Long-term drivers are fuelling the capital emirate and commanding the world's attention. Alicia Buller reports.
Palm-shaped islands versus art museums. Gleaming shopping malls versus long-term plans. Bling and bombast versus conservatism. The clichés of Dubai and Abu Dhabi are well-trodden. But what has forced a greater divergence in the paths of the emirates, and shaped their identities, is the recession.
While Dubai nursed its wounds and maintained an uncharacteristic hush, Abu Dhabi threw a little of its legendary caution to the wind and announced international acquisitions, high-profile global partnerships, neighbourly bailouts and billion-dollar megaprojects.
Home to seven per cent of the world's oil supplies and one of the highest per capita GDPs globally, the emirate has continued full throttle with its $500 billion plan to upgrade infrastructure and industry in line with the Abu Dhabi Economic Vision 2030.
But it would be churlish to say the capital emirate emerged unscathed from the recession. It didn't. Like
most global markets, the emirate was bruised by the real estate downturn, weakened company profits and tight bank lending.
The ambitious Economic Vision targets seven per cent growth through to 2015. But according to the International Monetary Fund the reality is somewhat damper, with 3.7 per cent growth forecast for 2010. Dubai's economy is expected to contract by 0.5 per cent this year.
For Abu Dhabi, it is not today that matters so much, but tomorrow. It is the combined factors of a proven ability to deliver and strong net assets that lend promise to the emirate's plan. Where Abu Dhabi excels is in the fuel of its long-term drivers.
Cash
Weighing in at an estimated $600 billion, Abu Dhabi boasts the largest combined sovereign wealth fund in the world. And while the government has borne the combined pressure of loans to Dubai, weakened oil prices and ill-fated international investments, the emirate's overall softly-softly approach to spending has ensured its treasure chest remains the envy of the world's debt-beleaguered nations.
Abu Dhabi posted a growth of six per cent for non-oil activities in 2009, signalling that the plans to buffer the economy are on the right track. Finance levels are no longer confined to the fate of crude. Add that to the fact that oil reserves are valued at $1 trillion, and the long-term cash outlook is buoyant.
Energy
In 2009, Abu Dhabi's oil reserves stood at 92.2 billion barrels, while its total natural gas reserves were estimated at 212 trillion cubic feet. Electric power generation grew at 14 per cent on year to 39, 189 gigawatt hours.
And despite its natural reserves, Abu Dhabi has unabashedly pumped billions into alternative energy projects, including carbon-free city Masdar. Foreign minister Sheikh Abdullah has also announced the country's nuclear ambitions with UN backing.
"Abu Dhabi has the capacity to lead in nuclear energy, this can't be ignored. While it might seem ironic, it's actually the perfect match," says Oliver Cornock, regional editor for the Oxford Business Group. "It is in line with the emirate's continued optimisation of the hydrocarbons. Abu Dhabi has a will, it has a way, and a proven ability to deliver."
Infrastructure
A large portion of the $500 billion investment in Abu Dhabi's future is reserved for infrastructure projects housing, roads, rail, ports and aviation.
"The 2030 strategy demonstrates an understanding of how you need to develop an economy," CEO of Abu Dhabi Ports Company, Tony Douglas, told Gulf Business. "For any city to be competitive on a global level, you have to have the transport infrastructure in place, seawater ports, air ports and heavy rail, as well as roads. Without any combination of three out of the four, you will never be competitive globally." Douglas, ex-boss of Heathrow airport in London, is masterminding Abu Dhabi's $24 billion Khalifa Port and Industrial Zone. The first phase is set to open in Q4 2012 and, when complete, the port will have a capacity of 35 million tonnes.
Industry
As part of its ambition to diversify its GDP income away from oil, Abu Dhabi is pumping billions into its industrial city projects, from primaries - such as steel and aluminium - through to glass and polymers, assembly, manufacture and high-tech sectors, such as bio-tech, semi-conductors and green energies.
