Abu Dhabi's Vision 2030: An Ongoing Journey Of Economic Development

An Ongoing Journey of Economic Development

Linda Low

• Publisher: WSPC
• Year: 2012
• ISBN:
  9789814452212
• Topic: Biological Sciences
• Subtopic: Science General
• Index: Biological Sciences

This book aims to tell the Abu Dhabi story in economic development, from its past dominance in oil to its economic vision for the future. More than being an exemplar of industrial restructuring and diversification from a resource-based to a 21st century knowledge-based economy and society, Abu Dhabi emphasises its cultural legacy and tradition as an environmental advocate for green and sustainable pathways. It has as many challenges as creative responses to show that its success is not by wealth alone.

This case study unveils Abu Dhabi in particular and the rest of Arabic and GCC economic development in general. They have all attracted foreign investment and global business, typically as hydrocarbon-rich resource economies. Beyond that, the geoeconomics and geopolitics of the Middle East and North Africa, with or without the Arab Spring in 2011 is in and of itself, a rich region for multidisciplinary studies and research, not just for economics and business. With Qatar, Abu Dhabi boasts of one of the highest per capita income in the world; therein lies a reason to enquire about its success and pivotal role in the GCC and global contexts.

Contents:

• Introduction
• Transformation From Oil to Industrialisation
• Non-Oil Knowledge-Based Economy Services
• Enablers in Labour, Laws and Regulations
• Abu Dhabi's Economic Development Model

Readership: Researchers and academics with interest in Abu Dhabi/Middle East studies, government and business professionals with interest in investment and forging economic relations.

Chapter 1

INTRODUCTION

1.1. Why this Book?

From an eighteenth-century sheikdom, since the mid-1960s, Abu Dhabi is already a striking example of rapid change surpassing Kuwait’s exemplary growth rate by three times. It is widely regarded as a “rags to riches” case (El Mallakh, 1970, p. 135 and ibid.,) 1981). One book, entitled From Rags to Riches (Al-Fahim, 1998) explores the city’s growth.¹ It was claimed then that Abu Dhabi boasts the world’s highest per capita income with Kuwait and the US at second and third place, respectively. Abu Dhabi more or less share the top spot with Qatar now.

There is no guarantee either of everlasting economic growth as quantitatively measured by gross domestic product (GDP) or qualitatively as economic development in terms of standards of living. Beset with piracy and tribal warfare, Great Britain in the mid-1800s finessed a maritime truce among the Trucial States now, the UAE. The rest is history. Piracy only remained in failed states, especially Somalia, affecting the world.

Fast-forward decades later, Zayed Vision² is crafted in 2007 into the Abu Dhabi Policy Agenda 2007-2008 (Executive Council, 2007) and Economic Vision 2030 (Government of Abu Dhabi, 2008). Unlike other cases of economic development, the Abu Dhabi model has already grown superlatively. Beyond megatrends (Naisbitt, 1982), the lingering Arab Spring³ in 2011, it straddles shifting geoeconomics, geopolitics, globalisation and information communication technology.

To maintain more of the same history of wealth and prosperity, the crux is now between Vision 2030 as planned⁴ and implementation. Zayed Vision is given life and substance in Vision 2030 as leadership and oil wealth combined to negate the resource curse.⁵ This book explores how the Abu Dhabi story, if started out right, will continue sustainably. The journey is more critical than the destination; reflecting the importance of adapting smartly and continuously to evolving challenges. How well it finishes will be left to be seen and judged by readers.

The literature on economic growth and development is extant with empirical evidence and evidence-based outcomes (Hill, 2002). This book features a narrative style to enable questions and issues to fill some gaps and prompt other scholars, researchers and readers to take a multifaceted approach to portray Abu Dhabi. The narration with anecdotal insights goes beyond consultancy reports, all offering expertise in areas from economic planning to project management.

1.2. Organising Theme and Structure of Book

The book’s theme focuses on economic development defined as the mobilisation of land (including natural resources, location and climate), labour and capital resources to attain a desired sustainable rate of GDP growth as laid out in Vision 2030. Quantitative growth and qualitative development (Rani et al., 2000; Schumpeter et al., 2003; Myint et al., 2009) are necessary and sufficient conditions — or two sides of the same coin.

Abu Dhabi attained rapid economic growth through oil with economic development to be more framed around a sustainable non-oil industrial structure. Vision 2030 centers on a creative innovative knowledge-based economy and society. Socio-cultural changes affect the economic development. Simplistically, GDP growth may be the means to an end as economic development in the first instance, blossoming to social and political development, however defined, suited to Abu Dhabi.

