of financial resources, said Hamad Al Hurr Al Suwaidi, Abu Dhabis department of finances undersecretary. The ultimate objective of the plan is to encourage economic growth. Will this group of initiatives lead to a stronger economy? Dr Hoe Ee Khor, chief economist at the Abu Dhabi Council for Economic Development (ADCED), said: We may have to adopt a wait-and-see approach but one thing is certain, the financial crisis has not been all bad news for Abu Dhabi. As an old Chinese proverb says: A crisis is an opportunity riding the dangerous wind. The Abu Dhabi government has seized the opportunity of the financial crisis to adopt various initiatives to strengthen the financial system and the economy.
THE ECONOMIC REVIEW AUTUMN 2009 5

All illustrations by Gary Bates

AGENDA Real estate

steadIer groWth
By Abd Al Majeed Al Heeti

anking isnt the only sector in Abu Dhabi to have been hit by the world financial crisis real estate has had its fair share of bad luck too. But while the banking sector is managing to resume normal activities with the help of a government cash injection at local and federal levels, the effects of the crisis on the real estate sector are still visible. While the crisis has brought an abrupt end to the frenzy of new high-profile construction projects, it has also led to a slowdown in building activity and ongoing projects have been rescheduled. This situation is due to several factors: first, the sudden disappearance of bank credit to fund major building projects and the purchase of real estate units and, second, a sharp fall in demand, which has resulted in an oversupply of properties in the market. Thats led to a decline in property prices during the last two quarters according to some estimates, real estate prices in Abu Dhabi are down by 30% from their peak in 2008 and are expected to decline by an additional 15% in 2009. But there are also upsides to the financial crisis for the real estate sector even though it may not feel like it right now. Most notably, the crisis has put an end to the excessive speculation that characterised the property boom. When prices of some properties in
AUTUMN 2009 THE ECONOMIC REVIEW

The progress of projects is increasingly linked to developers abilities to secure sound financing

Al Reem Island, for example, increased dramatically during the first half of 2008 from AED1,000 to AED3,000 per square foot, speculation was the prime driver. Now that the financial crisis has forced speculators to exit the market, property prices are falling back to more realistic levels. That means end consumers will play a major part in determining the fortune of the real estate market. This will see the sector fall back into its normal role as a supporter of economic growth, rather than a leader of that growth, with the associated risks of inflicting harm on the economy during a downturn. And now that banks and investors are exercising more prudent lending and borrowing policies, the flurry of off-plan property selling has died down. The progress of real estate projects is increasingly being linked to developers abilities to secure sound financing, which will bring a greater degree of certainty and transparency to the market and avoid cases of failure or uncompleted or scrapped projects. Despite its initial effects, the financial crisis has triggered a number of beneficial developments that have placed Abu Dhabis real estate sector on a sounder footing, which means it is now well positioned to contribute to the emirates economic growth in a positive manner.

AGENDA Real estate

tIme to reflect
By Hamda Al Kindi

ew property laws that the government of Abu Dhabi is considering can help anchor investor confidence in the emirates real estate sector after a decade of rapid development. In just 10 years, Abu Dhabi has grown from a desert city with sand dunes, palm trees and oases to a modern business and residential location dominated by glitzy skyscrapers. While the property boom has been good news for Abu Dhabis economy, many developers have rushed into too many projects in the past few years. Since 2007, nearly 215,000 units have been constructed or are in the pipeline in Abu Dhabi City (see table, top right). The problem is the result of a boom in an unregulated sector. In a bid to encourage property development during the early stages of the boom, the government gave away plots of land to state-backed real estate companies such as Aldar. They in turn sold the land to a selection of smaller, private sector property developers that, under pressure to deliver a return to investors, employed a sell-and-build

approach to property development. That worked fine during the period of growth but, when the financial crisis took hold, buyers pulled out and developers found themselves with thousands of empty units on their hands. The financial crisis has left both developers and buyers without liquidity, triggering a quiet phase in the real estate sector. While that is not great news for the major developers who have suffered sharp earnings declines due to an inability to sell units and land (see table below), its an ideal time to pause and consider how the sector can be regulated to avoid such problems in the future. Abu Dhabis Department of Municipal Affairs has finalised draft laws on a range of real estate-related activities including land registration, mortgages, escrow accounts and strata, which will be submitted to the government soon. The laws are intended to regulate the real estate sector and will hopefully provide property investors with more confidence when investing in the emirate. The government may consider some more fundamental changes. First, instead of granting land to selected companies, it may encourage auctions for land between two and three companies (which should be joint ventures between large and small local property developers with broad local investor bases). Bidders should be judged on a range of criteria including price, design and

residential building projects in Abu Dhabi since 2007

Al Markaziyah Al Raha Beach Al Reem Island Breakwater Ghantoot Khalifa Cities Mohamed Bin Zayed City Saadiyat Island Tourist Club Area Zayed Sports City 1,300 41,800 77,000 7,750 5,000 8,000 10,700 43,500 15,600 3,800
Source: Colliers International Real Estate Overview

Project

Number of units

environmental friendliness. Second, developers can be encouraged to use a build-and-sell model, which is more suited to the current economic slowdown. Finally, the government can set a cap on annual growth rates. An unregulated sector with access to cheap credit will inevitably experience difficulties in the face of an economic slowdown, but current problems should produce one positive outcome prices will fall to a more reasonable level and the balance of supply and demand will correct itself, putting the emirates real estate sector on a stronger footing again. And this time round, with regulations in place, the sector should be in better shape than ever, giving investors the confidence to return to the fold once more.

Abu Dhabi real-estate companies: 2Q09E Net income comparisons

Company Net income to common equity (AEDm) 2Q09E
EmAAr
Source: Company reports

Change Q/Q (%)

37 2,165 -84 227

1Q09
237 30 889 125

2Q08
1,660 318 1,236 687

Y/Y (%)
-80 115 -88 -40

324 682 145 410

UNioN ProPErtiEs AlDAr soroUh

Note: Emaars 2Q08 figures are based on prior accounting standards and are thus not comparable with forecasts