Heavy industry features heavily in the 2030 plan, with the majority of activity centred in the western town of Ruwais, which houses the Borouge polyolefin factory, Ruwais Refinary, the Abu Dhabi Industrial City and the upcoming Abu Dhabi Polymers Park. The billion-dollar industrial sector is pipped to catalyse the emirate's economy in the coming years, and is pivotal to the diversification scheme.
Art and Tourism
Literature competitions, film festivals and classical music concerts pepper Abu Dhabi's calendar, fuelled by the multi-million dollar Abu Dhabi Tourism Authority (ADTA) and Abu Dhabi Authority for Culture and Heritage (ADACH). The upcoming cultural district, Saádiyat Island, embodies the art and tourism vision and is set to house new Guggenheim and Louvre museums, in addition to 29 planned five-star hotels.
"Over the past six months, occupancy levels have fallen by 18 per cent, but are still a relatively healthy 64 per cent," says director-general of ADTA, Mubarak Al Muhairi.
"We are on track to achieve the 2012 targets of 2.3 million hotel guests and 24,000 hotel rooms."
Banking
Exorbitant oil prices and low interest rates propelled the national banking sector to grow at a compound annual growth rate of over 32 per cent between 2003 and 2008. These heady days were curbed somewhat by the recession, but the $35 billion government injection into the system bore fruit by mid-2009. Liquidity issues remain, but the drivers of a growing population, credit-hungry consumers and an upward trend in Islamic finance services hold long-term promise.
"Abu Dhabi has a strong banking sector and it is now evolving from the traditional and corporate banking to fee-driven added-value services, such as investment banking and asset management," says Phillipe De Backer, partner, global financial services, Bain & Company.
Education
Education is another pillar in the economic vision and a building block in stimulating non-oil GDP. The UAE federal government allocated $2bn for the sector in 2009 - and a programme of reform that is harnessing private expertise and international models.
Under the new education plan, $1.3bn will also be invested in research and development by 2018. Both federal and private universities will be invited to submit proposals to win grants for funding. Four key sectors, which are integral to the emirate's economic strategy, have been prioritised: health, aerospace, semiconductors and renewable energy.
Sport
The scale of Abu Dhabi's ambitions and, more importantly, its ability to realise them, was evidenced by the on-time completion of the $40 million Yas Marina Circuit, which hosted the inaugural F1 Grand Prix race.
Chief developer Aldar has seen troubled days since and sold some of its assets back to the government, but the triumph of the F1 race demonstrated the power that sport has to imbue a nation with success and recognition.
Abu Dhabi has hosted many world-class events including cricket, martials arts, tennis, golf and football. Most recent is the FIFA Club World Cup. The emirate has also been busy snapping up UK Premier League football clubs (Machester City, pictured right). Sport is more than just a game for Abu Dhabi, and is a major tourism and awareness driver.
Space
This time last year, state-linked arm Aabar Investments announced its 32 per cent stake in Virgin Galactic, which aims to start flying private passengers into space for $200,000 per ticket. Aabar has since been delisted and folded back into the arms of its owner IPIC. But this has done nothing to quell the emirate's appetite for the aerospace industry.
The IPIC deal included $100 million for the development of a satellite launcher, as well as building spaceport facilities in Abu Dhabi, which will be integrated with a university academy where students can study courses related space. Last year, the UAE underwent a galactic revolution with the launch of DubaiSat1 - the country's first Earth-seeking satellite system. Abu Dhabi continues to invest heavily in the aviation branch of the aerospace sector.
Health
A rapidly growing population and an ongoing push to modernise and improve medical services mean investment opportunities in Abu Dhabi's healthcare sector are on the rise. Demand for inpatient services may require up to 2,000 additional beds within 10 years beyond the current 3,642 beds. According to the Health Authority-Abu Dhabi, "aggressive growth" is needed in services related to diabetes and cancer, while low capacity in gynaceology and othropaedics means greater investment is required.
What is clear, from the sheer demand, is that the government will require increasing participation from private companies as it forges ahead with both modernising its current health facilities and building capacity for future generations.
© Gulf Business 2010
