The Report: Abu Dhabi 2020
Abu Dhabi is home to the world’s sixth-largest proven oil reserves and is working to achieve self-sufficiency in natural gas. It has been successfully pursuing diversification, particularly in terms of manufacturing, banking and ICT. While the global Covid-19 pandemic and decline in international oil prices poses challenges for the emirate, the fundamentals underpinning its economy remain strong.
Profile
Having declared its independence from the UK in 1971 as part of the federation of the UAE, the emirate of Abu Dhabi has significantly raised its political and economic profile in the intervening years, both regionally and internationally. While the emirate is home to the world’s sixth-largest proven oil reserves, financial buffers have helped it diversify and yield steady non-oil revenue. Centred on the Abu Dhabi Economic Vision 2030, an economic development strategy launched in 2008 to reduce dependence on oil and gas and foster a knowledge-based economy, the emirate has made important strides towards securing its growth plans amid global and regional risk. This chapter contains viewpoints from Sheikh Mansour bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Presidential Affairs; Narendra Modi, Prime Minister of India; and an interview with Sheikha Shamma bint Sultan bin Khalifa Al Nahyan, CEO, Alliances for Global Sustainability.
Explore chapterEconomy
Lower oil prices and a rigorous process of fiscal reform have led to a challenging economic backdrop for Abu Dhabi’s residents and businesses in recent years. Although concerns that the Covid-19 pandemic of 2020 would lead to a global downturn in the year ahead loomed large as of mid-2020, a shift to a more expansionary fiscal stance has helped establish a more promising foundation for growth moving forwards. Moreover, while government funding remains central to economic expansion, a major overhaul of the investment framework at both the national and emirate level aims to harness the power of private capital in Abu Dhabi’s future development. This chapter contains interviews with Ahmed Ali Al Sayegh, UAE Minister of State, and Chairman, Abu Dhabi Global Market; and Mohammed Ali Al Shorafa Al Hammadi, Chairman, Abu Dhabi Department of Economic Development.
Trade & Investment
Abu Dhabi has leveraged its hydrocarbons wealth to pursue a sovereign investment strategy that spans the globe, establishing itself as one of the largest overseas investors in the world. To strengthen the exchange of capital and ideas, the government has worked to create free zones to capture foreign direct investment, benefitting the emirate’s economic diversification strategy. Abu Dhabi’s status as a trading power, meanwhile, is supported by large export volumes of crude and refined oil bound for destinations as diverse as the Netherlands and Japan, and the emirate’s expansive logistics infrastructure has helped it become a primary intake point for imports to GCC countries. This chapter contains interviews with Tariq Bin Hendi, Director-General, Abu Dhabi Investment Office; and Mohamed Helal Almheiri, Director-General, Abu Dhabi Chamber of Commerce and Industry.
Explore chapterBanking
Despite the adverse effects of a low oil price environment over recent years, Abu Dhabi’s banking sector has remained well capitalised with a high degree of liquidity. Meanwhile, its financial performance has been characterised by rising net profits and lower cost-to-income ratios. A recent phase of consolidation has significantly altered the structure of the local market, with the larger balance sheets of financial institutions leaving them better positioned to make gains in an increasingly competitive domestic and international environment. Nevertheless, declining international oil prices and the effects of the global Covid-19 pandemic in early 2020 appear set to make for a challenging year for the emirate’s banking industry. This chapter contains an interview with Hareb Masood Al Darmaki, Chairman, Central Bank of the UAE.
Capital Markets
Abu Dhabi’s capital markets started 2020 on a positive note, bolstered by solid gains on the exchange’s main index in 2019. Similarly, the local debt market ended 2019 favourably, with the UAE ranking as the biggest issuer of fixed-income instruments in the GCC that year. Although much remains to be seen as global markets deal with the twin ramifications of Covid-19 and lower oil prices in early 2020, an increasingly proactive stance to economic diversification and a policy of domestic rationalisation that is creating an added need for debt financing, and which coincides with suppressed rates in global credit markets, bodes well for Abu Dhabi’s capital markets in the medium to long term. Against this backdrop, an ongoing process of reform and the emergence of a new trading platform are set to add further dynamism to the financial markets. This chapter contains an interview with Khalifa Salem Al Mansouri, Chief Executive, Abu Dhabi Securities Exchange.