THE ECONOMIC REVIEW AUTUMN 2009

AGENDA Nanotechnology

Big opportunities in a small world

By Abeya Mokhtar
anotechnology the manipulation of matter on an atomic scale to develop new materials has moved out of the lab and into commercial markets with applications in virtually every sector and industry. Could nanotechnology be the next big thing in Abu Dhabi? Investment in this increasingly popular strand of science is enjoying government support in the emirate. Last November, HH Sheikh Nahyan Bin Mubarak Al Nahyan, minister of higher education and scientific research, told delegates at an international nanotechnology conference hosted in Abu Dhabi: Nanotechnology bears huge potential that can effect changes in the fields of energy, technology, medicine, communications, food industry, military strategies and national security. This leadership commitment and the subsequent decision to establish two nanotechnology research centres at Khalifa University and UAE University suggests Abu Dhabi is serious about building nanotechnology research infrastructure to help meet its future needs. For Abu Dhabi, nanotechnology is not only a means to job creation and inward investment, its also key to realising the emirates vision of economic diversification and creating competitive advantage in knowledge-based industries. It could
8 AUTUMN 2009 THE ECONOMIC REVIEW

The economic impact of the tiny world is huge

offer solutions to more fundamental challenges, too its potential for water purification could put an end to Abu Dhabis mounting concerns about water shortages. Governments and corporations worldwide are investing massively in nanotechnology research and development. According to figures from Lux Research, government funding for nanotechnology reached $8.6bn in 2008, while private investment was $9.6bn. The US, European Union and Japan have traditionally been the biggest investors but recently, significant investments have been witnessed in emerging markets such as China, Russia and India. The economic impact of the tiny world is huge. Market analysts foresee a world market for nanotechnologies worth $3.1bn by 2013 and estimate that 10 million nanotechnology-related jobs will be

created by 2014 thats 10% of all manufacturing jobs worldwide. However, experts say if Abu Dhabi wants a slice of this market, research centres are not enough. There needs to be a cluster of organisations that link research closely with businesses and end users of nanotechnology. Around the centre, there should be a technology park or technology initiative where people will look at technological applications, says Professor C.N.R. Rao, a member of the advisory panel of Khalifa University Nanotechnology Center. Other elements are also crucial: a national nanotechnology framework; a commitment from government to support the sector and to encourage local and global private sector investment; and a regulator to address health, environmental and societal issues raised by nanotechnology

AGENDA Renewable energy

energy Boost
By Khawla Al Qemzi

a
research. Patient Capital investment philosophies such as Abu Dhabis Advanced Technology Investment Company (ATIC) are playing an increasingly important role at this stage. With all of these elements in place, longer term, the emirate could become a regional hub for nanotechnology. Steps to achieving that ambition have already been taken, with news that Abu Dhabi is to be the global headquarters of the International Renewable Energy Agency (see story, right). The decision suggests the international community is confident that the emirate can become a global hub for renewable energy an area closely linked to nanotechnology applications and research. By adopting the right strategy and displaying enough commitment, Abu Dhabi could even become a global hub for nanotechnology.

bu Dhabi can expect to enjoy a bigger international profile and play a role in shaping global energy policy following its recent victory in the battle to be home to the newly established International Renewable Energy Agency (IRENA). The city beat tough competition from Bonn, Germany and Vienna, Austria to be selected to host the global headquarters of IRENA. Its the first time an emerging economy has been chosen to host an international body. IRENA was set up in early 2009 to promote the transition from non-renewable to commercially viable green energy sources. The intergovernmental agency, which has a mandate to act as a think tank, currently has 136 signatory countries. In addition to its headquarters in Abu Dhabi, IRENA will have a technology and innovation centre in Bonn and a third base in Vienna. Abu Dhabi was always going to be a strong contender for the host city title. The emirate has been investing in alternative energy initiatives for some time now to

demonstrate how a major oil producer can also have an environmental conscience. A case in point? Masdar City, the worlds first zero-carbon, zero-waste city fully powered by renewable energy, which will be IRENAs headquarters. Sheikh Abdullah Bin Zayed Al Nahyan, the UAEs foreign minister, has said the IRENA win will boost the regions ability to network internationally in the renewable energy sector, further enhancing its expertise in this area. Not only that, it will also give young Emiratis increased opportunities to build their careers in the sector. IRENA may have found a home, but its first few months wont all be plain sailing. For one thing, its up against the clock global warming has increased at a rate that has exceeded the expectations of many in the scientific community. The agency also needs to raise public awareness of the importance of an ethical energy policy and, most important, it needs to find a way of achieving grid parity the point at which the cost of renewable power is equal to or cheaper than grid power. If these challenges can be overcome, Abu Dhabi can expect to find itself at the heart of an energy revolution.
THE ECONOMIC REVIEW AUTUMN 2009 9

AGENDA Corporate governance

Steering a Steady courSe

By Majid Julfar

ust how effective are corporate governance policies in todays corporate world? Thats a question on every regulators lips following recent global uproar about disproportionate executive pay, the irresponsible use of shareholders wealth, inaccurate financial reporting and governance malpractices in general. There is no globally accepted definition of corporate governance, although the Organisation for Economic Co-operation and Development describes it as a system by which businesses are directed and controlled. The system specifies the rights and responsibilities of different participants in a

corporation and spells out the rules and procedures for making business-related decisions. It also provides a structure for setting and attaining company objectives and monitoring performance. Good corporate governance is critical to the long-term future of any firm. It ensures that business operates in a fair, transparent and accountable environment. Investors tend to feel more secure when they invest in companies with strong internal controls. According to a study by CLSA Emerging Markets, stocks of companies with strong corporate governance policies tended to outperform the market. A second study by the group Saints and Sinners established a positive

link between strong corporate governance practices and a high return on equity. The recent economic growth enjoyed by Abu Dhabi has been

Investors are demanding better governance standards

10 AUTUMN 2009 THE ECONOMIC REVIEW

largely due to investment-driven projects. Investors who are putting up debt or equity financing are demanding fair and accurate financial reporting and better governance standards in general. Although disclosure standards of businesses listed in Abu Dhabi have improved, they still lag far behind counterparts in other emerging and developed markets. To encourage reform and modernisation of corporate governance practices, the Abu Dhabi Chamber of Commerce and Industry launched the Abu Dhabi Centre for Corporate Governance earlier this year. The centre has two main objectives: to provide consultancy services to the private and public sectors to help them adopt best practice in corporate governance; and to raise awareness and build local expertise in this issue. Ultimately, it hopes to promote economic growth and foreign investment through good corporate governance. The centre is aiming to achieve these objectives via a range of services including corporate governance audits, consultation on implementing better corporate governance practices, training and raising awareness about the issue through seminars and conferences. Such initiatives are a step forward but, if Abu Dhabi-based companies are to become globally competitive and attract foreign investment, more fundamental challenges need to be tackled the dominance of family-owned businesses in which the families are unwilling to cede control is one example. Other challenges include the lack of a long-term investment culture, inexperienced boards and conflicts of interest stemming from multiple board directorships.

