Despite falling oil prices, the economic outlook remains positive

As home to the capital of the UAE, the emirate of Abu Dhabi hosts many of the institutions that oversee the nation’s social and economic development. Over recent decades these bodies have put the country’s hydrocarbons resources to good use, employing the sizeable revenues to underpin an ambitious strategy of economic diversification. The results of this effort are apparent on the emirate’s balance sheet, where expansion of the non-oil sector outpaces oil sector growth. The emerging hubs of heavy and light industry, manufacturing and finance also now populate the economic landscape.

Key Sectors

Abu Dhabi is justifiably renowned for the scale of its hydrocarbons industry. However, while the successful exploitation of its large oil and gas reserves has provided the economic basis for its rapid development over recent decades, the variety of activities that contribute to the emirate’s GDP is more diverse than may be initially apparent.

The growth of Abu Dhabi’s non-oil GDP over the last decade is the result of the government’s determination to shift the economy away from its reliance on oil and gas activity, and in 2013 non-oil GDP reached Dh429.3bn ($116.86bn) at current prices, according to Statistics Centre - Abu Dhabi (SCAD) – or approximately 45% of the total. A number of key sectors are driving this phenomenon.

Construction

The government’s extensive allocation of hydrocarbons revenues to large infrastructure projects, combined with significant investment from the private sector, helped to establish the construction sector as the second-largest contributor to Abu Dhabi’s GDP and it is expected to remain a leading driver of economic activity in coming years.

In 2013 the sector accounted for 9% of the total, and while much of this figure was derived from construction work taking place in the capital, the most recent SCAD data shows that the emirate is witnessing an elevated level of construction: in the third quarter of 2014 the Abu Dhabi region accounted for 60% of building completions, while Al Ain and Al Gharbia accounted for 25.3% and 14.7%, respectively.

Manufacturing

This sector is the third-largest in Abu Dhabi, accounting for 5.7% of total GDP in 2013, and has been identified as a key area of future growth by the emirate’s economic planners. The most significant manufacturing activity in terms of gross output is the chemicals and plastics segment, which in 2012, as per the most recent data published by SCAD, showed a gross output of Dh114.7bn ($31.22bn), demonstrating the emirate’s success in directing a measure of its hydrocarbons resources into downstream heavy and light industry.

The manufacturing of basic metal, which reached a total output of some Dh20.1bn ($5.47bn) in 2012, represents another important manufacturing activity in Abu Dhabi. Additionally, non-metallic mineral products (excluding oil) represent the third major segment in terms of output, which stood at Dh12.45bn ($3.39bn) in 2012.

Other large manufacturing segments contributing to the gross manufacturing output of Dh182.9bn ($49.79bn) for the year included structural metal products (Dh9.41bn, $2.56bn); machinery and equipment (Dh7.53bn, $2.05bn); food, beverages and tobacco (Dh7.9bn, $2.15bn); and textiles, garments and leather products (Dh1.97bn, $536.23m).

Real Estate

Abu Dhabi’s real estate sector is the fourth-largest contributor to GDP, accounting for 4.8% of the total at current prices in 2013. Although negatively affected by the global economic crisis, it has staged a recovery over the past two years, largely thanks to a rationalisation of supply and demand in the local market, Abu Dhabi’s sustained economic growth and the emirate’s status as a secure destination in a region affected by unrest.

However, the UAE’s ability to attract investment to its real estate sector is not a recent one: between January 2003 and July 2013, the real estate sector attracted more foreign direct investment (FDI) than any other, according to fDi Intelligence from the Financial Times, for a total of $5.5bn.

Financial Hub

Abu Dhabi City is becoming increasingly well known as a financial capital, and in 2013 its dynamic financial and insurance sector accounted for 4.8% of GDP at current prices, according to SCAD. Banks headquartered in the emirate play a leading role within the wider UAE banking market, which in 2013 posted combined assets of Dh1.95trn ($530.79bn) to establish itself as the largest banking sector in the region.

