Abu Dhabi Model Economies: Singapore is the only Asian model among four that the architects of the capital's Economic Vision 2030 are looking to, Frank Kane reports.
An island of inspiration helps fuel Abu Dhabi's ambition
Back in 2007, when the Abu Dhabi Government was laying the groundwork for its Economic Vision 2030, one Asian country stood out as a paradigm: Singapore.
The island city-state, then about the same size as the UAE in terms of population, has in the space of a few decades become one of the leading economic centres of the world; in Asia, it rivals Hong Kong as a commercial and financial trading power.
It has raised its citizens' standard of living to among the highest in the world, and created a successful and increasingly sustainable urban environment out of scarce resources.
It has successfully bounced back from several financial crises, accumulated substantial resources in its sovereign wealth funds, and become a magnet for financial business with its much larger neighbours, such as Malaysia and Indonesia, in South East Asia.
All this has been achieved within the framework of a stable and well-ordered political society, with an educated and well-motivated national workforce providing a cadre of expertise for efficient public administration. Singapore is as good an example of the "transformation economy" as Abu Dhabi could find - it is the only Asian country in the four economies chosen by the emirate as models, the others being Norway, New Zealand and Ireland.
Moreover, a UAE version of the Singapore model had already been successfully adapted: neighbouring Dubai has leant heavily on the Asian city-state's example in its own early, transformational years.
The architects of the capital's 2030 vision even had a blueprint for their own work in Singapore: the Asian country's economic development board has been producing regular strategy reviews for decades, reporting directly to the policymakers in government, most recently last year.
"Singapore has always planned 20 years ahead at least; what you see today is the result of basic work done decades ago," says Mark Florance, the executive vice chairman for the investment bank Rothschild in the region.
That is not to say the two economies are identical currently. In 2007 there were big differences between the fundamentals of the economies of Singapore and Abu Dhabi - to some extent these have been widened by the financial crisis of the intervening years.
The first, and most obvious, is in energy resources. While Abu Dhabi is ranked among the world's leading oil and gas producers, Singapore has no similar bank of energy capital it can use to fund future development.
The two countries both have significant sovereign wealth funds, but Singapore's has been created and nurtured over decades from the proceeds of its main occupation: as an exporter of value-added products across South East Asia.
The second obvious difference is a socio-demographic one. Singapore is a more homogenous society, with about 70 per cent ethnically Chinese, and has a much lower proportion of expatriate workers - some 40 per cent of its population.
While the expat "issue" sometimes comes to the fore, as in the election earlier this year, there is no real equivalent of Abu Dhabi's emiratisation policy for the economic strategists to consider.
The third difference is geographical. Situated at the narrowest point of the Strait of Malacca, a key maritime trade route for centuries, Singapore has always used its position to good effect. Today, the value of its external trade is three times that of its GDP.
Abu Dhabi's recent growth owes a lot to its location as a hub for the vital Gulf energy business, but will have to go some way to leverage this position to become a global import-export centre. But that, of course, is one of the key goals of the 2030 vision.
What are the key drivers of the Singapore model Abu Dhabi has sought to emulate and adapt for its own strategic vision?
The bare statistics tells one part of the story: according to the official figures from Singapore's ministry of trade and industry, GDP rose by 14.5 per cent last year, to S$303.7 billion (Dh916.57bn), recovering from a decline of 0.8 per cent in the dark days of 2009 after the financial crisis.
Tellingly, last year the value of Singapore's external trade was S$902bn, up 20 per cent on the year before - reversing the trade slump of the previous, recession-ravaged year. Singapore had arguably the fastest rate of recovery from recession in the world, driven by the rapid revival of the Asian economies.
It has been a little trickier for the country to sustain such phenomenal growth this year, with a second-half downturn caused by the effects of the Japanese earthquake and tsunami in March and cyclicality in the important pharmaceuticals industry. Still, most experts predict 6 per cent GDP increase this year.