AGENDA Employment

Public to Private
By Amna Bin Hraiz

miratis must be encouraged to change their attitude towards working in the private sector if Abu Dhabi is to tackle its record 12.7% unemployment rate among nationals (see chart, right). Unemployment among non-nationals in the emirate is just 2.5%, even though, at around 823,000, non-nationals account for a much greater part of the workforce compared with the estimated 96,000 nationals of working age. Labour experts say the rising jobless rate is due to a number of factors, including an influx of cheaper foreign labour and a lack of supply to meet the demand for jobs. Not only that, there is a mismatch between science and engineering skills required by employers and the humanities training that many Emirati graduates bring to the job market. However, the government has a more fundamental challenge to tackle if it is to achieve its objective, outlined in the Economic Vision 2030, of increasing the participation of nationals in the workforce and particularly in the private sector. The problem? Nationals just dont like working in the private sector. According to Abu Dhabis Statistics Centre, 80% of nationals in employment work for local or federal government, 12% work for government-owned entities and just 8% work in the private or other sectors. The Ministry of

15

15
15 15

Unemployment rate in Abu Dhabi

12 12
Source: Statistics Centre Abu Dhabi, estimated 2008

9 9 % 6 6

3 3 0 0

1985

1995

2005

2008

National

Non-national
dominate the public sector, are more socially acceptable than jobs in hands-on private sector industries such as oil and gas. The government says the lack of representation of nationals in the private sector is not just due to the preference of Emiratis. It says private companies are not entirely committed to taking on nationals. In response, the government has passed an emiratisation law that requires

Source: Statistics Centre Abu Dhabi, estimated 2008

Labours figures are even lower. Of the total workforce registered with the ministry, Emiratis working in the private sector constitute just 0.3%. Nationals tend to believe the public sector offers a better deal than the private sector in a variety of areas, including pay and benefits, working hours and job security. There is also a cultural perception that administrative jobs, which

all private sector companies to ensure Emiratis make up at least 1% of their workforce. A number of additional initiatives are now under way. The Abu Dhabi Emiratization Council has been set up not only to ensure that every Emirati jobseeker finds employment, but also to facilitate interaction between jobseekers and the public and private sectors, and to advise the government on labour-market policy. The UAE Academy, a subsidiary of the Abu Dhabi Chamber of Commerce and Industry, has launched the Ebdaa Programme to prepare nationals and especially new university graduates for the workplace. More initiatives like this, which educate nationals about the benefits of working in the private sector, and also match what the education and training system supplies with skills employers want, are needed to tackle that rising Emirati unemployment rate.

Emiratis working in the private sector constitute just 0.3%

THE ECONOMIC REVIEW AUTUMN 2009 11

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From the academies stock market

An economic driving force

ADX is nine in November. Its stellar performance so far indicates it will continue its rise as one of the regions leading stock markets
By sultan sooud al Qassemi

atural resources and oil abundance are often associated with Abu Dhabi; however, one institution in the capital should not be neglected when one ponders the economic driving force of the 67,000-square kilometre emirate. The Abu Dhabi Securities Exchange, now known as ADX, is celebrating its ninth anniversary in November. It was launched with only 12 stocks, mostly from the banking sector, and has multiplied over the years. Today, the exchange includes some of the leading stocks not only in the United Arab Emirates, the Middle Easts second-biggest economy, but throughout the area. Notable listed companies include Etisalat, the telecoms giant with operations in 18 markets including Saudi Arabia, Egypt and Pakistan, and the National Bank of Abu Dhabi (NBAD), considered one of the leading companies in the region.

$63bn and today the average monthly trading exceeds $4bn. New entrants include the official telecoms firms of Qatar, Palestine and Sudan, Cairos Commercial International Bank and Kuwaitbased Gulf Cement, which opted for a dual listing on ADX as a strategic choice. Overall, what entices most investors is the fact that, even before the creation of ADX, Abu Dhabi-based firms have distributed stable dividends year after year. This also encourages investors to take a long-term view. Even in the

current year, when companies have tended to defer dividend payments, 44 firms listed on ADX distributed cash dividends and 24 of them distributed stock dividends. According to a regional and global survey by investment bank Shuaa Capital published in July, ADX topped the GCC index in terms of investors positive outlook, with 46% continuing to believe its stocks are undervalued.

Government support
Many ADX-listed companies enjoy implicit and explicit government support. The Abu Dhabi-based UAE Central Bank, for instance, has issued a statement that all bank deposits in the UAE will be guaranteed until 2012 to enable the sector to weather the current global financial crisis. Aldar Properties, the leading real estate developer in Abu Dhabi, also enjoys government support in the award of long-term projects to develop real estate and tourist attractions such as the Yas Marina Formula 1 Circuit. In addition, the Abu Dhabi government has significant shareholdings in many listed firms, including a 60% stake in Etisalat,

Illustration by Cath Riley

New interest
Recently, however, a series of new firms started listing to take advantage of the increasing volumes that ADX has to offer. In 2008, ADX volumes topped

Despite the global financial turmoil, aDX rose by 10% in six months

70% in NBAD, 72% in Taqa and a 50% stake in Union National Bank. ADX, which has a market capitalisation of more than $71bn, rose by more than 10% in the first six months of 2009 despite the global financial turmoil; it is perhaps a testimony to a market that has defied the downward trend of other emerging stock exchanges in the world. Another plus point? ADX offers exposure to the Gulf s muchcoveted energy sector, the worlds energy centre, including access to companies such as Taqa, Aabar Petroleum, which has recently expanded its mandate, and Dana Gas, a Sharjah-based firm that has regional and international operations in a sector gaining more and more global attention. Few markets in the region can offer the depth and exposure that ADX can. Coupled with the strong fundamentals of the Abu Dhabi economy and the improved regional and international exposure of the opportunities that it offers, ADX will continue its rise as a leading stock market in the emerging economies. Sultan Sooud Al Qassemi is a non-resident fellow at the Dubai School of Government.
tHe ecoNomIc reVIeW aUtUmN 2009 13

INSIGHT Al Gharbia

going west
Abu Dhabis western region of Al Gharbia is at the heart of an investment drive to boost population growth and encourage economic diversity
By Mariam Al Mehairbi and Bernadette Redfern
xciting times lie ahead for the 120,000 residents of Abu Dhabis western region (Al Gharbia) as businesses are launched, houses and roads constructed, educational facilities expanded and hotels opened. The government is pursuing a range of investment initiatives totalling more than AED98bn to improve opportunities in the seven main townships. The central coordinating body for the plans is the Western Region Development Council (WRDC). A principal factor the emirate faces is migration from Al Gharbia. This presents many problems, and the WRDC aims to stop this trend by developing our people through education and job creation, explains Mohamed Hamad Bin Azzan Al Mazrouei, director general of the WRDC, in a recent report on the area by the Oxford Business Group*. Urbanisation is an inevitable side effect of the countrys strong economic growth, which has seen both Emiratis and expatriates flock to the cities of Abu Dhabi and Al Ain. But the government hopes that by investing in local businesses, building new infrastructure and improving
18 AUTUMN 2009 THE ECONOMIC REVIEW

Al Gharbias AED115bn GDP comes mainly from the energy and industrial sectors
educational facilities, migration will reverse and Al Gharbias population will grow. There are seven urban concentrations and we would like to start by developing two or three of them to 40,000 a major increase from the current 10,00020,000, says Al Mazrouei. The seven are Madinat Zayed, Mirfa, Sila, Ghayathi, Dalma Island, Liwa and the industrial area of Ruwais (see box, page 21). Although Al Gharbia accounts for 83% of Abu Dhabis landmass, only 10% of the population lives there.

