The Report: Abu Dhabi 2015

Hydrocarbons revenues still form the bulk of Abu Dhabi’s GDP and while falling prices are a concern, the emirate has been moving steadily towards its economic diversification targets in line with Abu Dhabi Economic Vision 2030. The past 10 years has seen the non-oil sector expand strongly on the back of business-friendly government policies, as a result of which non-oil sector growth now outpaces that of the oil sector.

Country Profile

Abu Dhabi City hosts the UAE government, with the ruler of Abu Dhabi customarily serving as the president, while the ruler of Dubai serves as the country’s prime minister and vice-president. In mid-2013 Abu Dhabi’s population stood at an estimated 2.45m, with Emiratis making up 20.2% of the population and expatriates accounting for the remaining 79.8%. The economy has witnessed rapid expansion over the last 15 years with GDP seeing a five-fold increase since 2001 to reach an estimated $260bn in 2013 at current prices. While oil and gas remain the chief source of government revenues, diversification into other key sectors such as manufacturing, tourism, aerospace, defence and finance is reducing the emirate’s dependence on hydrocarbons. Trade relations between the GCC region and Asia continue to deepen, with trade volumes between China and the GCC, for example, topping the $100bn mark for the first time in 2011 and surpassing $150bn in 2012.

This chapter contains an interview from Sheikha Fatima bint Mubarak, Chairwoman, General Women’s Union, and Supreme President, Family Development Foundation; Lim Hng Kiang, Singapore Minister for Trade and Industry; and Yoon Sang-Jick, Korean Minister of Trade, Industry and Energy.

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While hydrocarbons still form the bulk of Abu Dhabi’s economy, the sector’s contribution to GDP has been falling over the last 10 years as the emirate pushes ahead with diversification goals in line with Abu Dhabi Economic Vision 2030. The manufacturing segment has seen sustained growth in recent times with the manufacturing of chemicals and plastics, basic metal and non-metallic mineral products (excluding oil), contributing $31.22bn, $5.47bn and $3.39bn to GDP, respectively, in 2012. The 2015 launch of the Abu Dhabi Global Market (ADGM) is expected to help boost the emirate’s growing reputation as a financial centre and a number of incentives have been proposed for companies operating within ADGM including 100% foreign ownership, a 50-year tax holiday, and a Customs duty exemption. Elsewhere, tourism is another sector that has been targeted for expansion, with the government aiming to attract 8m visitors by 2030. With nearly 3.5m arrivals in 2014, representing year-on-year growth of 25%, it appears the emirate is well on its way to hitting that target.

This chapter contains interviews with Ali Majed Al Mansoori, Chairman, Abu Dhabi Department of Economic Development; Khaldoon Khalifa Al Mubarak, Group CEO and Managing Director, Mubadala Development Company; Butti Ahmed Mohammed bin Butti Al Qubaisi, Director-General, Statistics Centre - Abu Dhabi; Mahmood Ebraheem Al Mahmood, CEO and Chairman, ADS Holding; and Mohammad Helal Al Muhairi, Director-General, Abu Dhabi Chamber of Commerce and Industry.

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The UAE accounted for 30% of the GCC’s total banking assets in 2014 following another year of steady growth, with Abu Dhabi playing a key role in this expansion. Having successfully emerged from the global economic turbulence of recent years, the sector is on a trajectory of loan-book growth and sustainable profits with all five of the emirate’s biggest lenders posting profits in 2013. A new Financial Service Law, now in draft form, provides for the move to a twin-peaks model of regulation in the near future, with the Central Bank of the UAE likely to act as the prudential regulator. Leading institutions in the emirate are increasingly searching abroad for expansion opportunities with a focus on the rapidly growing West-East corridor – an area already home to 13 mega-cities, with a further 12 set to become mega-cities by 2025.

This chapter contains an interview with Alex Thursby, Group CEO, National Bank of Abu Dhabi.

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Capital Markets

The Abu Dhabi Securities Exchange (ADX) was upgraded to emerging market status in 2014, and with total market capitalisation of more than $126.1bn as of late January 2015, it ranks first among the UAE’s three different exchanges. In addition to this, 2014 witnessed the first listing of a government bond on the ADX and the implementation of new rules guiding the listing of Islamic bonds, while technical upgrades to the exchange saw the introduction of NASDAQ OMX’s X-Stream Trading technology. The expected 2015 launch of Abu Dhabi Global Market, the UAE’s second financial free zone, which will be organised around a separate regulatory structure, an independent companies registrar and a financial services regulator, is expected to boost activity in the sector, helping to further establish the emirate as a centre of global wealth management.

This chapter contains an interview with Ahmed Al Sayegh, Chairman, Abu Dhabi Global Market; and Rashed Al Balooshi, CEO, Abu Dhabi Securities Exchange.

