Thoughtful development: Hydrocarbons revenues have given the authorities the fiscal flexibility to ensure the emirate’s growth is well planned

The UAE celebrated the 42nd anniversary of its establishment in 2013. Over this relatively short period of time, the country’s capital, Abu Dhabi, has rapidly developed to become a thriving metropolis. Although the emirate’s economic growth can be primarily attributed to its vast hydrocarbon resources, it has also made admirable progress diversifying into new sectors such as manufacturing, tourism, aerospace, defence, finance and logistics, as well as many other areas. Abu Dhabi has transformed itself into one of the wealthiest places in the world. Not only has it become an increasingly important player in the global economy through its many sovereign investments, it has also used its financial resources to invest in an array of targeted initiatives with the aim of creating a more balanced and sustainable future. In addition to the emirate’s economic investments, Abu Dhabi has also made major contributions to social welfare – education and health – as well as infrastructure, which has been identified as the bedrock for future growth. The rapid rate of development in the emirate has led to a need to employ a large number of overseas workers at all levels, so much so that Emirati nationals currently represent around one-fifth of the total population, according to the Statistics Centre – Abu Dhabi (SCAD). The pace of the emirate’s development has presented numerous opportunities for foreign investors and businesses looking to establish a presence in the Middle East. Indeed, with increasing transport options, Abu Dhabi’s businesses and industries can import and export a wide array of products efficiently, and individuals can fly directly from Abu Dhabi International Airport to over 93 destinations around the world. Despite the rapid changes that have transformed the UAE since its establishment, Emiratis are proud of their culture and heritage and ties to traditions are strongly maintained, permeating into the business culture, as well as forming an important part of Abu Dhabi’s growing tourism offering.


Abu Dhabi occupies nearly 87% of the country’s total land mass and boasts a coastline that stretches over 700 km, making it the largest of the seven emirates. Its land surface measures 67,340 sq km, of which only 30% is inhabited, with the remaining area covered mainly by expanses of desert and arid land. The emirate shares its borders with Dubai and Sharjah to the north, Saudi Arabia to the southwest and Oman to the east.

Within the emirate of Abu Dhabi there are nearly 200 islands including Das, located 170 km north-west of Abu Dhabi City; Mumbraz and Bani Yas, which are located approximately 180 km west of the capital. The emirate consists of the city of Abu Dhabi, the western region (Al Gharbia) and the eastern region (Al Ain). Abu Dhabi City, the capital of the UAE and the largest city in the emirate, is situated on an island around 250 metres off the coast. The city is seen by many as a template for urban planning, with its impressive skyline, many manicured parks, tree-lined roads and playgrounds.

Al Gharbia

Comprising 83% of the emirate’s land mass, but less than 10% of its total population, Al Gharbia, which means “western region” in Arabic, is an area of serene undulating deserts with 350 km of pristine coastline. Close to the borders of Saudi Arabia and Qatar, it is considered the main gateway to the UAE. Most residents live in the region’s seven main cities: Liwa; the capital Madinat Zayed, which is named after the late Sheikh Zayed bin Sultan Al Nahyan; Ghayathi; Ruwais; Mirfa; Sila; and Delma Island. It is home to a majority of the country’s hydrocarbons reserves as well as a developed agriculture industry. It also is home to thousands of species of animals and birds including the indigenous oryx, which roams the island of Sir Bani Yas.

Al Ain

Meaning “the spring” in Arabic, Al Ain is located in the east of the emirate, built on seven oases and has been inhabited for 4000 years. It is the second-largest city in Abu Dhabi and fourth in the UAE. This inland region covers an area of around 13,000 km centred on the city of Al Ain, which is located on the border with Oman, 160 km east of Abu Dhabi City. The city is dwarfed by Jebel Hafeet to the southwest, the country’s second-highest mountain, and the area boasts highly fertile soil. Consequently, it is home to a substantial number of agricultural developments. The city has maintained a strong sense of heritage, partly due to regulations passed by the late Sheikh Zayed bin Sultan Al Nahyan, founder of the UAE, to ensure that the city would retain its traditional architecture and distinctive charm. The city’s authentic atmosphere makes it a popular weekend retreat for tourists and residents.

As part of Plan Al Ain 2030 – a key contributor to achieving the objectives set out in the Plan Abu Dhabi 2030: Urban Structure Framework Plan – the government aims to promote economic development in the region while simultaneously preserving its traditional character. Under the development blueprint the authorities are set to boost employment by investing in a handful of new high-tech, knowledge-based sectors, including aerospace manufacturing, agribusiness, health care, higher education and other types of industrial activities.