Illustration by Jane Webster

Its AED115bn GDP constitutes about 40% of Abu Dhabis total and mainly comes from the energy and industrial sectors as the area hosts Abu Dhabis downstream oil industry with the enormous 417,000 barrels/day refinery in Ruwais. Growth in the energy sector is already under way through a range of expansion plans aimed at developing the burgeoning petrochemicals industry. However, as outlined in the Abu Dhabi Economic Vision 2030, promoting diversity beyond the oil and gas industry is high on the list of federal and local priorities. According to WRDC, involving the private sector is key to achieving its aims. Al Mazrouei told The Economic Review: One of WRDCs main objectives is to provide businesses and investors with guidance, help and support to be successful in the region. But he is clear about the types of projects the council wants to promote. WRDC will only promote and execute projects and initiatives that are in line with Abu Dhabis 2030 vision and protect Al Gharbias culture and traditional heritage, which are still practised and found in the region today. Improving the regions
THE ECONOMIC REVIEW AUTUMN 2009 19

INSIGHT Al Gharbia

infrastructure is vital to achieving the 2030 plans. Working with WRDC on this is the Western Region Municipality (WRM), set up in 2006. Dr Chafik Allaoui, executive director of strategy and performance, says: The main challenges emanate from different perspectives. Al Gharbia covers almost 80% of the land area of the emirate, and all of its cities need to be equally served to accommodate the needs of the dwellers within these urban centres. Meeting these needs is a challenge for a relatively young organisation. In some cases, it has meant bringing in private expertise, and more than 150

A railway will be built to link the emirates from the coast to the Saudi border
outsourcing agreements worth more than AED2.5bn have been signed. WRM is targeting a 35% reduction of its operational cost for increased quality services through a leveraged outsourcing scheme. We are actively leveraging the private sector and local expertise to deliver quality
20 AUTUMN 2009 THE ECONOMIC REVIEW

municipal services at reduced cost, says Dr Allaoui. Externally, the municipality identifies several key development areas. The type of development that the region is in need of spans issues such as housing both maintenance and creation of new units roads and infrastructure; community facilities such as parks, libraries and recreational centres and landscaping, says Khalifa Al Mansoori, WRM executive director for area services. WRDC agrees that improving the transport infrastructure is a major priority. Al Gharbia is a vast region, which currently has minimal infrastructure. However, this is all set to change following the release of the Abu Dhabi Urban Planning Councils 2030 plan for the region later this year, says Al Mazrouei. Already, this March, the trans-emirates rail network announced that a railway will be built to link all the seven emirates from the coast to the Saudi border in Sila, which will make Al Gharbia even more accessible in the future. Once the region overcomes its accessibility issues, it will enable faster development with excellent potential for growth, he continues. In July, plans were revealed for replacing or upgrading more than 3,000 houses in urban centres such as Mirfa and Madinat Zayed. Dr Allaoui says this is one of WRMs main achievements to date. We have dedicated AED4bn to improve public housing, affecting approximately 98% of the housing stock in Al Gharbia. The municipality has also

earmarked a further AED4bn for roads, community facilities and further growth of the government administrative offices known as TAMM centres. These are being rolled out in all of the towns and allow residents to carry out activities such as paying bills, licensing businesses and registering births locally rather than in Abu Dhabi City.

New businesses
Making it easier to do business is critical if new enterprises are to flourish. So far the measures appear to be working, as a range of new businesses from farming and tourism projects to petrochemical and handicraft manufacturing are launching in the area. A major catalyst for new enterprises is the Khalifa Fund, which gives financial and advisory support to locals with small to medium-sized businesses. We have approved nine loans in the western region, and are helping more than 40 applicants to develop their business plans, says Leila Ben-Gacem, manager

of the funds Entrepreneurship Development Department. New businesses vary from concrete blocks manufacturing to home-based handicrafts products. There are also a few services and tourism sector projects that could seem profitable. Also, due to the concentration of petroleum engineers and industry in the region, we have received a few applicants with plastic-recycling and petrochemical-processing industries, says Ben-Gacem. The fund also supports the agricultural sector, particularly the date farming industry. Many families own date farms, and several date packaging, processing and trading industries are growing, she says (see feature on page 22). The fund has also used a competition to target students as well as professionals. A design contest with the Vocational Education and Training Institution (VETI) Al Gharbia resulted in students receiving business counselling and financial rewards. The objective of the

contest was to make students aware of business opportunities in the handicraft sector, and develop their entrepreneurial spirit through a practical exercise in researching heritage and finding the balance between modernity and tradition.

