Economic Update

Abu Dhabi has moved ahead with plans to bolster the emirate’s non-oil economy following the launch of a Dh50bn ($13.6bn) programme aimed at fast-tracking economic growth and social development.

On September 16 Abu Dhabi’s Crown Prince Sheikh Mohammed bin Zayed announced the budget and initial round of projects for the Ghadan (Tomorrow) 2021 strategy, a three-year plan designed to further reduce the emirate’s dependence on oil revenues.

First announced in June, Ghadan 2021 will consist of 50 separate initiatives based on four foundations: business and investment; society; knowledge and innovation; and lifestyle.

Some Dh20bn ($5.4bn), or 40% of the Dh50bn ($13.6bn) budget, has been allocated for 2019.

Private sector targeted in business development

Key to the Ghadan initiative is the improvement of the emirate’s business environment, with a particular focus on facilitating greater private sector participation.

To this end, the Abu Dhabi Executive Council – the body tasked with overseeing the programme – announced the establishment of a new business licence registration process, which should allow for the approval of 91% of commercial activities within five minutes. To support this, the Tajer licence, which allows operators to establish businesses without having a permanent office, has also been expanded to cover all nationalities and more than 1000 different commercial activities.

Meanwhile, in terms of financing, officials announced that a credit guarantee programme will be established before the end of the year. Under this initiative, banks are expected to offer small and medium-sized businesses Dh10bn ($2.7bn) in funding over the next three years.

This was coupled with the announcement that a new public-private partnership (PPP) law would soon be issued, and the initial tranche of these PPPs will be tendered in the first quarter next year, with up to Dh3bn ($816.9m) worth of projects in housing, infrastructure, energy and health care on offer.

On this note, the Ghadan strategy is expected to generate opportunities for a range of service providers, with the construction and materials supply sectors in particular set to benefit from the uptick in projects forecast over the coming three years.

Additionally, the government is also moving to support domestic services and materials suppliers, looking to adopt by early next year a new content policy giving preference to local suppliers in state tenders.

Incubator to develop innovation and R&D

Another key feature of the programme is the facilitation of Abu Dhabi’s knowledge economy through a series of developments promoting innovation and research and development (R&D).

Key to meeting these goals is the establishment of a new tech incubator, expected to open by the end of the year.

On top of developing local expertise and start-ups through cooperation with the private sector, the committee said the incubator will serve to increase Abu Dhabi’s attractiveness as a destination for tech-sector talent, and support industry-based R&D efforts.

In terms of education, officials announced plans to add some 30,000 places to the emirate’s school capacity over the period, to be made up of 15,000 new students in private schools by 2021 and 15,000 in existing state schools by next year.

Strategy aims at greater diversification

The aims of the Ghadan 2021 programme mirror many of the emirate’s goals set out under Abu Dhabi Economic Vision 2030, the long-term development strategy designed to reduce its dependence on oil revenues.

Such an approach aims to insulate the economy from any significant shifts in the value of oil, as seen when the price of crude oil dropped from more than $100 a barrel in 2014 to around $30 a barrel in early 2016.

By increasing investment in tourism, manufacturing, logistics, education and telecoms, the emirate is hoping to reduce the hydrocarbon sector’s contribution to GDP to 20% by 2021, down from 59% in 2005 and around 50% in 2014.