Abu Dhabi – Not just about Hydrocarbons - Economic Diversification is the New Focus
Abu Dhabi’s economy has always been reliant on oil production, holding 9% of global proven oil reserves, however, with the changing economic tides, the drop in oil prices and demand has motivated Abu Dhabi to grow its non-oil economics, demonstrating a compounded increase of almost 7% from 2007-2012. According to the Department of Economic Development, these increases have elevated the emirates non-hydrocarbon related economics to 48% of their total economics, up from 5% a few years ago. The installation of the 2030 Economic Vision predicts this number to reach 64% by 2030. According to Chief Economist Monica Malik, the continued growth is a result of stronger investments.
In an effort to promote its non-hydrocarbon commitment to environmental awareness, the UAE participated in Milan’s Expo 2015. The theme “Feeding the Planet, Energy for Life” echoed the concerted efforts of the UAE and other Gulf nation’s commitment to these goals despite other global issues that have made it challenging to provide food and water for growing populations.
One of the biggest highlights of the Milan Expo 2015 was in agricultural technology - the key message was “how we grow, how we trade, how we eat”, once again demonstrating the diversity and commitment to grow the non-hydrocarbon economies globally.
Abu Dhabi is focused on the diversification of its economy, and Mubadala (a state-owned investment company) has initiated new projects to include aluminium and aerospace technologies. One of Mubadala’s aerospace plants recently announced a $5bn deal that will supply materials and other parts to Boeing and Airbus. 20K jobs are expected to be created by 2030.
The new focus on industry is now at the heart of Abu Dhabi’s agenda on diversification. Starting a new business will become simpler with 29 initiatives that being introduced by the Abu Dhabi Department Economics Development Department. In an effort to boost the private sector, the 2013-2016 strategy includes eliminating red tape and unnecessary delays for starting a new business. Over 10% of recent government contracts have been awarded to private companies. To support these initiatives, such services as consumer protection and market surveillance centre, an export promotion agency and a federal level credit rating agency for small and medium-sized businesses are to be included as incentives.
The goal is to fast-track the role of private enterprise in driving diversification. The projected benefits will be that private enterprises will raise the contribution of the non-hydrocarbon sector from the 2005 level of 40% to 64%projection for 2030.
Simon Williams, chief economist of the Middle East and North Africa for HSBC has said, “Steps of this kind can start to create a framework to help companies prosper but it is only the first step on a long path for Abu Dhabi to make a vibrant and competitive private sector.”
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