Islamic Financial Services
As one of the UAE’s two major financial centres, Abu Dhabi has played a prominent role in the development of the nation’s Islamic financial services (IFS) sector. In January 2020 Islamic banks accounted for about 18% of total banking sector assets in the country, according to the Central Bank of the UAE. In the local capital markets, sovereign and corporate sukuk (Islamic bonds) issuances comprise the bulk of the Islamic offerings, while in the insurance sector takaful (Islamic insurance) companies operate as either standalone entities or as part of larger, conventional banks. Abu Dhabi’s local IFS market features an onshore component, populated by companies transacting directly with the domestic market, and an offshore component, operating within the jurisdiction of the Abu Dhabi Global Market (ADGM), the emirate’s financial free zone that opened in late October 2015. ADGM was home to more than 100 financial service companies as of early 2020.
Insurance
In terms of gross written premium (GWP), the UAE’s insurance market has ranked first within the MENA region since 2008. In 2018 it had the highest insurance penetration and density levels in the GCC, at 2.9% of GDP and $1195, respectively. Abu Dhabi’s insurers play an important role in the sector, but as of 2020 they faced a number of changes to the domestic business environment, including new regulations and accountancy standards considered essential to the industry’s long-term sustainability. Alpen Capital, a prominent financial adviser based in Dubai, forecast a compound annual growth rate of 4.2% between 2019 and 2024 for the country’s insurance market. In terms of potential changes to the composition of GWP in Abu Dhabi and the wider UAE, any notable shifts are likely to be caused by the broadening of compulsory insurance. This chapter contains an interview with Ebrahim Obaid Al Zaabi, Director-General, UAE Insurance Authority.
Energy
Home to approximately 95% of the UAE’s total oil reserves and 92% of its natural gas, Abu Dhabi is one of the world’s leading hydrocarbons producers. The main player in Abu Dhabi’s oil and gas industry is Abu Dhabi National Oil Company (ADNOC), the largest company in both the emirate and the UAE. While the global Covid-19 pandemic and subsequent steep decline in international oil prices present challenges for the industry, the fundamentals underpinning the emirate’s energy sector remain strong. ADNOC doubled its refinery throughput between 2008 and 2018, and aims to raise oil production to 5m barrels per day by 2030. At the same time, Abu Dhabi is working to achieve self-sufficiency in natural gas, while also meeting a larger proportion of its domestic energy needs through renewables and nuclear power. This chapter contains a viewpoint with Sultan Al Jaber, UAE Minister of State; and Group CEO, Abu Dhabi National Oil Company; and Mohamed Al Hammadi, CEO, Emirates Nuclear Energy Corporation.
Security, Aerospace & Defence
In recent years Abu Dhabi and the wider UAE have passed several important milestones in terms of security, aerospace and defence strategy. In 2019 Hazzaa Al Mansoori, an astronaut born in Al Wathba, roughly 45 km outside Abu Dhabi City, became the first Emirati to visit the International Space Station. The mission helped to raise the profile and popularity of the UAE’s National Space Programme, under which the country aims to reach Mars by 2021, among other objectives. In 2020 the country plans to launch its Hope probe, which is scheduled to reach Martian orbit by 2021, marking the 50th anniversary of the UAE. At the same time, 2019 saw the development of new long-term strategies for aerospace and cybersecurity, alongside a major merger of defence sector entities. Meanwhile, the UAE Armed Forces continued to play a crucial role in ensuring regional stability. This chapter contains an interview with Mohammed Al Ahbabi, Director-General, UAE Space Agency.
Explore chapterUtilities
There is a rapid transformation taking place in Abu Dhabi’s power and water sector. A major shift in the energy mix is under way, with a transition away from fossil fuels and an expanded use of renewables and nuclear power. At the same time, the emirate continues to be a leading supplier of electricity and water to other emirates of the UAE, while technological advances and developments in demand management are shaping sector trends. Changes also mean challenges, however, with utilities providers having to adapt to new patterns of supply, while also having to meet increasingly urgent demands for sustainability and higher environmental standards. This chapter contains an interview with Bader Saeed Al Lamki, CEO, National Central Cooling Company (Tabreed).
Explore chapterTransport
Abu Dhabi has reached significant milestones across its air, land and sea transport, with more on the near horizon. The Midfield Terminal Building, which will facilitate higher visitor numbers, was scheduled to commence operations by the end of 2020, though this timeline was established before the Covid-19 pandemic broke out. Alongside the new terminal, the launch of two new low-budget airlines is set to make Abu Dhabi a more affordable travel destination. Within the emirate the green light has been given to key infrastructure projects that aim to improve the flow of traffic on road networks. In addition, the second phase of Etihad Rail’s network will start taking shape, increasing interconnectivity within the UAE for passengers and freight. Meanwhile, past investments in the development of Abu Dhabi’s seaports saw substantial increases in container traffic and cruise liner visits in 2019, with further growth anticipated in the long term. This chapter contains interviews with Falah Mohammad Al Ahbabi, Chairman, Abu Dhabi Department of Municipalities and Transport; Shareef Hashim Al Hashmi, Acting CEO, Abu Dhabi Airports; and Tony Douglas, CEO, Etihad Airways.
