Experts say that Abu Dhabi's recently announced stimulus package will help boost the emirate's economy, improve the ease of doing business and encourage an ecosystem in which the government and the private sector work together in tandem.
From infrastructure to tourism and from SMEs to the education sector, Abu Dhabi’s new $13.6bn (AED50bn) plan to stimulate its economy is set to have a far-reaching and positive effect on the emirate’s economy, according to a range of economic experts.
Last week, Sheikh Mohammed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, said that the plan is designed to accelerate Abu Dhabi’s growth over the course of the next three years, improve the ease of doing business, and enhance the work experience of both UAE nationals and expats living in Abu Dhabi.
While many of the details are still unclear, Sheikh Mohammed has given the Abu Dhabi Executive Committee 90 days to come up with a detailed execution plan for the stimulus package.
The Abu Dhabi plan includes 10 separate economic initiatives designed to cover infrastructure and legislative projects, as well as SMEs and industrial ad social projects. As part of the plan, the UAE capital plans to create at least 10,000 jobs for Emiratis in the private and public sectors over the next five years, in addition to taking steps to boost the competitiveness of SMEs at the local and regional levels.
Among the other initiatives that form this new stimulus package relate to licences. They include the exemption of all new licenses from the requirement of having an office or work space for two years, permitting permanent home licenses, and the implementation of an instant licensing system within most commercial license types.
Abu Dhabi plans to create at least 10,000 jobs for Emiratis in the private and public sectors over the next five years”
Additionally, Sheikh Mohammed gave a directive to accelerate the settlement of due payments on contracts for suppliers from the private sector and to review all fines for the healthcare and education sectors as well as municipalities’ affairs. Additionally, the Crown Prince ordered that building regulations for infrastructure, residential, commercial and industrial properties be reviewed in a bid to reduce costs and support Abu Dhabi’s urban development.
As part of the emirate’s wider effort to diversify its economy, Sheikh Mohammed also ordered the establishment of the Abu Dhabi Accelerators and Advanced Industries Council. The Ghadan – Arabic for tomorrow – will attract and support value-added investments and technologies that will help predict the course of Abu Dhabi’s economic development.
In the tourism sector, Sheikh Mohammed ordered officials to do more to develop eco-tourism facilities and programmes of all kind, both nautical and on the mainland, including camping villages and recreational sports areas.
Lastly, Sheikh Mohammed ordered the issuance of dual licences for Abu Dhabi free zone companies to enable them to work outside the free zones and participate in government tenders.
Even though many questions remain unanswered about how the ambitious plan will be executed – and we’ll know more once the 90-day deadline has elapsed – it was quickly welcomed by members of the UAE’s business community.
Speaking to Arabian Business, Trevor McFarlane, the founder and CEO of Emerging Markets Intelligence & Research (EMIR), says that the move is a “very positive” note that will have an important knock-on effect on the entire UAE economy.
Higher oil prices have provided more room for governments in the region to boost spending”
“Broadly for the UAE, everyone accepts that it’s the right step. The Abu Dhabi reforms [show] that there is a momentum, a clear drive from the leadership to make it easier for businesses,” he says.
As McFarlane notes, while for some time Abu Dhabi had been under “a bit of pressure, and had to pull back on a lot of spending” the emirate’s government is now in a position that it can use its resources to encourage SMEs and forge closer ties with private sector businesses.
Of the various initiatives that form the stimulus package, McFarlane is particularly excited about its focus on small to medium-sized enterprises. “That was a wise decision,” he states. “The SME part of it is incredibly important. SMEs are the building block of any economy. Look at Germany. Look at Japan.”
McFarlane adds, however, that in his opinion the most important part of the plan is the creation of an “ecosystem” that encourages more partnerships between the government and the private sector. Fortunately, in McFarlane’s eyes, Abu Dhabi and the UAE are perhaps better placed than other countries to make that into a reality.
“They want to promote partnerships by the end of 2018, and that’s where the UAE has done an incredibly effective job of tapping into its advantage as a regional hub for the majority of the big multinational companies. You can tap into this huge expertise, this reservoir of innovation, managerial skill and professional talent that’s here in the UAE,” he remarks.
“Abu Dhabi can really benefit if it can create more of these partnerships between private sector companies and the public sector. This will be critical, but what fashion or form they actually take, we have to wait and see.”
Tim Fox, chief economist at Emirates NBD, says the stimulus package should be seen within the wider context of the state of the UAE economy at a time when oil prices have rebounded. “Higher oil prices have provided more room for governments in the region to boost spending, and the UAE is particularly well placed with respect to its budget,” he notes.
“We anticipate a close-to-balanced consolidated budget this year after the new spending measures are taken into account. The latest announcements support our view that non-oil sector growth will be driven by government spending this year.”
Others, such as Emirates Global Aluminium [EGA] managing director and CEO Abdulla Kalban, hails the move as an important step in helping facilitate the success of businesses and their Emirati employees. “Cooperation between private sector companies like EGA and the public sector is important for the economy, including making it as easy as possible to do business,” he says. “We also particularly appreciate the initiative’s focus on Emiratisation.”
Similarly, Firoz Merchant, the founder and chairman of Pure Gold Group, notes that “with its focus on facilitating the ease of doing business and promoting infrastructure and legislative projects, including social enterprises, the new policy initiative will not only drive inward investment to Abu Dhabi but also foster human development.”
According to figures from the Statistics Centre – Abu Dhabi (SCAD), 2017 saw a total of AED108bn in foreign direct investment (FDI) into the UAE capital, a 7.1 percent increase compared to AED100.88bn recorded in 2016.
Of the total, property accounted for AED29.9bn, AED19.2bn from process industries and AED8.1bn from construction and building businesses.
More recent figures indicate that non-oil foreign trade rose to AED38bn in Q1 2018, with the value of exports standing at AED6bn, compared to AED26.34bn and AED5.58bn for re-exports between January and March.
During Q1, industrial accessories made up the lion’s share of Abu Dhabi non-oil exports, amounting to around AED5.4bn, accounting for 90 percent of the total, with F&B exports reaching AED262m. Non-oil merchandise worth AED10.4bn, including industrial accessories, was imported, comprising 39.5 percent of the emirate’s total imports during Q1, with transport equipment and accessories imports nearing AED8bn. In terms of re-exports, transport equipment and accessories accounted for 44.8 percent of total re-exports during the same period.