Abu Dhabi maintains reputation as engine for growth

With substantial financial buffers and hydrocarbons reserves that are among the world’s largest, Abu Dhabi has increased its political and economic influence in recent years, both regionally and globally. From renewable energy to health care and aviation, a rapidly diversifying economy means that the emirate is well placed to weather the prolonged period of reduced oil prices that continues to impact growth.

Plans for future development are mapped out in Abu Dhabi Economic Vision 2030. A comprehensive economic policy document, Economic Vision 2030 aims to reduce dependence on oil and gas, thereby securing a more sustainable, knowledge-based economy for the emirate. Successive five-year plans within the framework of Economic Vision 2030 aim to ensure the achievement of the plan’s goals.

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 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 in 1892 the town’s ruler, Sheikh Zayed bin Khalifa Al Nahyan, signed an agreement with the UK ceding control over certain matters 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 within the emirate 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, with a process of transformation beginning that would see it become a prosperous, modern society. In 1962 the emirate began exporting oil, and in 1966 it joined the Organisation of the Petroleum Exporting Countries, becoming the ninth member.

That year also saw the ascendancy of Sheikh Zayed bin Sultan Al Nahyan as ruler of Abu Dhabi. In 1968, following the announcement by the British of their intention to withdraw their forces east of 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 the country’s founding 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, including schools, housing and hospitals, and establishing services. The process of economic and social transformation would see the UAE 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 reached an estimated 2.78m in mid-2015, up from 2.66m in 2014, according to Statistics Centre - Abu Dhabi (SCAD). Emirati nationals made up 19.3% of the population, with expatriates – primarily foreign workers – accounting for the remaining 80.7%. As with many countries in the region, the UAE’s youth population has grown rapidly in recent years, with some 33% below the age of 25 (see analysis).

Language

Arabic is the official language of the UAE, though English is widely spoken. 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. The official language of all government communication is Arabic, and most 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 also plays a significant role in local culture, having 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. 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. In addition, 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. In the east of the emirate lie the Al Hajjar Mountains, the highest point of which, Jebel Hafeet’s 1249 metres, is to the south of the oasis town of Al Ain on the Omani border. Abu Dhabi’s 700-km coastline features over 200 islands, and 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 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 separate regions: Abu Dhabi City; Al Ain (the Eastern Region), which borders Oman; and Al Dhafra, which shares a long border with Saudi Arabia to the south and west.

Abu Dhabi City

Located off the mainland on a number of islands, the city of Abu Dhabi is the capital of both the emirate and the UAE. Of the emirate’s population of 2.78m, Abu Dhabi City is home to the majority, reaching 1.72m, or 61.7% of the total, in 2015, according to SCAD. The city is also the most densely populated part of the emirate, with 156.3 people per sq km in 2015, compared to the emirate-wide figure of around 45%.

Al Dhafra

Al Dhafra covers 71% of Abu Dhabi’s 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. 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 under way in the region. These are of 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 country 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 Dhafra also has a substantial Bedouin population.

According to SCAD Al Dhafra’s population was 325,800 as of 2015, giving it a population density of 9.3 people per sq km.

Al Ain

The emirate’s Eastern Region, Al Ain, although significantly smaller in area than Al Dhafra, was home to an estimated 738,500 people as of mid-2015, with most of them living in Al Ain City, which is the emirate’s second-largest city. The region had a population density of 55.2 people per sq km in 2015, according to SCAD figures.

The region’s location in the foothills of the Al Hajjar Mountains gives Al Ain a more moderate climate than the humid coastal plain, and historically made it a crossroads on trade routes between what is now Oman and present-day UAE. 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.

As the setting for some of the emirate’s most fertile land, agriculture is vital to the economy of Al Ain, which has a substantial number of farms and is considered Abu Dhabi’s agricultural capital. According to SCAD, the region had the majority of the emirate’s livestock in 2015, including 209,000 camels, 42,000 cattle, and 1.9m sheep and goats, as well as most of its plant holdings by area.

Other industries are also beginning to take hold, most notably aerospace and aviation. This is seen most prominently in the Nibras Al Ain Aerospace Park 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, each of which has a high level of political and economic autonomy. The federal government, which is based in Abu Dhabi City, is split into three branches – executive, legislative and judicial.