Plans are evolving for Al Gharbias main towns

Madinat Zayed
Population: 29,000 Location: 150km southwest of Abu Dhabi City Established by the late Sheikh Zayed Bin Sultan Al Nahyan in 1968, Madinat Zayed is Al Gharbias capital city. Agriculture has been the main source of income but the citys proximity to oil and gas fields has led to an economy in industrial services, manufacturing and residential construction. The city is also home to the famous Mazayin Al Dhafra Camel Festival. By 2020, it is intended that the area will generate AED100m per year in tourism income. According to the Abu Dhabi Urban Planning Council, proposed projects for the city include residential development, solar power facilities and government defence projects. Liwa Population: 20,000 Location: 250km west of Abu Dhabi City and the southernmost town in the region The birthplace of Abu Dhabis ruling families, Liwa is one of the largest oases on the Arabian Peninsula and comprises 53 villages. It is located on the edge of the Rub Al-Khali (the Empty Quarter) desert. Liwas economy is dominated by agriculture. Tourism is the main growth sector for the area and is expected to contribute AED140m to the economy by 2020. Ruwais Population: 16,000 Location: Coastal town, 300km from Abu Dhabi City Ruwais is the industrial centre of Al Gharbia and home to the 417,000 barrel/day (bpd) oil refinery run by the Abu Dhabi Oil Refining Company (Takreer). Expansion plans include investing AED30bn in building a second 400,000bpd refinery, along with a multitude of other downstream petrochemical-production facilities. Mirfa Population: 15,000 Location: Coastal town, 160km west of Abu Dhabi City Mirfa is a small township established in the 1970s and is famous for its farming, pearl and fishing industries. Mirfa also has a large power plant and a water-desalination plant that can produce up to 38m gallons/day. A range of projects is planned for the town including new educational facilities, sports centres, food-distribution centres and mosques. Ghayathi Population: 14,000 Location: 320km west of Abu Dhabi City, inland from Ruwais This traditional Bedouin settlement is best known for its archaeological finds. Fossils dating back eight million years, discovered in East Ghayathi, are considered to be the first of their kind found in the Arabian Peninsula. In more recent times, Ghayathis economy has been dominated by agriculture. Sila Population: 7,900 Location: Coastal town 350km west of Abu Dhabi City, close to the Qatari and Saudi Arabian borders Sila is Al Gharbias westernmost township. It contains a port and small airstrip, but is best known for its archaeological finds, which include 7,000-year-old arrowheads. Plans for the GCC railway could lead to it becoming a key transport interchange with a station planned for the town. Tourism revenue is hoped to reach AED690m by 2020, and projects planned include schools, housing, recreational facilities and healthcare provision. Dalma Island Population: 4,800 Location: 42km offshore and 116km from Doha A 45-sq km island off the coast of Abu Dhabi, Dalma Island is also known as Pearl Island because of its pearl industry. Fishing and pearl diving are the mainstays of the economy, but the Desert Islands project should see tourism making a major contribution to growth in the future. By 2020, the areas tourism industry is expected to contribute AED230m to GDP.

Attracting tourists
Building on the areas heritage is one of the principles underpinning several new tourism projects under way in the region. This is being led by the Tourism Development & Investment Company (TDIC), a subsidiary of the Abu Dhabi Tourism Authority. TDIC has several projects in motion for the western region. Our flagship schemes in this region are Desert Islands and Qasr Al Sarab, says a spokesman for the organisation. Desert Islands is home to eight natural islands off the shores of the western region, and hosts vibrant wildlife, rich marine life and a historical and cultural society. Qasr Al Sarab will represent the heart of touristic attractions in the Liwa area, and is home to some of the tallest sand dunes in the world. Al Gharbias investment and economic expansion plans are still in their early stages, but much has happened since the establishment of WRDC in 2005 and the municipality in May 2006. Only time will tell whether the measures will reverse the migration but, with a raft of new businesses opening, houses being built, educational initiatives under way and transport links improving, it seems that the opportunities are being taken and many more are certainly on the way.

THE ECONOMIC REVIEW AUTUMN 2009 21

* Taken from The Report: Abu Dhabi 2008 by Oxford Business Group

SECTOR FOCUS Sport

Abu Dhabis multibillion-dirham investment in sports is already starting to pay off but more importantly, its starting to put the emirate on the world map for good

a game
Illustration by Jamie Sneddon
14 AUTUMN 2009 THE ECONOMIC REVIEW

of patience
here will you be on November 1? Most Emiratis know that question well enough by now. It is at the heart of an advertising campaign launched to promote the biggest sporting event in the Gulf this year. November 1 is the final race day of the 2009 Formula 1 Etihad Airways Abu Dhabi Grand Prix. The prestigious race is one of several international sports events that Abu Dhabi is planning to host in the coming year. The FIFA Club World Cup (see box, overleaf) and the Red Bull Air Race are also on the

emirates sporting calendar. How will the multibillion-dirham investment in new sports infrastructure, sponsorship deals and global advertising campaigns benefit the local economy? The direct economic benefits sports-related construction projects, new jobs and an influx of sports fans with money to spend are undisputed, but experts say the intangible benefit of an increased overseas profile for Abu Dhabi is more valuable. Longer term, the government is hoping that will lead to a sustained attraction of mainstream tourists and investors to the UAE capital. Abu Dhabi is certainly building up a

strong record of investment in the global sports industry. Mubadala Development Company has taken a 5% stake in F1 player Ferrari. And UK Premier League football club Manchester City was recently bought by the Abu Dhabi United Group for Development and Investment (ADUG), a private equity firm owned by Sheikh Mansour Bin Zayed Al Nahyan, the UAEs deputy prime minister and minister of presidential affairs. In addition to hosting F1, football and flying, the emirate has also invested in golf. It already hosts golf s European Tour every year on its National Course, an event organised by

THE ECONOMIC REVIEW AUTUMN 2009 15

SECTOR FOCUS Sport

the Abu Dhabi Tourism Authority (ADTA). And two new golf courses a Gary Player course on Saadiyat Island and a Links course on Yas Island are under development. The real estate sector has been one of the biggest winners in Abu Dhabis drive to attract major international sporting events, with local contractors and developers enjoying a construction windfall. Aldar Properties, the largest property developer in Abu Dhabi, is developing Ferrari World Abu Dhabi an indoor theme park that will include the worlds fastest rollercoaster under a roof designed in the style of a classic double-curve body shell of a Ferrari GT car. Yas Marina Circuit and Ferrari World Abu Dhabi will play an integral part in the development of Abu Dhabi as a leading international city with world-class sporting and recreational facilities, says Ousama Ghannoum, director of marketing and media for Aldar.

geAring up for the fifA CLuB worLD Cup football fever is gripping Abu Dhabi as the countdown to the fifA Club world Cup uAe 2009 begins. the uAe capital is preparing to play host between December 9 and 19 to seven teams from around the globe. the teams confirmed to play are european champions Barcelona, South American champions estudiantes, north and Central American champions Atlante, oceania champions Auckland City and our very own uAe champions, Al-Ahli. they will be joined by the winners of the African and Asian champions leagues, which are decided in november. this a prestigious international tournament and our plan is to take it to a new level, says Shatha Al romaithi, communications manager for the local organising committee of the fifA Club world Cup uAe 2009. the mammoth logistical and construction task of preparing for the event is already in full swing. it involves refurbishing the two main venues Mohammed Bin Zayed Stadium and Zayed Sports City Stadium and laying brand-new pitches. But its not all about catering to the diehard supporters; the organiser wants the event to draw in new followers. its not just a sporting event targeting football fanatics. we want it to have a much broader appeal by ensuring there are lots of entertainment elements, both on and off the pitch, to appeal to everyone, says Al romaithi.

