How will the public-private partnership (PPP) model impact Abu Dhabi’s private sector?
AL RUMAITHI: The distinguishing feature of PPPs in Abu Dhabi is that, unlike other parts of the world, the government here is not facing an imminent shortage of funds. Usually, the raison d’être for PPPs is that the public sector faces budget constraints and needs the financial support of the private sector. We see that the very concept of PPPs is turned upside down when applied to Abu Dhabi, where the public sector has the financial capability to engage in projects of its own.
The main rationale of the Abu Dhabi government for using PPPs is to support the private sector. To this end, the ADCCI conducted a peer-reviewed study in January 2016, assessing the feasibility of different types of PPP models to be used. Moreover, the genuine desire of Abu Dhabi to diversify its economy away from oil has promoted closer cooperation between the public and private sectors, which, in turn, is driven by two factors. First, PPPs can introduce new products, processes, technologies and innovation through private sector participation; and second, they can be a smart approach to overcoming competition between public and private sector companies. In other words, PPPs can not only support private sector participation in the economy, but can also help diversify the economy into non-oil sectors, which is the long-term objective of the Abu Dhabi government. The key sectors that have been identified for PPPs are health, education, construction, infrastructure, utilities and industry, among others.
The Abu Dhabi government is also putting the final touches on a dedicated PPP legal framework, to better manage such projects with the utmost efficiency and, more importantly, with the greatest transparency.
What role can the private sector play in expanding the emirate’s industrial base?
AL RUMAITHI: Although the government’s target to double the share of the industrial sector is ambitious, we also realise that industrialisation is not as easy as when currently industrialised countries went through the process, going from subsistence agriculture to low-skilled manufacturing and ultimately to high-skilled, technologically advanced industries. We also realise that neighbouring countries have similar ambitions to industrialise and diversify their economies away from oil. For this reason, we have come to know that the best approach is to leapfrog to technically advanced industries, and bypass the first two stages of the traditional industrialisation model.
As highlighted in the long-term Abu Dhabi Economic Vision 2030, we wish to specialise in truly high-end manufacturing sectors such as microprocessors, health care equipment, pharmaceuticals and aerospace, among many other high-tech industries. The Abu Dhabi private sector – in partnership with other foreign private sector companies and the full support of the Abu Dhabi government – is at the forefront of this industrialisation process into these high-end, high-value-added industries.
At the same time, the gradual rise in wages and other costs in China and in some East Asian countries have eroded the traditional competitive advantages that these regions maintained. Many private sector companies are now eagerly looking for other locations, with infrastructure and facilities, such as the Khalifa Industrial Zone Abu Dhabi – a mixed-use, free zone industrial city – and twofour54, a duty-free media zone.
The UAE’s federal government has also been studying the possibility of granting 100% ownership to private sector firms in selected sectors, and the recently announced bankruptcy law should empower small and medium-sized enterprises to take greater risks and be more innovative. The role of the Abu Dhabi private sector is shifting towards driving innovative ideas to tap into the highest levels of the global value chain. These industries are highlighted in Abu Dhabi’s industrial strategy, which is reviewed and revised every five years.
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