The current president of the UAE is Sheikh Khalifa, who is also the ruler of Abu Dhabi and the commander of the UAE’s 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, made up of the hereditary rulers of each of the seven emirates, is the UAE’s highest national policy-making 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 bin Rashid in his capacity as UAE vice-president and prime minister and comprises the UAE’s various ministers, who handle internal and external affairs. Appointments to the Cabinet announced in February 2016 included eight new ministers, of whom five were female. The Cabinet now consists of 29 ministers and fewer ministries, as several, in areas such as foreign affairs and education, have been consolidated with more specialised ministers of state.

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 emirate’s population) and the remaining 20 by an electoral college of eligible voters, totalling around 225,000 Emirati nationals. The most recent elections for the FNC’s 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.

In early 2017, Sheikh Mansour bin Zayed Al Nahyan, Deputy Prime Minister and chairman of the Abu Dhabi Judicial Department, announced the introduction of special courts for expatriates and non-Muslims covering issues relating to inheritance, divorce and custody. The courts will be able to hear cases under the legal framework of the claimant’s own country or religion, and is designed to streamline case loads going forward.

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 this 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, which celebrated its 50th anniversary in 2016.

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 bin Zayed is the crown prince of Abu Dhabi, as well as the deputy supreme commander of the UAE armed forces.

The Abu Dhabi Executive Council sets the general policy of the emirate, its development plans, and 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 26th in the 2017 edition, up from 34th in 2016, making it one of the most improved countries, and outperforming all other countries in the region by a considerable margin. The next-highest-ranked country in the Middle East was Bahrain in 63rd place, followed by Oman, in 66th.

In particular, improvements to minority investor protection following new corporate governance regulations helped catalyse the rise, alongside continued positive ratings in establishing a business, dealing with construction permits, electricity and registering property. Issues of resolving insolvency remain relatively weak in the lead up to the formalisation of bankruptcy legislation.

Foreign Aid Strategy

In late 2016 the Ministry of Foreign Affairs and International Cooperation launched a new five-year foreign aid strategy covering the years 2017-21. The strategy was the result of cooperation between several government agencies, civil society and the private sector, and, representing a shift in priorities from recent years, focuses on developmental projects around the world, with a special emphasis on women’s empowerment, infrastructure and technical cooperation.

Around the same time as the launch, in defining an overarching theme for the year ahead, Sheikh Khalifa announced 2017 as the year of giving.

The move echoes previous announcements, including the year of reading in 2016 and the year of innovation in 2015, both of which brought strong government focus and great progress in their respective fields.

The government said that its focus would be three-fold – strengthening social responsibility in the private sector, promoting volunteer programmes across all segments of society and further embedding the importance of national service on the next generation. By early 2017 the first initiative was launched by Sheikh Mohammed bin Rashid in the form of a newly inaugurated UAE Food Bank, aimed at reducing food waste and feeding hungry populations at home and abroad by collecting excess food from supermarkets, hotels, restaurants and farms.

Economic Vision 2030

The emirate of Abu Dhabi’s efforts to reduce its reliance on hydrocarbons were given a major impetus in 2008 through the publication of the Abu Dhabi Economic Vision 2030 by the General Secretariat of the Executive Council, the Abu Dhabi Council for Economic Development and the Abu Dhabi Department of Economic Development (then the Department of Planning and Economy).

In 2008 Abu Dhabi Economic Vision 2030 was officially unveiled, and in mid-2016 a comprehensive new plan, dubbed the Abu Dhabi Plan, was released. The new blueprint touches base on all aspects of civil society, and attempts to keep the emirate on track towards its 2030 targets.

With these plans as a blueprint, the government intends to develop a diversified, sustainable economy that is integrated into global markets. Creating new sources of income and developing new industries that are part of a knowledge-based economy are particular focal points, especially in high value-added, non-oil sectors like tourism, manufacturing, logistics, health care, education, financial services and telecoms. While this is a concerted effort between both private and public entities, private sector funding and foreign direct investment will continue to play an important role in this process as drivers of growth. According to Economic Vision 2030, non-hydrocarbons sectors of the economy, including petrochemicals, are projected to account for around 64% of the emirate’s GDP by 2030, while oil and gas would contribute the remaining 36%.