Rights fights
It isnt only the property sector that is benefiting regional media companies, jostling for the rights to broadcast some of these major sporting events, are also seeing an upturn in business. Al Jazeera Sports is growing rapidly into the worlds top sports broadcaster and is in the process of launching more sports channels, while Abu Dhabi Media Company

has successfully outbid several broadcasters including Dubai-based incumbent Showtime Arabia to win the TV rights of the English Premier League with the deal estimated at around $330m (AED1.2bn), says Lara Vanjak, managing director of the UAE operation of international sports media company MP & Silva. Showtime Arabia has since announced that it will merge with Middle East pay-TV company Orbit in a bid to consolidate and compete with other players in the region. Tourism and telecoms firms are getting on board too, largely through sponsorship deals. ADTA sponsors the main races at Royal Ascot, one of the most prestigious events in the UK horseracing calendar. It also sponsors the FIA World Rally Championship and the Race of Champions, while telecoms company Etisalat has a fiveyear sponsorship agreement with FC Barcelona.

Etihad Airways, the UAEs national airline, has spearheaded Abu Dhabis sporting sponsorship offensive, striking deals with Harlequins Rugby Football Club in the UK, the All Ireland Senior Hurling Championships, the Abu Dhabi Golf Championship and securing the naming rights of the Etihad Stadium in Melbourne, Australia. One of its highest-profile tie-ups has been its shirt-sponsorship deal with Manchester City Football Club, which will give the airline international exposure and a potential boost in passenger numbers as the growing legion of fans working in the UAE fly back to the UK for games. In July, Etihad launched its weekend fan packages to Manchester, which include tickets to the teams home matches for the 2009/2010 season. The team unveiled its new Umbro kit on July 18, which features the Etihad Airways logo. Such was the demand for the kit from the teams UAE-based fans, local merchants were selling poorly imitated bootleg versions several

weeks before the genuine shirts were released.

Positive results
Will all this investment eventually reap rewards? Based on past experience, it should. Recent host nations to the prestigious F1 event, including Singapore, Turkey and Bahrain, have experienced a substantial increase in the number of visitors arriving specifically for the race. In Bahrain, the Mumtalakat Holding Company, which owns and operates the F1 Championships in Sakhir, said the event had generated nearly $2bn for the island over the course of five years, with $600m entering the economy on the back of the 2008 race alone. CNN reported that an estimated $11.3bn had been spent on motor sports in the Middle East between 2003 and 2007. And evidence suggests that sports tourists stay for longer than the duration of the event. Malaysias Sepang circuit, built in 1999, now attracts about 35,000 spectators a year who stay an average of 5.4 nights each Grand Prix event lasts three days. This all translates into significant tourist dirhams as F1 fans spend on average twice as much as regular tourists on shopping, three times as much on food and drink, and stay two to three nights longer, according to a study by the Singapore Tourism Board. Abu Dhabi has plenty of tourist attractions in the pipeline to keep visitors in town. As well as Ferrari World Abu Dhabi, which opens in 2010, four major museum openings are planned for Saadiyat Island.

Its not all about the bottom line its all about putting Abu Dhabi on the map
economics of sport. He points to three main reasons why sporting events can fail to fulfil their economic potential for host countries substitution, crowding out and leakage. First, major sporting events often draw mainly local crowds who substitute the money they would spend on other local activities for the sporting event. Second, for big events such as the Olympics, large influxes of spectators tend to crowd out other tourists who may have occupied the same hotel rooms in the city. Last years Beijing Olympics is a good example: the city attracted roughly the same number of visitors during the event as it had the previous summer. Lastly, revenues generated do not necessarily stay in the local economy. For example, international hotel chains will suck out money spent on accommodation before it can circulate locally known as leakage. This may sound discouraging, but Matheson says its not all about the bottom line, especially for a country that sits on top of almost 10% of the worlds proven oil reserves. For him, its all about putting Abu Dhabi on the world map. ADUGs acquisition of Manchester City Football Club is a case in point. The Manchester City deal has captured the imagination of thousands of fans and

dominated British sports coverage thanks to high-profile signings that have included Carlos Tevez. The exposure the Manchester City deal has brought Abu Dhabi will be repeated, to some degree, with every sport the emirate is involved in. The fact that each F1 race attracts 600m television viewers across the world means that the emirate will reach a significant portion of the global TV audience. The increased visibility of the UAE on the sports pages of newspapers around the world this year has already started to attract international sporting brands and consultants at a rate that would have seemed unthinkable just a year ago.

Broadcast goals
MP & Silva, which holds the media rights to Italys Serie A football league, established a UAE office earlier this year. The company has since been joined by TSE Group, the international sports consultancy. TSE set up its UAE office in July to target regional governments and sporting authorities. Indeed, the Gulf s commitment to the $500bn global sports industry is an exciting prospect for sector players who are facing slower growth in mature markets such as Europe and North America, says MP & Silvas Vanjak. However, in spite of the undeniable long-term potential of the sports industry in the Middle East, it remains in a nascent stage and will require continual investment, and sound management of infrastructure and business conditions over the next decade to develop a fully fledged sports industry, she adds. In the meantime, the emirate can bask in a significantly increased international media profile that has already changed the way it is perceived. It has not come cheap, but by strategically leveraging events such as F1, Abu Dhabi is realising its ambition of a diversified economy.
THE ECONOMIC REVIEW AUTUMN 2009 17

Measuring the benefit

But some sports economists believe these tangible benefits arent as great as they may at first seem. When economists try to measure these things, the direct economic benefits from employment, income generated and overall tax receipts are often very small, even for big events, says Victor Matheson, a US-based professor who specialises in the

DEBRIEF Date farming

The fruiTs of new labour processes

A strategy that has improved farming practices and reduced government subsidies has radically transformed the date production industry in Abu Dhabi
By Jonty Summers

Illustration by Neil Webb

ates are inextricably linked with Arabian identity. The Holy Koran mentions dates and date palms in no fewer than 17 Surahs. The United Arab Emirates provides a fertile environment for date cultivation and, during his time as ruler of Abu Dhabi, Sheikh Zayed Bin Sultan Al Nahyan placed great emphasis on the sustainable propagation of agriculture, and of dates in particular. The environment is a dear part of our heritage, civilisation and future, he once reflected. Moreover, it represents a great emotional value of our consciousness, and we must take great care to exert every effort to protect it and protect our wealth. In 2001, the UAE accounted for 6% of the worlds date production. In the years that followed, owing to government policies to encourage agricultural industries and limit

desertification, the volume of dates had increased significantly. By 2005, however, it became apparent that the date industry had structural flaws that needed to be addressed to enable it to flourish in the future. Volume growth had been principally achieved through subsidies. In 2001, government subsidies to farmers were around AED180m. By 2005, the government subsidy to the date farming industry had shot up to AED524m a figure that was predicted to double by 2010. This situation presented the leadership of Abu Dhabi with a number of problems. As a central tenet of Abu Dhabis policy agenda, Sheikh Mohamed Bin Zayed Al Nahyan had encouraged the 17-member Executive Council to get the most out of the dirham and outsource and privatise where appropriate. Burgeoning subsidies were achieving none of these goals.