Plan Al Ain also includes a variety of provisions aimed at supporting existing local industries, including agriculture, tourism and construction, among others. At the same time the government is working to protect and preserve both Al Ain’s natural environment and the area’s cultural history, primarily by establishing a number of new national parks and other protected areas, and by ensuring that all new economic development in the area is carried out on a sustainable basis.

Environment Protection

Like many other desert countries, both in the Gulf and elsewhere around the world, Abu Dhabi currently faces a variety of environmental challenges. Over the past decade and a half, the government has prioritised sustainability across all economic sectors, with the goal of protecting the emirate’s delicate natural ecosystem for future generations (see Environment chapter). The Environment Agency – Abu Dhabi (EAD), which was established in 1996, has a mandate to develop, implement and enforce environmental standards in the emirate.

The EAD seeks to address all of the environmental challenges facing the emirate. Rapidly declining water resources are a key issue, for example. Groundwater accounts for around 60% of Abu Dhabi’s total water supply, with desalinated water and treated sewage water making up the remainder. As a result of steadily increasing usage – primarily by the agriculture sector, which accounted for more than half of total water consumption in 2012, for example – the emirate’s groundwater resources have declined significantly over the past decade. This is considered to be a major potential food security issue.

The EAD works with farmers in an effort to encourage more efficient water use, both through the deployment of new technologies and new training and education programmes. Similarly, under a new and improved regulatory framework the state is monitoring water usage on individual farms more carefully, in addition to working to make it harder to obtain permits for drilling new wells, for example. Finally, the EAD is working to replenish Abu Dhabi’s depleted groundwater with desalinated water.

Other sustainability-related issues that are being addressed by the EAD include air quality, waste management, resource consumption and biodiversity, among others. Together these efforts are expected to have a positive impact in terms of slowing environmental degradation and climate change, while simultaneously maintaining economic development.

National Government

Unlike other Arab countries, the UAE operates under a federal system consisting of seven different emirates. As the home of the national government, Abu Dhabi City stands at the head of the federal system. The government structure includes a Supreme Council of Rulers ( comprising the hereditary rulers of each emirate), the Council of Ministers and the semi-appointed Federal National Council, which holds an advisory role.

Each of the seven emirates is still governed by its own hereditary ruler, with its own local government and courts. However, some functions, such as international relations, defence and currency, are handled by the federal government. The president of the UAE is Sheikh Khalifa bin Zayed Al Nahyan, who is also the ruler of Abu Dhabi.

Local Government

In governing Abu Dhabi, Sheikh Khalifa is assisted by the Abu Dhabi Executive Council, which is responsible for representing and supervising the various departments of the government and is chaired by Sheikh Mohamed bin Zayed Al Nahyan. The Executive Council is also responsible for approving and monitoring the progress of government-sponsored projects, as well as providing oversight for government operations as a whole.

Abu Dhabi holds a number of additional powers, and is widely considered to have more influence on national affairs and foreign policy than the five Northern Emirates. For instance, the ruler of Abu Dhabi (and additionally Dubai) holds veto power on the UAE’s Supreme Council of Rulers.

Despite the existence of a modern government system, some aspects of Abu Dhabi’s tribal heritage continue to play a role in the government’s operations. For example, the emir and senior family members still practice a tradition of holding open majlis, through which individuals from outside the government are given an opportunity to provide opinions and debate topics that they feel are important.

Rich History

Much of the area that now includes Abu Dhabi has been a regional centre for trade among a wide variety of cultures for thousands of years. Al Ain, in particular, has likely been inhabited for around 4000 years, according to archaeological work carried out in the area. Al Ain’s location at the foot of Jebel Hafeet has made it a strategically important location for millennia. Archaeological remnants discovered in both the UAE and Oman have been linked to the Umm An Nar civilisation, which was active on the Arabian Peninsula during the latter half of the 3rd millennium BCE.

For long periods of time during the ensuing centuries – and particularly during the Sassanid and Byzantine empires, for example – the area was widely known as a fishing and trading hub. Islam has been the dominant religion in Abu Dhabi since it was introduced early in the 7th century, during the Prophet Muhammad’s lifetime. In the 16th century the local pearling industry took off in the emirate. Pearl diving was a major source of income for the area until the early part of the 20th century.

Modern Abu Dhabi can trace its history back to members of the Bedouin ethnic group that first settled around the Liwa oasis before the 1600s. In 1761, members of the Bani Yas tribe first travelled to the island Abu Dhabi, according to legend, in pursuit of a gazelle (leading to island being named Abu Dhabi, which literally means “Father of the Gazelle”). After finding fresh water on the island, the first settlers began establishing permanent residences. Initially the Al Nahyan family, which headed the Bani Yas tribe, remained in Liwa Oasis; however, in 1793 they made a permanent move to Abu Dhabi.

