ICT Investment

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Information and communication technology (ICT) will continue to play an important role in government policy and consumers' everyday lives in Abu Dhabi, despite the global economic slowdown.

As part of its Abu Dhabi Economic Vision 2030, released earlier this year, the Department of Planning and Economy (DPE) has outlined the government's intention to make ICT an integral part of its development plans.

"Further spending on ICT will be encouraged to reach levels similar to that of New Zealand or Singapore, ensuring residents and businesses are plugged into the global network," the DPE stated.

Given the emirate's healthy cash surplus from its vast hydrocarbon wealth, Abu Dhabi - which sits atop 9% of the world's proven oil reserves - is ideally positioned to invest in efficient ICT infrastructure, and thus further encourage its residents to adopt new technology.

Compared to the rest of the region, computer, telephone and internet usage in the United Arab Emirates (UAE) is already high, particularly in the capital. Indeed, the UAE received the highest score in the 2007 Arab ICT Use Index, conducted by Madar Research Group and Orient Planet and released late last year.

According to the DPE, mobile penetration in Abu Dhabi stood at 108.2% as of 2006, while figures for PC penetration were also high at 26%, compared to 2% in Egypt. In more recently released figures from an Al Mal Capital telecoms report, mobile penetration had reached 166.4% by year-end 2007. Couple this with rapidly growing internet user penetration (44.7%) and a stable fixed-line percentage (30.0%) for the same period, and the UAE's ardour for technology becomes evident.

That residents of Abu Dhabi have proved eager to snap up the latest gadgets is hardly surprising, given the emirate's high rate of purchasing power. According to Al Mal Capital, by year-end 2007 Gross Domestic Product (GDP) per capita stood at $43,859.

Today, however, intractable global forces have translated into domestic woes across the world. Although Abu Dhabi has suffered far less than many due to its healthy current account surplus and history of prudent policy, consumers are experiencing changes that could affect their appetite for new technology.

From January 20-29, 779 UAE nationals responded to a survey conducted by YouGov, an international internet-based market research firm, regarding consumer reaction to tougher financial times. With 74% of participants indicating that they do not expect a larger salary rise this year than in 2008, consumer confidence is expected to subside, although purchasing power in Abu Dhabi should remain stronger than in other emirates.

Khaled El Mattrawy, senior economist at DPE, told OBG that the international downturn would not impact locals in Abu Dhabi. "They have a high standard of living, and they are not going to to stop purchasing the latest phones and small laptops," he said.

Nevertheless, he acknowledged that foreign workers would be affected. Certain ICT products - such as the latest smart phones, computers and broadband packages - could become viewed as luxury items. "Like in any other crisis, people need time to adapt and in the very short term we may see a slight reduction in consumer purchases of electronics," El Mattrawy said.

As with all downturns, retailers will do their best to ameliorate any slouch in sales. As people move to cheaper and sometimes imitation goods, shopkeepers may discount on mounting midrange priced inventory, while brand name products have the option of using sophisticated brand management techniques to retain their allure.

El Mattrawy remains optimistic in spite of the global economic climate. "Solutions are always found to boost sales, and the slowdown won't be a major issue in Abu Dhabi," he told OBG.

The important question now is how less optimistic economic times will affect the government's plans for increasing ICT infrastructure. In the current climate, where credit is tight, updating infrastructure could require using existing capital. Fortunately for Abu Dhabi, if private investors do become reticent, the government, with its healthy current account surplus, is in a position to intervene and ensure that projects move forward.

"During difficult times, fiscal policy is one of the main instruments used, as governments step in and increase spending, and infrastructure is one main part of that," El Mattrawy said. "The current global economic slowdown is not going to affect Abu Dhabi's plans to increase ICT."

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