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Islamic Financial Services

Demand-driven growth is expected to continue in the Islamic financial services sector, with sharia-compliant assets making up some 21.4% of the UAE’s banking system in 2013, up from 17% in 2012, and crossing the $100bn mark for the first time. Abu Dhabi’s takaful operators are playing their part in the growth of the UAE industry, which has seen the nation become the second-largest provider of takaful contributions in the GCC. Meanwhile, between January 1996 and September 2013, the UAE was the source of some 73 Islamic bond issuances for a total value of $47.9bn – placing it second only to Malaysia in terms of global sukuk activity. Overall, the growth of the UAE’s non-hydrocarbons sector, low interest rates and the firming up of real estate prices have resulted in a positive outlook for the nation’s banking sector, with Abu Dhabi’s sharia-compliant institutions well placed to capitalise on this anticipated expansion.

This chapter contains an interview with Tirad Al Mahmoud, CEO, Abu Dhabi Islamic Bank.

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The introduction of mandatory health coverage in Abu Dhabi has had a considerable impact on the wider UAE’s insurance and medical market and has helped drive strong expansion in recent times with double-digit growth expected to continue into 2015. Total market premiums stood at $8.03bn in 2013, while industry reports showed the UAE to be one of the largest and most penetrated insurance markets in the region, representing up to 45% of all premiums written in the GCC. A slate of regulatory reforms begun in 2007 aim to further develop the market by encouraging Emiratisation, takaful, bancassurance, consolidation, as well as enhanced codes of conduct. Meanwhile brokerage reforms implemented in February 2014 established a framework that helps boost security and sustainability and promotes consolidation in the market.

This chapter contains an interview with Ebrahim Al Zaabi, Director-General, Insurance Authority.

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The oil and gas sector accounts for 80% of the UAE government’s revenues and although current oil prices are a concern, the emirate’s focus on increasing production should ensure stable growth moving forward. While exploration is still a major activity, the emirate has increasingly focused on enhanced oil recovery (EOR) technology to recover heavier and harder to reach oil. The emirate has also seen an increase in the development of its sour gas reserves, which, although costly and difficult to extract, present many benefits in terms of boosting gas supply and supporting EOR operations. Meanwhile growing domestic demand has prompted the need to build additional refining capacity, with the energy sector’s downstream segment earmarked as an area for future expansion as a result.

This chapter contains an interview with Abdulla Nasser Al Suwaidi, Director-General, Abu Dhabi National Oil Company.

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Abu Dhabi’s economic growth, rising population and expanding industrial sector have contributed to increasing power demand in the emirate. Demand is growing at a rate of 7.5% a year with authorities expecting this trajectory to continue over the next decade. The sector is run on an independent water and power producer model, which sees the government investing in an increasingly diversified range of facilities to meet demand for power and water generation. Most of Abu Dhabi’s power generation comes from combined-cycle gas turbine power stations, though both nuclear and renewable energy are developing in the emirate. The Gulf’s first nuclear power plant is due to come on-line in 2017, when the first of four reactors at the Barakah plant in Al Gharbia starts generation. Developments in wastewater management are improving the sewerage system, which will see it become one of the world’s largest gravity-driven networks when completed, with a 42-km main tunnel.

This chapter contains an interview with Saif Al Qubaisi, Acting Director-General, Regulation and Supervision Bureau.

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Security, Aerospace & Defence

Driven in large part by targeted government investment and an offset programme aimed at bolstering domestic capacity, Abu Dhabi has witnessed tremendous growth in its aerospace and defence industry in recent times. National Service was introduced in the UAE in 2014 and is mandatory for Emiratis aged 18 to 30. The government has also launched a range of training programmes aimed at bolstering its national security initiatives and applying international best practices to the domestic security sector. Moving forward the UAE is expected to double homeland security spending over the next 10 years, from $5.5bn to more than $10bn, while the emirate’s growing aerospace sector is having positive knock-on effects for domestic industry, with additional training set to boost employees’ qualifications in other key areas, such as foundries and shipbuilding.

This chapter contains a viewpoint from Homaid Al Shemmari, CEO of Aerospace and Engineering Services, Mubadala.

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Real Estate & Construction

The real estate sector in Abu Dhabi is currently in a period of growth and rising prices, following the global financial crisis that began in 2008. As of the third quarter of 2014, all segments of the market were in simultaneous recovery for the first time since the downturn. The government is set to continue promoting market stability, maintaining its high level of involvement in real estate investment development while growing demand, coupled with tight supply in some areas, suggests that overall prices will continue to rise across most market segments in 2015. Meanwhile the emirate’s construction industry appears to be entering a period of renewed growth, with the total value of construction projects under way or in the pipeline standing at $727bn as of April 2014, making the UAE the second-largest construction market in the GCC.

