Stimulating greater trade and investment inflows is vital to the Abu Dhabi government’s ongoing drive to diversify the emirate’s economy away from a dependence on hydrocarbons. While diversification has been a central goal for both the federal and Abu Dhabi governments for a number of years, the post-Covid-19 pandemic era has seen a sharpening of focus in this respect, as the emirate attempts to improve its business environment and strengthen legislative frameworks to attract international investors, companies and entrepreneurs.
Steps taken in this direction have contributed significantly to Abu Dhabi recording the MENA region’s fastest economic growth rate in 2022, at 9.3%. Current expansion is being driven by a core focus on fortifying and diversifying the emirate’s manufacturing lines, with its broadening national production profile being harnessed to drive exports.
Relevant Authorities
There are various government authorities at both the federal and emirate level that are relevant to the development of trade and investment activities in Abu Dhabi. The federal Ministry of Economy works to establish policies aimed at increasing non-oil GDP, enhancing foreign direct investment (FDI) inflows, boosting the UAE’s standing in global entrepreneurship and innovation indices, raising the contribution of small and medium-sized enterprises (SMEs) to non-oil GDP, and growing household incomes. Federal policies apply across the seven emirates, but emirate-level governments are afforded considerable freedom in adapting those policies to benefit the local economy.
Significant trade and investment-related authorities in the emirate include the Abu Dhabi General Administration of Customs and the Abu Dhabi Investment Office, with the latter launched alongside a new public-private partnerships law in 2019. Both the law and the authority were introduced in order to facilitate FDI inflows to the emirate. The Abu Dhabi Department of Economic Development (ADDED), for its part, was established in 2018 and is responsible for regulating business activities in the emirate, with licensing and economic diversification strategy implementation both key components of its mandate alongside overseeing development plans.
Strategies
In addition to overarching national economic development plans (see Economy chapter), various strategies and initiatives are in operation with the aim of enhancing specific dimensions of the emirate’s business environment and attracting private investment. These include the Abu Dhabi Industrial Strategy, rolled out in 2022; the $1.4bn Abu Dhabi Initial Public Offering Fund, launched by ADDED in 2021 to incentivise private companies to list on the Abu Dhabi Stock Exchange; and schemes aimed at bolstering the local SME ecosystem.
The Abu Dhabi Chamber of Commerce and Industry (ADCCI) released its new strategy for 2023 through to 2025, through which the organisation will work to enhance its role in strengthening the emirate’s private sector. ADCCI aims to facilitate increased trade between Abu Dhabi and its existing partners, while also facilitating new international partnerships. The organisation also intends to increase its influence in the area of policy formulation and help to accelerate the ongoing digital transformation of the emirate’s business community.
March 2022 saw the launch of the Destination Abu Dhabi digital platform, which provides information to potential investors and entrepreneurs regarding entry to the emirate’s economy. Harnessing the reach and influence of social media, Destination Abu Dhabi has a significant presence on Instagram, Snapchat, LinkedIn, TikTok, Twitter, YouTube and Facebook, and had attracted nearly 500,000 users by November 2022. Gulf nations accounted for 70% of that number, and the platform also gained significant traction in Egypt. Indeed, the ongoing drive to streamline business and investment procedures in the emirate by digitising government services has benefitted from the creation of other investment-related digital portals. The Investor Journey platform was launched by the Abu Dhabi government in 2021, while the Entrepreneurial Nation portal was brought on-line by the UAE Ministry of Economy in 2022.
Sovereign Wealth Funds
The Abu Dhabi Investment Authority (ADIA) is Abu Dhabi’s largest sovereign wealth fund (SWF), followed by Mubadala Investment Company and ADQ. All three are instrumental to the government’s local and global investment strategies. ADIA was established in 1976, while Mubadala and ADQ were formed in 2017 and 2018, respectively, with the mutual goals of driving the emirate’s economic diversification agenda.
