Abu Dhabi's long-term development efforts to foster economic diversification

Abu Dhabi is home to a rapidly diversifying economy that is among the largest in the region, with GDP reaching a total of Dh952.68bn ($259.32bn) at current prices in 2014, according to the “Statistical Yearbook Abu Dhabi 2015”.

Looking forward, plans for future development are mapped out in Abu Dhabi Economic Vision 2030, a comprehensive economic policy document that aims to reduce dependence on oil and gas, thereby securing a more sustainable knowledge-based economy for the emirate and its inhabitants.

Aided by hydrocarbons reserves that are among the world’s largest and substantial financial resources, Abu Dhabi has built up a strong foundation to become a regional leader and an increasingly important global player in a wide variety of sectors, including oil and gas, financial services, health care, aviation and renewable energy.

History

Archaeological evidence on the coastal plain and in the Al Hajjar Mountains suggests that the area known today as Abu Dhabi has been inhabited continuously for the last 5000 years. Its modern history can be traced back to the Bani Yas, a nomadic Bedouin group that settled around the Liwa Oasis prior to the 1600s. In 1761 members of the Bani Yas tribe first travelled to the island of Abu Dhabi, according to legend, in pursuit of a gazelle (the source of its name, which literally means “father of the gazelle”). After finding fresh water, settlers began establishing permanent residences on the island. Initially the Al Nahyan family, which headed the Bani Yas tribe, remained in the Liwa Oasis, but in 1793 they moved to Abu Dhabi.

Due to the region’s favourable geographical position along trade routes between Europe, the Levant and Asia, the area has been an important centre for commerce since Roman times. The local population for most of the emirate’s history made their living from a seasonal combination of harvesting dates from oases in the interior and pearling in the shallow seas and lagoons off the coast. British records from the 19th century suggest that such was the skill of pearl divers from this part of the world that some travelled as far as Sri Lanka to go pearling once the season in the Gulf was over.

During the late 1800s the settlement thrived on the back of the pearl trade, and following the signing of the General Maritime Treaty of 1820 by several Gulf states, in 1892 the town’s ruler, Sheikh Zayed bin Khalifa Al Nahyan, signed an agreement with the UK ceding control to the British, who wanted to preserve their trade route to India, in exchange for protection from the Ottoman empire. This would see the emirate join the Trucial States and become a British protectorate.

Following the death of Sheikh Zayed bin Khalifa in 1909 and the collapse of the region’s pearling industry, caused in large part by the rapid growth of freshwater pearl cultivation in Japan, the emirate’s prosperity declined. However, the discovery of oil elsewhere in the region in the 1930s was to change Abu Dhabi’s fortunes significantly. The first oil concession was granted in 1939, but, due partly to the outbreak of the Second World War, drilling did not start until 1950, with the first commercial discovery occurring several years later.

Transformation

The 1960s was a key decade in the emirate’s modern history, during which a process of transformation began that would see it become a prosperous, modern society. In 1962 the emirate began exporting oil, and in 1966 it joined OPEC as the organisation’s ninth member.

The latter year also saw the ascendancy of Sheikh Zayed bin Sultan Al Nahyan as ruler of Abu Dhabi. Two years later, in 1968, following the announcement by the British of their intention to withdraw their forces east of Aden (in what is now Yemen) in 1971, including the Gulf, Sheikh Zayed invited the rulers of the neighbouring Trucial States to join him to create a new nation. On December 2, 1971 the emirates of Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Qawain and Fujairah came together to form the UAE, with Sheikh Zayed elected by his fellow rulers as its president and Abu Dhabi City as its capital.

The federation was officially complete with the inclusion of the seventh emirate, Ras Al Khaimah, on February 10, 1972. Subsequently, Sheikh Zayed began the process of developing and modernising Abu Dhabi and the greater UAE, pursuing an expansive programme of building infrastructure and establishing services, including schools, housing and hospitals. The process of economic and social transformation in the UAE would see it become one of most modern and prosperous countries in the region. When Sheikh Zayed passed away in 2004, his son, Sheikh Khalifa bin Zayed Al Nahyan, succeeded him as president of the UAE and ruler of Abu Dhabi.

Demographics

Abu Dhabi’s population grew to reach an estimated 2.66m in mid-2014, up from 2.5m in 2013, according to Statistics Centre - Abu Dhabi (SCAD). Emirati nationals made up 19.1% of the population, with expatriates – primarily foreign workers – accounting for the remaining 80.9%. More than 66.5% of residents are men, due to the number of male labourers residing in Abu Dhabi. As with many countries in the region, the UAE’s youth population has grown rapidly in recent years. Some 79.6% of the country’s population is currently below the age of 40 and 33.2% is below the age of 25.

Language

Arabic is the official language of the UAE, although English is widely spoken by many in the emirate. Most road signs and restaurant menus are provided in both English and Arabic. In addition to these two, Tagalog, Bengali, Hindi and Urdu are all widely spoken as well. Legal documents must be written or translated into Arabic before they can be submitted to government agencies for review.

