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Business in Abu Dhabi
Undeterred by the global economic slowdown, the economy of Abu Dhabi, one of the most prosperous and vibrant economies in the Middle East, has continued to perform strongly over the past years. The relatively high oil prices in the international markets coupled with robust domestic demand maintained the stability of the local economy and boosted investor confidence, which hit rock bottom elsewhere in the world.
Strong political commitments, prudent investment decisions and long-term economic development policies from the government continue to give the economy the momentum it needs to become a highly developed, flexible and diversified economy.
The Abu Dhabi Economic Vision 2030
The Abu Dhabi Economic Vision 2030 outlines the economic diversification plans of Abu Dhabi Government. It reflects the desire of the Government to envisage the development process of the emirate over the next two decades with a clear and long-term road map and general policy framework for economic development. The vision involves a greater collaboration between the public and private sectors in implementing the policies and plans of the government. The vision identifies the following points as the priorities of the Government to achieve an ambitious economic transformation by 2030.
- Creating an open, efficient and globally integrated business environment.
- Adopting a well disciplined fiscal policy that is responsive to various economic cycles.
- Establishing a resilient monetary and financial market environment with manageable levels of inflation.
- Improving the efficiency of the labour market.
- Developing a powerful and efficient infrastructure able to support the anticipated economic growth.
- Developing a highly skilled and productive human capital.
- Enabling financial markets to become the key financier of projects and economic sectors.
Economic Diversification
Abu Dhabi is taking a number of serious steps to diversify its economy away from overdependence on hydrocarbon industries. It sees the implementation of a well-defined economic diversification policy with clear goals and appropriate mechanisms as the first step to build a self sufficient economy that can offset the impacts of fluctuations in the oil prices, share markets and real estate sector. The Emirate is also improving its investment climate to generate considerable investor interest and become the most attractive investment destination in the region. With this in view, a number of specialised economic zones that offer various tax-free incentives to investors and cater to a variety of business and industry sectors are being developed.
Abu Dhabi, which is the fifth largest exporter of oil in the world, wants to see the oil sector play the role of a stimulator to other economic sectors in order to achieve a sustainable and inclusive development in all areas. According to a report released by the Department of Economic Development (DED) in 2008, the non oil sector is projected to overtake the oil sector by 2025 when the contribution of the oil sector will decrease to 40% of the GDP and to less than 20% by 2050. With the consistent growth of the non-oil sector, the Emirate’s real GDP is expected to triple by 2025 to about $ 315 billion from $ 105 in 2008.
Money previously invested outside the country is returning and investors are on the lookout for investment opportunities within the country in hope of hedging against the high risks involved in investing in foreign funds and financial markets. This influx of capital will give a tremendous boost to the government’s plans to promote private sector participation in developing various economic sectors.
The measures currently being taken by the government to reform its economy as part of its overall economic vision include five major areas: privatising a number of state-owned enterprises, strengthening the Abu Dhabi Securities Exchange Market, diversifying the industrial sector by focusing on the petrochemical, steel and aluminium industries, establishing specialised economic zones and developing tourism sector.
TopIndustrial Development
With the aim of achieving a diversified and modern economy, Abu Dhabi is in the process of developing a powerful and modern industrial sector that would replace the traditional oil and gas sector as one of the major contributors to the Emirate’s economic activity and attract more foreign investment into the Emirate. Aluminium, iron, steel, glass, metal, plastics and petrochemical industries are some of the heavy industries identified to stimulate the growth in the industrial sector and create thousands of new job opportunities for UAE nationals.
Abu Dhabi holds key elements of creating a successful industrial sector. Availability of industrial land, raw materials, cheap energy, state of the art industrial infrastructure, fast and flexible project delivery, simplified procedures for obtaining industrial licenses and flexible foreign ownership regulations are some of the major factors that make Abu Dhabi an attractive destination for investment in the industrial and manufacturing sector. With the Emirate planning to give foreigners the right to own up to 100% share in industrial projects, the sector is projected to attract huge foreign investment and employ large numbers of qualified professionals.
TopTourism Development
As a result of the Abu Dhabi Government’s intensified efforts to diversify the economy, with tourism being identified as another vital sector for economic growth, the Emirate is witnessing an unprecedented boom in the number of hotels, amusement and theme parks, shopping malls, luxurious residential complexes, waterfront communities, sports and other recreational facilities, and art galleries and museums which all cater to a growing number of domestic and international holiday makers.