This chapter contains interviews with Saeed Al Ghafli, Chairman, Department of Municipal Affairs; and Mohammed Al Mubarak, CEO, Aldar.

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The transport and storage sector contributed some Dh35bn ($9.5bn) to the emirate’s economy in 2013, equivalent to 3.67% of overall GDP. Sector GDP for the year was up 7.1% on 2012 figures in real terms, with its real compound annual growth rate for the period between 2009 and 2013 standing at over 12%. Several major new infrastructure projects indicate that the rapid development and growth of the transport sector is set to continue. The current expansion of the emirate’s rail capacity is seeing the construction of 1200-km network that will connect industrial centres with sea- and airports, while the emirate’s ports, which are primarily used for cargo transport and reshipping, are now being paired with industrial zones and manufacturing centres to integrate with the logistics offering. In the aviation sector, a new terminal at Abu Dhabi International Airport will occupy a 700,000-sq-metre footprint on completion in 2017, making it the largest building in all of Abu Dhabi.

This chapter contains an interview with Faris Al Mazrouei, CEO, Etihad Rail.

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Manufacturing is playing an increasingly important role in the emirate as it pushes ahead with efforts to build a long-term growth path that is less dependent on hydrocarbons. In 2013 manufacturing contributed 5.7% to the emirate’s GDP, up from 5.3% in 2012 with the sector accounting for 12.6% of the country’s non-oil GDP in 2013. Meanwhile Abu Dhabi’s petrochemicals industry has a number of competitive advantages, such as the emirate’s vast crude oil reserves and gas resources, the UAE’s location and significant local demand. Local producers of construction materials are set to benefit from the upcoming construction projects in the emirate, which include projects in the oil and gas, infrastructure, transport and chemical sectors. Retail construction is also on the rise with Abu Dhabi’s retail stock growing strongly in recent years, from 1.7m sq metres of gross leasable area in 2011 to 1.8m in 2012 and 2.2m in 2013. Growing competition in the sector is expected to see players start to diversify their retail mix as more malls open in the coming three to four years.

This chapter contains an interview with Suhail Mubarak bin Athaeeth Al Ameri, CEO, Senaat.

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Al Gharbia

The region’s GDP is set to double by 2030 with various sectors, including oil and gas, power generation, infrastructure and transport, and tourism, expected to drive this growth. The government has identified these sectors as having particular potential for investment and can offer competitive advantages in terms of resources, geography and development needs. The region is home to both the world’s largest sour gas project and the biggest concentrated solar power project. In addition, a rising population is expected to drive real estate demand in coming years, while the region is increasingly looking to boost visitor numbers by promoting its natural beauty in an effort to attract tourists.

This chapter contains an interview with Sheikh Hamdan bin Zayed Al Nahyan, Ruler’s Representative in the Western Region.

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Tourism & Culture

The past decade has seen significant sums invested in developing tourist facilities and infrastructure in the emirate, and the sector has been earmarked as key in supporting economic diversification in line with Abu Dhabi Economic Vision 2030. The strategy appears to be paying off, with around 3.5m guests staying in Abu Dhabi in 2014, up 25% on the previous year. The emirate aims to continue this rising trend, and is investing heavily in the conferences and exhibitions sector, another area that witnessed strong growth in 2014, while the Yas Island and Saadiyat Island developments represent key planks in the government’s strategy to attract a diverse range of international leisure tourists.

The emirate is also adding events to its sporting calendar, and in 2015 is due to host the World Triathlon Series and pro-cycling race Abu Dhabi Tour.

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The development of a knowledge-based economy and a highly skilled and productive workforce are key priorities of Abu Dhabi Economic Vision 2030. To this end the government continues to invest significantly in education, with 21% of federal spending under the UAE’s $38.11bn draft budget for 2014-16 going towards public and higher education. Meanwhile private schools have played an increasingly important role in recent years as their number rose from 181 to 185 between 2010/11 and 2012/13. Moving forward, partnerships with the private sector are helping to match university programmes with high-growth sectors, while several new Ministry of Education teacher-training programmes are expected to have an impact on the emirate’s human resources development and job creation strategies.

This chapter contains interviews with Sheikh Hamdan bin Mubarak Al Nahyan, Minister of Higher Education and Scientific Research; and Amal Al Qubaisi, Director-General, Abu Dhabi Education Council.

