Abu Dhabi turning vision into reality
Abu Dhabi is set for a journey to build strong foundations for its economy. Based on diversification and future planning, resilience becomes inevitable, offering both citizens and investors a safe haven to be fruitful and multiply the entrepreneurial ventures in the emirate and UAE.
Both Abu Dhabi Plan and Economic Vision 2030 are complementing the emirate's development strategy to bolster growth in key sectors like energy, food security, industry, real estate, construction, banking, transport, tourism, culture, education and health, which are currently undergoing a massive shift in policy and progress, paving the way to strengthen economies of scale.
"Development is a continuous process that requires diligent efforts and determination and the latest iteration of the Abu Dhabi plan, launched last year," said Sheikh Hazza bin Zayed Al Nahyan, Vice-Chairman of the Abu Dhabi Executive Council.
In an Oxford Business Group (OBG) report under the theme 'Charting the Emirate's Way Forward', he said Abu Dhabi Plan has translated the vision of creating a confident and secure society and to build a sustainable, open and globally competitive economy into a strategic blueprint for all three regions in the emirate.
"The plan contains 25 key objectives and 83 programmes that are implemented through a transparent coordination process between Abu Dhabi's government entities. It also represents strong commitment to achieve this ambitious vision, as we will examine and assess the outcomes of the plan on a quarterly basis, based on performance indicators and periodic reports to ensure a seamless and effective workflow," says Sheikh Hazza.
"Transforming the plan's objectives into concrete results will become a continuous endeavour, achieved through efforts between all stakeholders," he added.
At the emirate level, GDP data shows that significant progress towards increased sectoral diversification has been made since the turn of the century: the oil and gas sector's contribution to aggregate economic growth has declined steadily over the past decade, accounting for 59.3 per cent of GDP at constant prices (2007) in 2005, 51.8 per cent in 2010 and 50.5 per cent in 2014, according to Statistics Centre -Abu Dhabi (Scad). The construction sector, which is the second-largest component of the economy, accounts for approximately 9.6 per cent of the emirate's total GDP.
The financial sector is one of the most dynamic areas of economic activity in Abu Dhabi, and in 2017 the recently-launched Abu Dhabi Global Market is likely to be a focus of regional and international attention. The Abu Dhabi Securities Exchange (ADX) has been the centre of equities trading in the capital since its establishment in 2000. With a total market capitalisation of Dh475 billion ($129.3 billion) at the end of 2016, the ADX is the largest exchange in the country, compared to the Dh337.41 billioncapitalisation of the Dubai Financial Market and Nasdaq Dubai's approximately Dh64.3 billion for the same period.
"Abu Dhabi is encouraging the large enterprises that underpin the economy, such as the investment and development company, Mubadala, to use their competitive edge to support small and medium-sized enterprises, to diversify the enterprise base and enable the spread of technological innovation that will maximise growth in high value-added sectors," says Ali Majed Al Mansoori, chairman of the Abu Dhabi Department of Economic Development.
The emirate's banking institutions play a leading role in the wider UAE banking sector. As of the third quarter of 2016, the aggregate assets of the nation's banking industry stood at $662 billion, making it the largest banking industry in the region. Combined with insurance, Abu Dhabi's vibrant financial sector accounts for approximately seven per cent of the emirate's GDP, according to Scad.
A landmark moment in the banking sector's history occurred in April 2017, with the legal completion of a merger between National Bank of Abu Dhabi and First Gulf Bank, the emirate's two largest banks. The new combined institution - First Abu Dhabi Bank - has assets totalling Dh670 billion and a market capitalisation of approximately Dh111 billion.
In January 2017, credit ratings agency Fitch reaffirmed the emirate's 'AA' rating with a stable outlook, given its ample fiscal and financial buffers. According to figures from Fitch, Abu Dhabi's sovereign net foreign assets were 282 per cent of GDP in 2016, which is higher than the median of 61 per cent of GDP for other 'AA'-rated economies. The key drivers for the decisions included strong fiscal and external metrics and a high GDP per capita, balanced by a high dependence on hydrocarbons and a relatively weak economic policy framework. Fitch also stated that it expected a 5.9 per cent deficit in 2017 and higher spending following two years of lower expenditure.
Abu Dhabi enjoys a low outstanding debt level, equivalent to about four per cent of GDP, according to a February 2016 report from Moody's; raising debt on international markets has emerged as a viable option due to competitive market rates and Abu Dhabi's solid sovereign rating.
Moreover, a new investment law that the Federal National Council is expected to approve sometime in 2017 will have ramifications for foreign investors who are considering Abu Dhabi as an investment destination, as it promises to open up several economic sectors to 100 per cent foreign ownership.
OBG's regional director, Michelle Solomon, said the group's research pointed to myriad openings for investors, particularly as government spending continues to pick up and as the private sector's contribution to the economy continues to increase.
"Despite challenging macroeconomic headwinds, the emirate continues to show resilience and be an engine for growth, with infrastructural development under way in segments such as power, transportation, tourism and real estate," she said.
"Investors eyeing the market's potential have plenty to consider."