ADIA is the third-largest SWF in the world. Its total assets rose from $697bn in 2020 to $790bn in 2023 and are spread across more than 24 classes and subcategories. While the majority of assets are in developed economies in North America, Europe and Asia, it aims to spread between 10% and 20% of its investments across emerging economies. This profile reflects a combination of the fund’s historical remit for prudence in its investment approach and its post-pandemic strategy, by which it is attempting to capitalise on growth opportunities opened up by the events of 2020-21 in the world’s most prominent markets. Indeed, in 2022 ADIA announced its intention to deepen its penetration in US markets, with real estate investment a primary focus.
In terms of specific deals, ADIA was the lead investor in funding rounds for both US-based McWin Restaurant Fund and Chinese biopharma company Taibang Biologic Group, with the pair raising $500m and $300m, respectively. India is among a host of countries seeking financial backing from GCC SWFs in the post-pandemic era. in March 2023 Indian eyewear retailer Lenskart secured a $500m investment from ADIA. Lenskart’s procurement and business models have allowed it to significantly undercut the competition in terms of pricing, enabling it to gain market share. Another Indian retailer, Purplle, which operates in the health and beauty space, secured ADIA funding in the range $50m-60m in 2023.
Mubadala’s assets under management carried a value of $276bn in 2022, according to the fund’s annual review for that year. Its investment activity over recent years reflects its aforementioned directive to diversify Abu Dhabi’s sovereign investment portfolio and expand the emirate’s involvement in disruptive and emerging sectors. In 2020 Mubadala pledged $2bn to a strategic investment partnership with US-based tech fund Silver Lake.
That same year it assumed a significant stake in Abu Dhabi-based artificial intelligence and cloud solutions company Group 42. The following year brought the announcement that the SWF had entered into a $1bn sovereign investment partnership with the UK, providing $800m of the total investment in UK-based life sciences ventures. Also in 2021, the group consolidated a number of its health assets in Abu Dhabi to create an integrated health service cluster for citizens and residents, and in 2022 it invested $350m in Asian data centre company Princeton Digital Group.
Since its inception ADQ has undergone a process of asset consolidation – which, among other mergers, resulted in the formation of Emirates Steel Arkan in 2021 (see Industry & Retail chapter). Following its October 2022 absorption of UAE national flag carrier Etihad Airways, ADQ’s assets under management were valued at $157bn. ADQ has a strong focus on strengthening local value chains through industrial cluster creation, and in 2022 the group contributed 22% of Abu Dhabi’s non-oil GDP.
A major development came in March 2023, when ADQ and Abu Dhabi-based International Holding Company announced that they would partner with the Abu Dhabi Growth Fund – one of ADQ’s subsidiary wealth funds that is focused on public and private equities, hedge funds and venture capital – in order to form the region’s largest multi-asset class investment management group. The new entity will have a focus on alternative investments.
Investment Zones
ADQ’s establishment saw it assume ownership of the emirate’s two major industrial zone operators: AD Ports Group and the Higher Corporation for Specialised Economic Zones ( ZonesCorp). The two companies merged in July 2020, with AD Ports assimilating the 900 manufacturing and commercial operations under ZonesCorp’s banner. At the time the merger gave AD Ports a portfolio value of Dh143bn ($38.9bn).
In September 2022 AD Ports established the Khalifa Economic Zones Abu Dhabi Group (KEZAD Group), establishing a single entity to oversee the country’s 12 major industrial zones. This includes Khalifa Industrial Zone Abu Dhabi (KIZAD), which has a footprint of 410 sq km – 100 sq km of which is designated free zone status – making it one of the world’s largest industrial zones. In total, KEZAD Group zones encompass 550 sq km.
A number of KEZAD Group’s zones follow a clustering strategy designed to invigorate specific value chains, whereas others, including KIZAD, are open to a broad range of high-priority, high-value activities, including automotive industries, metals, pharmaceuticals and life sciences, chemicals and petrochemicals, renewable energies, building materials, agricultural technologies and others. All the zones are strategically tied into AD Ports’ extensive logistics infrastructure, with Khalifa Port, located between the cities of Abu Dhabi and Dubai, one of the busiest maritime hubs in the MENA region.
Financial Zone
Abu Dhabi Global Market (ADGM), established in 2015, is an economic free zone designed to stimulate investment in the UAE’s advanced financial services sector. It encompasses the whole of Al Maryah Island and operates under its own civil and economic laws. As of May 2023 ADGM was home to 5500 commercial licences and an 11,000-strong workforce.