Other Sectors

For its part, the Abu Dhabi Securities Exchange’s total market capitalisation of more than $123.6bn at the close of 2014 makes it the largest in the country, and the development of a new financial free zone on Abu Dhabi’s Al Maryah Island is set to further increase the scale and sophistication of the local capital markets (see analysis).

Other areas of the economy that are playing an important part in the development of the emirate include the transportation and storage segment, which accounted for 3.7% of GDP in 2013, and is being buoyed by the expansion of the Midfield Terminal Building of Abu Dhabi International Airport and the 1500-km Etihad Railway (see Transport chapter); the wholesale and retail segment, which contributed 3.6% to GDP in 2013 and is benefitting from a wealthy and rapidly expanding population; and the information and communications segment, which contributed 2.3% to GDP over the same period.

Despite Abu Dhabi’s success in its efforts to create a more balanced economy, the oil and gas sector continues to play the single biggest role in the nation’s economic development. In 2013 mining and quarrying activity, which encompasses the oil and gas industry, accounted for 55% of total GDP.

Abu Dhabi’s history of hydrocarbons exploitation is a storied one: the emirate became a member of the Organisation of Petroleum Exporting Countries in 1966, before the formation of the UAE, and since that time has been a significant player in the international oil market. At the close of 2013 the UAE’s proven oil reserves stood at 97.8bn barrels, according to BP’s “Statistical Review of World Energy 2014”, and around 92.2bn barrels of that figure falls within the jurisdiction of Abu Dhabi. Oil production in the emirate has recently reached a level of 2.8m barrels per day (bpd), while the Abu Dhabi National Oil Company has plans to boost this figure to 3.5m bpd by 2017 by doubling the number of rigs in operation to 40. The emirate has also turned its attention to increasing gas reserves and production, and to that end has successfully developed its first unconventional sour gas field, while ongoing carbon capture projects promise to use CO as part of enhanced oil recovery efforts instead of re-injecting gas, freeing the fuel up for much-needed electricity generation.

Strategy

While the revenues from Abu Dhabi’s oil and gas sector have driven the emirate’s development, the long-term ambition of the government is to reduce the relative contribution of the sector to total GDP. The consistent, large fiscal surpluses it enjoys from the lucrative hydrocarbons industry allow the government to play the leading role in this diversification effort, and the manner in which it intends to achieve its goal is laid out in the Abu Dhabi Economic Vision 2030 strategy document.

Formulated in 2008, the strategy document commences with an overarching ambition for the emirate to build a “safe and secure society and a dynamic, open economy”, and thereafter identifies a number of economic priorities: building an open and globally integrated business environment; adopting a disciplined fiscal policy that is responsive to economic cycles; establishing a resilient monetary and financial market environment with manageable levels of inflation; improving the efficiency of the labour market; developing infrastructure capable of supporting economic growth; and enabling financial markets to be the key financiers of economic sectors and projects. The plan also identifies a number of key sectors through which Abu Dhabi has the potential to boost its non-oil GDP. Included among them are sectors such as tourism, manufacturing, logistics, health care, education, financial services, aerospace and telecommunications.

Phasing In

The strategy’s implementation has been broken down into phases of five years in duration, the first of which ran from 2008 to 2012 and was focused on the areas of economic liberalisation, industrial infrastructure and support for small and medium-sized enterprises.

During 2014 a range of government authorities cooperated in the formulation of the next five-year plan, which, according to the Abu Dhabi Chamber of Commerce & Industry (ADCCI), is due for publication in the first quarter of 2015.

While the Economic Vision 2030 plan still has many years to run, historic GDP data show that progress towards increased sectoral diversification has been made since the turn of the century: the oil and gas sector is estimated to have accounted for 62.4% of real GDP in 2001 and 59.3% in 2005, compared to the 2013 level of 51.4%. Furthermore, according to SCAD, the emirate’s non-oil GDP at current prices grew by 9.8% year-on-year in 2013, compared to a 1% increase in oil GDP.