During the late 1800s, the settlement thrived on the back of the pearl trade and in 1892, the town’s ruler, Sheikh Zayed bin Mohammed Al Nahyan, signed an agreement with the UK that would see the emirate join a group known as the Trucial States and become a British protectorate. Following the death of Sheikh Zayed in 1909, the emirate’s prosperity declined due to the collapse of the pearling industry. The prospects of the new emirate were set to change drastically, however.

In light of oil discoveries made elsewhere in the region, Abu Dhabi granted its first oil concessions in 1939. However, in part due to exploration efforts being put on hold during the Second World War, oil was not discovered until well into the 1950s. The emirate’s first oil exports began in 1962 and have since driven a transformation of both the emirate’s economy and its society. In 1966, Abu Dhabi officially joined the Organisation of Petroleum Export Countries as the group’s ninth member.

Also in 1966, Sheikh Zayed bin Sultan Al Nahyan first began proposing a formal union between the various sheikhdoms that were covered under the Trucial States agreement with the UK. In 1968, while facing adverse economic pressures, the UK announced the termination of its agreement to provide military protection to the Trucial States.

This move spurred action amongst the sheikhdoms to create a more formal union, with Abu Dhabi and Dubai taking the first steps towards establishing an official federation. In 1971 the UAE was formally created and consisted of the emirates of Abu Dhabi, Ajman, Dubai, Fujairah, Sharjah and Umm Al Quwain, with the seventh and final emirate, Ras Al Khaimah, joining the federation in 1972.


Abu Dhabi’s weather is characterised by pleasant winters, with moderate temperatures, and extremely hot summer months. In all seasons, however, sunny blue skies can be expected. The hottest months are July and August, according to the National Centre for Meteorology and Seismology, and the average maximum temperature is 34.3°C. The cooler season is from November to March, which ranges from warm to moderately hot, with an average minimum temperature of 22.4°C in 2012.


According to SCAD, in mid-year 2012 the estimated population in Abu Dhabi region was 1.42m (60.7% of the total), with the population of Al Ain region estimated at 630,000 (26.9%) and Al Gharbia at 290,000 (12.4%). Combined, the emirate’s total mid-year population was 2.34m. Emiratis make up about 20% of the total population, while foreign, mostly male workers from Asia, the Levant, Europe and North America make up the remainder.


Although Arabic is the official language of the government and business in the UAE, a range of other languages are also spoken, given the country’s large expat community. English is frequently used in business and government dealings, and signs and labels are typically in English or both English and Arabic. In terms of other languages, Persian, Hindi, Urdu and Chinese are relatively common, as are a variety of European languages.


The official religion of the UAE is Islam, although other religions are practised freely. Abu Dhabi’s cosmopolitan population supports many places of worship from Hindu temples to Christian churches. Islam has an important influence on many facets of life, including the law, calendar, personal and business relations, behaviour and codes of conducts, marriage, art, literature and even architecture.

Natural Resources

The UAE has considerable hydrocarbons reserves, and these have been crucial for the economic and social development of the country. In terms of proven reserves, according to BP’s “Statistical Review of World Energy 2013”, the UAE holds 5.9% of the world’s oil reserves and 3.3% of its natural gas reserves. Of the country’s total hydrocarbons reserves of 97.8bn barrels of oil and 215trn cu feet of natural gas, the US Energy Information Administration reports that Abu Dhabi accounts for around 94%. According to figures from SCAD, the emirate’s daily average production of crude oil reached 2.59m barrels per day over 2012, while the average daily production of natural gas was around 7.6bn cu feet.

According to SCAD, the mining and quarrying segment, which includes oil and gas activity, contributed 56.5% to Abu Dhabi’s GDP in 2012. However, despite Abu Dhabi’s large reserves, the government recognises that hydrocarbons are a limited resource and has therefore adopted a number of measures aimed at boosting non-hydrocarbons sectors. Furthermore, greater diversification of the economy will help reduce the country’s vulnerability to supply disruptions or external price shocks.

The petrochemicals industry, as well as other oil-based and energy-intensive industries, enjoy a major comparative advantage in Abu Dhabi, given the abundance of these resources. As a result, the local petrochemicals industry has evolved rapidly, with Abu Dhabi’s industrial plants manufacturing a wide range of petrochemicals products, including polyethylene and fertilisers, such as urea and ammonia.

Economic Development 

Conscious of the need to diversify the economy away from its traditional reliance on hydrocarbons, the government of Abu Dhabi, after the more than two years of review, launched the Abu Dhabi Economic Vision 2030 in 2009. This broad policy document serves as a blueprint for the long-term economic development of the emirate. Importantly, both the public and private sectors played a significant role in developing the strategy. Three entities in particular took the lead in the development process: the Abu Dhabi Department of Economic Development, the Abu Dhabi Council for Economic Development and the General Secretariat of the Executive Council.