A wholesale transformation was deemed necessary and, in the summer of 2005, Executive Council member Sheikh Hamed Bin Zayed Al Nahyan, chairman of the Crown Princes Court, agreed to lead the implementation of a plan to transform the industry. One major impediment to progress was the processing system from the 25,000 date farms around Abu Dhabi. The Abu Dhabi Department of Agriculture operated 22 centres in the emirate to receive and evaluate dates. These centres supplied two independent factories capable of processing 30,000 tonnes of dates. The problem was that total output was 74,000 tonnes: 44,000 tonnes of non-processed dates were thrown away, or packed as animal feed at a price of half a dirham per kilo. The valuation of dates was also inaccurate. Evaluators or muarfeen graded the dates by volume, type and grade at the receiving centres. As the muarfeens decision had a major impact on the farmers profit from his harvest, it was often open to debate. The misclassification

of dates by weight or quality was estimated to be costing the government up to AED250m a year. Furthermore, farmers frequently had to wait many days for their dates to be received in the heat at harvest time, which meant that their harvest was often spoiled.

Processing system
Sheikh Hamed came up with a solution. By bringing the processing system under one management and improving the efficiency of the receiving centres, wastage could be minimised. As a result, a new company Al Foah was established as part of the General Holding Corporation (GHC), a government holding company for diversified non-oil industries. Finding the right individuals to facilitate the transformation was key. Sheikh Hamed approached ex-McKinsey consultant Dr Karim Mohyeldin Said known for his vigorous results-oriented approach to be CEO of the new company, supported at an operational level by new general manager Saeed Salem Messri Al Hameli, an agricultural specialist who had worked on palm-tree cultivation at Sheikh Zayeds farms. The chairmanship was offered to Rashid Mubarak Al Hajeri, Chairman of the Department of Municipal Affairs, a member of the Executive Council and board member of GHC. The new management team rapidly decided on five short-term priorities as part of a broad strategy to improve farming practices and overhaul the subsidy framework. These quick wins would provide visible results for the 2006

The new receiving process saved an estimated AED591m

22 AUTUMN 2009 THE ECONOMIC REVIEW

harvest. The priorities comprised consolidating the number of receiving centres to eight, installing advanced processing capabilities, introducing policies to ensure correct classification of dates, increasing capacity to eliminate waste and establishing management structures to support the transformation. Restructuring the receiving centres was the most pressing priority. Ensuring these would be ready in time for the 2006 harvest was an enormous undertaking, and one that was subject to strong resistance from farmers, workers and traders in addition to many challenges in construction and the final roll-out of the facilities.

Ready for harvest

Despite the ambitious six-month timeframe, by the beginning of the 2006 harvest, the centres were ready. Automated handling and sorting systems had been installed, and the processes completely re-engineered and standardised for storing, accounting and packaging. The results were impressive: 95% of arrivals were processed on the same day; previously, it took three to five days. Average time in the dock was 29 minutes. From 2006 to 2007, the redesigned receiving process saved an estimated AED591m. The success of lean production systems was matched by the financial results. Profits rose from AED39m in 2006 to AED55m in 2007, driven by process efficiency and improvement in quality. With the transformation complete, the date industry is ripe for global growth.
THE ECONOMIC REVIEW AUTUMN 2009 23

The paTh To conTinued TransformaTion

More equitAble subsiDy DistributioN until 2006, the largest 1% of farms received 49% of the subsidy. the smallest farms (51% of the total) received only 10%. subsidy to larger farms was reduced by 50% and that of the smaller farms raised by 50%. Profit through quAlity With the introduction of a quality initiative, the yields of higher-grade dates increased more than six and a half times in 2005-2007, from 126 tonnes to 832 tonnes. revenues quadrupled from AeD1.1m to AeD4.3m. CreAtiNg A WorlD-ClAss orgANisAtioN structuring the future organisation has involved the creation not only of divisions for agriculture, logistics and research and development, but also heritage and tourism, and food. the heritage and tourism division aims to leverage the importance of the date palm by way of a date palm destination. the food divisions task is equally ambitious: to take uAe dates global. ProMotiNg A PreMiuM brAND Designing a premium brand with the potential to develop globally is a priority. Marketing expert ghada fikry, hired by Al foah to lead this area, said: We need to find the correct positioning, proposition, product, name and packaging for each market. Key markets are south-east Asia, europe and the us. Products in the pipeline include sweets for Japan, energy bars for the us, dry snacks for China and date honey for india.

DATABANK Abu Dhabi economic indicators

Abu Dhabi selected economic indicators 2008

GDP (in $USm) GDP per capita (in $US) Real GDP growth (%) Population 141,571 90,006 7.8 1,572,906 77.6 2.0 2.54 96.9 85.4 98.60 13,726

Consumer Price Index (av; % change)* Three-month interbank deposit rate (av) Exchange rate AED: $US (av)

3.4 2.82 3.6725 239,213 176,288 -33,831 22,278

Abu Dhabis strong economic fundamentals, and its climb up the World Banks index on ease of doing business, are attracting more and more investors

Total exports and re-exports (FOB) (in $USm) Total imports (FOB) (in $USm) Net trade in services (in $USm) Current account balance (in $USm) * Latest figure available for UAE CPI for the first half of 2009

GDP growth
20

600 500

Sectoral distribution of GDP

Nominal GDP (in AEDbn at current prices)

15

400
in AEDbn

Oil and gas 63.5 Manufacturing 9.6 Construction 5.2 Financial institutions 5.0 Government and others 9.7 Trade, real estate, business services 7.0

% change

10 5 0
01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 00 20

300 200 100

-5

Real GDP growth (% change)

24 AUTUMN 2009 THE ECONOMIC REVIEW

Sources: SCAD, Standard & Poors

th

10

20

30

40

50

60

70

80

Percentage of total GDP

Source: SCAD

Abu Dhabi is home to the worlds sixth-largest proven oil reserves of around 98 billion barrels. It is also the worlds 10th-largest oil producer.