In 2021 ADGM’s assets under management underwent a 56% expansion. Considerable further growth appears likely, given the 2023 announcement that Reem Island, which is currently undergoing significant commercial development, will become part of ADGM, expanding the area 10-fold. With a total footprint of around 14 sq km, this will make ADGM one of the largest financial free zones in the world.
Investment Inflows
Total foreign investment stock in Abu Dhabi rose from Dh264bn ($71.9bn) in 2013 to Dh758bn ($206.3bn) in 2021. The level of FDI stock, meanwhile, increased from Dh72bn ($19.6bn) to Dh104bn ($28.3bn). While this expansion reflects the work carried out by both federal and emirate-level governments to ease business regulations and procedures, the FDI growth figures tell two different stories. For the period 2013-16 FDI stock increased by 39% to around Dh100bn ($27.2bn), whereas during 2020-21 growth slowed to 4%. However, at 2.6%, FDI growth between 2020 and 2021 represents the highest annual increase since 2016, suggesting that the government’s various endeavours designed to establish more attractive business and investment frameworks are bearing fruit, even amid the market turbulence caused by the pandemic.
In terms of the sector distribution of investment, the five highest levels of FDI stock in 2021 were seen in real estate (31.5%); mining and quarrying, including oil and natural gas (20%); electricity, gas, water supply and waste management (12.1%); financial and insurance (11.2%); and manufacturing (8.8%).
The robust expansion of the manufacturing segment since 2020 and the sector-specific initiatives being implemented to drive private and foreign investment bode well for an evolution of this breakdown. However, the fact that total FDI stock in manufacturing contracted by an average of 16.9% per year for the period 2018-21 could lead to further efforts to boost inflows given the sector’s priority status.
Trade Agreements
As a member of the World Trade Organisation, the UAE benefits from the 1994 General Agreement on Tariffs and Trade, and the Information Technology Agreement, whose 78 signatory nations work to remove trade tariffs on ICT products. In 2004 the UAE and the US entered into a trade and investment framework agreement to improve protections and concessions regarding mutual trade. A similar agreement was forged between the GCC and the US in 2012.
The UAE benefits from trade agreements with multiple nations across Asia, MENA and the broader Arab world. GCC member states enjoy free market access to the bloc’s six constituent nations, while the Greater Arab Free Trade Agreement encompasses the GCC, as well as Jordan, Egypt, Iraq, Lebanon, Morocco, Tunisia, Palestine, Syria, Libya and Yemen.
In 2022 a comprehensive economic trade partnership was signed between the UAE and India, through which the two nations will endeavour to boost bilateral trade to $100bn in the first five years of operation. Efforts to strengthen the country’s trade ties with Poland and South Korea also made progress in 2022 and 2023, respectively.
Trade Breakdown
The UAE was the world’s sixth-largest exporter of crude oil in 2021, with an overall value of $58.5bn (see Energy chapter). The emirate holds roughly 96% of the country’s oil wealth. Crude oil thereby remains the highest -value export for both the country and the emirate.
According to the General Administration of Customs, the total value of Abu Dhabi’s non-oil foreign trade, which comprises imports, exports and re-exports, increased by 12% in 2021, from Dh201bn ($54.7bn) to Dh225bn ($61.2bn). Growth in non-oil exports and re-exports reached 7% and 29%, respectively. Total non-oil export value in 2021 stood at Dh79bn ($21.5bn), while total re-export value was around Dh45bn ($12.3bn). The value of imports, meanwhile, rose by 9% during the aforementioned period, to Dh100bn ($27.2bn). Those figures amount to an overall trade surplus of approximately Dh24bn ($6.5bn) for the emirate in 2021, representing a 50% improvement from the previous year.
Trade passing through the emirate’s private Customs warehouses reached a value of Dh2.2bn ($598.8m) in 2021, whereas the value of trade through its free zones exceeded Dh15bn ($4.1bn). The emirate’s land ports saw the highest proportion of trade value, at Dh91.5bn ($24.9bn), while its seaports and airports handled Dh73bn ($19.9bn) and Dh61bn ($16.6bn) worth of trade, respectively.