Religion

Islam is the official religion of the UAE and has a wide-ranging impact on many areas of daily life in the country. The UAE’s legal system, for example, is based on a combination of certain precepts of sharia law and international legal standards. Islam plays a significant role in local culture as well, with a clear influence on art, music, the calendar and general behaviour.

As is customary in many Muslim countries, during the month of Ramadan, the pace of life slows down. Many restaurants close during the day and working hours change. As a sign of respect to those fasting, non-Muslims should refrain from both eating and drinking in public during Ramadan. The Sunni tradition is the dominant form of Islam in the UAE and is practised by most Emiratis. However, Abu Dhabi’s cosmopolitan population includes adherents of a number of other religions, such as Christianity and Hinduism, and the emirate is home to a variety of houses of worship. The constitution of the UAE guarantees freedom of religion in accordance with established traditions and local customs.

Climate

Like much of the region, Abu Dhabi has a hot desert climate characterised by year-round clear blue skies and very little rainfall. Maximum daytime temperatures in the coolest month ( January) hover around 26°C, falling to around 15°C at night, whereas summer temperatures from June to August regularly exceed 40°C. Rain is rare for nine months of the year, but occasionally falls during the winter months of December to March.

Topography

Although it is mostly flat, vast sand dunes cover the emirate, the tallest of which – Tel Moreeb – is over 300 metres high. The Al Hajjar Mountains are located in the east of the emirate, the highest point of which, Jebel Hafeet, at 1249 metres, is to the south of the oasis town of Al Ain on the Omani border.

The emirate’s 700-km coastline boasts over 200 islands and a significant number of mangrove forests cover hundreds of hectares along the coast. These forests and islands are important breeding grounds for local wildlife.

Geography

The UAE covers a total area of around 83,600 sq km, making it roughly the size of Austria. The emirate of Abu Dhabi occupies almost 90% of this and is itself divided into three different regions: Abu Dhabi City (the Central Capital District); Al Ain (the eastern region), which borders Oman; and Al Gharbia (the Western Region), which shares a long border with Saudi Arabia to the south and west.

Abu Dhabi City

Located off of the mainland on a number of islands, the city of Abu Dhabi is both the capital of the emirate and of the UAE. Out of the emirate’s population of 2.66m people, Abu Dhabi City was home to the majority, reaching around 1.63m, or 62% of the total, in 2014, according to SCAD’s “Statistical Yearbook Abu Dhabi 2015”. The city is also the most densely populated part of the emirate, with some 148.9 people per sq km in 2014, compared to the emirate-wide figure of 44.7.

Al Gharbia

Al Gharbia, Abu Dhabi’s Western Region, covers 71% of the emirate’s total land area and has substantial natural resources wealth. It possesses 90% of the emirate’s hydrocarbons reserves, which in turn account for around 90% of the UAE’s total reserves. Unsurprisingly, the oil and gas sector is the main driver of the region’s economy.

The vast Al Hosn gas project, the Barakah-based nuclear power plant, the Bab sour gas project and the expansion of the Ruwais oil refinery complex are some of the large-scale developments that are currently under way in the region. These are of a sufficient size and scale that they are not only important on a local level, but are also significant contributors to growth and economic development in the emirate as a whole.

The region’s main cities – Dalma, Sila, Ghayathi, Ruwais, Madinat Zayed, Mirfa and Liwa – are home to the majority of its residents. Al Gharbia also has a substantial Bedouin population. According to SCAD’s “Statistical Yearbook Abu Dhabi 2015”, Al Gharbia’s population was 313,500 as of 2014, giving it a population density of 8.9 people per sq km.

Al Ain

The emirate’s eastern region, Al Ain – although significantly smaller in terms of land area than Al Gharbia – was home to 704,100 people as of 2014, according to SCAD, of which around 473,000 live in Al Ain City, the emirate’s second-largest city. The region had a population density of 52.6 people per sq km in 2014, as per SCAD figures.

The region’s location in the foothills of the Al Hajjar Mountains gives Al Ain a more moderate climate than the more humid coastal plain and has historically made it a crossroads on historic ancient trade routes between what is now Oman and the present-day UAE. The name Al Ain means “the spring” in Arabic, but the conurbation is also known as “the garden city” due to its location among natural oases and its ancient irrigation system.

With some of the emirate’s most fertile land, agriculture is vital to the economy of Al Ain, which boasts a substantial number of farms and is considered Abu Dhabi’s agricultural capital. According to figures from SCAD, the region was home to the majority of the emirate’s livestock in 2014, including camels (55%) and sheep and goats (64%), as well as of its plant holdings by area, with 59.4% as of 2013.