Oil is finite vis-à-vis renewable energy as alternatives. The fact that Abu Dhabi is extending sustainably as an energy capital from traditional oil to solar, wind and nuclear renewable energy is not surprising, but prescient. In envisioning its next growth curve, tackling human resources development as its weakest link is more qualitative than quantitative. Upgrading capital and labour efficiencies encompasses building the right overall environment in institutional-capacity and capability premised on equity.

This chapter will examine the raison d’etre for a different but positive growth trajectory to 2030 based on the economic development framework. Chapter 2 traces Abu Dhabi’s growth from an oil resource-based economy to industrialisation. Chapter 3 follows with knowledge-based services including financial development. Chapter 4 rounds up the remaining enablers in labour, laws and regulation. Chapter 5 reviews, compares and contrasts the Abu Dhabi model with others to share experiences and lessons.

A political economy approach is inevitable with state dominance.⁶ Both specific interventions and other tools of laissez-faire market capitalism are discerned in a more competitive globalised world. This book explores Abu Dhabi within the UAE to fit into the new multipolar global operating system.

Since the global financial crisis (Lim et al., 2010; Steil et al., 2009; Reinhart et al., 2009) in 2008, the fragile recovery in the Organisation for Economic Development (OECD) is juxtaposed with rising emerging economies, Brazil, Russia, India, China and South Africa (BRICS).⁷

1.3. Abu Dhabi in the UAE

Foreign investors and multinational corporations analyse Abu Dhabi in the UAE at a country-level. A brief overview is needed to understand Abu Dhabi’s resources, wealth and influence in the UAE context.⁸ Abu Dhabi, as the capital city, is the largest of seven emirates in the UAE, comprising Dubai, Sharjah, Ras al Khaimah, Ajman, Umm al Quwain and Fujairah.

As the British prepared in 1968 to withdraw East of Suez by 1971, Sheikh Zayed bin Sultan Al Nahyan led the Trucial States to form the UAE union.⁹ The confused prologue had Qatar and Bahrain in earlier negotiations. They opted out, but shaped many compromises in the provisional constitution, parts of which may have been settled differently otherwise, representing an expression of the political status quo then.

A small digression without the detailed etymology of tribes and resultant tribal capitalism faced by Sheikh Zayed is pertinent. Tribal groups do exist with modern capitalism, not in a primitive setting. Acknowledgment of the authority of a tribal chief is owed to a common ancestor or territorial affiliation. A social distance is implicit. Yet, all are UAE nationals, united in culture and religion.

UAE federalism is unique in power ceded upward by local governments, not top-down federal and public finance systems as found elsewhere. The constitution manifests unity with virtually all the functions of a unitary state. Federal laws are implemented and enforced by the emirates’ own set of state institutions. What is vested to the union and what is preserved by emirate-sovereignty may duplicate with ambivalence.

The constitution lacks clarity on funds to be provided to cover the federal budget. Article 127 states that all emirates contribute a specified proportion of their annual revenue to cover the UAE annual general budget expenditure, but without an explicit formula. Neither has the constitution any jurisdiction over the collection of, or contribution of, funds.¹⁰ Clearly, Abu Dhabi’s munificence is its ability-to-pay.¹¹

Each emirate has individual economic development plans, strategies and policies.¹² The Ministry of Economy and other related federal bodies knit together over-arching, cross-cutting or across-the-board matters for a whole-of-UAE. National defence or immigration is clearly federal. Education or health is both federal and local.

The UAE Government Strategy 2011-2013 lays the foundations to celebrate UAE Vision 2021¹³ as the 50th anniversary since 1971. Seven general principles, seven strategic priorities and seven strategic enablers are the major focus areas for the government in the seven emirates. It is another matter how various ministries coordinate and work with their local counterparts.

1.4. UNDP Strategic Development Programme Abu Dhabi, 2000-2020

A historical preface to economic planning is the Abu Dhabi Strategic Development Programme 2000-2020 by the 1999 United Nations Development Programme UNDP/DES A Project UAE 96/005.¹⁴ It was never executed, except Dubai which executed a similar UNDP project.¹⁵ Unsurprisingly, despite the hiatus, the UNDP plan for Abu Dhabi has the same elements as Vision 2030 or Zayed Vision in the 21st century.