Partners & Products
Abu Dhabi’s top-five trading partners for imports were Saudi Arabia, the US, China, the Democratic Republic of the Congo and Japan, with those countries shipping merchandise worth Dh14.5bn ($3.9bn), Dh12.5bn ($3.4bn), Dh10bn ($2.7bn), Dh6.3bn ($1.7bn) and Dh6bn ($1.6bn), respectively, in 2021. The top-five non-oil export destinations that year were Saudi Arabia, Hong Kong, Kuwait, China and Switzerland, with respective values of Dh26.1bn ($7.1bn), Dh6.4bn ($1.74bn), Dh4.5bn ($1.22bn), Dh4.3bn ($1.17bn) and Dh3.8bn ($1.03bn). The value of non-oil exports to Saudi Arabia and Kuwait experienced substantial growth that year, at 44% and 73%, respectively, whereas for Hong Kong non-oil exports contracted by 25%.
The top-five imported products and their contribution to total imports was as follows: machinery, sound recorders, reproducers and parts (20%); base metals and articles of base metal (19%); vehicles of transport (16%); products of the chemical or allied industries (12%); and mineral products (8%). Meanwhile, the top-five non-oil export products and their contributions to overall value in that metric were base metals and articles of base metal (28%); pearls, stones, precious metals and related articles (26%); plastics, rubber, and related articles (21%); products of the chemicals or allied industries (5%); and foodstuffs, beverages, spirits and tobacco (5%).
According to the Abu Dhabi Media Office, nonoil trade for the first six months of 2022 increased by 12% year-on-year (y-o-y) to Dh124bn ($33.8bn). Exports registered growth of 26% y-o-y for a value of Dh49.5bn ($13.5bn), while re-exports increased by 6% y-o-y to Dh23bn ($6.3bn). Imports, for their part, rose by 4% y-o-y to a value of Dh51.5bn ($14bn).
The list of the top trading partners for the aforementioned period retained a familiar composition; however, trade with Switzerland expanded by 260% y-o-y to reach a value of Dh9.5bn ($2.6bn). Economic ties between the UAE and Switzerland have been improving for a number of years. UAE-based investment management firm Swiss Group announced that it would open a liaison office in Zurich in January 2023 to facilitate smoother entry to UAE markets for Swiss investors. In terms of other leading partners, trade with the US expanded by 21%, while trade with Kuwait and China was up 13% and 9%, respectively.
Increased bilateral trade has been central to economic developments across the GCC in recent years. September 2022 saw the Abu Dhabi and Oman unveil plans to strengthen their bilateral economic ties. ADQ and the Oman Investment Authority, which is the primary investment arm of Oman’s government, plan to build on their existing Dh10bn ($2.7bn) investment partnership by exploring investment opportunities with a potential value of Dh30bn ($8.2bn) in key sectors such as renewable energy, food and agriculture, ICT, logistics and health care. The two entities also plan to establish a venture capital fund worth Dh592m ($161m) that will invest in tech start-ups in Oman. At the national level, the UAE and Oman have collaborated to create a joint railway company valued at $3bn, with the aim of connecting Oman’s Sohar Port with the UAE rail network, which is the most advanced in the region, cutting transport time and boosting trade volumes and value between the two countries (see Transport chapter).
Outlook
The sweeping regulatory updates and development strategies that have been implemented in key sectors of the economy over recent years are enabling Abu Dhabi to reinvigorate its FDI inflows. Indeed, FDI growth in 2022 across key areas of the economy – in particular, real estate and highvalue manufacturing lines such as those related to aerospace and defence (see Security, Aerospace & Defence chapter) – indicates that the positive effects of new land- and company ownership and visa laws are beginning to filter through the economy and register on the emirate’s balance sheet.
In addition, collaborative efforts by relevant public and private authorities to strengthen international trade relations are supporting sustained expansion of the emirate’s export revenue, while the increasing dynamism displayed by bodies such as Mubadala and ADQ demonstrates the Abu Dhabi government’s ability to identify not only what its economy needs, but also the type of vehicle and apparatus required to drive growth and enhance business ecosystems.
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