Expanding opportunities for the private sector is another key aim of the emirate’s strategy. “As outlined in Vision 2030, the long-term goal of the diversification strategy of Abu Dhabi is to empower the private sector to be the driving force of the economy by creating opportunities in a market-oriented business enabling environment,” Mohammad Helal Al Muhairi, director-general of the ADCCI, told OBG.

Private Sector  Leadership

In March 2014 the private sector gained a useful channel by which it could offer its views regarding the emirate’s development to the authorities. The new Centre for Economic Growth (CEG) is a collaboration between a number of regional private sector entities and leading international business school INSEAD. Established at INSEAD’s Abu Dhabi campus, the new institution will help to address the need for timely and independent statistics, conduct economic research, and provide a platform for the private sector and academia to engage with regional governments and ministries on such key issues as sustainable economic growth and job creation.

While the level of the centre’s interaction with the Abu Dhabi government is as yet unclear, the CEG has the potential to provide a central conduit to augment the multitude of sector-specific business associations already in existence.

In addition to the CEG, the ADCCI also has a number of initiatives under way to support private enterprise in the emirate. In its annual report for 2013, released in August 2014, the chamber highlighted a range of e-services it had launched over the year to support business development, alongside the establishment of a Member’s Services Centre, which brings together a number of public and private entities that provide licensing and other services to companies setting up shop in the emirate.

As well as supporting entrepreneurship and innovation, the ADCCI is also encouraging franchising as a way into business, with 160 companies attending the Franchise Exhibition that it hosted in November 2014. Looking more widely at investment opportunities, 26 international business councils are registered with the chamber to represent the interests of business communities from their countries.

Fiscal Policy

Assessing the fiscal situation of Abu Dhabi is made more complex by the federal nature of the UAE; the federal budget only accounts for approximately 14% of total fiscal spending in the country. Each emirate is free to set its own fiscal budget, although some degree of strategic oversight is provided by the Fiscal Policy Coordination Council, a federal-level body that, supported by the Ministry of Finance, prepares backward-looking fiscal data for the nation as a whole. Another level of fiscal coordination, meanwhile, is provided by a self-financed programme of IMF technical assistance.

At the national level, the UAE continued to show a fiscal surplus over 2013 thanks to stable revenue levels coupled with moderate increases in expenditure. The overall fiscal surplus of 6.5% in 2013, according to the IMF, represented a mild consolidation from the 8.9% surplus of 2012, although this tightening did not take place as rapidly as initially budgeted.

While the Dubai government reduced its deficit more rapidly than scheduled, the year saw higher current spending in areas such as security and defence on the part of the federal government. In terms of the UAE’s medium-term fiscal plans, the IMF reports that the federal government foresees it will maintain a balanced budget until 2016 – a stance that the IMF judges to be “appropriate”.

At the emirate level, Abu Dhabi has recently sought to establish greater fiscal clarity by producing reports on the medium-term fiscal outlook and setting budgets that run for multiple years. Since 2013, for example, the emirate has been implementing a Dh330bn ($89.83bn), five-year spending plan devised by the Abu Dhabi Executive Council.

According to the Abu Dhabi Executive Council, a total of 12,500 homes will be constructed across nine major projects, while Dh3bn ($816.6m) in housing loans will be extended over the period – an expansion of a scheme that has seen 6500 loans disbursed to date for a total value of Dh13bn ($3.54bn).

Other projects that will benefit from the spending plan include sewerage and wastewater works, highways and schools. Abu Dhabi consistently posts budget surpluses, despite the costs of subsidised energy and a cradle-to-grave health and welfare system for nationals, but forecasting surpluses accurately is quite challenging due to the frequency of budget reviews, by which spending plans are often altered mid-year, and the large component of hydrocarbons revenue on the emirate’s balance sheet. Standard & Poor’s, for example, sees the Abu Dhabi fiscal surplus declining in the medium term due to the weakening oil price, from the 16% of GDP posted in 2013 to 7.6% of GDP in 2016.