The tourism sector accounts for 2.1% of Abu Dhabi’s GDP, and 6.4% of the non-oil sector. UAE citizens occupy 1% of direct tourism jobs. The sector witnessed 8% growth in 2009 although it was hit hard by the worst economic turmoil in several decades all over the world. The Emirate is planning to invest a whopping $ 230 billion in various tourism projects over the next five years. The number of hotel guests is set to increase to 2.7 million and hotel rooms to 25,000 by 2012. The Emirate is also expected to attract 3 million tourists by 2015.
However, Abu Dhabi is not pursuing an open tourism policy; rather it is mainly focusing on the business tourism sector which mainly includes meetings, incentives, conferences and events. In 2010, the Abu Dhabi Exhibition Centre, the premier venue for many major exhibitions and business events in the Middle East, is hosting nearly 110 events, exhibitions and conference which will attract a large number of visitors into the Emirate. The business tourism sector is expected to account for 50% of the total number of tourists by 2015 compared to 25% at the present. To make Abu Dhabi an ideal tourism destination and attract more tourists and visitors to Abu Dhabi, the Abu Dhabi Tourism Authority (ADTA) is implementing various programmes and initiatives including a five-year strategic plan in line with the overall economic vision of the Government. The main priorities of this strategy are regulating the tourism sector, improving the transportation facilities and entry procedures, fostering international marketing efforts and utilising the heritage and culture of the emirate to consolidate the status of Abu Dhabi as a premier international tourist destination.
TopForeign Investment in Abu Dhabi
While supporting the local entrepreneurship that is capable of competing with global players is one of the top priorities of the Abu Dhabi government, it hasn’t forgotten its commitments to open up the economy to foreign trade and investments as the Emirate is increasingly promoting itself as an investment hotspot with a dynamic and competitive business environment.
As part of its efforts to create a healthy and effective business environment that is friendly to foreign investments and well integrated with the global economy, Abu Dhabi is adopting the highest standards and seeking top rankings in global indices and reports of economic freedom and competitiveness. The UAE is ranked in the 33rd place in the World Bank's index of best countries worldwide in the Ease of Doing Business and is aiming to improve its position in the coming years. Another report released by World Bank and International Finance Corporation (IFC) ranked the UAE among the top 10 countries that provide a more favourable climate for foreign investment.
Abu Dhabi is planning to increase Foreign Direct Investment (FDI) in its economy and boost its non-oil exports over the next two decades to strengthen its GDP. At the present, FDI accounts for 14% of the GDP of Abu Dhabi with plans to achieve a growth of 23% by 2030.
In 2008, the UAE attracted $ 14 billion (AED 51.4 billion) in Foreign Direct Investment with a significant share being invested in Abu Dhabi despite a major decline in global investment flows.
Over the past few years, the number of foreign companies opening their branches in Abu Dhabi has reached 994, registering a remarkable annual growth of 51.9% from 2005 to 2008. The Department of Economic Development in Abu Dhabi registered 264 new branches of foreign companies up to October 2009, with the number set to increase in the coming years. Political stability, security, strong economy, modern infrastructure, proximity to a huge consumer market, flexible and investor friendly procedures and laws, availability of raw materials and funds, tax exemptions, low tariffs, among other factors make the investment climate in the UAE in general and Abu Dhabi in particular an ideal one for foreign investment.
TopForeign Trade
Various statistics released by the relevant authorities reveal that Abu Dhabi is fast on track to becoming a leading trading hub in the region with the Emirate planning to increase its non-oil exports to 11% of GDP from 1.5% currently over the coming two decades. With this objective, the Emirate is planning to set up an export promotion agency.
According to the data released by Abu Dhabi Customs Administration, the foreign trade of the Emirate has witnessed a significant growth in 2009.
The value of the Emirate’s foreign trade surged to AED 112 billion in 2009 registering a 9% growth as against the previous year despite the challenges faced by the global economy. The data also shows that the Emirate’s non-oil exports increased by 52% to AED 9.5 billion in 2009 while the imports reached AED 93.8 billion posting a 4% growth.
The value of re-export trade grew by 39.3% to AED 8.6 billion. The Emirate’s sea ports accounted for 62% of the total imports. These statistics underscore the success of the free trade policy of Abu Dhabi Government. Qatar followed by Saudi Arabia are Abu Dhabi’s biggest export destinations while the US, Germany, Saudi Arabia and the United Kingdom top the list of major import sources.
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