Other industries are also beginning to take hold locally, most notably aerospace and aviation. Mubadala Aerospace, a business unit of Mubadala Development Company, the Abu Dhabi-based investment and development company, has established operations in Nibras Al Ain Aerospace Park. The park has attracted, among others, the two global market leaders in commercial aircraft production, Airbus and Boeing. The region also has a well-developed education sector and is an increasingly popular tourism destination, with a particular focus on the cultural and ecotourism segments.

Federal Government

Under the constitution of 1971 the UAE operates as a federation of seven emirates and each of its constituent emirates has a high level of political and economic autonomy.

The federal government, based in Abu Dhabi City, is split into three branches: the executive, the legislative and the judicial. The current president of the UAE is Sheikh Khalifa, also the ruler of Abu Dhabi and the commander of the UAE military. The ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, is the vice-president and prime minister of the UAE.

The Supreme Council of Rulers, which is made up of the hereditary rulers of each of the seven emirates, is the UAE’s primary national policymaking body. The Council of Ministers, also known as the UAE Cabinet, is the executive branch of the government. It is presided over by Sheikh Mohammed of Dubai and comprises the UAE’s various ministers, who handle internal and external affairs. Recent appointments to the Cabinet, announced in February 2016, included eight new ministers, of which five were new female ministers. The Cabinet now consists of 29 ministers and fewer ministries, as several, in areas such as foreign affairs and education, for example, have been consolidated.

The legislative branch consists of the Federal National Council (FNC). Of the FNC’s 40 members, 20 are chosen by the rulers of the seven emirates (the allocation depends on the respective emirate’s population), while the remaining 20 are elected by an electoral college of eligible voters, totalling around 225,000 Emirati nationals.

The most recent elections for the FNC’s 20 elected members were held in October 2015. The judicial branch consists of the Federal Supreme Court and Courts of First Instance. The legal system operates both sharia and civil courts, and all judges are appointed directly by the president.

The federal government oversees national issues, including security and foreign policy, communications, fiscal and monetary policy, immigration, air traffic control and education standards. Aside from these matters, the emirate-level governments have considerable power over their own affairs.

Local Government

Abu Dhabi has used the autonomy to pursue a series of economic diversification programmes, in addition to social and cultural development initiatives, under the direction of the Abu Dhabi Executive Council, the executive branch of the emirate’s local government.

The Abu Dhabi Executive Council comprises 14 members, many of whom represent a section of government such as health or education and in turn assist and advise the chairman, Sheikh Mohamed bin Zayed Al Nahyan, on matters relating to services and performance. In addition to his role as chairman of the council, Sheikh Mohamed is also the crown prince of Abu Dhabi and the deputy supreme commander of the UAE armed forces.

The Abu Dhabi Executive Council sets the general policy of the emirate, its development plans going forward, as well as its laws and decrees. It is also responsible for both approving and monitoring the progress of government-sponsored projects, and providing oversight for government operations as a whole. However, the implementation of government policy initiatives is overseen by various departments and entities, nearly all of which are accountable to the council.

Ease Of Doing Business

The UAE performs favourably in the “Doing Business” global rankings issued by the World Bank, which rate countries on how welcoming they are for businesses in terms of their operating environment. The UAE was 31st in the 2016 edition, outperforming all other countries in the region by a considerable margin. The next highest ranked of its neighbours was Qatar at number 68. The UAE was also well ahead of leading economies such as Japan and appeared in the top 10 globally for some of the most crucial factors in establishing a business, including dealing with construction permits, getting electricity and registering property.

The Economic Vision 2030

The emirate of Abu Dhabi’s efforts to reduce its reliance on hydrocarbons were given major impetus in 2006, when Sheikh Mohamed mandated the General Secretariat of the Executive Council, the Abu Dhabi Council for Economic Development, and the Department of Planning and Economy – now the Abu Dhabi Department of Economic Development (ADDED) – with creating a long-term development plan.

In 2008, the Abu Dhabi Economic Vision 2030 was unveiled. Using this as a blueprint, the government intends to develop a diversified, sustainable economy that is integrated into global markets. Creating new sources of income and strengthening and developing new industries that are part of a knowledge-based economy are particular focal points under the plan, especially in high-value-added, non-oil sectors like tourism, manufacturing, logistics, health care, education, financial services and telecoms. Private sector funding and foreign direct investment will play an important role in this process as drivers of growth as well. According to the Economic Vision 2030, non-oil sectors of the economy, including petrochemicals, are projected to account for 64% of the emirate’s GDP by 2030, while oil and gas will contribute the remaining 36%.

Although the vision applies to all sectors and is a concerted effort between many in the public and private spheres, it will be primarily driven by three government entities: ADDED, the Abu Dhabi Council for Economic Development, and the General Secretariat of the Executive Council.

These entities have together identified the engines of future growth, the enterprises that will drive the economy, and the policies and resource enablers that will improve the environment for all of these entities and allow them to flourish.