However, a notable feature of Abu Dhabi’s fiscal profile is that its public finances are even more robust than is shown in available data: the emirate pays a portion of its oil revenue directly into reserve accounts, not reporting it as current revenue, while the public accounts do not include the significant income derived from the emirate’s portfolio of publicly owned foreign assets. This “reserve liquidity” grants Abu Dhabi considerable flexibility to deal with exogenous shocks, and the emirate’s economy is considered to be one of the strongest in the world. The world’s three most influential ratings agencies all place the emirate in the “high quality” category, which establishes it on par with countries such as Norway, Singapore and Switzerland (see analysis).

The economic powerhouse of Abu Dhabi has also played a large part in returning the UAE’s wider consolidated accounts to stability, following a volatile period during the global economic crisis. This is most obvious in its support for government-related entities (GREs) and banks. While outstanding GRE obligations, estimated by the IMF to be $95bn each for Abu Dhabi and Dubai, still represent a downside risk, the early repayments made by some of the stronger GREs, such as Nakheel, have been welcomed as an indication of a recovering economy and a decrease in the likelihood of debt restructuring.

Monetary Policy

The UAE’s monetary policy is limited by the pegging of the dirham to the US dollar. Interest rates are set at the federal level by the Central Bank of the UAE (CBU), and therefore its capacity to address inflationary pressures through interest rate changes is somewhat circumscribed by the need to synchronise them with the actions of the US Federal Reserve.

Growing calls for a de-coupling of the dirham-dollar link were silenced by the onset of the global economic crisis, which saw UAE inflation fall from around 12.3% in 2008 to 1.6% in 2009. Subsequently, the priority of the CBU was to boost liquidity and protect the banking sector, although a rise of inflation to 3% in early 2011 brought its attention once more to inflation management in the short term. Monetary policy continues to support the US dollar peg, and the policy rate has remained at 1% with a stable spread over the Federal Reserve funds rate since 2008. According to the IMF, the UAE has been well served by its longstanding exchange rate peg. Although the last year has seen a modest uptick in inflation, mostly attributable to a recovery in the housing market, IMF inflation projections do not see a problematic rise in the near term: according to the organisation, average consumer price index (CPI) inflation will reach 3.5% in 2016, rising to 4% in 2017.

At the emirate level, SCAD maintains a CPI by which inflation within the emirate can be tracked. Data published in October 2014 show that the inflation rate for consumer prices in Abu Dhabi over the first 10 months of 2014 was 3.1%, compared to 1.1% for the same period in 2013. In terms of inflation drivers, the “housing, water, electricity, gas and other fuels” category showed the largest relative increase over the period, reflecting the rise in rents seen in Abu Dhabi over the past year.

Given the relatively modest rates of inflation in both Abu Dhabi and the wider UAE, and the lack of near-term inflationary risk, the CBU is expected to maintain its accommodative monetary policy under the dollar peg for the foreseeable future.

Soverign wealth

Abu Dhabi’s sustained fiscal surpluses over the years have enabled the emirate to effectively deploy its wealth in the pursuit of its strategic objectives. This process began early in Abu Dhabi’s modern development, starting with the creation of the Financial Investments Board in 1967 as part of the Abu Dhabi Ministry of Finance.

The Abu Dhabi Investment Authority (ADIA) was established by law in 1976 to succeed the board as the principal instrument by which the government of Abu Dhabi invests its sovereign wealth with a view to creating long-term value. Since that time it has grown to become the largest sovereign wealth fund (SWF) in the Middle East, with assets estimated to stand at $773bn, according to the Sovereign Wealth Fund Institute (SWFI). Although the fund is wholly owned by the government, it is established as an independent legal entity and is therefore free to pursue its own investment policies, developed by its strategy unit, which obey the general rule of generating stable returns over the long term within established risk parameters. The fund additionally seeks medium-term tactical opportunities with which to generate returns in excess of its long-term investments, while maintaining its target risk profile.

