Why Sheikh Mohammed bin Zayed's new economic plans are a game changer for Abu Dhabi and its people
Ten measures to make the emirate more competitive combined with Dh50 billion in stimulus will have an immediate and positive impact
There is likely to be an immediate and positive impact on the non-oil economy from the Dh50 billion of stimulus announced on Tuesday night.
The accompanying 10 key measures will further liberalise the business environment, creating a much more competitive landscape in Abu Dhabi.
The timing is also significant, coming only a few weeks after new visa and foreign ownership rules were announced for the UAE, linking local and national policies.
It is worth noting that Abu Dhabi, perhaps more so than other emirates, is a government-led economy. At the heart of every non-oil sector, including construction, property, retail, finance and industry, has been the driving engine of government spending.
It has historically been the catalyst of any period of economic boom. But over the past eight years, the need to maintain spending levels has been outweighed by a focus on efficiency and sustainability. The period of lower oil prices across 2015 and 2016 made reforms even more urgent.
The pace of economic diversification has also picked up and new income streams have been developed, including from Value Added Tax. The flip side of this has been a reduction in subsidies and other expenditure.
The 10-step stimulus plan
As a result, in recent years government-led spending has been a diminishing part of every segment of the Abu Dhabi economy, relatively speaking, and rather than spurring on the private-sector to fill the gap, its reduction left little impetus for growth.
This is partly because the UAE has for two decades been very much a demographic play. Bring in more people to visit, work and live here, resulting in an increase in the population, and fill the homes, offices and shopping malls being built. This creates wealth for all strata of society.
Dubai’s growth continues to be fundamentally a nexus of property and tourism, led by demographics. The new visa rules and allowing 100 per cent foreign ownership outside of free zones are designed to bring in more foreign investment and the skilled professionals required to attract this funding.
Similarly, the 10 initiatives from Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, will put the emirate front and centre with investors in the UAE, the region and the world, who are looking for the ideal environment in which to operate and make returns.
Allowing more freedom of movement between onshore areas and offshore free zones will be an important part of a more attractive landscape. Arguably, removing the requirement of a physical office space for business licence registration will be more so, in particular for start-ups, small and medium enterprises and freelancers, creating a wider pool of skilled workers, service providers and support infrastructure for the bigger companies.
Amid the lower spending by the public sector, as government jobs were reduced and the reforms kicked into gear, businesses relocated from Abu Dhabi to other parts of the UAE or even abroad.
This was led by business rationale. If your biggest client – ultimately for most here it is the government – is spending less, then you have to rethink your entire model. Costs and expenses become a bigger part of the discussion when profits shrink. Until recently, Abu Dhabi could not realistically offer a low-cost operating environment as compared with other destinations.
But even amid this more measured approach, big projects backed by the Government have continued to be developed, not least Louvre Abu Dhabi, a true game changer for the tourism and culture sectors.
Infrastructure has always remained a priority. Now, critical projects that will be a boost for all, are back in play and the action on slow payment of private contractors by the public sector ordered by Sheikh Mohammed will ensure that these are developed as efficiently as possible.
Overall, homes, shops and offices were always being built, led by long-term fundamentals and plans are being made a reality across the emirate including on Yas and Reem islands, in Ruwais in Al Dhafra and elsewhere.
We have also come through a period of mergers and new alliances, such as in the banking and property sectors, which promise stronger local corporations and institutions, well positioned for the future.
The long-term belief in Abu Dhabi has never wavered, even throughout the most challenging periods that have involved no little amount of economic pain for all stakeholders. This announcement by Sheikh Mohammed signals that it is now the appropriate time to draw a line under that era and to look forward with confidence, especially in the short-term.
The Ghadan - tomorrow in English - initiative sends the message that the future is bright and that there is the talent and the resources available in Abu Dhabi to be a leading part of it, developing and harnessing technology locally.
Reducing the burden on entrepreneurs and innovators will give them every chance to help in that effort. The Dh50bn will be a stimulus for all parts of the economy and should give the private sector the comfort that they can put more skin in the game - that they are very much supported by the leadership.
The deadline of 90 days for the emirate’s Executive Council to map out the implementation of these measures and how these billions should be spent is a clear indication that it is understood we have no time to lose on embarking on this new era of growth. The time is now.
The impact of these new measures will be to make Abu Dhabi super-competitive and technology-driven, which will -- along with its reputation as a stable and secure market, the benefits of economic and financial reforms, and a more efficient government sector -- immediately improve sentiment for investment locally and internationally.
Becoming more competitive is more important than ever given the rapidly evolving business climate across the Gulf region, with, for example, Saudi Arabia implementing its own reforms and diversification plans.
The reality of this is that there will be more opportunities than ever before for investors looking at the region to consider and Abu Dhabi will need to retain an even sharper edge to draw them in.
This greater investment should then spur job creation and opportunities for small and medium enterprises in this market, drawing back more companies and stimulating a tech-related private sector.
The Government is taking responsibility for triggering this potential windfall with its new measures but it will ultimately be down to all of us to build on it and reap the rewards for ourselves. The latter is the key point.
Ultimately, all of the above should lead to wealth creation, whether in terms of new businesses, through higher consumer spending, bigger volumes on the local stock market, increased liquidity in the property sector and greater ease of borrowing, to name just a few.
Sheikh Mohammed’s new plans put wealth, as much in terms of quality of life in the emirate as financial gain, front and centre.
Updated: June 7, 2018 02:02 PM