Real Estate & Construction
Investment in energy and infrastructure has resulted in the development of various mega-project opportunities for construction and engineering companies in Abu Dhabi. These include strategic projects such as the Midfield Terminal Building at Abu Dhabi International Airport and the Barakah Nuclear Power Plant, both of which are due to become operational in 2020. Real estate, meanwhile, has remained a buyers’ or renters’ market as the delivery of new retail, office and residential properties coincide with a softening of demand. This could change, however, as the government amends laws to allow foreigners to own freehold property in designated investment zones. Looking ahead, while the construction pipeline remains robust in the medium and long term, the broader economic slowdown related to the Covid-19 pandemic in early 2020 may impact the pace of projects in the near term. This chapter contains interviews with Talal Al Dhiyebi, CEO, Aldar Properties; and Saleh Al Mazrouie, Acting CEO, Abu Dhabi General Services Company (Musanada).
Explore chapterIndustry & Retail
Abu Dhabi’s industrial sector continues to be a key contributor to GDP and the drive for diversification away from oil- and gas-based growth. The sector has also widened its industry portfolio in recent years, with companies based in Abu Dhabi now ranging from steel production to high-tech manufacturing, among other areas. Many of these outfits are located in the emirate in order to take advantage of the investor-friendly approach adopted by Abu Dhabi’s industrial and free zones. Companies are able to leverage the emirate’s geostrategic location via a wide range of air and shipping routes, enabling them to conduct export and re-export activities. Meanwhile, in 2019 Abu Dhabi’s retail sector continued to adapt to a 5% value-added tax that came into force in early 2018, with consumer confidence picking up as residents began to factor the new levy into their purchasing behaviours. Malls continue to dominate the retail space, which saw some 200,000 sq metres of gross leasable area added to the emirate’s stock in 2019. Meanwhile, developments like the construction of a digitally enabled smart shopping mall on Reem Island indicate Abu Dhabi is positioning itself at the forefront of innovation in the retail sphere. Though these types of malls are well placed to compete with the growing tide of e-commerce, the Covid-19 pandemic led to the shuttering of many physical retailers around the world in the first half of 2020, prompting consumers to shop online. This chapter contains interviews with Mohamed Juma Al Shamisi, Group CEO, Abu Dhabi Ports; and Saeed Al Remeithi, CEO, Emirates Steel.
Explore chapterAgriculture & Food Security
Agriculture is a key target for expansion, modernisation and diversification in the emirate. The Abu Dhabi Economic Vision 2030 aims for the non-oil sector to make up 64% of the economy by 2030. Food and agriculture have an important part to play in achieving this and represent vast potential for growth into new areas. In spite of the emirate’s dry desert conditions and high summer temperatures, the sector has made significant progress in recent years. The authorities are working on increasing local production in the face of high imports and a growing population. While this presents challenges it also offers an opportunity to stimulate local food resources, farms and the private sector. Other priorities include advancing research and development, investing in agricultural technology, addressing water scarcity, and employing sustainable practices such as reducing food waste and ensuring the highest standards of food safety for a market that demands consistency and quality. This chapter contains an interview with Saeed Al Bahri Salem Al Ameri, Director-General, Abu Dhabi Agriculture and Food Safety Authority
Education
Abu Dhabi continues to make significant investments in its education sector, which is set to remain an area of consistent growth in the coming years. Education is a key component of the Abu Dhabi Economic Vision 2030, the emirate’s long-term development strategy that aims to build a globally competitive, knowledge-based economy for the post-oil era, and raising teaching standards is considered essential to meeting the needs of the future labour market. To this end, the authorities are seeking to diversify the skills of the local population and investing in education to broaden the range of opportunities available to Emiratis. Recent developments in the sector include the expansion of technology and use of artificial intelligence in schools, and a greater emphasis on technical and vocational training. The emirate also continues to encourage international private schools and tertiary education institutions to open new campuses in Abu Dhabi. This chapter contains an interview with Hussain Ibrahim Al Hammadi, UAE Minister of Education.
