Sustainable growth through economic diversification
Abu Dhabi’s multi-billion dollar spending programme is set to spur demand across all real estate sectors.
Abu Dhabi takes economic diversification seriously; it is a central part of Abu Dhabi’s 2030 Vision. By decreasing reliance on the oil sector, which is subject to price volatility, steady long-term growth can be maintained. By 2030, the emirate of Abu Dhabi targets a 64 percent contribution from the non-oil sector to Abu Dhabi’s total GDP. [Chris you can use this as a figure if you like]
Since the 1960s, the oil industry has been the main engine of Abu Dhabi’s development. The emirate is home to the world’s sixth largest proven oil reserves, of around 98 billion barrels, and is the world’s tenth largest producer, at around 2.5 million barrels per day (bpd), most of which is for export. It is estimated that this provided the emirate with more than USD 90 billion a year in revenues at 2008 prices (Abu Dhabi Economic Vision 2030).
Through the process of economic diversification, these oil revenues are invested to develop key areas of the economy and broaden the emirate’s revenue base. With the recent fluctuations in oil prices in particular, it becomes evident that Abu Dhabi cannot rely on the income derived from the hydrocarbon sector alone.
Currently, “there are multiple projects under way in Abu Dhabi which are ‘game changers’ in terms of building Abu Dhabi’s city offering and profile, changing the urban skyline and putting Abu Dhabi firmly on the global map,” says David Dudley, Regional Director, Abu Dhabi, JLL.
Key projects include developments in infrastructure (airport expansion, the new port and road upgrades, together with other projects at an advanced stage of planning including the expansion of Etihad rail and the new metro/light rail system); tourism development; economic development (through freezones such as Abu Dhabi Global Market (financial services), Masdar (technology), twofour54 (media) and KIZAD and Skycity (logistics, industrial and trade); as well as social development (education and healthcare projects).
Central in driving the tourism industry is the Abu Dhabi Tourism & Culture Authority (TCA) which aims to promote the heritage, culture and traditions of the Abu Dhabi emirate worldwide. As part of its management of the emirate’s tourism sector, TCA is also responsible for overseeing the development of the new, landmark museums in Abu Dhabi’s Saadiyat Island Cultural District, including the Louvre Abu Dhabi, Zayed National Museum and Guggenheim Abu Dhabi. It is also committed to “supporting an ongoing programme of events and intellectual and artistic activities aimed at nurturing a cultural environment that will be enriching for residents and visitors alike.”
These efforts are obviously working. In January 2015, TCA recorded an increase of 23% in guest arrivals when compared to last year, with the total number of hotel guest arrivals at 339,523. Hotel occupancy in January 2015 stood at a healthy 77% whilst the total revenue for hotel establishments in Abu Dhabi in January 2015 was AED 570 million, marking a 9% increase over the same month last year. (TCA Abu Dhabi)
Abu Dhabi has ambitious targets, however with developments such as Yas Island and its attractive offerings including Ferrari World, and the planned cultural offerings on Saadiyat Island, the emirate draws visitors from all over the world which impacts positively on the hotel as well as retail sectors.
“In terms of visitor numbers, Abu Dhabi has managed to meet its targets and has shown some impressive growth recently,” comments Mat Green, Head of Research and Consultancy UAE, CBRE Middle East. ”We expect the tourism market to continue to improve (albeit a slight slowdown as a result of the issues surrounding Russia and a reduction of European visitors),” he adds.
Infrastructure & logistics
Along with tourism, industry forms the heart of Abu Dhabi’s goal to diversify the economy away from oil. Central to this is Abu Dhabi Ports Company (ADPC) whose core objective is to “facilitate the diversification of the economy by stimulating development and trade, following Abu Dhabi’s Economic Vision 2030.”
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