Over the years ADIA has developed a broad portfolio, the largest single component of which is equities from developed markets (which ADIA’s risk profile targets at 32-42% of the total), followed by emerging market equities (10-20%) and government bonds (10-20%). In all, the fund invests in around 24 asset classes, which also include real estate, small-cap equities and private equity. In terms of geography, ADIA’s investment policy is weighted towards North America (which it targets at 35-50% of its portfolio), followed by Europe (20-35%), developed Asia (10-20%) and emerging markets (15-25%).

The government directs around 70% of any budget surplus to ADIA, but about 30% is granted to the Abu Dhabi Investment Council (ADIC), which was spun off from ADIA in 2007 and took over all local subsidiaries previously owned by it. These include institutions such as Abu Dhabi Commercial Bank, National Bank of Abu Dhabi and Abu Dhabi Investment Company. While ADIC retains a strong focus on the local economy, its remit goes beyond the emirate’s borders to allow for a globally diversified investment strategy across a wide range of asset classes, including equities and fixed income, infrastructure, real estate and direct investments.

State-Owned Development

Within the emirate, the most visible government mechanism for economic development is Mubadala Development Company. Established in 2002, Mubadala is a state-owned investment firm. Over the past 13 years it has invested in some of the largest and most strategically important developments in Abu Dhabi, including the Cleveland Clinic Abu Dhabi, Emirates Aluminium, aerospace manufacturer Strata, Dolphin Gas and Paris-Sorbonne University Abu Dhabi. More recently, it has begun to seek additional investment opportunities in overseas markets, across four broad areas: technology and industry; aerospace and engineering services; energy; and emerging sectors, which includes health care, real estate and infrastructure, and capital investments (see analysis).

Trade

Mubadala’s ongoing investment in Abu Dhabi’s industrial sector has played a part in the growth of exports from the emirate. Foreign trade in goods is a central component of the emirate’s economy, and in 2013 net foreign trade in goods accounted for 44.3% of GDP, according to SCAD.

The export of oil, gas and oil products accounts for the vast majority of goods and products leaving the ports of the emirate: in 2013, hydrocarbons-derived exports of this type amounted to Dh490.5bn ($133.51bn) compared to Dh16bn ($4.36bn) worth of non-oil exports, although as the effects of Abu Dhabi’s diversification strategy become apparent in the medium term, the non-oil component of the emirate’s foreign trade is expected to expand. Base metals are the single-largest non-oil export group, adding around Dh8bn ($2.18bn), to the export total in 2013, followed by plastics and rubber (Dh5bn, $1.36bn) and machinery (Dh748m, $203.61m).

In terms of export markets, the UAE’s participation in numerous regional and global trade agreements has helped Abu Dhabi develop strong international trading ties. At a regional level, it benefits from the 2002 economic agreement signed between the nations of the GCC, and the UAE's membership in the Greater Arab Free Trade Area, which provides it with access to markets in 17 states in the Middle East and North Africa. The UAE has been a member of the World Trade Organisation since 1996, and as a leading member of the GCC negotiation team, it is at the forefront of talks to establish free trade agreements with a number of significant markets such as the EU, Japan, China, India and the South American Mercosur bloc, which includes inter alia Brazil and Argentina. Abu Dhabi has also moved to develop trade at the emirate level. The Trade Incentive Package, which applies to local and international investors in the emirate, offers full income and corporate tax exemptions, and Customs tariffs as low as 5%.