Source: Ministry of Economy 2009

the right place to do business

Proportion of population of working age (%) Unemployment rate (%) Oil production (in million bpd) (estimate) Abu Dhabi oil production as % of UAE total Crude oil exports (in $USbn) Average oil export price ($US per barrel) Natural gas exports (in 000s metric tons) (estimate) Abu Dhabi gas exports as % of UAE total (estimate)

0.88

Investors choice of the strongest-performing real-estate markets in MENA*

Dubai 11%
Levant 5%

Abu Dhabi 26%

33 3

Saudi Arabia 25% Qatar 19% North Africa 4% Bahrain 6% Kuwait 2%

Oman 2%
* For the next 12-24 months

The UAE jumped nine places to 33 in the World Banks 2009-2010 Ease of Doing Business Index, signalling the GCCs biggest improvement.

Source: Jones Lang LaSalle Investor Sentiment Survey, March 2009

Benchmarking Abu Dhabi globally: GDP per capita (2008)

113,044 95,062 93,204 90,006 67,385 61,810 46,859 45,920 38,972 30,049 27,248 19,345 18,988

Luxembourg Norway Qatar Abu Dhabi Switzerland Ireland United States Kuwait Singapore New Zealand Bahrain Saudi Arabia Oman Revenue generator: Dolphin Energy gas station, Abu Dhabi

Abu Dhabi ranked third in Foreign Direct Investment magazines 2009 Middle East Cities of the Future ranking, which features investment targets.

0%

20,000

40,000

60,000

80,000 100,000 120,000 (US$)

Residents of Abu Dhabi enjoy 0% Personal Income Tax and VAT. Corporate Tax is also 0%, except in limited sectors (oil, gas and foreign banks).

Source: WEO 2009 database, IMF

UAE has the largest number of FDI projects in the GCC region (both as source and destination) World as destination
Partner region/economy Bahrain Kuwait Oman Qatar Saudi Arabia UAE * First quarter of 2008 only 2003 2 14 1 3 14 49 2004 5 15 1 12 20 41 2005 2 16 13 20 107 2006 12 45 23 60 222 2007 13 26 4 11 42 123 2008* 7 12 1 5 9 57

World as source
Partner region/economy Bahrain Kuwait Oman Qatar Saudi Arabia UAE 2003 24 7 11 22 32 146 2004 17 21 14 27 37 156 2005 28 12 14 24 57 231 2006 52 24 41 48 103 294 2007 31 8 14 28 49 277 2008* 9 7 5 16 20 86

Source: World Investment Report, 2008

THE ECONOMIC REVIEW AUTUMN 2009

25

IN CONVERSATION Stelios Haji-Ioannou

calling all high flyers

Stelios Haji-Ioannou turned Europes airline industry upside down when he launched easyJet, now one of the continents leading carriers. He says Abu Dhabi has the potential to produce similar success stories

What business interests do you have in the Middle East? The Middle East is clearly a very exciting and growing market for businesses, and I have been looking to enter the area for some time. This year, the first easyHotel should open in Dubai. In contrast to the expensive luxury hotels, prices will be as low as $80 a night to stay in the Jebel Ali Free Zone. This hotel will be the first of a number in the region, including Abu Dhabi. Does Abu Dhabi need to be entrepreneurial, bearing in mind its huge oil wealth? All countries benefit from entrepreneurs. On an economic level they are the ones who create jobs and, importantly, help to diversify the economy. I have always thought that good entrepreneurs can spot an opportunity to provide consumers with what they want. Is Abu Dhabi entrepreneurial? From what I have seen, Abu Dhabi is now very entrepreneurial. It appears that there is an understanding that oil wealth will not last forever, and that new initiatives are
26 AUTUMN 2009 THE ECONOMIC REVIEW

now needed. Im very keen on helping environmental causes where I can, and so am pleased to see the development of the green city [Masdar City] in Abu Dhabi. Working on new ideas as an example to others is pure entrepreneurialism, and so the government is showing the way for private enterprise. Does a collaborative and conservative approach make it harder for would-be entrepreneurs? Looking at Dubai and some of the initiatives in Abu Dhabi, there are clearly no barriers in the way of local entrepreneurs. The United Arab Emirates build it and they will come gamble shows that the whole country is based on an entrepreneurial spirit. Every time I head to the GCC there seem to be new state-of-theart facilities and world-leading technology parks. What may make it harder for entrepreneurs, and this can be true worldwide, is the conservative approach of central governments towards private enterprise. But a few trailblazing private personality-led businesses could really open the floodgates to

A few trailblazers could really open the floodgates to further entrepreneurs

encourage them governments worldwide need to give them an opportunity to succeed. Private enterprise can be encouraged through allowing free-market competition without subsidies for state-run businesses, and any start-up business will always benefit from a favourable tax regime. People may also have fantastic ideas but not the business know-how to put them into practice, so business education is also important. Stelios Haji-Ioannou was speaking to Charles Orton-Jones.

further entrepreneurs because the will and ability is there. What is certain is that Abu Dhabi and the GCC are currently very exciting places, and there are many cross-border opportunities available for people with the ideas and capital to put them in place. How can Abu Dhabi encourage young entrepreneurs? To an extent, entrepreneurs are born and not made. They need to have a spark and a passion. Entrepreneurs are those who are unable to work for others, so to

Illustration by Mark Dickson

The Economic Review is the newsletter of the Abu Dhabi Council for Economic Development. The Abu Dhabi Council for Economic Development is a statutory body, established in May 2006, to facilitate economic diversification and growth through creating greater understanding, cooperation and engagement between the public and private sectors of the emirate of Abu Dhabi. ADCED thanks its employees: Khawla Ahmed Al Qemzi Abeya Mokhtar Amna Sale Bin Hraiz Mariam Sultan Al Mehairbi Hamda Khalifa Al Kindi Abeer Sulaiman Al Jassim Mariam Ibrahim Al Mahmoud Salwa Fadhel Special thanks to: Sultan Sooud Al Qassemi Majid Julfar Production Youcef Azrgui Chief editor Dr. Abd Al Majeed Al Heeti Chief economist Dr. Hoe Ee Khor Translation Dr. Hadi Al Taie Coordination Khalifa Salem Al Mehairi Publications director Mohamed Al Qubaisi

Abu Dhabi Council for Economic Development PO Box 44484 Abu Dhabi UAE T: +971 2 418 9999 F: +971 2 418 9988 E: info@adced.ae

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Reproduction, copying or extraction by any means of the whole or part of this publication must not be undertaken without the written permission of the publisher. The views expressed in this publication are not necessarily those of the Abu Dhabi Council for Economic Development.