Economic Vision 2030 offers a long-term plan for the transformation of the economy, including reduced reliance on the hydrocarbons sector as a source of economic activity over time and a greater focus on knowledge-based industries in the future. In achieving this objective, the government aims to stimulate growth in non-oil sectors rather than to reduce activity in the oil sector.

As a major oil producer, Abu Dhabi plans to continue supporting the global economy by playing its role in ensuring stable oil prices and supplies. Assuming that the hydrocarbons sector continues to grow at historic rates, Economic Vision 2030 expects that non-oil sectors, including petrochemicals, will contribute around 64% of the emirate’s GDP by 2030, which will mark a reversal of the current situation.

Economic Vision 2030 provides a comprehensive outline for the diversification of the emirate’s economy and has seven priority development areas: building an open, efficient, effective and globally integrated business environment; adopting a disciplined fiscal policy that is responsive to economic cycles; establishing a resilient monetary and financial market environment with manageable levels of inflation; improving the efficiency of the labour market; developing sufficient and resilient infrastructure capable of supporting anticipated economic growth; developing a highly skilled and highly productive workforce; and supporting financial markets to boost private sector financing of development projects.

The EAD’s Abu Dhabi Environment Vision 2030 strategy was developed to complement and support the overarching Economic Vision 2030 document, and vice-versa. Indeed, the decision to invest heavily in a handful of new knowledge-based, technology-driven industries is in line with the EAD’s long-term objective of supporting environmentally sustainable economic development. Boosting efficiency throughout Abu Dhabi’s existing industries – including the oil and gas sector – is also expected to have positive implications for both environmental issues and economic development.

Business Environment

The UAE business environment is regarded as being one of the most open in the GCC, and this is reflected in the country’s rankings in the World Bank’s 2014 “Doing Business” report. Overall, the UAE is ranked in 23rd, ahead of GCC neighbour Saudi Arabia (26th), as well as European countries such as the Netherlands (28th), Switzerland (29th) and Austria (30th).

For the 2012/13 year, the World Bank recognised three changes that the UAE had made to improve its business environment: fewer procedures to connect electricity; increased operating hours for the land registry and reduced property transfer fees; and new measures aimed at protecting investors.

Although the UAE ranks in 23rd place overall, it is in the top five for five of the 10 factors that contribute to a country’s rating, including dealing with construction permits (5th), getting electricity (4th), registering property (4th), trading across borders (4th) and paying taxes (1st). Despite these strengths, however, the country’s overall ranking is brought down by poorer rankings on four factors: getting credit (86th), protecting investors (98th), enforcing contracts (100th) and resolving insolvency (101st).

In relation to Abu Dhabi specifically, Economic Vision 2030 plan outlines a number of goals related to improving the business climate in the emirate. Because businesses find themselves subject to both federal and emirate-level laws and regulations, the plan advocates for better coordination between the two jurisdictions to improve policy-making and provide a faster response to changing economic conditions. A review of the emirate’s judicial system and business legislation is also recommended, to bring it more in line with international standards. Furthermore, although Abu Dhabi has already taken major steps in reducing corruption and streamlining government processes, the development plan calls for further action in this respect. Finally, the plan identifies the importance of foreign direct investment (FDI) and aims to develop and improve procedures to facilitate increased FDI.


The government hopes to promote the development of greater industrial activity as part of its diversification efforts. Given Abu Dhabi’s impressive energy wealth, much of the emirate’s attention has so far been directed at stimulating the petrochemicals industry. These efforts have slowly been paying off. In 2012, manufacturing accounted for 5.9% of GDP and 13.4% of non-hydrocarbons GDP, up from 5.6% and 10.1% respectively in 2009. Of the sector’s gross output, the chemicals and plastics segment was responsible for just over 62%.

As with many countries aiming to stimulate industrial activity, Abu Dhabi is pursuing a strategy of establishing planned industrial zones. The emirate’s Khalifa Industrial Zone Abu Dhabi (Kizad) hopes to attract tenants thanks to its competitive utility prices and close proximity to Abu Dhabi’s deepwater Khalifa Port. Within the zone, some areas are designated tax free, while other areas pay tax normally. As of May 2013, Kizad had successfully leased 34% of the total area, with one of the largest tenants, Emirates Aluminium, expected to attract a number of downstream industries thanks to the creation of a new aluminium smelter (see Industry chapter).

ICT: Recognised for its advanced information and communications technology (ICT) infrastructure, Abu Dhabi hopes that growth in the ICT sector will help boost the country’s non-hydrocarbons output. Government efforts to diversify the economy promise to increase demand for ICT services, as new firms set up offices. However, a current shortage of ICT professionals means that major investments in training will be required going forward (see ICT chapter).

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