An increased emphasis on the protection of intellectual property has resulted in a dedicated commercial protection section at the Abu Dhabi Department of Economic Development (ADDED), to which owners of trade agencies can report instances of trademark counterfeiting and commercial fraud. In terms of top trading partners, in 2013 Saudi Arabia was Abu Dhabi’s largest export market, accounting for 41.7% of non-oil exports, followed by China (13.7%), India (6.3%) and Qatar (5.5%). On the other side of the ledger, total imports of around Dh100bn ($27.22bn) in 2013 compared to total exports of nearly Dh523bn ($142.36bn) gave Abu Dhabi an enviable trade balance of around Dh423bn ($115.14bn) for the year. Machinery represented the biggest import category over the period, accounting for around Dh23bn ($6.26bn) of the total, followed by transport vehicles (Dh21bn, $5.72bn) and base metal (Dh20bn, $5.44bn). The US provided the largest amount of goods and services to the emirate over the year, accounting for 12.7% of the total, followed by Saudi Arabia (11.7%), Japan (8.3%), Germany (7.6%), Italy (4.7%) and the UK (4.5%).

Re-Exports

Thanks to its investment in its port facilities (see analysis), Abu Dhabi is also emerging as a significant re-export hub. Re-exports in 2013 were valued at approximately Dh16.4bn ($4.46bn), according to SCAD, an increase over Dh14.7bn ($4bn) in 2012. The majority of this activity is derived from Asian trade routes, which account for around 86% of all re-export activity – most of which is related to the shipment of manufactured products. However, Abu Dhabi is also a gateway for accessing GCC regional markets, with the neighbouring economy of the Kingdom of Bahrain claiming the largest share of Abu Dhabi’s re-exports to the GCC, at 29%, followed by Saudi Arabia with 28.6% and Qatar with 21.5%.

Foreign Investment

While Abu Dhabi is in the fortunate position of being able to define its own diversification strategy and underwrite this with its hydrocarbons revenues, boosting the level of inward FDI remains a core component of the government’s long-term economic planning. Part of this effort involves ensuring that the emirate is perceived as a desirable place to do business, and to this end the Economic Vision 2030 strategy calls for further progress in international competitiveness rankings, such as the World Bank’s “Doing Business” report and the World Economic Forum’s (WEF) “Global Competitiveness Report”.

At the national level, concrete progress has been made in this regard: the UAE was ranked 12th in the WEF’s Global Competitiveness Index 2014-15, with a score of 5.33. This placed the emirate ahead of other globally competitive economies, including Canada, Qatar, Denmark, China and Australia.

At the emirate level, ADDED has been tasked with creating an investment climate that can attract national and foreign capital, and to this end it has embarked on a review of all economic laws in force in the emirate. The practicalities involved with starting a business have also been addressed by ADDED’s Abu Dhabi Business Centre, a facility that acts as a central location where important functions such as obtaining a licence and securing facilitation agreements can be carried out.

Launched in 2013, the business centre has greatly simplified the process of establishing and operating a company in Abu Dhabi, which in some cases requires more than 60 permits from state entities. To date, it has established agreements with over 30 government departments, and continues to seek more in a bid to further streamline the bureaucratic process. In the meantime, many key processes and services can now be carried out online, via the Abu Dhabi Business Centre portal. These include information on approvals, documents and estimated fees; trade name searches and registration; licence issuance, renewal and amendments; payment of fines; and permits for advertising.

Abu Dhabi has also taken steps to gain deeper insight into the levels of FDI specific to the emirate (rather than the wider UAE), and in 2011 began to provide a detailed breakdown of FDI inflows. According to SCAD’s most recent data, the value of FDI stock in Abu Dhabi reached Dh60.9bn ($16.58bn) by the end of 2012, up from about Dh52.2bn ($14.21bn) at the end of 2011. Overall, the real estate sector has attracted the most FDI in recent years, a trend that has been strengthened by Abu Dhabi’s status as a safe haven in the midst of regional unrest: at the close of 2012, real estate investment by nonresidents accounted for 38.4% of total FDI. Other major contributors to the emirate’s inward investment include manufacturing industries (which accounted for 19% of the FDI stock in 2012), utilities projects (11.1%), mining and quarrying (10%), and financial institutions and insurance (9.7%).