The UNDP identified issues of a narrow production base, falling GDP per capita, slow productivity¹⁶ improvement, population composition and low employment for national graduates. Generous income distribution in health, education and jobs, other wealth distribution in land, buildings, farms, preferential licenses and shares could be revisited. A macro internal–external financial imbalance in the long-run, if oil revenue stagnates or falls thus disrupting public finance, is unsustainable.

Table 1.1. Abu Dhabi vision and stages of development in UNDP plan.

Stages of development	Period	Main features
Starting point	1970s	Oil wealth
I	1975–2000	Oil-based economy, factor-driven
II	2000–2015	Wealth-based with selected investment drive and emphasis on HRD
III	2015–2030 and beyond	Rich economy with selected innovation drive and technology beyond as adaptation/development

Source: 1999 UNDP/DESA Project UAE 96/005.

While the government plays a major role in guiding the private sector, many “missing markets” include a land market and a flexible labour market. Cumbersome business licensing by a multiplicity of authorities is slowly mitigated by inter-governmental agency coordination to promote investment, business or trade. Vision 2030 echoes the UNDP socio-economic concerns of a mindset change in the next generation to propagate innovative growth into the next S-curve.¹⁷

The main conclusion is that Abu Dhabi needs a long-term vision and development strategy, not more of the same pathway aggravating problems. By stages of development, the UNDP considered the 1975-1995 factor-driven phase to last till 2000 (Table 1.1). With proper planning and private sector support, it could enter a wealth-based economy as investment-driven beginning in 2000-2005 which will remain for another 10-15 years, then entering innovation-driven as an interesting coincidence with Vision 2030.

UNDP Vision 2000-2020 would grow, prosper and diversify Abu Dhabi by broadening its production and income bases. Targets would exceed $35,000 (exceeded in 2005) per capita by 2020 and reduce oil dependence from 43% to 20% of GDP. The proposed scenario and vision using simple limited economic frames and input-output analytical framework has five options:

I Moderate-high growth and economic stability requires government policy and support to develop hydrocarbon, provide a supplementary cushion to the economy to yield 1.5% real increase or 3% nominal growth per annum of oil and gas component of GDP under the standard path.

II Productivity improvement to tackle population, reduce labour intensity with selective policy intervention in coverage and depth for the main sectors in agriculture, manufacturing, construction, trade, hotels and restaurants, government, other services, and higher labour participation rate of nationals.

III Restructuring and upgrading to build on Option II with changes in a sectoral growth strategy on labour and capital requirement. Two broad orientations are the first based on past sectoral growth strategy mainly relying on real estate and housing, trade, hotels and restaurants, agriculture and finance, and the second on heavy emphasis on manufacturing, electricity and water, trade, hotels and restaurants, transport, storage and communication.

IV Wealth creation proposes a conscious effort to acquire assets which would gain significant value in the long-run, targeting $1 billion yearly for investment in assets to gain $30 billion by 2020 and $50 billion by 2030.

V Rationalise public finance to reduce the government deficit mainly through reduction in labour intensity and target population, as well as greater privatisation and improved efficiency of public services.

Options II and III would produce quite satisfactory results in terms of labour requirement, population size and mix, economic diversification, economic stability (Table 1.2). Combining the two is recommended. Some attention to policy Options IV and V could further enhance financial strength as an important guarantee for sustainability for both Abu Dhabi and the UAE as a whole.

Table 1.2. Comparison of development options and results 2000–2020.

Source: Table 12.1, Table 3.3 (Main document).

The development scenario includes strategic elements, including higher economic growth, productivity improvement, a proper labour/population policy, enhanced labour force participation rates, economic and financial stability, economic dynamism and private sector development. To date, a population policy remains in-waiting.

Targets include a minimum mean GDP 4.5% per annum (assumed real growth) and a maximum population growth of 2.4% per annum for non-citizens for a total of 2 million in population by 2020. Additional employment and business ...

Table of contents

• Cover Page
• Title Page
• Title Page1
• Copyright
• Dedication
• Foreword
• Preface
• Contents
• List Of Tables
• List Of Figures
• Chapter 1 Introduction
• Chapter 2 Transformation from Oil to Industrialisation
• Chapter 3 Non-Oil Knowledge-Based Economy Services
• Chapter 4 Enablers in Labour, Laws and Regulations
• Chapter 5 Abu Dhabi’s Economic Development Model
• Bibliography
• Websites
• Index