The big drivers expected to be behind that growth are manufacturing, wholesale and retail trade, and financial and business services, which all together account for two thirds of GDP. Manufacturing, with 22 per cent of the total, is the biggest, and illustrates the Singapore model in its essence: high-value computer, electronic and optical products count for 36 per cent of manufacturing; followed by petroleum products from the country's huge refining plans; while chemicals and pharmaceuticals form another big part of the total.
The history of Singaporean manufacturing followed a cycle familiar to development economists: basic infrastructure products; then cheap-labour based consumer goods; replaced by higher value and more sophisticated technology; and bio-technology products.
The strategy was to keep one step ahead of the lower-cost regional rivals, especially China, although oil refining, regarded as a strategic activity, and financial services, remained constants in this model.
"Precisely because Singapore did not have natural resources, it had to develop a model that was dynamic, adaptable and sustainable.
"What emerged was a 'command economy' with prioritised sectors, like infrastructure in the early days. Exports and trade have always been central, and financial services has been an important element throughout. But other sectors have risen and fallen in importance as global economic conditions have changed," says Leif Eskesen, HSBC's chief South East Asia economist based in Singapore.
With Singapore's growth as a manufacturing centre there has developed a transport and logistics industry, based on high-quality port facilities, the national airline and the logistics base at the main airport, Changi, in the east of the island. The fast-expanding Jurong industrial zone feeds these distribution centres.
Alongside this industrial infrastructure is a growing tourism and hospitality sector, with two big resorts opened off Singapore's south coast in Marina Bay and Sentosa.
These initiatives echo similar projects in Abu Dhabi, and mirror the strategic aim of "broadening the sectors of economic activity, enlarging the enterprise base, and growing external markets", in the words of the capital's 2030 document.
But for Singapore it all revolves around trade, and its trading partners reveal how crucial its geographical location is to the overall economic strategy: China and Hong Kong together are the biggest; followed by its closest neighbour Malaysia. The EU and the US are towards the top of the trade tables, but there is not much between them and Indonesia, Japan and Taiwan. It is the "Asian hub" model in practice.
Trade with the Middle East and UAE is comparatively small, but growing. Saudi Arabia is the biggest Gulf trading partner, but in low single digits. According to figures from International Enterprise Singapore (IES), exports to Singapore from the UAE rose by 40 per cent last year over 2009 to US$8.7bn (Dh31.95bn), on the back of the rise in oil prices; from Singapore to UAE, the value fell by 3 per cent to $5.2bn.
Apart from oil, the trade consists of jewellery, telecommunications equipment, ships and infrastructure equipment, says the IES.
In terms of foreign direct investment, traffic from Singapore to Abu Dhabi totalled $1.47bn, with about $1bn going the other way, comprising property, hotels and tourism, communications, plastics and financial services, says IES. "There is great potential for further cooperation between our two countries, and we have much to learn from each other," says Low Pit Chen, the charge d'affaires at the Singaporean embassy in Abu Dhabi.
"We are each seeking to be knowledge-based, modern economies, and an integrated, coordinated approach to strategic decision making is the key to achieving that aim."
The IES points to several joint ventures between Singapore and Abu Dhabi companies as evidence the relationship is maturing. Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, has set up the joint venture Capitala with Singapore's flagship developer CapitaLand with a view to developing 1.4 million square metres of land in the Sheikh Zayed Grand Mosque district of the UAE capital.
Economic cooperation also includes projects between Singapore and Abu Dhabi companies in utilities, port equipment and training programmes. This year, representatives of the Abu Dhabi Executive Affairs Authority met Singaporean officials in the fifth of a regular series of joint forums between the two countries, and more are planned.
There was also a strong Abu Dhabi presence at a conference held in Singapore last month to discuss an issue of great interest to the two economies - the management and exploitation of water resources.
Of course, there are plenty of contrasts between Abu Dhabi and Singapore. But the two have enough in common to suggest mutual cooperation is the best means of achieving successful economic development.