Health
Abu Dhabi’s health care sector has witnessed significant expansion in recent years, with health services improving and an increasing number of hospitals, clinics and specialised facilities coming on-line. Both private and public entities are investing heavily in the sector, ensuring a steady stream of new facilities. However, while new and high-tech facilities are improving access to and quality of care, the sector continues to be challenged by high incidences of lifestyle-related illnesses. Like the rest of the world, the sector came under additional pressure in early 2020 as a result of the Covid-19 pandemic, though the authorities were quick to respond with a series of measures designed to slow the spread of the virus. The government has rolled out a number of public-private partnerships to assist with the sector’s expansion. Recent trends have included greater digitisation and innovation, and the development of the medical tourism segment. This chapter contains an interview with Sheikh Abdulla bin Mohammed Al Hamed, Chairman, Department of Health.
Tourism & Culture
The global Covid-19 pandemic has significantly impacted the global tourism industry in 2020; however, with demand likely to be high after months of enforced isolation, the tourism sector is hopeful there will be a recovery in activity once international travel is able to resume. The substantial growth of the tourism segment in recent years demonstrates solid underlying fundamentals. Abu Dhabi has emerged as a destination for those seeking entertainment, culture and relaxation. The emirate has also become a magnet for weekenders from elsewhere in the UAE, with residents of the country’s other six emirates visiting Abu Dhabi’s many attractions. This chapter contains an interview with Mohamed Khalifa Al Mubarak, Chairman, Department of Culture and Tourism – Abu Dhabi.
Explore chapterEnvironment
Climate change, population growth and increasing rates of urbanisation have put a strain on the environment in complex and intertwined ways. Encouraging sustainable development and protecting the environment are key to ensuring future growth in Abu Dhabi. The need for solutions has created opportunities for investment and innovation, and pushed the market towards economic diversification. The emirate’s low levels of rainfall and high temperatures have led to large increases in water and energy demand. Further adding to the strain are high rates of per capita resource consumption, rapid development and a sharp population increase. These factors have also led to greater volumes of waste and encroachment into natural habitats. As part of efforts to address these challenges, Abu Dhabi’s overarching policy initiatives seek to balance social and economic development with environmental sustainability, with the underlying understanding that environmental wealth and well-being is crucial to long-term prosperity. This chapter contains an interview with Shaikha Salem Al Dhaheri, Secretary-General, Environment Agency - Abu Dhabi.
Explore chapterICT
Abu Dhabi’s ICT sector saw further growth in 2019, driven by major public investment in the digitisation of services for residents and businesses. The emirate and the wider UAE continue to lead the way regionally in rolling out 5G technology, with the UAE’s two national telecoms companies making significant investments in network expansion and upgrades. The emirate is also consolidating its position as a leading centre for research and development in areas such as artificial intelligence, cybersecurity and cloud services, and the emerging start-up sector is playing an active role. Recently, the emirate’s digital drive has been accelerated by the global outbreak of Covid-19 in early 2020, which caused businesses, educational institutions and government entities to offer remote services after travel restrictions were imposed. This chapter contains an interview with Omar Al Olama, Minister of State for Artificial Intelligence.
Explore chapterMedia
Abu Dhabi’s media sector has evolved rapidly in recent years, establishing the emirate as a regional centre for film, television and social media. Sustained government support at both the emirate and the national level has been key to the sector’s success. Carefully calculated promotion has attracted investment and encouraged collaboration in the production of local content in Abu Dhabi’s dedicated media free zone, twofour54. Major developments took place in 2019 in the film and TV broadcast segments, which saw the signing of new partnerships and considerable investment, while the advertising segment followed global shifts placing more emphasis on social media platforms. This chapter contains an interview with Maryam Eid AlMheiri, Vice-Chair, twofour54; and CEO, Media Zone Authority – Abu Dhabi.
Explore chapterTax
The UAE currently has no system of federal income taxation. Instead, most of the emirates – including Abu Dhabi – enacted their own corporate tax decrees in the 1960s. These emirate-level decrees are of general application and remain in force as amended. In practice, however, corporate income tax is only enforced on oil and gas companies engaged in upstream activities, certain petrochemicals firms and, under separate banking tax decrees, branches of foreign banks. Entities established within free trade zones (FTZs) are subject to the rules, regulations and tax regime of that FTZ, as well as applicable federal tax regulations such as value-added tax. FTZs generally offer companies and branches a complete exemption from all emirate-level taxes or a 0% tax rate. The length of these tax holidays typically ranges from 15 to 50 years from the date that the entity registers with the FTZ, with a possibility of renewal upon expiry. This chapter contains a viewpoint from Mark Schofield, Partner, PwC Middle East Tax & Legal Services Leader.
Explore chapterThe Guide
This chapter contains selected listings of some of the country’s top hotels, advice and etiquette for business and leisure travellers, and useful tips for first-time visitors to Abu Dhabi. This chapter contains an interview with Samia Bouazza, Managing Director and Founder, Multiply Marketing Consultancy.
Explore chapterTable of Contents
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