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Plans for two new residential complexes for workers in the Industrial City of Abu Dhabi were unveiled this week, demonstrating the government's commitment to industrial expansion and diversification.

On August 1, Norman Johnston, CEO of the Higher Corporation for Specialised Economic Zones (ZonesCorp), the government-owned company charged with setting up and running the Industrial Cities of Abu Dhabi, signed two contracts for the provision of these new complexes with Said Bin Omeir, chairman of Bin Omeir Holding Group and Ahmed al-Hussaini, CEO of al-Rayan Investment Company.

The new residential complexes for workers will be built under a public-private partnership and are the first of five complexes planned for construction in Abu Dhabi and al-Ain under the directives of Sheikh Mohammed bin Zayed Al Nahyan. Each complex will provide accommodation as well as a variety of amenities including shopping malls, sports and recreational facilities, restaurants, post offices, healthcare centres and a mosque. The two new complexes will build on the successful inauguration of the first phase of the labour residential blocks in the Industrial City of Abu Dhabi, which took place in April.

This project is an integral part of the government's drive to address the provision of labour accommodation throughout Abu Dhabi and the UAE. Ali bin Abdullah al-Ka'abi, the minister of labour, told local reporters upon the inauguration of the ZonesCorp's Residential Workers' City, "ICAD is our first project, we want to improve the lives of all workers in the UAE and so we shall be building similar cities across the Emirates, not just in Abu Dhabi."

However, these residential complexes are also seen as a crucial part of the practical implementation of an efficient and self-contained economic zone, which provides incentives for investment in the industrial sector. Jack Matar, managing director of Toledo, a medium-sized electrical and mechanical works contracting company already based in Abu Dhabi, told OBG that ICAD will help him to make his business more efficient, cutting out red tape and centralising his operations.

This is facilitated by the fact that all relevant government authorities for industrial licensing have a presence in ICAD. Investment is also encouraged through a tax-free environment and the possibility of 100% foreign ownership in these economic zones.

The government hopes that such a combination will help to lure the bigger fish of foreign direct investment (FDI). Sheikh Hamed bin Zayed Al Nahyan, the chairman of the Department of Planning and Economy and chairman of the Higher Corporation for Specialised Economic Zones feels that Abu Dhabi is creating an attractive environment for FDI in the industrial sector. In a press release last week, he stated, "ZonesCorp is working to promote and make available a conducive industrial environment to attract FDI by streamlining procedures so that the emirate can compete with the rest of the world. The government aims to have a world class, modern and efficient industrial infrastructure which will distinguish Abu Dhabi as an investment haven internationally."

The recipe seems to be working. As a consequence of the success of the $2.72bn ICAD Phase I, the Higher Corporation for Specialised Economic Zones launched ICAD II at the end of last year. This has already attracted the interest of more than 20 major companies and generated more than $1.9bn in investment thus far. There are now nascent plans for ICAD III and ZonesCorp hopes to establish an industrial zone in al-Ain as well.

These component parts fit the wider strategy of creating a low-cost manufacturing hub which can fill the void left by the closure of manufacturing plants in Europe and the US due to the high cost of production. The emirate has the natural advantage of low-cost energy and space combined with a burgeoning transport infrastructure, tax-free environment and cheap labour. Abu Dhabi is, therefore, seeking to create more than 30 industrial clusters in areas such as petrochemicals, automobiles, metals, construction and building materials as well as food processing.

Meanwhile, the impetus to diversify away from oil and gas production is also reflected in plans to build an aluminium smelter and two steel plants in Abu Dhabi. The $6bn aluminium smelter, which is being jointly developed by Dubai Aluminium Company (DUBAL) and Mubadala Development Company, is to be located at the proposed Khalifa Port and Industrial zone in Taweelah. The first phase of the project, which will be operational by 2010, will see an annual capacity of 700,000 tonnes rising to 1.4m tonnes upon full completion, making it the largest single-site aluminium smelter in the world. Al-Ghurair Iron and Steel Company and Abu Dhabi National Company for Building Materials (Bildco) are both setting up steel plants in ICAD I and II respectively.

These new initiatives come at a time when the industrial sector is growing at a rapid pace. According to figures released by the Ministry of Finance and Industry recently, investment in the industrial sector in Abu Dhabi has grown by 416.4% in the last five years progressing from Dh7.45bn ($2.02bn) in 2001 to Dh38.55bn ($10.5bn) in 2005. These figures exceed the growth rate for the UAE as a whole which was nevertheless an impressive 140% rising to Dh68.22bn ($18.6bn) worth of investment in 2005.

During this period, the sector witnessed a 30.4% increase in the number of workers making ZonesCorp's announcement regarding residential complexes for workers timely.

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