ADDED tracks the sentiment of foreign investors through a regular survey carried out by its Studies Directorate – the FDI Policies Transparency General Index. The survey solicits the views of respondents on a range of issues, including the efficiency of government policies for attracting and encouraging FDI to Abu Dhabi, and the role of the emirate’s government in the management and implementation of policies and incentives. The FDI Policies Transparency General Index increased in 2014, according to ADDED, rising to 78.95 (out of 100). This was a significant jump over the 67.3 of 2013, indicating a positive view of Abu Dhabi’s progress with regard to investment policies and their implementation.

Zones

Much of the FDI that Abu Dhabi expects to secure over the coming years will be directed towards the emirate’s free zones. The principal incentive of these developments, each of which specialises in a specific group of activities, is that companies that are established within them are able to sidestep the 49% foreign ownership limit that pertains to the wider economy. Abu Dhabi first adopted the free zone principle in 2007, when it established twofour54, a media and entertainment free zone. Starting operations in 2008, the zone has succeeded in attracting major companies involved with TV, film and digital media, including international giants such as CNN, Ubisoft, Cartoon Network and the Thomson Reuters Foundation (see Media chapter).

In 2008 Abu Dhabi started the construction of Masdar City, described by ADDED as the world’s first “cleantech” cluster. The new city, currently taking shape 17 km from the capital, is intended to be a centre of research and development for clean technology, and has been designed to become one of the most sustainable cities in the world. The sustainable urban development is pioneering what is termed a “greenprint” for how cities of the future will accommodate rapid urbanisation, while also reducing waste generation and energy and water usage. The 6-sq-km development is already home to the Masdar Institute and the headquarters of the International Renewable Energy Agency. Following a number of adjustments to the city’s master plan, the completed city is estimated to cost $16bn.

Abu Dhabi Airport Free Zone was established in 2009, and has since become a centre for catering, fuel, cargo, logistics and light manufacturing. The operator, Abu Dhabi Airports Company, has also established free zones at Al Bateen Executive Airport and Al Ain International Airport, focused on aerospace manufacturing and servicing, respectively. Companies operating in the three zones get access to exemptions from duties on imports, on-site Customs inspection, one-stop administration services and swift cargo clearance, among others.

However, while Abu Dhabi’s various zones have met with considerable success, two currently ongoing developments are set to dwarf what has gone before (see analysis). In Taweelah, the new Khalifa Industrial Zone Abu Dhabi is being established next to the Khalifa Port (also in development), and is pursuing a strategy centred on the creation of vertically integrated industrial clusters that will be made up of companies specialising in areas such as petrochemicals, aluminium, metals, glass, paper and food processing (see Industry chapter). With a scheduled completion date of 2030, the new site will eventually include more than 100 sq km of free and special economic zone space, with access to one of the largest and most technologically advanced cargo and container ports in the region.

On Abu Dhabi’s Al Maryah Island, meanwhile, a new mixed-use financial, retail, residential, leisure and commercial development is already in progress. The financial zone that lies at the heart of it, Abu Dhabi Global Market, will have its own regulatory system, legal structure and inventory of incentives (see Capital Markets chapter). Its establishment will represent a significant step in the development of Abu Dhabi’s economy, and has the potential to spur new growth in the already vibrant financial sector.

Outlook

In the years immediately following the global economic crisis, Abu Dhabi demonstrated a pronounced resilience to extraneous shocks. Since that time, continued economic growth, a stabilising real estate market, and a liquid and well-regulated banking system have all helped the emirate comfortably address the debt maturities of its GREs.

The emirate’s growth strategy has, as a result, continued largely unimpeded and its assiduous development of its non-oil economy has already begun to pay dividends, especially in the context of dramatically falling oil prices. The price per barrel of crude dropped more than 50% from $115 in June 2014 to $56 per barrel by the end of the year.

The rapid pace of the oil price decline led the IMF to revise its forecast for the UAE’s GDP growth in 2015 and 2016 downward to 3.5%, in January 2015, by a percentage point from its October 2014 estimate. Given its sound macroeconomic position and the government’s strategy of development by diversification, the outlook for Abu Dhabi remains positive.