The winds of change are sweeping across Abu Dhabi as economic diversification, liberalisation and privatisation are increasingly engaging the attention of the government.
Not that the concepts of diversification, privatisation or liberalisation are new. In fact, Abu Dhabi, along with Oman, pioneered power privatisation in the Gulf and in the last few years there are sectors other than oil and gas that are contributing to the emirate's GDP.
Nevertheless, if the latest initiatives are any indication, privatisation is here to stay and the planned industrialisation in the capital is a strategic move to increase the share of the non-oil sector in GDP.
In June, Shaikh Hamed Bin Zayed Al Nahyan, chairman of the Abu Dhabi Department of Economy, unveiled plans of the new Higher Corporation for Specialised Economic Zones (HCSEZ) in Abu Dhabi at its first board meeting.
"The HCSEZ will focus on attracting investment in these specialised economic zones from the private sector, from individuals and through joint ventures. We will provide infrastructure, customer service and other facilities in these zones," Shaikh Hamed said.
Then in late July, Abu Dhabi announced the launch of a new public joint stock company to take over factories owned by the now defunct General Industries Corporation (GIC) and roll out a privatisation plan for their partial or full sell-off.
Besides plans to privatise key industrial plants, the emirate in its bid to attract foreign capital of nearly $10 billion into its burgeoning industrial zones is also planning to revise its economic and investment laws in line with World Trade Organisation (WTO) rules.
"New economic legislation in the emirate is currently under study so they will conform not only to regional laws but also to WTO requirements," a senior official of the Abu Dhabi Department of Economy said.
"We want the new investment and economic legislation to be compatible with the new world economic order and in this respect the Abu Dhabi Department of Economy is giving priority to expanding the private sector by increasing its role in domestic development and finding a real partnership between this sector and the government.
"For this purpose, we are planning to present a series of important projects to the private sector with minimum government participation."
The official said various projects have been identified and feasibility studies have been done by international firms.
"We want to reassure private investors that the government will have only a small shareholding in these projects and there is no intention of monopolising or having a controlling stake in any project to be presented in the coming period."
In line with privatisation plans, the Department of Economy announced it was spinning off some state-owned plants under a new holding company.
The enterprises, previously owned by the GIC include Al Ain Cement Plant, Abu Dhabi Animal Feed factory, Abu Dhabi Flour Mill, Al Ain Mineral Water Bottling Factory, the Cement Building Block Factory at Al Ain as well as Wathba and Mafraq Steel plant.
Observers said the planned privatisation of the factories through a partial or full sell-off of shares will create the right investment climate to absorb Arab money returning home from overseas and thus boost stock market activity in the country.
"Abu Dhabi's ambitious industrialisation plans of creating industrial cities and the recent move to privatise the GIC-owned industries is a strategic move to tap the huge liquidity sloshing around here," said Terence D. Allen, former head of investment banking at the National Bank of Abu Dhabi and currently an independent consultant.
"The local authorities are creating a conducive investment climate for large sums of Arab money returning from abroad. There's a huge appetite for stocks and public offerings will be over-subscribed many times," he said.
Industry watchers are waiting for more details regarding the HCSEZ under which will come two new zones namely the car manufacturing zone and the oil services zone along with the Abu Dhabi Industrial City, the Al Ain Industrial City and the Ruwais (Baynounah) Industrial City. A few other zones are also planned but details have yet to come out.
Bullish mood
Shaikh Hamed is bullish about attracting investments into the new zones.
"A lot of Arab capital has migrated outside due to a lack of investment opportunities in Arab countries. We will try to get that back. We will also attract local capital."
Each of these specialised zones will have their own laws and they will soon engage the attention of the HCSEZ.
Land has been allotted for the new zones in Abu Dhabi and Al Ain. Small and Medium Enterprises (SMEs) will also be encouraged to enter the specialised zones.
The immediate response to the free zones speaks volumes about the interest from foreign companies. One was the interest shown by German auto giant Volkswagen (VW) to set up a new car manufacturing facility while other German and Japanese manufacturers have also expressed interest.
VW would be an anchor investor in the car manufacturing zone. Further negotiations are under way and some details are likely to follow in the next quarter.
Indeed industry watchers will be keen to see the response from foreign and local investors in the specialised zones as well as industrial zones in Abu Dhabi and the coming months could well be a period of intense negotiations and some positive developments.
Meanwhile, Etisalat's decision recently to open up the telecoms sector to competition reflects yet another aspect of planned liberalisation.
A second GSM operator is to come into the UAE thus breaking Etisalat's long-held monopoly. Clearly then, the buzz-word today in the capital is privatisation, diversification and liberalisation.
"There has been private investment in some sectors such as construction, real estate, medical services, retail and malls but the kind of investments coming from the private sector in the new planned zones and industry will be huge and that would truly reflect the changing economic climate in Abu Dhabi," concluded an economist at the Ministry of Economy.
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