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The health sector in Abu Dhabi has expanded rapidly on the back of a mandatory medical insurance scheme, while the sector has also been driven by population growth, rising health awareness and an increasing incidence of lifestyle-related diseases. Government health care expenditure nearly doubled between 2007 and 2012 to reach over $12bn that year, with government spending comprising 3.3% of total GDP, the highest ratio in the GCC. Human resource shortages will present a challenge to the emirate, with estimates suggesting that Abu Dhabi will require an additional 1600- 4800 doctors by 2022. Such challenges, though serious, have nonetheless opened considerable opportunities for expansion for health care providers in the emirate.

This chapter contains interviews with Dr Maha Barakat, Director-General, Health Authority - Abu Dhabi; and Dr Matar Al Darmaki, Acting CEO, Abu Dhabi Health Services Company.

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The UAE as a whole, of which Abu Dhabi is the largest emirate, ranked 25th in Yale University’s 2014 Environmental Performance Index, with the UAE scoring higher than any other Middle Eastern nation. Sustainability is a key focus moving forward and is included in the Abu Dhabi Economic Vision 2030. Since 2008, all new buildings in Abu Dhabi must comply with Estidama, the emirate’s sustainable building framework, while in January 2014 Abu Dhabi launched a Water Resources Management Strategy to increase the efficiency of water use among the population. Meanwhile, in an effort to reduce its dependence on hydrocarbons, the emirate is exploring alternatives such as nuclear and renewable energy, with these expected to generate 25% and 7%, respectively, of its energy needs by 2020.

This chapter contains an interview with Razan Khalifa Al Mubarak, Secretary-General, Environment Agency - Abu Dhabi.

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Dates represent Abu Dhabi’s most important commercial crop and agricultural export, with 99,136 tonnes produced in 2013, an increase from 80,461 tonnes a year earlier. Authorities are also encouraging the development of aquaculture as an alternative to fishing, with this segment seeing increased investment as new fish farms start to open in the emirate. Meanwhile the Abu Dhabi Farmers Services Centre, set up in 2009, aims to develop a sustainable agricultural industry and is expected to launch a project based on soil-free farming, which can offer water savings of up to 70%. Moving forward a food products and processing industry cluster at Khalifa Industrial Zone Abu Dhabi will enable firms to bring agricultural goods to market, with large facilities set to open in the cluster, including several processing plants and a ready-meals factory.

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Media & Advertising

Abu Dhabi’s media environment is in the midst of rapid diversification, with ongoing investment in technology and skills in line with Abu Dhabi Economic Vision 2030 goals to build a sustainable sector capable of driving long-term economic growth and creating highly skilled jobs for Emiratis. Abu Dhabi Media Zone has attracted hundreds of companies to date with film and television broadcast and production firms making up 30% of its tenants, while companies in the growing digital media segment account for another 13%. Indeed, digital platforms are forecast to outperform traditional media in MENA in the next three years, with compound annual growth of 28% anticipated over the 2013-17 period, with increased levels of e-commerce expected to be a major growth contributor across the region.

This chapter contains an interview with Noura Al Kaabi, CEO, twofour54.

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Telecoms & IT

The telecoms industry is valued at $7.9bn and currently accounts for 3% of national GDP with the sector witnessing expansion of 6.6% in 2013, comparing favourably with the country’s overall GDP growth of 5.2%. Meanwhile the ICT sector added $5.7bn in real terms to the economy in 2013, representing a rise of 13.2% and equivalent to 2.9% of GDP. Indeed ICT has been a government focus in recent years, representing both a target and an enabler of diversification in the emirate with the public sector acting as the main driver of ICT spending and investment. With this ongoing investment in the sector, Abu Dhabi is positioning itself to capture growing regional demand for technological services while simultaneously putting itself at the forefront of the Gulf’s high-tech future.

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Al Ain

Just over 50% of Al Ain’s Emirati population is under 20 years old and this young labour force, coupled with efforts outlined in Plan Al Ain 2030 to promote diversification should see the metropolitan area of Al Ain become an economic centre moving forward. The region’s status as an aerospace industry hub is growing rapidly, with this set to generate both direct jobs in the industry and to provide employment and training in non-technical areas. Meanwhile the promotion of eco- and cultural tourism has helped boost visitor numbers to the region, with 641,000 hotel guest nights in 2013, up 12% year-on-year from 571,000, and accounting for 7.3% of all guest nights in the emirate.

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This chapter contains an overview of the tax framework in which local and foreign investors operate in Abu Dhabi including a look at the limited tax laws in place and an outline of the incentives available for companies in the free zones.

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Legal Framework

This chapter outlines the legal framework in which local and foreign investors operate in Abu Dhabi. It includes an overview of the court systems and arbitrations options, a breakdown of the various ways to establish a business in the emirate and a look ahead to the new company and foreign investment laws that are on the way.

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The Guide

The guide contains listings of some of the leading hotels and resorts in Abu Dhabi and contacts for government offices and services. It also offers useful tips and information for first-time or regular business and leisure visitors.

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